Around the traps on housing

Wellington's Independent Hearings Panel put up its recommendations on the Wellington District Plan. 

They note that Council's plan provides far more than the minimum required zoned housing to keep up with projected demand and so scaled it back.

A few bits from me on all this.

Oli Lewis and Dileepa Fonseca at BusinessDesk

Wellington already suffers from infrastructure challenges, and restricting housing development in existing areas may worsen it. 

That’s the view of Geoff Cooper, general manager for strategy at the Infrastructure Commission, Te Waihanga, who commented to BusinessDesk expressing surprise at recommendations made by an independent hearings panel (IHP) convened to hear submissions on a proposed district plan put forward by the Wellington city council.

...

Cooper said that the NZ infrastructure strategy, produced by the commission, also highlighted a need for national direction to help guide planning decisions. 

“The aim of this national direction is often about balancing economic matters, like enabling housing supply for future New Zealanders, with other factors.” 

Economic considerations needed to be given appropriate weight, he said. 

“We note that as of today, the list of 999 accredited RMA independent commissioners includes just 12 that report having expertise in economics – amounting to 1.2%.” 

Crampton was far more scathing, saying the Wellington IHP clearly needed economic assistance. 

“Their engagement with the economic evidence presented was incredibly poor; they were unable to distinguish academically credible arguments from academically risible arguments, and they provided a series of recommendations that will worsen housing affordability,” he said. 

“All in all, the report discredits the IHP process and the methods used to select panellists. Wellington council would be right in dismissing the IHP report’s conclusions.”

Tom Hunt asked what I'd thought about it:

The New Zealand Initiative chief economist Eric Crampton said the council’s proposed district plan had a larger buffer between planned-for supply and projected housing demand in Wellington in coming decades. The new recommendations significantly reduced that buffer, which particularly mattered when Wellington was starting from a housing shortage.

But he believed the whole system may need to change to rely less on forecasts of whether housing demand would be met by zoned supply. If housing was unaffordable, people could be expected to leave town, reducing forecast demand, he said.

Instead, councils and the Government could watch land values. If those prices showed that zoned land was scarce, as work by the Infrastructure Commission had shown, then the Government could get councils to zone for more development.

There had been 2016 work by Covec and MRCagney for MfE looking at how prices could be used as signals of zoned scarcity. This was part of the prep for the older National Policy Statement on Urban Development Capacity. NPS-UDC was replaced by NPS-UD, and none of it took price signals as seriously as it should have. They're mentioned as one of many possible things to look at when they should be a trigger compelling release of more zoned land. 

I talked about this a bit more over at The Herald. The full column is gated but I've snipped a couple bits. 

In short, it’s a backward kind of way of setting urban plans. Forecasts of demand are not only highly uncertain, they also depend on housing affordability.

If you start with overcrowded, poor-quality housing, you will have a hard time fixing it. And if the resulting unaffordability discourages people from moving here while encouraging young families to flee, projected demand is the wrong measure entirely.

None of it faces a simple sanity check. Land prices can quickly show whether councils have zoned sufficient land for development. Last year, the Infrastructure Commission compared the 2021 price of land just outside of city limits to the price of land just inside the boundary. They accounted for the cost of turning rural land into urban land, like earthworks, surveying, planning, and development contributions. And they found urban zoning quadruples the price of land inside Auckland and Tauranga’s boundaries, while more than tripling land value in Wellington, Hamilton and Queenstown.

Those ratios had increased substantially since 2010.

Since the commission’s work accounted for land development costs, the price multiples at the boundary largely reflect scarcity caused by zoning.

If it were legal to turn rural land around Wellington, like in Ōhāriu, into housing, land zoned for housing in Wellington would not cost $490 per square metre more than land just outside the boundary. As the typical Wellington section is about 600sq m, the commission’s figures mean zoning at the boundary added almost $300,000 to a Wellington section’s price in 2021.

This simply would not happen if the council had really zoned enough land for development.

But the problem is not just at rural-urban boundaries. It will also be at every other zoning boundary where zoning creates scarcity.

On the plus side, the IHP work really didn't mess around. Some reports are just kinda bad. And then inertia sees them adopted. But this one's bad enough that it's unified everyone other than the more hopeless NIMBYs against it. So it's more likely to be tossed.

It also seems to have inspired the latest NZ Association of Economists member's survey. If you're an NZAE member, do check your inbox for that survey. It asks member whether zoning provides a binding constraint against housing supply and consequently affects prices. 

And on the fun side, Twitter urbanist Boxcar Joey mapped the conspiracy of Twitter urbanists against the IHP proposal.

Felicity Wong trying to ‘Atlas Network’ YIMBY twitter. pic.twitter.com/5GFAL0c0QN

— joey🦫 (@boxcar_joey) February 9, 2024

Around the traps

Blogging has been light as other commitments have pressed, but you may have caught me around the traps:

• I pointed to Stats NZ's disaggregated CPI figures in this piece by Susan Edmunds over at Stuff. 

  "Statistics New Zealand recently began releasing cost-of-living statistics for different groups to take account of differences in spending patterns. Since they started doing that, they have found that increases in the cost of living have been most sharply felt by the poorest because tobacco excise increases, petrol price increases and housing costs there have the worst effects. And these are areas directly under the government's control. Ceasing punitive tobacco excise increases and fixing the regulatory settings to allow new housing be built would substantially affect living costs for the poorest."

  You can check out Stats' shiny Living Cost Explorer right here.


• I also pointed to the consequences of failing to adjust NZ Superannuation in recognition of rising life expectancy in another article over at Stuff:

  Crampton said, if things were left as they were, it would not mean fiscal collapse.
  
  But it would mean government budgets were increasingly skewed to helping those who are older rather than those in greater need.
  
  "And, the longer we wait to make changes, the harder it will be to make changes because of changes in voter demographics. I view that as inequitable, but others can reach different conclusions."

• At the Herald, I suggested that reductions in the projected number of superyachts attending the America's Cup would worsen the already dubious case for government funding big sporting events. Tom Dillane there was only able to use a smaller part of my more verbose commentary, so here's the full text:

  “The case for government funding of the America’s Cup was always rather weak. After correction to some errors in the initial estimates, MBIE reported an estimated benefit-to-cost ratio only slightly higher than 1:1, with a range from 0.997 to 1.14. So every dollar of estimated benefit was matched, nearly one-to-one, for a dollar of cost. We can worry that these kinds of estimates are often optimistic about the benefits of these kinds of events. But the estimates would have been based on an expected number of visitors. If fewer superyachts are coming in for the event, then the benefits of the event will be a bit lower than expected. If we think that events like the America’s Cup do more to change the timing of just when tourists and superyachts come to New Zealand than to affect whether they ever come to New Zealand, then we should perhaps be less worried about things – except that that would also mean that the initial benefit estimates were always overstated.”
  
  “We should be sceptical that the path to national riches lies through public subsidy of large sporting events. If New Zealand taxpayers are happy for the government to spend a lot of money on what is effectively a big party in Auckland, then the event should be funded on that basis. But we should not delude ourselves that big parties attended by some foreign tourists are really investments.”




• Finally, I had a chat with Heather du Plessis-Allan about New Zealand's mess of regulations around heritage-listed buildings, that too often make it just too hard to own the things.

Around the traps

• Me at Newsroom ($) on coalition politics and the Capital Gains Tax. I wonder whether Labour wasn't rather pleased to be able to blame Winston for not progressing the thing. Ungated here.


• Me at The Spinoff on the job creation claims around the Provincial Growth Fund. Where I'd worried that MBIE was delaying my OIA so they could backfill workings onto some high-looking job creation numbers, reality was far less complicated. Why they took so long to release things is up in the air, but all they did was take the lower bound of the job creation estimates provided by the grant applicants and added them together. Dunno why it took months to tell me that. 


• In our Insights newsletter, I wonder whether Treasury's Heartwork game were a parody. But I fear the answer is no. I'm told that Treasury's Intranet, last Wednesday, included this bit.

  What's all the fuss about Heartwork?
  
  Wednesday 24 April 2019
  
  Over the last couple of weeks, you might have read or heard about criticism being levelled at the Treasury for its involvement with training organisation Heartwork, who’ve run several workshops with small groups of our staff as well as an external event at our premises last week.
  
  You will already know the importance the Treasury places on staff wellness, diversity and inclusion, and building capability of our people. We have many initiatives underway to help achieve our objectives in each of these key areas.
  
  Our workshops with Heartwork were a small trial to see what benefit we - as individuals, teams and as an organisation - might gain from their approach to incorporating empathy in our dealings with others.
  
  In providing the venue for last week's event, organised and run by Heartwork, the Treasury provided an opportunity for others interested in this approach to gather together and talk about their thoughts and experiences. Providing a venue for groups to gather for presentations and discussion about aspects of wellbeing is one way in which the Treasury can help promote diversity of thinking and common understanding.
  
  Contrary to the rhetoric of critics, the importance of empathy and communication skills in business is well established – and our stakeholders are asking this of us. Engaging effectively with a broad range of New Zealanders, and collaborating productively with our peers across the public sector, is also core to our ability to provide policy advice well. We will continue to focus on growing these and other skills in our people.
  
  Finally, to give you clarity around one of the comments made in the media: the Treasury's involvement in these workshops, and with the event held here last week, is in no way related to the government’s Wellbeing approach or Budget 2019. It has been an internal capability-building exercise.

  The response doesn't really address the 'why the heck is this a Treasury priority when you have rather bigger problems' concern raised in my NBR column of the prior week. My probity questions of Treasury, posted here, are now an OIA request with a due date of 20 May. But I guess we now know that it was a Heartwork event at Treasury rather than an event Treasury commissioned.
  
  If you haven't yet read Danyl Maclaughlin's write-up of the event, you really really should. It may leave you somewhat sceptical about the whole thing. Point of Order on Treasury's Heartwork game is also worth a look.

Around the traps...

I've not had a lot of time for blogging over the past week, but you can catch a few bits from me around the traps:

• Of course there was always going to be a surge of purchases by 'foreigners' in advance of the stupid foreign buyer ban. Anybody living here on a work visa would be rushing like hell to get their house sorted before the ban hits. 


• But Labour seems to be successful in scaring away foreign investors. Most places want to attract foreign investment and have to work hard to do it. Scaring it away, that's pretty easy. If you have an Overseas Investment Office application in for buying a farm property and then have to worry about whether you're able to live in a house on the property or rebuild it when the time comes, perhaps easier just to find some other place to live where the government doesn't hate foreigners as much.  


• The zero-percent student loans scheme was bad enough. Switching to fees-free study is worse. Folks on twitter got mad about this one and thought I was making numbers up, but it's right there on the darned Education Counts website. The government last year wrote off $0.4452 on every dollar it lent out. That's $662 million that could do a lot more in improving access to tertiary study if shifted over to means-tested student assistance and help for secondary schools in improving preparation for tertiary study. 


• I don't like film subsidies. Will have a post on this later. 

Four day weeks?

The Dom Post asked me for comment last week on Perpetual Guardian's trial of four-day work weeks. They wanted to know whether I were pro or con. I couldn't really do that: how am I or anyone else outside of the company to know what works best for them? I'm totally 'pro' their being able to try this out, but how could anybody be for or against it as a general policy?

So I gave them this instead, celebrating that companies and workers still have the freedom to come to whatever arrangements work best. For some it could be four day weeks, but it would hardly work for all. 

New Zealand's relatively flexible labour markets allow this kind of innovation, but we should not take them for granted.

Australia's Awards system, for example, is far more prescriptive about the pay and conditions that must be in place in every workplace.

The rules might make sense if one size really did fit all firms in any given industry, but the market is more complicated than that.

If Perpetual Guardian's experiment works for them, firms facing similar circumstances will have to take notice. If it fails, they can revert to the more standard five-day week.

The costs or benefits either way fall with them, so they have every reason to have thought hard about this.

But when regulation sets the conditions across a whole industry, experimentation like Perpetual's becomes much too hard.

And if MBIE gets things wrong, firms and workers bear the costs.

Let's celebrate Kiwis' ability to innovate, while we still have it.

Times Tables

Me at The Press on the Initiative's numeracy report:

The Numeracy Project, as it was called, had some really great elements. Rather than simply rote learning facts, students would also build their understanding of why six by nine is 54 and alternative strategies for figuring it out. Those alternative strategies can really help when trying to multiply larger figures beyond the twelve-by-twelve that those my age had to memorise.

But something went wrong in the implementation – or at least in some schools. There is a lot of school-by-school variation in New Zealand – and this is a good thing. But some schools took the Numeracy Project a bit too literally. Rather than complementing the times tables with the additional strategies, they threw out the rote learning part.

Patterson's report suggests this too great a lean against rote learning lies behind some of New Zealand's recent poor maths scores. Kids who have to spend time working out six by nine use up mental capacity that then is not available to take the next steps. Those who memorised it can move quickly to the next step in applying their answer.

Far from a call to abandon modern teaching practices in favour of rote learning, Patterson's report argued simply that the pendulum has swung too far. We need both rote learning and understanding. The report also recommended measures to help parents ensure that their kids' teachers are ready to really apply the more modern mathematics teaching methods which require greater teacher numeracy than teaching simple rote memorisation.

While the Initiative's Twitter stream filled with the usual attempts to pigeon-hole our recommendations into the Kiwi Twitteratti's ideological view of the world, our email inbox filled up with supportive messages from teachers, university lecturers, and maths tutors who agree that New Zealand kids really deserve better.

Read the whole thing...

Uber opposition

I'd expected that the Taxicab Federation wouldn't like Uber.

In last week's Herald, they protested that Uber would need to become an Approved Taxi Organisation. [HT: EdBlog]

NZTA [NZ Transport Agency] spokesman Andy Knackstedt said there were many requirements that must be met for establishing a company as an 'Approved Taxi Organisation' such as clearly displaying fares and driver identification, using a tested fare meter and having an in-vehicle security camera system installed.

"If Uber did not establish themselves as an ATO, they would rely on existing ATOs and their drivers integrating or using their system," Knackstedt said.

...

University of Canterbury senior lecturer in economics and transport commentator, Eric Crampton said Uber may be able to side-step taxi industry regulations by hiring drivers with a P endorsed drivers' license and using unmarked vehicles to operate as a 'private hire service'.

"Current cabbies could flip to Uber in their own cars, retired cabbies who still have the P endorsement could start up again, and others willing to sit the test could come into the market," Crampton said in his blog.

The New Zealand Taxi Federation has voiced safety concerns about the growth of app-based taxi booking systems becoming available around the country.

Other transport apps to launch in New Zealand recently are Zoomy, in use by taxi organisations, and Cab Chooze, along with other apps developed for taxi companies.

In a letter to the NZTA, Taxi Federation executive director Tim Reddish called for the apps to be shut down until the companies prove their drivers are properly licensed and operating under the control of approved ATO's.

"In our view any app-based taxi service delivery system must also ensure that customers are protected from unlicensed drivers and untested as fit for purpose vehicles," Reddish said.

Again, I am not a lawyer. But it looks to me like Uber could run under existing private hire service regulations. I expect that the Taxi Federation will do their best to block it.

If I were the Taxi Federation, I'd be claiming that an app-based immediate hire is a lot more like flagging down a cab than it is like an advance booking; if I were Uber, I'd say it's rather more like calling a bunch of car companies to see who'll give the best rate. I think the latter's the more accurate description and that the private hire regs could then apply, but again, I'm not a lawyer. If running as a private hire service under Section 6 hits the 'too hard' basket, Uber could still come in as an app booking system for more standard cabs, but we'd lose much of Uber's benefit: the ability to surge supply into the market with higher fares during periods of anticipated high demand. It's harder to bring part-timers into the market when they'd need to be running a signed, metered, and camera-equipped car.

And a big thank-you to Daniel Lynch at the Herald for doing this properly. He quoted from the blog while linking to it to provide context for those wanting the additional context. Nice job!