Resource Management and degrees of freedom

The Natural and Built Environment Act has eighteen different outcomes and sub-outcomes that regional planning must seek to achieve, without hierarchy among them. 

When I see this many outcomes, with no way of weighing across them, and without a requirement to run some kind of CBA across the set, I see infinite degrees of freedom for a regional planning body to just go ahead and do whatever the heck it wanted to while justifying it by pointing to one or several of the outcomes.

I mean just look at this.

5 System outcomes

To assist in achieving the purpose of this Act, the national planning framework and all plans must provide for the following system outcomes:

(a) the protection or, if degraded, restoration, of—

     (i) the ecological integrity, mana, and mauri of—

          (A) air, water, and soils; and

          (B) the coastal environment, wetlands, estuaries, and lakes and rivers and their margins; and

          (C) indigenous biodiversity:

               (ii) outstanding natural features and outstanding natural landscapes:

               (iii) the natural character of the coastal environment (including the coastal marine area),  wetlands, and lakes and rivers and their margins:

(b) in relation to climate change and natural hazards, achieving—

     (i) the reduction of greenhouse gas emissions:

     (ii) the removal of greenhouse gases from the atmosphere:

     (iii) the reduction of risks arising from, and better resilience of the environment to, natural hazards and the effects of climate change:

(c) well functioning urban and rural areas that are responsive to the diverse and changing needs of people and communities in a way that promotes—

     (i) the use and development of land for a variety of activities, including for housing, business use, and primary production; and

     (ii) the ample supply of land for development, to avoid inflated urban land prices; and

     (iii) housing choice and affordability; and

     (iv) an adaptable and resilient urban form with good accessibility for people and communities to social, economic, and cultural opportunities; and

(d) the availability of highly productive land for land-based primary production:

(e) the recognition of, and making provision for, the relationship of iwi and hapū and the exercise of their kawa, tikanga (including kaitiakitanga), and mātauranga in relation to their ancestral lands, water, sites, wāhi tapu, wāhi tūpuna, and other taonga:

(f) the protection of protected customary rights and recognition of any relevant statutory  acknowledgement:

(g) the conservation of cultural heritage:

(h) enhanced public access to and along the coastal marine area, lakes, and rivers:

(i) the ongoing and timely provision of infrastructure services to support the well-being of people and communities.

6 Decision-making principles

(1) To assist in achieving the purpose of this Act, the Minister and every regional planning committee, in making decisions under the Act, must—

     (a) provide for the integrated management of the environment; and

     (b) actively promote the outcomes provided for under this Act; and

     (c) recognise the positive effects of using and developing the environment to achieve the outcomes; and

     (d) manage the effects of using and developing the environment in a way that achieves, and does not undermine, the outcomes; and

     (e) manage the cumulative adverse effects of using and developing the environment.

(2) If, in relation to making a decision under this Act, the information available is uncertain or inadequate, all persons exercising functions, duties, and powers under this Act must favour—

     (a) caution; and

     (b) a level of environmental protection that is proportionate to the risks and effects involved.

(3) All persons exercising powers and performing functions and duties under this Act must recognise and provide for the responsibility and mana of each iwi and hapū to protect and sustain the health and well-being of te taiao in accordance with the kawa, tikanga (including kaitiakitanga), and mātauranga in their area of interest.

I don't think there exists a possible regional spatial plan that can meet all of the objectives without trade-offs between the objectives. And there's enough of them that you could write up whatever spatial plan you preferred (based on aesthetics or whatever else), and then just point to how any alternative worsens one or several of the named outcomes relative to your starting point. 

"Oh, we'd love to allow more density in this region. But as I'm sure you're aware, that area's important for the preservation of cultural heritage. And while we'd like to enable urban expansion at the fringes, we're simply surrounded by land that either has high agricultural value, or is ancestral land, or both. So I'm afraid our hands are tied. We aren't NIMBYs who just hate change and newcomers; we'd love to be able to do what you recommend. But we must give regard to a broad set of outcomes. It is unfortunate."

Unless councils have a lot stronger incentive to want growth, they'll have plenty of degrees of freedom for blocking it. 

My column at Newsroom this week covers it. Ungates tomorrow by dropping /pro from the URL. 

The game of whack-a-mole in which central government legislates against each new way that councils find to obstruct growth seems likely to continue – unless councils are made to welcome urban growth by sharing in its benefits.

In praise of paper roads

My column in the Stuff papers this week went through the merits of unformed legal roads - the paper roads that sit, waiting to be used.

We may need a few more of them.

New Zealand, like Canada, has road allowances, or “unformed legal roads”. But remaining unformed roads are not part of any systematic grid. They rather were set to ensure access to pieces of land that might otherwise be landlocked, to provide access along waterways, and to provide access to the coast.

Designating corridors for urban growth here has consequently been more difficult.

Manitoba’s land survey, 150 years ago, preserved space for roading. Here and now, it requires designating a corridor on top of land already owned and already in use. If the corridor comes to be used, the owner will be compensated under the Public Works Act. But the designation itself can impose uncompensated costs by introducing uncertainty. It is hard to make full use of your property if it hangs under the risk of compulsory acquisition for a road or highway.

Retrofitting a full prairie grid onto a topographically difficult country might not work.

But there could be promise in designating more corridors for growth well in advance of their being needed and compensating the owners of the designated land for the inconvenience. Then, when there is need for a road or busway, and the funding is lined up, council could exercise its option and use the corridor.

Here's what it looked like in Southern Manitoba. Our old farm is on the map there, south of Notre Dame. Every one of those big squares is one mile by one mile. You can see the quarter-sections within a lot of them. In a few places, like around Cardinal and Babcock, the terrain didn't allow the gridded roads to continue. So the road would wiggle a bit before snapping back to grid as soon as practicable. 

I love the bloodymindedness of it. There will be a road on the mile every mile, or allowance for one, and topographical disruptions can have only local effect. The grid must go on. 

You'll also notice an offset in the grid just north of Notre Dame de Lourdes. That's a correction line. Because a square grid doesn't sit well on a sphere, you need correction lines. As you move North from the US border, fewer square miles fit into the next row up. So the sections all offset by a bit at the correction lines. 

Afternoon roundup

The tabs... there are so many of them.

A few notes on the closing of the tabs.

• Tyler Cowen is excellent on herd immunity. Those who urge us not to worry about the virus used to claim that herd immunity would kick in and the virus would burn itself out. Now they tell us not to worry because the death rate has dropped. But herd immunity was supposed to stop case numbers from rising. And even places with lotsa Covid aren't there yet - other than perhaps at San Quenton. 
• Sam Bowman has a neoliberal agenda for the 2020s: YIMBYism, support for immigration, and carbon pricing (he says carbon taxes, but if you've already got an ETS, that'll do the job). Neoliberalism is a bit of a political swear word. Oliver Hartwich goes through the history of the term - the actual neoliberals were more 'third way' types. Whether the term should be buried or reclaimed is a bit of an open question. 
• Steve Ambler and Nick Rowe on NGDPLT.
• Freedom of speech doesn't encourage terrorism. It reduces it. Here's Eskildsen and Bjørnskov in Political Studies. Why? They suggest "(1) more freedom of expression makes it easier for the police and intelligence agencies to gather information on potential terrorists and targets, and (2) freedom of expression works as an outlet for displeased citizens through which they can openly express their discontent instead of resorting to terror."
• Chris Bishop and Phil Twyford had an excellent panel discussion, hosted by Warren and Mahoney, in which they went through urban and transport policy. This kind of thing makes you really appreciate what we've got in NZ. 
• Get yourself a city councillor with a digger. It helps.
• Support for immigration improves, albeit on a bit of a tough to interpret question. If folks recently said that the amount of immigration should increase, are they thinking about policy as it was before Covid, or are they thinking about current border restrictions?
• Helen Clark comes out in support of the euthanasia bill. I agree with her. 
• Superb piece from Colby Cosh on tax and legal cannabis in Canada. It isn't enough just to look at the tax take on cannabis. Is it a complement or a substitute to alcohol or tobacco? What are the general equilibrium effects? 
• Every supporter of circular economies and zero waste should support this initiative.
• Can you build a new tech hub? It's harder than it sounds.
• Razib Khan on Brahmin Privilege
• Keas are awesome
• Arthur Grimes on getting targets back into government.

Reader mailbag: Weird urban planning edition

Hoisted from the inbox:

Weird urban planning stories: Melbourne's Eastern Freeway is being considered for heritage listing.

Heritage Victoria has backed the Andrews government’s application to heritage list Melbourne’s Eastern Freeway, finding that the road’s “naturalistic landscape setting” and “series of distinctive concrete road overpasses” make it worthy...

In his recommendation to the Heritage Council, Heritage Victoria Executive Director Steven Avery has supported the Andrews government’s heritage application in a report describing the road as “a fine, intact, influential and pivotal example of a freeway”.

“The Eastern Freeway – Stage One is also historically significant for the prolonged and at times violent community protests that met its announcement, construction and opening,” Mr Avery found.

This is the second-worst urban planning story I've read this week. However, it turns out that the heritage listing is intended to block construction of a connecting freeway with a BCR of 0.8, so perhaps this is actually good from a broader economic efficiency perspective?

This is the worst urban planning story I've seen this week, and possibly ever.

I suspect that the second-best case fails to hold - there will surely sometime be a project that would have a better BCR that will get blocked by this. I don't know if the same nonsense applies to roads as to houses, but even a resurfacing could wind up being tricky, or repainting the lines.

That last link is pretty bad.

Demotion, or second chance?

My Newsroom column from last week looks at the Twyfortunity in the cabinet shuffle - belatedly posted here as I was off at the NZAE meetings last week. 

Cabinet shuffles provide great journalistic set-pieces.

For the politics-as-sport contingent, it provides all the narrative arc of changes to the Black Caps line-up for the World Cup: winners and losers, who’s in and who’s out, and whether the changes will do more to help the team score political runs or to defend against the Opposition’s bowling attack.

As expected, the Government’s changed the housing line-up. Megan Woods became Minister of Housing; Kris Faafoi took over public housing; Nanaia Mahuta took responsibility for Māori housing; and Phil Twyford took up Urban Development and Economic Development. Sporting commenters framed it as a loss for Twyford. But is it a loss for housing?

In last week’s column, I urged the Government to give Minister Twyford the chance to see through his housing supply agenda. I have argued that no one in Parliament better understands the underlying failures in local council incentives, regulatory settings, zoning, and infrastructure financing. And solving that complicated mess is what is required if New Zealand is to build its way back to affordable housing.

When it comes to housing, it isn’t just the batting line-up that’s out of order, it’s the selection process, the training system, and the club system generating the talent that might be picked. It needs fixing from top to bottom.

An optimistic read of the cabinet changes is that this is not a demotion for Minister Twyford, who maintains his ranking within Cabinet, but rather an unshackling. The Government’s housing supply agenda has not made necessary progress, at least in part because the Minister and the Government have been distracted by impossible-to-achieve Kiwibuild targets. Twyford will be able to focus on the areas where he can make the most difference.

But let’s step back to the mess of problems that yet needs solving and consider the way forward.

...

Minister Twyford’s supply agenda, on the surface, begins with a change to infrastructure finance. Rather than falling onto Council balance sheets, or onto homebuyer mortgages, the cost of new infrastructure will be covered by levies on the housing benefiting from the new infrastructure over the life of that infrastructure. Targeted rates on new developments will pay off the bonds issued to finance new infrastructure.

Separating infrastructure financing decisions from political processes helps set a longer-term platform for urban development. Even if a substantial Crown infrastructure push over the next few years was able to get around the very real capacity constraints in a sector already under strain, it would not set the foundation necessary for long term growth. It would instead help to perpetuate the boom-and-bust cycle that has bedevilled the construction sector for ages.

Infrastructure bonds whose financing depends less on political interest than on the commercial viability of the underlying development can set the stage for greater longer-term urban growth that is responsive to changes in demand. When demand for more housing makes it profitable to build more housing, the developer can issue infrastructure bonds and start building without having to convince the Crown to take on new infrastructure debt. It is a way of sustaining infrastructure investment beyond the current crisis.

But it also requires the buy-in of those who will be paying the levies. And here, I think, Minister Twyford may need to do a bit more work.

This kind of infrastructure finance, in the United States, typically has the assent of those who will be footing the bill. Property owners setting a new development establish infrastructure boards that will own the infrastructure, that will be responsible for paying off the debt through a tax on the properties within the development, and that will be governed by those who buy properties in the new development. Taxation is coupled with representation.

Here, so far, proposals for new infrastructure bonds do not require the assent of the levied. In greenfield sites, where the land’s owner or development partner might set the bond, that kind of assent process will matter less. But it will matter in brownfield sites where an Urban Development Authority might seek an infrastructure bond to allow for upzoning. Homeowners who do not redevelop in response to the zoning change would still be on the hook for contributions toward the new infrastructure.

And while that may be fair enough where the infrastructure increases the value of those properties, it can also be a problem. If an Urban Development Agency seeks a new infrastructure bond without some credible demonstration that the bond issue is supported by most of those who will be paying the levy, political opposition to the process can stymie development.

New Zealand’s business improvement districts may provide a useful model. Business improvement districts allow businesses in a village centre, for example, to levy themselves for the provision of amenities that are to their mutual benefit. But that requires the assent of the affected owners through a ballot. A double-majority requirement is there in place. A majority of business owners is required, as well as the assent of owners whose combined holdings represent a majority of the capital value of the businesses in the proposed district. That double majority requirement prevents a large number of smaller owners from preying upon a small number of wealthier businesses, and also prevents a small number of large owners from imposing too high of costs on smaller owners.

A similar double-majority threshold could provide democratic legitimacy to new infrastructure districts, while leaning on an established body of New Zealand practice.

It is all rather complicated, and hits only onto the infrastructure financing part of the work ahead for Minister Twyford. Unwinding the mess is not a small job.

Focusing on the ballsports [EC: I wrote sportsball; I don't know who changed it to ballsports] parts of politics suggests the cabinet changes were a loss for Twyford. But if it allows him to focus on the parts of the portfolio that play to his strengths, it may instead be a win both for Twyford and for housing. Carving out the parts of the job that can be well handled by others, like social housing, makes a lot of sense. Letting Minister Woods take over Kiwibuild should let Minister Twyford make progress in the parts of the housing agenda that will matter the most over the longer term.

But we will need to see progress now that the barriers and potential excuses are out of the way.

 Ungated version here.

It is not hard to come up with scenarios where brownfield sites for the new bond-and-levy-funded projects get blocked because a small number of owners who'd be subject to the levy are very rightly aggrieved - they'd be paying for something for which they have no use. The levy has no particular democratic legitimacy. There are potential ways around it - like maybe you could accrue those levies against the property until sale or transfer. But things will get messy more easily, and the whole thing potentially binned as having proved too hard, if they get too many cases where the project's been blocked because they've tried imposing the levies on folks who don't agree to them.

The Rise of the Vogons

Matt Ridley doesn't call a Vogon a Vogon, but that's what he's talking about at The Times. The UK has a process-based nightmare in planning. New Zealand is in the same boat, but Peter Dunne will not allow the government to fix the Resource Management Act to solve it.

Here's Ridley:

At last, the government is about to decide on a third runway at Heathrow airport — by the end of this month, I hear. It’s only been ten years since Tony Blair’s government first proposed the plan. Yet it will be three years until planning permission is granted and another six before the runway is finished. That’s two decades. Heathrow’s original three runways in 1946 took less than two years to build from scratch in a war-ravaged country depleted of funds and fuel. Why do such projects now take so inordinately long?

Land-use planning in Britain is not a joke; it’s a disgrace. The present system is grotesquely biased, not so much in favour of opponents or proponents of development, but in favour of delay and cost. I happen to think HS2 and Hinkley Point C are mistakes, but if I’ve lost those battles — and I probably have — then at least let’s get on and build them quickly, rather than spend the next decade paying lawyers and consultants to slow them down and inflate their costs.

Ridley points to a new iron triangle. Lobbyist charities do well in fundraising and point to blocking things as evidence of success. Politicians take astroturfed complaints from the lobbyist campaigns as evidence of popular opposition and so insulate themselves through lengthy processes - which also suit the bureaus. And lawyers intermediate, with complicated processes both providing avenues for suits and for regulatory consulting work.

Ridley concludes:

As C Northcote Parkinson might have put it (as an example of his eponymous law), the civil servant who delays a decision because he is inundated with protests, then pleads a backlog of work as a reason for needing a bigger budget and expanded team, is not being irrational; far from it. But nor is he taking decisions solely in the public interest. The protester whose actions lead to a goldmine of publicity and the besieged public servant who thereby gets a budget increase, and the lawyer who interrogates both in court — are all benefiting from delay.

If this government wants to govern it must grasp how this process works. The risk is not just that the state is ineffective but that it gets consumed. Like a caterpillar full of parasitic wasp larvae that will eat its vital organs last, Britain can still inch forward in the world economy despite its ridiculous planning system and its powerful protest industry. But not for ever. Somehow we have to rebalance the incentives in favour of faster and cheaper decision-making.

Local regs, macro effects

What's the cost of bad urban planning policies? About 9.5% of GDP as a first cut, according to new work by Chang-Tai Hsieh and Enrico Moretti at NBER.

What's the mechanism? When productive cities make it hard to accommodate new workers, whether because of restrictive zoning downtown preventing densification or restrictions on the urban fringe, workers who could otherwise be more productive in moving to the more productive place instead can't; they're priced out and have to stay in less productive centres.

When we quantify the output and welfare cost of this increase in dispersion of the marginal product of labor, we find that aggregate output in 2009 would have been significantly higher if the dispersion of nominal wages had not increased. Holding the distribution of local TFP fixed at 2009 levels, we hypothetically reallocate labor from high wage to low wage cities such that the hypothetical wage in each city (relative to the average wage) is equal to the relative wage in 1964. Intuitively, this scenario involves setting amenities and housing supply at their 1964 level, while keeping labor demand constant at its 2009 level, and allowing workers to reallocate across cities in response. Under this scenario, aggregate yearly GDP growth from 1964 to 2009 would have been 0.3 percentage points higher. In levels, U.S. GDP in 2009 would be 13.5% or $1.95 trillion higher. This amounts to an annual wage increase of $8775 for the average worker.

The effect is driven by housing supply constraints rather than by compensating differentials due to disamenity effects from larger populations.

We estimate that holding constant land but lowering land use regulations in New York, San Francisco and San Jose to the level of the median city would increase U.S. output by 9.7%. In essence, more housing supply would allow more American workers to access the high productivity of these high TFP cities. We also estimate that increasing regulations in the South would be costly for aggregate output. In particular, we estimate that increasing land use regulations in the South to the level of New York, San Francisco and San Jose would lower U.S. output by 3%. 

And if central government is looking for justification for heavy-handed approaches to dealing with cities with restrictive zoning:

We conclude that the aggregate gains in output and in welfare from spatial reallocation of labor are likely to be substantial in the U.S., and that a major impediment to a more efficient spatial allocation of labor is the growing constraints to housing supply in high wage cities. These constraints limit the number of US workers who can work in the most productive of American cities. In general equilibrium, this lowers income and welfare of all US workers and amount to a large negative externality imposed by a minority of cities on the entire country.  

What sorts of policies?

In principle, one possible way to minimize the negative externality created by housing supply constraints in high TFP cities would be for the federal government to constrain U.S. municipalities’ ability to set land use regulations. Currently, municipalities set land use regulations in almost complete autonomy since the effect of such regulations have long been thought as only local. But if such policies have meaningful nationwide effects, then the adoption of federal standard intended to limit negative externalities may be in the aggregate interest. 

An alternative is the development of public transportation that link local labor markets characterized by high productivity and high nominal wages to local labor markets characterized by low nominal wages. For example, a possible benefit of high speed train currently under construction in California is to connect low-wage cities in California’s Central Valley -- Sacramento, Stockton, Modesto, Fresno -- to high productivity jobs in the San Francisco Bay Area. This could allow the labor supply to the San Francisco economy to increase overnight without changing San Francisco housing supply constraints.

So fix Auckland land supply, or put in a 200kph bullet train from Hamilton to Auckland CBD.

Update: to make very clear, whenever I say "land supply", I mean both allowing increased density in town and allowing expansion at the fringes. Land supply means land where you're not banned from doing what's economically appropriate. Height regulations block economically appropriate uses as can metropolitan urban limits.

Auckland SimCity

Some reports make you want to find a city planner and beat it with a heavy muddy stick.

Arthur Grimes and Ian Mitchell's latest MOTU report is the latest. They demonstrate just how badly Auckland Council has wrecked housing affordability. Stupid "it was a good idea at the time" rules compound on one another to make it impossible for developers to innovate in providing affordable housing.

Read the whole thing. But Table Two has the main effects.

Every one of these things would have seemed like a good idea to somebody at the time, but nobody stopped to think about the cost.

• Height limits appeal to NIMBYs, maintain viewsheds (the notion that there's infinite value in being able to see some mountain in Auckland from some point on the Harbour Bridge), and appeal to idiotic planners who reckon nobody would want to live that high up anyway.*
• Floor to ceiling height limits appeal to planners who think that it's not fair that poor people's apartments would have low ceilings; they ignore that tenants could otherwise choose between higher ceilings and higher rents and lower ceilings and lower rents. Some people prefer the cash in hand; planners imagine this stuff's costless.
• Minimum balcony area regs appeal to planners' sense of aesthetics; they ignore the cost and cannot imagine that others might prefer the cash.
• Delay is costless to planners, who imagine the costs of a poor (ie, not what they like) design to be huge because buildings last a long time. 

Grimes writes:

In some cases, developers felt that they may even face additional challenges gaining planning consent if their proposal includes innovative solutions that are not typically included in other developments. Specifically, developers considered that being innovative in order to reduce cost heightens the risk and uncertainty when trying to obtain a consent, both in terms of the time required to work through the consenting process and the ultimate outcome in terms of the number of dwellings. Developers commented that urban designers do not like small uniform dwellings which are easy to produce and which reduce costs.

He also specifically cites Grey Lynn people as part of the problem around NIMBY activism.

While I broadly support Nick Smith's look at how the RMA might be fixed so it stops enabling this kind of Council ridiculousness, I doubt it goes far enough. Underpinning all of this is that Councils have zero current incentive not to behave this way. The RMA was never intended to enable this kind of mess; planners used it to set rigid district plans and to fob off blame for lengthy processes. If Councils instead had better incentives, so that growth were in their interest instead of just NIMBY-appeasement, we'd have better outcomes. 

New Zealand is the 7th least affordable place in the world to live. Bad urban planning takes a good chunk of the blame.

Update: See also:

• RMA Changes and Council Incentives
• Costs, Benefits, and apartments

* I'm not exaggerating. That was one of the reasons behind Christchurch CBD height limits. Never mind that it's developers' money on the line if they're the ones wrong about what customers might want. 

Herne Bay and Property Rights

A correspondent tells me that this flyer's been showing up in mailboxes around Herne Bay.

Let's go through the purported rights here enumerated:

• The right to object to neighbours' putting up a 4-story building that "steals daylight, privacy, perhaps views, and devalues your property".
• Some of this is legitimate; a process that facilitates Coasean bargaining with truly affected neighbours would be better. 
• The right to have ample on-street parking available whenever you might want it.
• Unless they've bought an easement from Council providing guaranteed spots in front of their houses, this is no more a right than having an unconstrained commute with no traffic.
• Pragmatically, this stuff should be handled by putting in time limits on parking on residential streets with exceptions for those with residents' passes. Hand out two per house and let them on-sell them if they want.
• The right to have the neighbourhood look as it always has looked.
• Again, unless they've gone and purchased easements from the neighbours preventing substantive changes to properties, there's no right here. 

The rights that are missing:

• The right to use your owned property as you wish;
• The right to change how your house looks, even if some other people who don't own your house don't like that anything anywhere ever changes.
• The right of others to join together buy a property on the street with their own money, from a willing seller, and to put up townhouses to live in.

The "If you think your home is your castle, think again!" line is a howler. If it's my castle, I can paint it purple and change the front gate without getting resource consents even if the Herne Bay Residents Association Incorporated doesn't like it. 

Property rights and neighbourhood character

A real estate parable.

Suppose that, when we bought our house in Khandallah, the realtor told us about a particularly nice feature of our house. A few doors down lived a lovely grandmotherly type who adored young children. She was in her early 50s, independently wealthy with few time commitments, and loved nothing more than helping out with young children. We went to meet her before deciding on buying the house, and she was just as good as the realtor advertised. We bought the house entirely because she would be our neighbour. In fact, we paid a premium for our house because of it.

Over the next couple of years, we became great friends with her. Our kids referred to her as Nana. She picked them up from school every day and, 'cause she loved us just so much, she'd have dinner on the table for us when we'd get home. We'd all eat together before she'd head back to her place after the kids were to bed. Every bit was exactly as the realtor promised: an essential part of the neighbourhood's character, for us, was that she lived a few doors down. We wouldn't have bought the place if she weren't, and we came to rely on her.

Sadly, she was hit by a bus downtown one weekend and her house was then on the market.

An essential part of the neighbourhood character was that this house was occupied by a woman with these characteristics. Since we bought the house with the expectation that that character would be maintained for at least another 20 years, we consequently have a property right in who lives in that house. Only a grandmotherly type who will help us take care of our kids is allowed to buy that house; anything else would fundamentally change the character of the neighbourhood and violate the expectations we had when we bought our house in that neighbourhood.

Seems a pretty ridiculous basis for a property right, doesn't it?

So why might anybody think they have a property right in whether the neighbour a few doors down turn his property into a set of townhouses?

Density happens, if you let it.

For as long as I've been following the politics of urban regulation in New Zealand, I've been hearing Hugh Paveltich lauding the successes of Houston in successfully delivering affordable housing on the city's outskirts through the use of innovative infrastructure funding models, and Kiwi urbanists excoriating the Houston model for sprawl.

And now Houston's showing that up can go well with out.

More Houstonians are choosing to live in high-rise and mid-rise buildings and the trend is about to spread to an unlikely place — outer suburbia.

Consider this: A developer is considering a mid-rise apartment in Pearland, the Brazoria County ‘burb, south of Houston. And a high-rise condo is being talked about for The Woodlands.

Amazingly, a significant number of home buyers have been requesting high-rise living units in the suburbs, realty experts say.

Amazing. Suburban areas where people are free to put up apartment buildings, without NIMBYs blocking them everywhere with complaints about denigration of local amenities or planners insisting that density can only happen in specified areas where they think it ought to happen.

Downtown also has a number of mid-rise apartment buildings underway, typically seven, six or five-story projects.

Two-story apartments just aren’t being built any more. Land is so expensive that developers are forced to build taller buildings to cover their costs and make the project financially viable.

Many of the new Inner Loop apartment projects have at least four floors of living units stacked atop two-level parking garages.  So even though it may not be high-rise, the residences on the sixth level often get a very decent view of the skyline. The Inner Loop of Houston has a significant number of mid-rise multifamily projects under development — the most in decades. 

The trend is even spreading to the suburbs.

Pearland is about get a four-story mid-rise residential building, just west of Highway 288, says realty broker Brad LyBrand of NewQuest Properties.

“It’s a first for Pearland,” LyBrand says.

The dense urban-like development plan for the Pearland site makes sense because two hospitals (read: job base) are under construction within walking distance, says Houston developer Allen Crosswell, who has owned the acreage for several years.

Bottom line: Houston is changing. Houston led the nation in population growth last year. The city is more urban and residential development is more vertical.

I wonder how they've managed to get suburban apartments without NIMBY action.

How do you mitigate a problem like a NIMBY?

I think I might have a partial solution to NIMBY blocking of urban intensification: a way of paying them at the margin for disamenity effects.

The one-line version: if your neighbour develops, your taxes drop.

Here's how we do it. Or at least the initial sketch-outline blog version of it. I'll expand on it later and, hopefully, fix the problems with it that you'll helpfully point out.

Consider a city of 10,000 dwellings and 12,000 households. Most of these dwellings contain one household, but some contain two households because there are more households than there are dwellings. The City collects $10,000,000 in taxes, with a $1,000 per-dwelling tax, on a standard Council rates system: the Council specifies how much money it needs to collect and that amount is apportioned across dwellings based on the relative value of the dwellings. Dwellings with higher total capital valuation pay more in tax. In this case, they're all identical for simplicity of exposition but nothing requires that they be identical or pay identical taxes.

Suppose that, in this set-up, somebody wants to put up an apartment building that would contain 100 dwellings to house 100 households. The developer pays Council a development levy that covers the building's interconnection costs: the costs the building imposes on Council. Since people would move into this building from existing overcrowded dwellings, there's no additional cost on Council of additional capitation-based services. Specify for now that each of these apartments has the same capital valuation as existing dwellings for simplicity, though again, that will vary in the real world. Council still needs to collect $10,000,000 in taxes in total to cover those services, so long as it's set the development levy correctly.*

Under the existing system, the $10,000,000 in taxes will now be spread over 10,100 dwellings rather than over 10,000 dwellings. Each dwelling consequently remits $990 in taxes. If the neighbours of the apartment building get more than $10 in disamenities from the apartment building's existence, they will lobby against its construction.

Now the RMA has some mechanism for identifying neighbours who are affected by the new development. Maybe some experience more traffic, maybe some lose a bit of view, and maybe others lose a bit of neighbourhood character. Specify that these effects, for this apartment building, extend over 100 dwellings in a circle around the new apartment building. Again, in the real world, it won't be a circle, but it doesn't matter. The RMA and Councils already have some mechanism for identifying affected neighbours; whatever that mechanism is has, in this case, identified these 100 dwellings.

Council needs to raise $10,000,000 in total, but nothing says that we need to spread the abatement provided by the new apartments to the city as a whole. In fact, on thinking about it, it seems pretty silly to spread the abatement so broadly. We've identified a set of affected neighbours who bear the costs of the new development but get the same tax abatement benefits as everybody else. Why not define a Special Ratings Area by the dwellings that experience disamenities from the new development, using whatever process is already in place for defining affected neighbours?

Let's instead specify that the total rates collected from both the new development and all the affected neighbours remains constant after the new development's construction. Those 100 dwellings used to remit, in total, $100,000 in taxes: $1000 each. Dwellings in the circle paid $100,000; dwellings outside of the circle paid $9,900,000. Outside of the circle isn't affected by the apartment building. We'll say now that all of the dwellings inside the circle, including the dwellings in the apartment building, have to remit $100,000 in taxes in total. Since there are now 200 dwellings in the circle instead of 100, the per-dwelling levy is now $500 instead of $1000. The dwellings outside the circle continue to pay $9,900,000 and the necessary $10,000,000 is collected in total. Now, neighbours would need to enjoy more than $500 per year in disamenity effects in order to wish to block the development.

This doesn't solve every problem in the world. There are neighbours who would experience more than $500 per year in disamenities and would still NIMBY up. But there will be a range of neighbours in the $10 to $500 range who cease their opposition.

If we wished a stronger counter-NIMBY effect, we could say that all dwellings inside the circle remit in total the necessary $100,000, but that the new apartments are levied at the rates that obtain outside of the circle. Only the affected neighbours then enjoy the benefits of the Special Ratings Area. The total amount collected will be the same. But, in that case, and in this example, the new apartments each remit $1000 in taxes while the 100 affected neighbours each see a complete rates abatement. So we would only hear complaints from NIMBYs experiencing more than $1000 in disamenity effects.

If the apartment development were large enough, and if the number of affected neighbours were small enough, one could imagine scenarios where the neighbours received a negative rates bill: had there been 150 apartments each remitting $1000 in taxes, and the same number of affected neighbours, there would have been $50000 in surplus to distribute among the 100 affected neighbouring dwellings: a $500 cash bonus each instead of a $1000 rates bill. In that case, it would take $1500 in disamenities to trigger NIMBY activity.

I doubt you would want that this be locked in in perpetuity.** I would expect we could see this system apply in the first year. Perhaps after 10 years, the circle as a whole, including the apartment, could remit a total rates bill equal to a half-way point between the total amount remitted inside the circle prior to the development and the total amount that would be remitted had every dwelling inside the circle, apartments included, paid the same amount as those outside the circle.

The steady-state for the circle going from 100 dwellings to 100 dwellings plus 100 apartment-dwellings could then be $150,000 in total taxes rather than $200,000. Prior to the development, the 9900 dwellings outside the circle remitted $9,900,000 in total taxes; now they'd only need to cover $9,850,000, so their rates bill would drop from $1000 each to $995 each. Each of the 100 apartments would remit the same $995 in taxes, covering $99,495 of the circle's $150,000. The remaining dwellings in the special ratings area would remit $505 each in taxes. Everybody's better off. Affected neighbours get strong abatement. Other pre-existing dwellings see a small amount of abatement too. And we reduce overcrowding because we have found a way of compensating the NIMBYs.

Now real world ratings systems are more complicated than this. More valuable dwellings remit more in tax. What I'm here establishing is a new Special Rating Area within which the city could apply its standard differential progressive capital value taxation scheme, charging more valuable dwellings a greater share of the amount that needs to be collected and less valuable dwellings a smaller proportion. It's just that instead of applying it over the city as a whole, they carve out areas around new developments as defined by the affected neighbours, and re-apply the standard apportionment formula to levy a total amount of rates across dwellings within that defined area. The rates bill for those in the area has to drop relative to what they pay in the current system, and NIMBY pressure consequently drops too.

Note further that these kinds of benefits should be stackable. If your dwelling is affected by two different new developments, you should see cumulative rates decreases.

Questions for readers:

1. Does a system like this apply anywhere in the existing world?
2. Are there obvious gaping holes that I'm missing?
3. What seems like a fair and politically sustainable time path for the special ratings area?

I'm sure there are many practical implementation issues like the calculations for dwellings in overlapping special ratings areas. And maybe we'd want gradations within the Special Ratings Areas where the most affected dwellings see the most abatement. But this all looks pretty feasible.

It seems like a good idea. Surely somebody has thought of this before. And surely somebody else has explained why it can't work. I'll look forward to your pointers.


* In the real world, they could under- or over-shoot. I've heard many arguments that Councils currently have incentive to over-shoot because doing so shifts the tax burden to new residents over existing ones and to discourage development to avoid NIMBY complaints. I can deal with the latter problem here, but we'll otherwise assume that the developer levies are set correctly.

** And especially where new dwellings might cater to new residents rather than for a shuffling of existing ones: the Council's total budget then has to increase for services that have a per-capita cost, and we don't want to give those outside the circle strong reason to lobby against the new development.

Urban Economics: student bleg

Good news! Auckland Council is sponsoring a scholarship in urban economics. It's open to postgraduate students in urban economics or related fields.

Kiwis finishing up their undergraduate Economics degrees and interested in doing a Masters in Economics at Canterbury should get in touch with me: I'd be interested in supervising a thesis looking at local urban planning issues around Auckland. Blog readers know the kinds of urban topics I like; if you want me as supervisor, drop me a note, but read the caveat below.

The closing deadline for scholarship applications is 30 May.

The Economics Department here at Canterbury is currently undergoing a redundancy process; I should know whether or not I will continue to be here prior to the closing date for applications. Updates will be provided when uncertainty is resolved: I am definitely not going to take on any new graduate supervision unless uncertainty is resolved favourably. But we expect resolution on or about 20 May.

Pre-quake, we were a Department of 19.6 full-time equivalent academic staff, including 2 Teaching Fellows. Subsequent to post-quake departures and encouraged early retirements, we are a Department of 12.6 full-time equivalent academic staff, including 2 Teaching Fellows. Subsequent to the forthcoming change proposal, should all go as currently proposed, we will be a Department of 9.6 full-time equivalent academic staff, including 2 Teaching Fellows.

Interesting times. Navigating these waters has taken much of my time lately; apologies for the light blogging.

Planning failures

After the Christchurch earthquakes, downtown was locked down by military cordon: hazards posed by buildings were deemed too perilous even for those willing to front the costs of their own SAR teams. The military cordon shrank, and finally disappeared, but the lockdown continued: a succession of master plans for the downtown prevented anybody from doing anything. At the same time, the government decided to make downtown be expensive by mandating a green frame: they'd buy up land on the southern and eastern fringe of downtown and take it out of use, though subsequent revisions have the land more sensibly incorporating residential development.

Because nobody could do anything downtown while the planners argued about which master plan would be enacted (Council's, the CCDU's), where the master-planned precincts all got to be situated, and whether or not hotels could be rebuilt in a newly designated Arts precinct, development moved out of the planned zone. Victoria Street, Sydenham, Addington: the fringes of downtown, plus industrial parks near the airport.

While Council and CCDU's lock-down approach to downtown planning was pretty destructive, at least businesses could move to the fringes. The alternative would have been to leave Christchurch: the planners made it impossible to do anything downtown.

The Press reports that Council's not happy. The headline: "Suburban development killing CBD".

The Christchurch City Council wants to stem the haemorrhage of business from the central city by clamping down on commercial growth in the suburbs.

However, it could be another year until the changes takes effect. Central city landowners have welcomed the plan, but say it comes far too late.

The new rules are in the city's draft district plan review, and would ban new office, retail and hospitality buildings in light industrial (business 4) zones.

This would halt construction in most parts of Addington, Lincoln Rd, Blenheim Rd and much of Moorhouse Ave, where new buildings have sprung up since the earthquakes. It would also affect many suburbs and land near the airport.

The plan, open for public feedback now, comes as developers complain of insufficient tenants to start rebuilding in the central city.

Where to start.

Blaming the suburbs for killing downtown, when the planners made it impossible to build anything downtown and figured everybody would be real happy to just hit a pause button for 3 years after the quakes, is more than a bit rich. If they'd also clamped down on the suburbs at the same time, they'd have thoroughly destroyed any chance of recovery. Fortunately they didn't. I wonder whether Council's hired Diana Moon Glampers as chief planner.

Downtown property owners worried about tenant flight to the suburbs, and who helped convince the planners about the need to maintain high property values downtown by constraining supply, have only themselves to blame for that part. That developers now cannot put up properties downtown at prices tenants are willing to pay is a signal that property prices downtown have to fall. The price of land downtown should be the present discounted value of expected rental flows. If the rent that the market can bear is lower, property prices have to drop.

Now, suppose that you're a developer who's still a bit iffy about Central City. You're sitting on a bit of insurance money and trying to decide whether to build downtown, build in the suburbs, or leave. You'd been holding off in hopes that the planners would start easing up downtown and making things there easier. Council's just told you that, as of a year from now, you won't have the option to build in the suburbs. Were I in that spot, I'd now be rushing through to get things consented in the suburbs ahead of the ban on new developments.

A Council concerned about the pace and nature of the recovery downtown would be implementing measures to make downtown more attractive: easing zoning restrictions, easing building regulations other than those affecting structural strength, reducing development contributions, getting faster consenting, and getting some certainty around the darned anchor projects. But, Council's constrained by that they don't have much say in the downtown; it's CCDU's baby. Confusopoly reigns.

The latest news on the Christchurch Central Development Unit's website about the Convention Centre was a 2 October update saying that they're seeking an operator for the facility.

Blueprint for failure

I really really hope that the Christchurch Press's John McCrone is writing a book on the Christchurch rebuild. This weekend's installment in the Mainlander section, not online other than via PressDisplay, is must-read. [Update: Jack, in comments, points me to a now-ungated version.]

McCrone uses the EPIC technology hub as exemplar of how government is blocking the rebuild. Recall that EPIC started, shortly after the quakes, when Wil McLellan and Colin Anderson set up a new hub for Christchurch's software and tech sector. Late in the process, a bunch of bureaucrats wanted in on the game. And the planners decreed that there should be a tech precinct with limited borders. The act of zoning a tech precinct of set boundaries, as part of an overall central city plan designed to prop up land values via artificial supply restrictions, which Treasury bizarrely viewed as a feature rather than a bug, made developing there, well, hard.

Here's McCone:

Epic was a citizens’ initiative and halfway to being built when the Government got excited about the project. Steven Joyce with his new super-ministry MBIE (Ministry of Business, Innovation and Employment) stepped in to insist that Earthquake Recovery Minister Gerry Brownlee include it almost at the last minute in the Christchurch Central Development Unit’s (CCDU’s) 100 day Blueprint masterplan.

And so the Blueprint came out with its dream of the South Frame, a strip of nine blocks of the old central city which would be given over to campus-style office developments spread among greenery and cycleways.

The ugly car yards and warehouses of Tuam St would be booted out to give the central city a defined southern margin of upmarket commercial development – a tidy border that Treasury experts said would have the added bonus of propping up quake-hit central city property values.

The Epic project would now anchor two entire blocks of an official hi-tech innovation precinct down at the High St/CPIT end of town, while up at the hospital/ Avon River end, three blocks would be given over to a matching health technology precinct.

That left a further three city blocks in-between which were just ‘‘South Frame’’ – campus-style commercial space. Maybe lawyers or other high-paying tenants would take those.

On paper, it was a bold idea. But then the heavy micro-managing hand of bureaucracy descended. Government departments trying to engineer a commercial outcome.

Andersen struggles here to remain polite – it does not really pay to be critical of those who have such complete authority over the city at the moment.

But he admits: ‘‘We got preached to by MBIE that they wanted the innovation precinct initiative to be market-led. But then they’ve spent the next two years telling the market what it will be.’’ Here we are 17 months after the Blueprint and progress has slowed to a crawl.

‘‘I’m frustrated by the Government process. It’s in the way. They think they’re putting in place all these wonderful structures and methods to build a long-term plan. But while we [are] waiting for it to happen, [all the prospective tenants] are having to sign up lease agreements outside the central city. Why didn’t we just suck it and see? Why didn’t we just let it evolve?’’

Andersen reveals that earlier this year he and McLellan had got to the point where they were going to pull out of the precinct plan, take Sigma down to Sydenham where the land would have been cheap, the place probably half built by now. But MBIE and the CCDU managed to reel them back in.

Last I'd chatted with Wil, EPIC was ready to head to Sydenham.

I suspect that Steven Joyce's idea of "Market-led" differs from mine. There's a word for an economic system in which private property owners own most of the means of production, but act under the direction and planning of the relevant Minister. It's not a nice word.

As for the rest of the wonderful precinct planning?

But speaking with property owners and developers in the South Frame soon reveals what a gap there is between teh park-like precincts the Government is trying to create and the commercial realities of rebuilding properties at rentals real-life tenants can afford.

If the economics do not stack up, the market is just not going to deliver and the Blueprint will be dead in the water.

The Health Precinct seems to be going well, as it's mostly being set around existing facilities and ones that were set to go prior to the earthquake anyway. McCone notes that Forte Health decided to build a new private hospital outside of the various blueprinted areas out on Kilmore Street; he doesn't say whether they'd looked into positioning themselves in the Health Precinct. And there remains the question of whether the government will steal use compulsory purchase to get the existing car dealerships out of the way. It isn't just the potential theft that's the problem - there's also the stupid unnecessary paralyzing uncertainty.

McCone quotes Angus Cockram, owner of one of the affected dealerships:

"They change their minds all the time. You talk to five different people and you'll get five different answers. But while they've got a [potential compulsory purchase] designation on you, they've got a wheel clamp on your property. You can't even change a toilet block or do anything to your showroom."

Cockram says he has been told the Government might buy only the land needed for laneways and cycle paths, including one cutting across the middle of his car yard.

"There's no way you could run a business like that," he says angrily. Howerver he also gets the feeling the CCDU is backtracking as it realises an urban planner's glossy streetscapes sketches cannot be just magicked into existence.

I still blame SimCity.

Imagine if the quake had hit in 2006 and Cunliffe were running MBIE under Clark, doing exactly what Joyce is doing to us now. What would that world's version of John Key be saying about central planning in Christchurch?

McCone finishes up with Kaila Colbin:

But state agencies have a tendency to want to engineer these creative environments, she says. They automatically think in terms of impressive marble and glass architecture, plenty of advisory committees and formal grant processes. They build the structures first, then try to fill them with people.
And all around the world there are sterile failures as a result.
... If allowed to to grow organically, it [innovation hubs] will naturally begin to colonise the spaces around it. And this is the right way round to do things.

Put away the blueprints: cities are organic.

I've tried to embed the McCone piece below, or at least a link to it. McCone's fortnightly reporting on Christchurch is worth the Press's annual subscription fee.

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The Press
Jan 4 2014

Glaeser on Christchurch

Ed Glaeser's Condliffe Memorial Lecture is now up at the University's "What If?" site. I've embedded it below.

 

I tell my students of the Pantheon of the Econ-Gods. Ed Glaeser is one of our Elder Gods - fueled not by the apples of the Hesperides but rather by Diet Coke.

Ed had a ridiculously busy day prior to his talk at Canterbury. He started with a tour of downtown with CERA, chipped in for a documentary somebody was making, lunched with a bunch of architects, provided a seminar for the Department, gave an interview for a freelancer for The Listener at the Staff Club, then the Condliffe. Then off for breakfast with Roger Sutton in the morning.

There are a lot of fans of Glaeser's approach to urbanism around the country. Let's hope it's done some good!

Housing daily: LVR, NIMBYs, and congestion charging

The RBNZ will soon announce its Loan-to-Value rules. Matt Nolan makes a few reasonable points (all my paraphrasing):

• If the policy is targeted at financial stability, then it has to bite on high-leverage first home loans as those are the most likely to wind up in positions of default. 
• I'm still a bit sceptical here as the OBR rules mean that the banks have to burn their equity holders and unsecured creditors before touching depositors if they make a bunch of really risky loans: I'm just not convinced that the banks here are really imposing systematic risk by allowing highly leveraged loans. But maybe the RBNZ has insider information suggesting that the government is way more likely than anybody thinks to start stomping on Councils' NIMBY regs currently preventing new building and so property prices are set for an unexpected fall.
• Further, the choice of "speed limit" will matter. Suppose we've had a road with no speed limit and we're promised one will soon be implemented to stop speeding-related risks. If they then announce a highway speed limit of 100 or 110 kph, that's all fine. If they announce a highway speed limit of 25 kph, not so much. I don't know what fraction of normal-conditions first home loans would be blocked under the new rules, so I don't know whether we're setting a 100 or 25 kph speed limit.
• Politicians mucking about with what the RBNZ is proposing risks undermining the whole purpose of the thing.
• I expect here that Matt's alluding to some of John Key's comments suggesting that first-home buyers be exempted.
• Politicians seem to see LVR as a way of fixing housing affordability; it's not well-suited to that end. 

  At the moment political parties want to loosen financial conditions for home owners, and introduce all sorts of schemes that will get capitalised into house prices.  Instead, the politicians should be looking at it as a distributional issue – it isn’t about giving young households cheap large houses that only exist in fantasy, it is about being realistic about any intergenerational distribution issues that we believe exist due to the inherent “cause” of the current “bubble” or a broader “misalignment” – this has to be relative to what we think is “fair” around the distribution of lifetime resources.  We can’t just “pop” a bubble, but if we understand the causes we can deal with the distributional issues associated with it.  Looking at supply side constraints (which both parties are) makes sense – good to see that.

  But what about the near term?  Worst case scenario, one-off tax all property, given money to group who is “hard done by” – if you aren’t willing to do that, you are faking your belief in a distribution issue. 

  Indeed.
• Matt's sick of Gen X / Gen Y whinging about house prices and wanting transfers. 

I agree with Matt that most of the demand side schemes are horribly misguided. But current housing policy prevents substantial expansion of current supply, inducing large regulatory transfers to those who bought houses when supply was less constrained. In a world where supply could expand (both with increased density and expansion in the suburbs), we wouldn't get the kinds of price run-ups now being experienced in Auckland. Matt's right that more people, and especially young mobile people, should rent rather than buy.

What we really need to figure out are policies that pay off the losers while expanding supply. We have something of a transitional gains trap in housing policy. Current homeowners do get some direct benefits from regulations preventing both them and their neighbours from developing: NIMBY is NIMBY for a reason. But another large effect is that the NIMBY regs keep up house prices as a whole. Sufficiently expansionary housing policy would impose capital losses on homeowners. And we tend not to have easy ways of implementing those kinds of policy changes without compensating those adversely affected so that we can move towards the more efficient equilibrium.

And so I was really disappointed to hear Gerry Brownlee on the radio this morning. One thing that could help Auckland move toward expanding on the fringes would be allowing the use of congestion charging to both internalise the consequent externalities and to help defray the costs of any new roading necessary to service the new communities. It's the kind of policy that compensates the losers (at the margin) while taxing the winners (at the margin). Gerry Brownlee on Radio New Zealand this morning suggested that Auckland wouldn't be allowed to implement congestion charging. Gerry should remember that it's socialists, not free-marketers, that usually recommend that scarce resources be allocated by queuing rather than by prices. If Auckland's willing to move toward sensible road pricing, and they're blocked by central government, we're in rather a bad spot.

Bland by design

I could grok changed building rules in Christchurch post-quake. Earthquake and liquifaction changed what we might want from foundations.

But the percentage of building frontage that must be in windows, no matter what? That car parking be hidden?

For example, the rules requiring buildings facing a road or public space to be between 60 and 90 per cent windows would not suit many businesses.

"Such blanket provisioning ignores that such a percentage of glazing may be inappropriate for the retailer, who may need more security, such as a jeweller or a bank; whose security requirements must take a higher priority than urban design,'' the submission said.

"Furthermore, it ignores the needs of department stores or larger stores who may need to place stock on shelving attached to solid walls around the perimeter of building."

The Property Council said that, because glazing was so expensive, the rule would boost the cost of new shops.

"We are strongly opposed to any provisions in the plan change that call for an increase in development costs without sufficient justification."

The submission criticised the requirement for car parking to be hidden from view, saying visible parking was a principle marketing attraction for retailers.

"This is completely impractical for many retail activities, which rely on visible parking to attract sufficient customers in order to remain viable,'' it said.

Prescriptive zoning rules are what deliver boring, expensive cities. Get a long enough list of "every building must", and you'll get a pretty short menu of options that can fit the bill.

I just don't get why we have to be so prescriptive about things that are orthogonal to "risk this building causes to others that are avoidable at reasonable cost." Minimum engineering standards that keep buildings from falling onto passers-by make sense. Council failed to do anything about this prior to the quakes, and even hindered owners who had wanted to tear down buildings that wound up falling down and killing people in February's quake. Even if we take a hard econ line on that individuals should be free to live or work in a dodgy building and trade safety for money, risk imposed on passers by seem sufficient to require either strictly enforced minimum standards or liability rules with compulsory insurance.

I wonder how much intersection there is between the kinds of people who think prescriptive town planning rules are great things and the kinds of people who don't like the tilt-slab construction that's been the consequence of trying to tick all the planning boxes on a budget.

Meanwhile, in America, Matt Yglesias has taken up Donald Schoup's banner on the high cost of free parking. Parking minimums are pretty common in the States: developers then have to put in more parking than they'd like to. Other places have parking maxima, preventing developers from providing as much parking as they think appropriate.

What happens when you stop being so prescriptive around parking?

Michael Manville of UCLA studied a liberalization of parking regulations in one section of Los Angeles and found that deregulation leads to the construction of more housing units and fewer parking spaces. Conversely, tighter regulation leads to a lack of affordable housing and a surplus of parking spaces. That might make sense if parking spaces were a public good, like clean air. But they’re closer to being a public bad. When Chicago mandates the creation of ahigh number of parking spaces per square foot of downtown office building, it reduces the price of parking, but it has a number of negative consequences. Cheaper parking means more traffic congestion on the streets. It also means lower ridership for Chicago mass transit. Perversely, cheaper parking offers a subsidy to commuters from outside the city limits at the expense of Chicago residents living within walking or biking distance of the central business district. And, of course, it leads to dirtier air, not cleaner.

Yglesias recommends abolishing requirements that buildings have parking spaces; I'll also recommend abolishing requirements that they have maximum numbers of parking spaces. If the highest valued use of a piece of land, as seen by the person with skin in the game, is a parking space, why need Council get involved?

Maybe, just maybe, if Christchurch Council focused really hard on a small number of rules around building safety, and dropped the other stuff, they'd be able to competently administer a set of useful rules instead of, well, what we have instead.

Coming to the nuisance

John Walley has a point. He worries that commercial encroachment on industrial zones is not being treated as a coming to the nuisance but rather could push out the prior industrial firms.

The mobile Nimbys are motivated to perceive these residual problems as significant, using every opportunity to whip up opinion against any previously acceptable use as unacceptable.

In normal times this creates problems, in a disaster recovery situation it becomes a more serious issue. Industry and manufacturing has been a lifeline for our city through our disaster, the sector kept going and, through the efforts of many, maintained activity.

Our disaster has forced our city to become more diverse, more mixed. Different sensitivities have been pushed together and sadly, we have not seen an expansion in the tolerance of established use.

Minor problems become significant when more sensitive people are present to witness them. We all know that dealing with problems becomes all the more challenging when earthquake damage insurance difficulties and weather extremes are in the mix.

The reverse sensitivities in Woolston are not new; noise and smell have always been potential issues, however these existing uses need to be tolerated as many jobs are threatened, being replaced by a handful of hospitality and retail jobs. Does that make any sense? How would you feel if your job was threatened in this way?

The Woolston gelatine plant has generated a gawdawful stench for at least the decade I've lived here.* Rolling up the windows while driving past is pretty standard drill. And it's been worse since the earthquakes.

A few short months after the earthquakes, Cassels & Sons opened their excellent brewpub close to the Woolston plant. It is a glorious place to spend the afternoon when the sun is out and the wind is coming from the right direction; we were there on Sunday. But when the wind isn't right... well, they have a phone number displayed prominently for patrons to call Environment Canterbury with complaints. Cassels are expanding with a large section of retail shops soon to open beside the brewpub.

The gelatine plant clearly pre-dated the retail development. It's also very likely that the gelatine stench predated most of the current owners of the houses just up the road from the plant; they would have bought their properties at a substantial discount reflecting the disamenity. Anyone who bought a house there after the plant was established came to the nuisance as much as did Cassels.

So, it's almost a classic coming-to-the-nuisance case. And, it's also one where there's a strong residual claimant on most of the abatement benefits: the Cassels family. Their brewpub and assorted retail holdings will do rather better when the foul winds cease to blow. In this kind of case, we expect bargaining to efficiency: if it's cheaper for the gelatine plant to change their operations or to move than it is for Cassels to bear the stench, then they can pay the plant to do it. It might have been too hard for the dispersed homeowners to pay the gelatine plant for abatement, but Cassels could pretty easily coordinate things if they wanted a Coasean solution.

But it's a bit more complicated. The gelatin plant may have been breaching some of its emissions consents:

As one of the three air monitoring stations set up in Christchurch by Environment Canterbury (ECan) is directly across the river from Cassels, ECan is well aware of the problem too. As ECan monitoring officer Chris Elsmore explains, there is the odour from gelatine production and there have also been breaches from sulphuric acid production - that would account for the sulphur smell.

"It's at a difficult stage at the moment," Elsmore says.

"Gelita certainly comprehend the problem and are taking significant steps."

But Gelita is working at a different speed to Cassels and others in Woolston, Elsmore says.

But if Cassels aims to have his Tannery complex open in six months, which is his ambition, will the smell have been minimised by then?

"Most likely," Elsmore says. "We're pushing them all the time."

That said, Woolston has long been an industrial area and is where such businesses have traditionally been. Besides Gelita, there is Independent Fisheries, a tannery and, until recently, rubber curing.

"If it was smelling, it was in that area," Elsmore says. "Alasdair's right in that things needed to improve."

So if Gelita is emitting more noxious fumes than they have the right to emit, and if it is more expensive for them to abate down to Code than for Cassels to bear the stench, they could pay Cassels to stop complaining. Cassels is pushing their customers to notify ECan whenever things are too smelly; some of this will be a push for enforcement of existing code while some of it would be to build pressure for reducing the permissible amount of emission.

John Walley has a point where changed neighbouring uses lead to lobbying for changed rules in cases where it would be really simple for the aggrieved neighbours to buy abatement if abatement could efficiently be provided. But where they're instead lobbying for the enforcement of existing standards, and where you can make a pretty reasonable case that any de facto easement existed only because of strong coordination problems among the residential neighbours, perhaps Gelita should be the ones purchasing abatement from Cassels.

* If you're from Winnipeg, think about the Saint Boniface yards from two decades ago.

Affordable City

Like Canada, New Zealand doesn't really have political parties at the local level. There are city-by-city loose affiliations that can be viewed as Labour-linked or National-linked, but they're not all that obvious.

While it's nice to avoid party politicking, it does make it harder for voters trying to figure out which candidates they should support for particular policy bundles. To the extent that local politics is mostly about constituency work rather than policy, this can make sense. But local government policy issues are getting to be rather pressing; failures in local politics seem to be driving housing price inflation and are starting to have macroeconomic consequence. 

And so it's great to see the launch of a new local-politics political party: Affordable City. Their policy objectives:

The national Affordable City umbrella has five policies which all local Affordable parties will have in common.

• Lower rates
• Balanced budgets
• Making housing affordable
• Spending only on the basics
• Restoring private property rights

The individual local Affordable parties may also have other policies which are specific to the issues in their region.

If any readers are sufficiently masochistic to wish to stand for local government, they might wish to get in touch with the folks at Affordable City. Getting local government right is rather important. I worry that it will be a tough slog: homeowners vote far more regularly than do renters, and policies that make cities affordable aren't in the short-term interest of current homeowners.