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Have your say: Taskforces eye RMA reform on urban limits to cut section prices

Posted in News

Environment Minister Nick Smith has announced two new taskforces to look at Resource Management Act (RMA) reform, issues surrounding urban design, metropolitan urban limits and housing affordability.

"There are major question marks over the way the Resource Management Act is working in urban areas," Smith said.

"I don't think we have the incentives right for developers to do the best urban design in our largest cities. There are also questions about the policy of metropolitan urban limits, the effect they have on section prices and the negative flow-on effects to the broader economy. Nor do we have a good track record of having the right infrastructure in place at the right time for supporting urban development," he said.

We welcome your views below.

Here is the announcement from Smith, including outlines of what the two groups will focus on:

New Zealand needs to do better with its planning of urban development and associated infrastructure, Environment Minister Nick Smith said today announcing two new technical advisory groups to support the Government's programme of resource management reforms.

"There are major question marks over the way the Resource Management Act is working in urban areas," Dr Smith said. "I don't think we have the incentives right for developers to do the best urban design in our largest cities. There are also questions about the policy of metropolitan urban limits, the effect they have on section prices and the negative flow-on effects to the broader economy. Nor do we have a good track record of having the right infrastructure in place at the right time for supporting urban development.

"These are complex issues that require careful deliberation and expert input. That is why the Cabinet has appointed Urban and Infrastructure Technical Advisory Groups to work with the Ministry for the Environment to report on these issues this year."

The Urban TAG will be chaired by barrister Alan Dormer and includes planning consultant Adrienne Young Cooper, research economist and consultant Arthur Grimes, architect and urban designer Graeme McIndoe, Chief Executive of the Property Council of New Zealand Connal Townsend and Ernst Zollner of the New Zealand Transport Agency. It has a report date of 31 March 2010.

The Infrastructure TAG will be chaired by Mike Foster, Director of Zomac Planning Solutions Ltd, and includes planning consultant Adrienne Young Cooper, barrister Alan Dormer, solicitor Kelvin Reid, civil engineer Lindsay Crossen, Sacha McMeeking from Ngāi Tahu and the Chief Executive of the New Zealand Council for Infrastructure Development Stephen Selwood. It has a report date of 30 June 2010.

"These issues of urban design and infrastructure have important linkages and that is why Alan Dormer and Adrienne Young Cooper have been appointed to both advisory groups. The work the TAGs will do will feed into the Government's broader Phase II RMA reforms and a further amendment Bill."

Urban Technical Advisory Group

The RM Phase II Urban Technical Advisory Group (TAG) is appointed to provide independent advice to the Minister for the Environment on proposals for the reform of the urban planning and design mechanisms in the RMA and related legislation.

The scope of the review will look the merits of tools currently available for implementing urban planning and design including:

  • housing affordability/section pricing mechanisms
  • urban design panels
  • metropolitan urban limits
  • financing and funding mechanisms for infrastructure
  • spatial and structure plans

It will also look at integrating and align planning statutes and planning mechanisms (specifically the RMA, Local Government Act and Land Transport Management Act).

Infrastructure Technical Advisory Group

The RM Phase II Infrastructure Technical Advisory Group (TAG) is appointed to provide independent advice to the Minister for the Environment on proposals for the reform of the Infrastructure provisions in the RMA and related legislation.

The Scope of the TAG's investigation of infrastructure work will include:

  • A review of the role of designations in facilitating infrastructure development and an examination of options for reviewing and streamlining the designation mechanism.
  • An investigation of alternatives to designations for planning for and managing the effects of activities on network infrastructure.
  • Streamlining and integrating processes including for acquisition and compensation, under the Public Works Act 1981 and other legislation.

Click here to see a previous story: Motu's Grimes says Auckland urban limits driving land prices up, stifling development.

What do you think? What should the two taskforces recommend (if anything)? Will this just create a whole lot more hot air with recommendations that won't be acted on? Is there really a problem?

We welcome your comments and insight in the space below

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment in the box on the right or click on the "'Register" link at the bottom of the comments.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

66 Comments

Several of the most vocal

Several of the most vocal proponents of the theory that land prices are artificially high due to urban planning restrictions have directly or indirectly bought rural zoned land on the periphery of cities hoping that rezoning will make them (probably) millions.
Similar gains have been made via freeholding crown land under the review of pastoral leases in the High Country.

Irrespective of whether one approves of urban sprawl, it seems a bit unfair that capital gain can be made in this way... I wish the media would dig a little deeper on the true motives of some lobbyists behind this issue.

<i>Irrespective of whether one approves

Irrespective of whether one approves of urban sprawl, it seems a bit unfair that capital gain can be made in this way"¦

Yes, we can't have profit in the Peoples Republic.

From googling it is apparent

From googling it is apparent that Adriene Young Cooper of Hill Young cooper have done work for Queesntown recommending things like requiring developers to provide a proportion of units as "affordable"
Strong international evidence suggests such policies actually inflate property prices, because its deters development
So that's what kind of thinking we'll have here
Its almost like Labour were stil in Govt!!!!!

"Yes, we can’t have profit

"Yes, we can't have profit in the Peoples Republic."

Mark, I think what he's referring to is NZ's own kind of crony capitalism.

Sacha McMeeking ?? Why? Good

Sacha McMeeking ?? Why?

Good Urban Design - hmmm in NZ - forget it.

We are far too cheap for good urban design. We prefer slapdash and patchwork.

the first phase of RMA

the first phase of RMA reforms was a total waste of space, not expecting anything different with this load of hot air

http://beehive.govt.nz/release/bringing+better+balance+housing+m

http://beehive.govt.nz/release/bringing+better+balance+housing+market
and http://www.demographia.com/dhi5media.pdf

Interesting comments about the differences between mainly USA cities where affordability is 1.6 to 3 and our planning laws which have led to values of 6+.

Sydney is a real problem because it is perceived that the NSW state government practices are verging on corrupt.
As to Auckland, by being the main international gateway for immigrants, it has problems that may be more easily addressed by reducing employment expansion perhaps even by turning over proposed commercial/industrial land to residential and making it more expensive to do business in Auckland than elsewhere in New Zealand.

I can feel the broadsides even before I suggest this but really other places in NZ have to be made more attractive at Auckland's expense.

High speed train between Hamilton

High speed train between Hamilton and Auckland. Could commute to Auckland in about an hour. Both cities would benefit. Hamilton would get a lot a more residential development and rates etc. Housing pressure would be relieved on Auckland.
Moratorium on reserve contributions on all development in Hamilton would probabbly pay for half of the cost in 10 years

Long term planning by Government.

Long term planning by Government.
Example. Introduce the land tax BUT tell the public it is going to be increased each year by say 0.2% until it reaches 2%
That gives plenty of time for individual planning and for land prices to adjust downward.
Possibly make a differential between Auckland and elsewhere.
Encourage hubs of activity outside Auckland like a primary air freight international hub at Hamilton. Telegraph long term plans and expectations.

I agree with "Matt in

I agree with "Matt in Auckland", add more supply to the market by adding fast trains to other urban centres, Hamilton would be a great start and another one which could be developed further is Helensville. Intensive development around the stations and spreading out form there. Trains need to be fast though.

wot about a fast train

wot about a fast train to Warkworth or Pukekohe

How about before we think

How about before we think about high speed trains and urban limits we fix Aucklands crappy power supply (businesses lose out big time when the power goes out)

You people don't REALLY expect

You people don't REALLY expect to see this BS result in housing becoming affordable....DO YOU?...

"High speed train between Hamilton

"High speed train between Hamilton and Auckland"

Great idea!

I intend to respond with

I intend to respond with an article Monday to the Minister for the Environment, Hon Dr Nick Smiths important announcement.

Considered and constructive comments from interest Co NZ readers would be most helpful.

Hugh Pavletich
Co author - Annual Demographia International Housing Affordability Survey
Performance Urban Planning
www.PerformanceUrbanPlanning.org
Christchurch

........Additionally, the French president suggested

........Additionally, the French president suggested a general overhaul of the financial system should be considered, where capitalism would be more "regulated."

"Let us rebuild together a regulated capitalism in which whole swathes of financial activity are not left to the sole judgment of market operators, in which banks do their job, which is to finance economic development rather than engage in speculation," he was reported as saying by Deutsche Welle.

http://euobserver.com/9/26796

Walter

....By “return of the state”

....By "return of the state" Sarkozy does not mean the subordination of private profit interests to the requirements of society as a whole. He intends to place French corporations under state protection in order to strengthen them in the conflict with the French working class and their international rivals.
Please, read and judge this comments in consideration with my many other proposals.

Walter

Matt in Auck Says: "High

Matt in Auck Says:
"High speed train between Hamilton and Auckland. Could commute to Auckland in about an hour. Both cities would benefit. Hamilton would get a lot a more residential development and rates etc. Housing pressure would be relieved on Auckland."

When was the last time you actually took an extensive tour all around Hamilton?
Checkout all the new subdivisions and industrial parks?
And about an hr? I had to commute to Auckland daily for a while from Cambridge, that is a little over an hr direct to place of work...If someone jumped on a hi speed train, once in Auckland they still have to commute to their place of work...and other hrs....
A statement not full thought thru at all.

The Bank Manager Says:
"wot about a fast train to Warkworth or Pukekohe"

And the same applies to both of these, when was the last time you took a tour of these towns, and the travelling issues remain the same on a smaller scale.

Surely it is far less expensive and far less social disruption to the region to decentralise than to move a work force 100s of Kms each day?
Which is what is currently happening.

New Zealand housing needs to

New Zealand housing needs to be going UP not out. Look at the size of Auckland for the number of people living here, its totally ridiculous. If our population is going to grow we need to be practical about urban planning, housing and infrastructure, and not keep expanding our cities geographically outwards.

Or put a stop to immigration. Why do we "need" more and more people coming here in the belief that it will make the country more "prosperous", when the Govt can't even raise the living standards of the people already here. Immigration seems to the the lazy way of creating growth (if it doesn't actually create more problems) by armchair politicians who are too incompetent to do the job they were elected to do.

Matt S, I suggest you

Matt S,
I suggest you read the Demographia report about the bad effects of urban concentration.

I totally agree on immigration. We should take in only those who can contribute and ONLY if it does not strain facilities. Business leaders seem to think that MORE is good and that is often their only way of planning to grow their businesses.

Bank Manager's idea of high

Bank Manager's idea of high speed train to Warkworth is probably a better idea
Hamilton is probably just that bit too far
Say, Warkworth - Albany - Auckland Central

Here here on immigration I'm

Here here on immigration
I'm totally supportive of it if it is very targeted
Fact is, if we reduced personal income tax substantially less young kiwis would leave permanently and we'd need less immigration

Right on the mark there

Right on the mark there Matt S

NZ has enough room for X number of cows and apple trees
Each cow/tree produces Y amount of income per head of population
Increase population Y becomes smaller
Bury good viable land under houses and Y becomes even smaller faster.
And the strange thing is we build on the most viable land, take Manuewa, Wiri and GI both where once high producing market gardens and farms
Take a look at all the new suburbs around Hamilton in the last 40 yrs...
How much lost production, exports have been lost...forever

Look at history where Great cities states have collapsed, they ran out of viable productive land to support the population.
We plan to fill the pockets of current generations but have failed to plan for our great, great grand children...
Up to this point in time it has not been an issue, but now or not too far in the future the point of no return is going to be reached.

Matt in Auck Says: "Here

Matt in Auck Says:
"Here here on immigration
I'm totally supportive of it if it is very targeted
Fact is, if we reduced personal income tax substantially less young kiwis would leave permanently and we'd need less immigration"

The issue is we have not produced the 'trades' this country needs out of our education system, and had to import them to fill the gaps...

Brilliant, lets hope something good

Brilliant, lets hope something good comes of it all. It seems Hugh's message is getting through. We don't have a house (building) price problem we have a land (section) price problem. Lets put the land to the best use, which presumably is housing shops factories and offices anywhere near Auckland.

As an aside since it is mentioned - it is easy to solve the problem of young graduates leaving the country - simply match their student loan repayments like kiwisaver does.

Unfortunately property speculators (pick n

Unfortunately property speculators (pick n flick - I don't have to live in it) like the building industry (leaky homes) can't be trusted to do the right thing when it comes to urban design. Why can't we have inner city living which is less of a strain infrastructure, no extra strain on our crap public transport system and motorways. I have many Asian and European friends who take one look at our public transport system who are then more than happy to live in reasonably designed and priced apartments.

An economic catastrophie, is the

An economic catastrophie, is the only way land would become cheaper, in NZ.
To many infuential vested interests, to let it happen any other way.
Task Force, Mask Force to convince the plebs some sort of action is being taken. It will go through the motions, with the usual non action, afterwards.
The land is part of the problem, what about the exorbidant, regulated costs inflicted on house builders by bloated Councils, continually hunting for revenues to maintain there unweildly structures, and fund there wish lists.
At the end of last year when I looked at developing an existing property, in Tauranga the Council fees, were 18% of the build costs. If you count building inspection fees, which I don't include as I think they are required, it is 20% of the build cost.
I have got the land, but the inflicted costs, kill the financial viability. How does this work for cheaper housing, when I can only rely on capital gains to lift the value of the development to a financially viable level. As usual a blinkered approach that will be a complete waste of time. But may humour the NZ public who want to see a few so called rich get a financial bashing.

Just what is this Kiwi

Just what is this Kiwi obsession with building a house so you can also have the nightmare of being stuck on a motorway on your way to the daily treadmill of debt. My grandmother who came from England in the 60's said the only way you will make people live in cities with apartments is to make houses unafordable which by all accounts we are well on the way to.

Why do we need to

Why do we need to grow?

Isn't the whole point of the RMA about allowing the public their say? This looks like they will wanting to reduce the publics say.

Most people want development to occur, just not next to them....hence the problem.

Currently if people want urban sprawl, they can ask for it under the current system.

I love how the scope of the review does not mention anything about the environment, funny really as that is what the RMA was supposed to be about. Sure no probs balancing that against the Section 5 criteria, but where is that mentioned?

What about iwi constraints?

Alan Dormer is a smart man, but some of his independent commissoner decisons have not exactly been razor sharp. Approving million dollar sections is not exactly going to help the problem.

I find the problem is the legal system, not the RMA, the RMA just has to follow the courts. No common sense in the british legal system, therefore everyone has to run back to the black and white and where the comma was positioned in the sentence.

Can not wait to see what comes out of this.

We have a resource -

We have a resource - it's called the CBD - let's live in it

Paul ( the YOung) some

Paul ( the YOung) some good points, however I think the Problem IS the RMA.
Unlike the previous Town and Country Planning Act, it has little emphasis on social and economic devleopment. Of course, this is perhaps understandable when it is environmental legislation, howeve the problem lies in that it does not apply well to URBAN environments - it deals with rural and natural environments quite well.
The late urban designer Barry Rae had good criticisms - the RMA is focussed on preserving the status quo rather than creating a better world that may be different to the status quo.

This as all to do

This as all to do with affordable housing, hmmmm I was in Europe and thought I'd pick up a nice 3 bedroom house not far from a major city and/or the water, I was basing my thoughts on the average wage in NZ and the multiplier required being so high here and less elsewhere from all the stats, after all our house prices are so high. well could I find an affordable house to buy, no.
Is it because our wages are so low? i.e. multiplers 80k x 4 equals 320k house. 50k x 6.4 equals 320k house. I was gutted as I was going to take over the world as I deduced that my salary being near their average should have had me laughing all the way to the bank, as rents are higher thier, but this was not to be.
Damned statistics, lies and more statistics.
These places have lower home ownership than us and more renters, better income to house price ratios and ownership is down.
The solution appears to be not to be easy or simplistic.
Let us ensure that our source data is robust and comparisons are just as it appears the devils in the detail when we try and take over the world. Location Location location seems to be more important than all the stats that seem to differ from the reality when one goes and has a look.
Relatives have a semi detached house, 3 rooms(not 3 bedrooms), one on top of other, cold running water, out house, no land. Needs complete restoration, Not holiday location just a small town. 1 hour from a city size of Wellington in Europe. bargain at 200 Euros, and our houses are deemed expensive. America may be different, having a look there next, but I will be looking at Location, Location, Location and price. Not price and statstics.

Matt in Auck Yeah you

Matt in Auck
Yeah you are right, the original Town and Country Planning Act worked well but as things got bigger it was lacking..Hence the RMA, the trouble is the RMA is very different from the original concepts and issues it was originally designed to address, including the bureaucratic BS it was to replace.
It was poorly drawn up and administered.
Bottom line it needs to be scraped, the designers go back to the original concepts and replace it along those lines.
Even those who originally designed it say it doesnt do what it was set out to do.

John why would you base

John why would you base buying a house on New Zealand wages in Europe as you don't get paid a Kiwi wage in Europe? - Most intellegent Europeans north of Greece and Spain (not counting stupid the English who seem to have followed the stupid Americans down every path of destruction, housing, war etc) stay well away from houses and either buy or rent an apartment just as we did when we lived in Paris and save the rest so as to have a decent lifestyle. Stupid wet behind the ears Kiwi's who can be seen ramapaging around with their quarter acre obsessions

oh, I thought Section 5

oh, I thought Section 5 [The purpose of the act] said......sustainable management meaning the use, development, and protection of the natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural wellbeing and for their health and safety........

Hmmm, mentions social, economic and cultural wellbeing........seems pretty good to me, so how did it go wrong? Oh that is right, the people that apply it became sh$t scared of developers [and their big money] as well has the greenies taking things through the courts, and of the courts and their ruling on the law [not justice] that you end up with a system where the people that have to administer it just end up running around in circles.

Once again it is the vocal minorities that get the run the system while the silent majorities just moan and whinge on forums rather than using the system in place.

Problem is that everyone has an opinion, and we all think we are right. So the people get to have a "say", how much they have a say is a fine balancing act. However pendulums swing, and I guess this one has gone as far as it can go in one direction and appears to be wanting to move back in the other direction.

As for the Town and Country Planning Act, now that has created enough problems as it is, not sure we want to go back there. Currently costing ratepayers a small fortune fixing up the mistakes of the past.

Next question is it really a big problem? And how come the free marketeers are not here at the moment saying not to worry as the market will sort the problem? Isn't that what modern economics all about? Let people decide if they want to pay that much for the land? If people stop buying then there the demand will fall. I do love all this stuff, totally hardcase.

Steps - I hope there

Steps - I hope there are not rose tinted glass there? The T + C planning act worked well.....then why did they scrap it? Does "worked well" mean "free for all"?

Issue is really that the hand brake was placed on the system and now people are saying that the handbrake has been applied too heavily as it is effecting our "economic wellbeing", therefore that IS a consideration under Section 5 of the Act.

It is also about the general population not liking the change that is required to be put in place over time to ensure that we do not stuff things up too far. People take time to change, or should I say it takes generations to change some population. Look at the BB's view and outlooks on life, Gen X/Y's, then look at the BB's parents. Some of the views of my grandparents would not be tolerated in society today, they haven't changed, just the generation's.

What a waste of time

What a waste of time and more money. Simple fact. Rates are derived from land and house values. If we devalue the land or the house the rates come down. Council rates cannot come down, they have spent all your money already on roading and waste water projects.
Why do you think the Auckland supercity is being put together?
More ratepayers in the Auckland city for rate purposes means greater revenue.
Look at the boundry limits for Auckland city, they are insane. Rodney district, 45km away from the city, Papakura and beyond 40km from the city, how more rural do you need to be to get away from the city?
So where are these new Metropolitan boundary limits going to be? Wellsford? Huntly?

hmmm... I thought Counci'sl derived

hmmm... I thought Counci'sl derived what money it needed to spend, and then shared the bill out over the landowners within the district, the price of the property does not matter, only the relative value of your piece of land to the next that determined how much you pay.

The public get to determine the spending [ontop of those statuatory expenses imposed by Central Government instead of paying for them via central taxes] via the elected members. Therefore if they want to spend less their get their pollies to spend less, or as is the case, most of us sit on our a$$-ets and whinge and moan to the wrong people.

If the Council's spend less, the rates are less [nothing to do with land prices] as they do not get to make a profit from their core business, but that is an LGA issue not a RMA issue.

Thanks Sean, Based on NZ

Thanks Sean, Based on NZ wages because thats what I earn, I was trying to show how the statistics and comaprisons don't stack up. Theoretically I earn the same as the average wage in Europe, but when looking to by an equivelen property based on the statistical comparisons, one finds that the so caled comparisons do not reflect reality, i.e. if prices are lower and yeilds are higher i.e over 10% then why not, but in reality the statistical comparisons between house prices and affordability are not there so the underlying data is flawed and we are making claims on affordabilty comparisons with this data.

@Hugh Is it possible for

@Hugh

Is it possible for the state to rent the land to individuals who wish to build houses?
Thus removing the land cost, and replacing it with a ground rent. Any number of variations can be imagined, but the bottom line is that the state controls/owns the subdivision and develops the land accordingly.

Compulsory purchase can apply/be threatened where obvious land banking can be shown.

How many of you people

How many of you people commenting here have actually read the latest "Demographia" Report? It does a good job of anticipating and debunking all the arguments that are made against the case for urban planning reform; these arguments are overwhelmingly made from ignorance.

Re Europe, many countries have similar problems to us. There are good reasons that Germany does not; their funding of the regions is carried out from central government tax revenues in a way that incentivises the regions to allow progress and development rather than hinder it. Essential reading: Oliver Marc Hartwich; "Bigger Better Faster More".

Ian Abley of "AudaCity" (UK)

Ian Abley of "AudaCity" (UK) posted THIS on "New Geography" a few weeks ago:

He is so frustrated with the political obstacles to reform, that he is trying to get a movement underway to establish "illegal settlements" on legally purchased farmland.

2 - In theory everyone is free under capitalism to accumulate capital

3 - In practice there are those who accumulate capital only by employing the majority who are free to sell their labour

4 - People are mostly employees, not capitalists "“ they are not free in a political sense (A)

5 - It takes capital to build a house, but a house is not productive capital like a factory

6 - Most people never have that sort of capital themselves "“ they are not free in an economic sense (B)

7 - Finance capital has developed ways to allow people to buy a home (on a mortgage for example) making a percentage in the process

8 - People attempt to borrow the cost of constructing the home, plus the cost of the land

9 - If they cannot organise the construction and land themselves, they must also borrow to pay for developer profits

10 - Farmland is invariably cheaper than the centre of cities "“ land is a positional good

11 - Where cheap farmland is available on the peripheries of cities the major cost is the cost of construction

12 - Planning makes farmland unavailable through the denial of development rights

13 - People must buy land alongside developers from within the planning system "“ they are not free to ignore the law (C)

14 - Land values are inflated within the planning process above any value as a simple positional good

15 - Developers can raise the finance to pay for planning inflated land values in ways most people cannot

16 - People increasingly cannot afford the price developers will pay for land "“ they are not free to build (D)

17 - This inflated cost can be turned into a larger burden of household debt through the mortgage system

18 - People have to live somewhere "“ they are not free to avoid indebtedness (E)

19 - The existing housing market inflates within the containment of the planning system

20 - Existing homes on planning approved land are valued higher than the cost of building new construction

21 - Developers make more profits from planning gain than they could make as a percentage on the cost of construction

22 - Planning gain is recognised by developers, planners, and land owners who have land that will gain planning approval

23 - The negotiation over who shares in planning gain becomes institutionalised within the legal planning system

24 - People have no choice but to buy new homes at inflated prices and realise the planning gain through their debt

25 - The government sustains the legal planning system, and uses environmental arguments to do so

26 - The legal system of denying development rights to farmers sustains the inflationary process in the housing market

27 - The fund of finance capital lent across the population requires house price inflation to remain secure

28 - To avoid indebtedness (E) the price of housing should relate to average household incomes (Demographia)

29 - If people were free to build on farmland (D) they could easily do so in affordable ways

30 - One way to do this is to break the planning law (C) which widely happens in the developing world

31 - However they would find it near impossible to borrow finance to break the law, and so would not be free (B)

32 - Government is not about to loosen the planning system and threaten the security of the finance system

33 - People remain unfree "“ as employees (A)

34 - Employers face few effective political demands for higher wages to make housing affordable

35 - More household income is spent on inflated house prices

36 - Households have found ways over the years to withdraw equity from the inflated values of their homes

37 - People also know that as employees they must retire from work, and paying off a mortgage is attractive

38 - Once paid off the home is a retirement fund

39 - For many people too, when mortgage rates are kept low, housing equity can be acquired by trading up

40 - Mortgage lenders have enjoyed their fund of finance capital being expanded in that process

41 - The popular trade in the stock of housing has turned into a housing bubble

42 - Those bubbles can burst

43 - Governments have found ways to avoid the bursting of bubbles being too prolonged or severe

44 - Quantative Easing to stabilise the finance system with its fund of mortgage lending was politically accepted

45 - The price of Quantative Easing in future will be cuts and taxes

46 - Taxing housing equity gains "“ misnamed a "Capital Gains Tax" "“ may interest governments in future

47 - Households will be squeezed in their equity in the name of avoiding housing bubbles

48 - Planning gain sustained through containment and tax squeezed from inflated equity is essential to government "“ the financial sector would collapse without the inflationary planning system

I would like to raise

I would like to raise the question whether the urban planning profession could be stimulated to look further into the way the laws of economics affect the prices of the various options for people to house themselves, under urban limit scenarios varying from tight to non existent.

I have been pointing out for a long time that the price of urban fringe land affects the price of all land proportionally. If urban fringe land is several times the price it should be, then urban center land will be several times as expensive as it should have been even if the effect is not exactly the same. I do not know if fringe land being ten times too expensive results in urban center land being ten, seven, or five times too high.

But from observation of reality, historically and in jurisdictions where urban limits have not been instituted or tightened enough to force prices up; the result is that sections might be available for $30,000 and whole new house packages for $150,000. But furthermore, in such jurisdictions, old decrepit homes can be had in older established areas, for prices like $20,000 for the house and $60,000 for the more conveniently located lot; totalling $80,000. Even lower prices could be found even pre crash, in much of the USA.

In the event of conveniently located lots being developed with, say, 3 small homes on them, the cost of the land per new buyer might be $60,000 divided by 3. Then the small home might be $100,000 or less. This represents a competitive option for home buyers.

But when the urban fringe sections are $300,000 (ridiculous given the price of farmland), the whole equation changes. The more conveniently located lot with a decrepit old house on it might end up priced at $600,000. Thus the historic "cheapest option" for low income earners, and generally conveniently located to the urban center what is more; is no longer. Where do these people go? Many go to the bank for a subprime loan. But more perniciously, as World Bank economist Alain Bertaud has identified, many such people end up living in the new "cheapest option": HIGHER DENSITY development CLOSER to the urban fringes. Thus they end up with the worst of all worlds: long commutes, a mortgage they can only barely afford, AND less living space. And the jurisdiction ends up with longer average commutes than they would have without the urban limits!

If we could incorporate into research, the effect of the various price options on peoples attitudes regarding where and how to live, it could be interesting. High density inner city living in Texas (as the best example of a free market) is a "cheap option" wheras in California (the best example of "planning") it is an "expensive option". The resulting "vibrancy" of each inner city community would probably be of quite a different type; the Californian one being wealthy elites, almost akin to gated communities. The Texan one would have the young artists and students and hoi polloi.

I observe the young artists and students being driven out of inner city areas by high rental prices subsequent on inflated land values. Many students now face lengthy commutes to Uni. But the penny has not dropped with any of them. They remain politically the main constituency for "save the planet" activism, and think that something should be done, not about their jurisdictions "cap and trade" scheme in land, but about those dreadful, greedy, grasping landlords and developers.

I simply cannot understand why so many seemingly intelligent people find all this so hard to grasp. I love Hugh Pavletich's description of Urban Planning's "sun rises in the west" research. He sure said it. I just hope people like him have got some honest but previously deluded people in high places, doing some intelligent thinking at last.

@colin 11:56 "Simple fact. Rates

@colin 11:56

"Simple fact. Rates are derived from land and house values. If we devalue the land or the house the rates come down. Council rates cannot come down, they have spent all your money already on roading and waste water projects."

I've suggested before that maybe GV should only reflect a 'notional' value.

It should be replaced by a generalised banding - and detached entirely from any idea of resale value.

Please don't say it is unfair if my neighbour has 50 sqm more garden than I do ..... see what this could mean in practice.

This rectifies your observation that "if we devalue the land or the house the rates come down"

I feel that GV may be a minor part of the 'inflationary' cycle for housing and for housing equity release (no link offering proof!!!)

Just bands will do - and each council then applies a factor to arrive at the final rates demand .

The stress falls on the council to keep the factor under control.

Done this way in UK when I lived there (I haven't the brains to think this one up).

I find that people on

I find that people on both ends of the spectrum are equally deluded.
The Planners who believe unmovingly in Smart Growth, and the Demographia's of the world who believe the opposite.

here's my view:

- Smart growth in its pure form will not work. This is because there are too many cultural and economic obstacles to higher density development. Furthermore, centres like Glen Innes, depsite what the Planners say, will never attract much higher denisty living.
- Neither will Demographia's approach work, nor is it desirable. Some people may want to live on the edges of the city, and some people may be able to work close to those areas. But for many people they will still need to work somewhere central in Auckland.
As a result I think there is likely to be limited demand for housing on the edges of the city. Furthermore there are some serious flaws / omissions / assumptions in Demographia's work. Refer this recent article which I think raises some valid criticisms of Demographia, such as the distorted and twisted use of some Australian studies (but also in a very protective and defensive sense also refutes some of Demographia's valid points):

http://www.planetizen.com/node/42679

Truth is, I think the answer lies somewhere between the two extreme views

If urban limits are driving

If urban limits are driving land prices up, how would that stifle development? Wouldn't that encourage more productive use of the land (high density construction/conversion) and therefore encourage development?

Also, seeing as an equivalent apartment is cheapar than a similar house - wouldn't building more apartments and high density living do more to bring down house prices than building more (expensive) McMancsions on the urban fringe.

I understand life isn't black and white, but I just don't underrstand the logic of the Demographia lobbying.

@Alex Do you not think

@Alex

Do you not think that the 'infill' housing (i.e selling the garage as a building plot) might be plausible evidence of "urban limits driving land prices up" - or is it that we all like cuddling closer and closer, whilst still pretending to live in 'detached' housing?

The urban fringe does not have to be used for 'mcmansions'.... mix it up a bit -maybe include some light industry even. Not just baby suburbs or commuter land.
I guess this is just a failing of letting 'housing developers' build without proper consideration.

I totally agree with central apartment living as well. Different choices at different stages of life.

Long term - wouldn't it be great if people carried mortgage debt for as short a time as possible, Banks, as currently configured, might not like it, but imagine having all that spare income. More plasma screens, save it, or maybe start a business?

I understand demographia as saying that city boundary limits are an artifice that inflate house prices by creating unnecessary shortage. This is open to all sorts of corruption, both ignorantly and deliberately.

The little boxes are not 'currently' worth it.

But we all need somewhere to live, and I don't want the kids living with me forever because my generation didn't have other credible pension options.

Alex, it is perfectly true

Alex, it is perfectly true that higher value land will tend to be redeveloped at higher densities. But World Bank Economist Alain Bertaud's studies show the following. I use simple guesstimates for values by way of illustration.

If urban fringe land is several times the price it should be, then urban center land will be several times as expensive as it should have been even if the multiplier is not exactly the same.

But from observation of reality, historically and in jurisdictions where urban limits have not been instituted or tightened enough to force prices up; the result is that sections might be available for $30,000 and whole new house packages for $150,000. But furthermore, in such jurisdictions, old decrepit homes can be had in older established areas, for prices like $20,000 for the house and $60,000 for the more conveniently located lot; totalling $80,000. Even lower prices could be found even pre crash, in much of the USA.

In the event of conveniently located lots being developed with, say, 3 small homes on them, the cost of the land per new buyer might be $60,000 divided by 3. Then the small home might be $100,000 or less. This represents a competitive option for home buyers.

But when the urban fringe sections are $300,000 (ridiculous given the price of farmland), the whole equation changes. The more conveniently located lot with a decrepit old house on it might end up priced at $600,000. Thus the historic "cheapest option" for low income earners, and generally conveniently located to the urban center what is more; is no longer. Then if this land is carved into 3, that is $200,000 per buyer instead of $20,000 per buyer. and a small $100,000 house ends up $300,000 total instead of $120,000.

So you have one model with urban fringe homes at $150,000 and 1/3 townhouses close to urban centre at $120,000. The other model has fringe homes at $450,000 and the other at $300,000. So far, so good. You might say, what's the difference? I'll turn that back on you. Why force up the cost of housing for everybody for no discernible differences in economic incentives?

But it is not this simple. Under the latter scenario, there are NEW economic incentives that did not exist before, for the cheapest possible option; seeing the historical cheapest options have been denied to them. The new cheapest possible option is higher density development closer to the urban fringes. Bertaud's studies actually graph urban density profiles to show this happening in Portland, Oregon; which is the longest standing example of restricted urban planning.

This effect can be observed in any NZ urban area today. Further-out suburbs with infill development all over the place. The practical result of this, is more people commuting further than would have been the case under a lassez-faire regime.

K W John, you are

K W John, you are onto it. Have you noticed Demographia's comparison, I think in last year's report, of the lengths of time taken to pay off an average mortgage? A young Texan can be mortgage free in 6 years while a young Kiwi will take 19. These are averages; the poorer people at the extremes might be 12 years in Texas and 38 in NZ. In NZ, there will be far more people who will never pay off their mortgage and far more people who will never own their own home.

I have been saying for a while that I expect NZ to eventually have a meltdown comparable to those of Iceland, Ireland, Greece, and Spain. There are simply too many fundamentals that are way out of line. Comparisons of Net Debt, bad as that is, are missing the fact that NZ not only has Net Debt as high as any economy in the disaster areas of the world, but the average TERM LENGTH of the loans and mortgages that make up that debt is probably the highest of anybody's.

Matt in Auckland, Planetizen does

Matt in Auckland,

Planetizen does NOT debunk the Demographia Reports at all. I could demolish their arguments just as I do to the same arguments here. These people simply have their ideological heads in the ideological sand; especially their favourite "expert" Todd Litman with whose work I am already familiar.

The same argument has got well under way, as it always does, HERE:

http://www.interest.co.nz/ratesblog/index.php/2010/01/29/rbnzs-bollard-d...

Matt in Auck The blog

Matt in Auck

The blog article (not on the main list) by the Canadian researcher / librarian Michael Dudley will be responded to shortly by Dr Tony Recsei, the author of the Introduction to the widely reported Demographia Survey.

You are being deliberately misleading in suggesting that Demographia takes an ideological or extreme approach. Indeed the Demographia approach is clearly structural and pragmatic - that resonates across the political spectrum. The NZ Planning Institute publicly supporrted it way back in early 2007 for example.

May I with respect ask you to explain to interest co nz readers what detailed solutions you have, that will allow households over a reasonable and realisrtic time frame, to purchase housing at or below three times annual household income and mortgage load to around 2.5 times household income.

Lower land costs help detached housing as well as the dense stuff you seem to prefer. All forms of development win.

i would really prefer if things moved on to "solutions" - and look forward to readers views on the article topic - the hugely important announcement by Environment Minister Dr Nick Smith.

Hugh Pavletich

PhilBest - if you open

PhilBest - if you open your mind a bit, put aside your religious libertarian fervour (take your ideological head out of the ideological sand!) , which is just as one eyed as the smart growth lefties, you might actually see that there are actually some quite valid criticisms of Demographia's work.

As an intelligent person you will know full well that things in life are hardly ever black and white.

I share some of the critical views.

The introduction to the latest survey refers to (without referencing) an Aussie study that indicated that the per capita energy usage (and greenhouse gas emissions) of people living in apartment buildings was greater than people living in single detached suburban homes. The study did indeed find this. But what the introduction doesn't mention is that small flats and townhouses had lower per capita energy use than the single family detached houses. This is an important point.

Also, we need to be careful about taking this Aussie research and applying it uncritically to NZ. Due to the fact that a much larger proportion of our energy comes from renewable energy sources, the energy use of apartments in NZ would be associated with much lower carbon emisisons than in aussie. So whilst apartment living in Aussie might have marginal benefits in terms of carbon emissions over detached housing (when one factors in transport use) therefore diluting arguments in favour of high density devleopment on environmental grounds, it is likely that in NZ the higher per capita energy use in apartments would mean almost nothing in terms of higher green house gas emissons relating to energy use. And it is highly likely that centrally located apartments would generate significantly lower transport related gas emissions.

So it is liekly that NZ, at least, there ARE enviroentmal benefits to be gained throuhg higher density development.

Notwithstanding this, Litman is likewise ideologically blinded, and desperately defensive of any valid criticism of smart growth (and I do think some of demographia's criticism is valid)

Lets say I think both sides of the arguments have points. Let's bring them together and say, hey we actually need a bit of urban expansion in strategically identified places (rather than free for all sprawl), but complemented with some urban intensification as well.

Hugh What a load of

Hugh
What a load of bollocks!
Demographia are the ones who are being misleading here with very selective use of study findings (most of which aren't referenced, very sloppy), and overly simplistic arguments like planning is all to blame for housing affordability problems.

Any intelligent person knows that it is more complicated than that.
Restrictive planning is ONE of a number of SUPPLY AND DEMAND factors that have a negative influence on house prices, NOT THE ONLY FACTOR

Don't you think that some of the following are also relevant factors:

- desirability of a place
- geographic constraints (ah, things like hills and water might actually have an influence on how much housing can be suppleid don't you think?)
- Access to credit
- interest rate levels
- immigration policy
- Building monopolies
- lack of economies of scale in places like NZ for building
- demographics

the list goes on and on

but of course you will not consider this argument, because you have made up your mind long ago that there is one and only one cause for high house prices

We need a law that

We need a law that makes it a capital crime for pollies to own property in NZ other than the one they reside in and prohibits them from having trusts of any sort. This way we can be sure of saving hundreds of millions because less than 5 would want to be in Parliament.

Matt in Auck - when

Matt in Auck - when your blood pressure comes back to safe levels, you might like to dispassionately enlighten us with your "soluitions".

Do read this years Demographia Survey www.demographia.com closely with the abundant end note references. Particularly Richards of the Reserve Bank of Australia.

Yes - Im convinced that to keep housing at or below the 3.0 Multiple, we need to aim to be supplying fringe starter stock over the long haul, at around the 2.5 Multiple mark.

Hugh Pavletich

@Hugh Sorry, I tried.... http://www.interest.co.nz/ratesblog/ind

@Hugh

Sorry, I tried....

http://www.interest.co.nz/ratesblog/index.php/2010/01/28/have-your-say-t...

@Matt in Auck

All of the 'relevant factors' you identify are relevqant! Many of the threads I've read attempt to tackle them individually rather than as 'part of the whole', and do so fairly well.

The real trick... the magic.... the clever bit... the bit government is best placed to tacke, is to 'weave all the threads'.

If you leave one thread out - it will unravel.

god almighty i write trite crap sometimes..............

Hugh Once again you avoid

Hugh
Once again you avoid addressing criticism (perhaps because it is valid?), you just deflect it by saying "read this year's survey"
same old tricks, same old tricks
I would appreciate if you can either acknowledge I have a point, or if I don't, tell me why
Good luck if you think you can get houses selling on the market on the edge of Auckland for around $200,000 - you are dreaming! There's no way you will build a 200 square metre house for less than $200,000, a section even on the edge of Auckland will cost at least 100K, then add in developer profit and you are extremely unlikely to sell for less than $350,000. By my estimates thats still a good 4-5 times the median income in Auckland

Good luck, I look forward to seeing houses on the edge of Auckland selling for $200,000 in two or three years time! (can I see a flying pig somewhere on the horizon?)

this is worth looking at,

this is worth looking at, a ranking of the most livable cities:

http://en.wikipedia.org/wiki/List_of_cities_by_quality_of_living

surprise surprise, the ones in the top half of the list are generally less affordable, the ones in the bottom half are generally more affordable

Matt in Auckland; ".....Notwithstanding this,

Matt in Auckland;

".....Notwithstanding this, Litman is likewise ideologically blinded, and desperately defensive of any valid criticism of smart growth (and I do think some of demographia's criticism is valid)...."

You go up in my estimation by dissociating yourself from Litman's litanies.

"......But what the introduction doesn't mention is that small flats and townhouses had lower per capita energy use than the single family detached houses. This is an important point......"

Yes, it is. It is simple arithmetic; less space per person for a similar structure = lower carbon footprint. I can think of many ideas that the people of NZ could be sold on to help save the planet. Restricting everyone's home sizes is one. Abolishing zoning to allow employment and living to exist side by side, is another. Both are just as likely to be democratically accepted.

".......Due to the fact that a much larger proportion of our energy comes from renewable energy sources, the energy use of apartments in NZ would be associated with much lower carbon emisisons than in aussie....."

So why the......? are our Greenies the main reason that we can't get any more Hydro dams built? Why can't we just solve the whole problem that way and let people live how they like?

"........Lets say I think both sides of the arguments have points. Let's bring them together and say, hey we actually need a bit of urban expansion in strategically identified places (rather than free for all sprawl), but complemented with some urban intensification as well......"

Fine. But lets admit the economic realities consequent on urban limits, that drive the price of all land up to the point that potential customers for high density development are stiff-armed by the final prices. What the planners will have to do to make this work without relaxing urban limits, is to confiscate part of the inflated value of inner city land. Good luck with that.

I don't think it is at all mideological to say that a completely lassez-faire city, if such a thing existed, would have the lowest commuting distances of all. In fact, the amount of "walking to work" that happened 100 years ago was because of LACK of zoning, so that employment and living existed side by side everywhere.

Hugh's research is non ideological and convincing. Median multipliers historically panned out around the magical 3.0 regardless of all those fancy factors you list. There is NO WAY those factors, absent urban limits, could result in median multipliers of 9 and over.

Matt in Auck Says: January

Matt in Auck Says:

January 30th, 2010 at 5:46 pm
"this is worth looking at, a ranking of the most livable cities:

http://en.wikipedia.org/wiki/List_of_cities_by_quality_of_living

surprise surprise, the ones in the top half of the list are generally less affordable, the ones in the bottom half are generally more affordable"

Matt, I am losing track of who I have said what to, because I am having this argument on 2 threads at once. Here is what I said to "steven" a few hours ago on the other one.

".......One of the commonest but least understood contradictions of Green advocacy, is this. In the advent of depleted resources and scarce, expensive energy, most inner city jobs will simply cease to exist. We might condemn the extravagance of the advanced US economy, yet we completely fail to recognise that millions of bureaucratic and paper-shuffling jobs simply cannot be supported by a leaner, simpler, "Green" economy. All those workers have to be fed, clothed and housed; and these things have to be provided by millions of other humans for whom inner city living is impossible.

Not to mention the sheer unaffordability of high density downtowns for the most people. Not only do the inhabitants of Manhattan have jobs that would not exist without the extravagant, complex US economy, they earn the highest incomes in that economy. Manhattan actually represents the same sort of elitism as the ancient castle in which the nobility lived, surrounded by peasants who did the dirty work necessary to sustain the inhabitants of the castle in their utopian existence. When the peasants were forced by enemy action, to abandon their low-density living, the castle could not survive for long.

Furthermore, inner city living itself will become impossible in the brave new world of scarce resources. The same factors that will make free use of private vehicles less feasible will also apply to public transport. If we really do have to confront such a crisis, we will be forced to resort to freely mixed uses of land. The transport necessary for the support of modern living, particularly for the supply of food and necessities, will no longer exist; neither will the supplies of affordable electricity.

In the brave new world of depleted resources, what makes sense? Living in a wholly separate house with its own plot of surrounding land, where you can burn biomass to heat your home, cook on a barbecue, hang washing on a line, grow your own vegetables and fruit trees, collect rainwater, compost your own waste and recycle "grey water", keep fowls or even a sheep or two, and have solar panels all over your roof and a wind turbine in the back yard; and buy produce from nearby small farms, vineyards and cottage industries? Where does living in high density inner city blocks of flats, or catching trains, fit in to this picture?"

Ian Abley of "AudaCity" in

Ian Abley of "AudaCity" in the UK, is actually attempting to get an "illegal settlement" movement underway in protest against all this, having lost patience for political-legal reforms that will not happen because of incumbency. I must admit a good deal of sympathy for this approach. Imagine a well publicised movement presenting the prospect of thousands of young people getting $5,000 sections outside the urban limits, which cost could go up by $10,000 or $20,000 if services were provided. The $200,000 plus involved in the status quo, is almost ENTIRELY a "planning tax" or rather, the result of a "cap and trade scheme" in urban land......"

$5,000 sections - well now,

$5,000 sections - well now, why not?

Everyone's run away, gibbering and hoping the thread dies.

Where's my profit? Wasn't like that when I was a kid! Gen thingy don't deserve it - get everything fo nothing.... I had to sweat to pay for this.

Hell, my kids even went overseas it was so tough then.....

All that interest I had to pay to get where I am....

"......Everyone’s run away, gibbering and

"......Everyone's run away, gibbering and hoping the thread dies......"

Actually, check out

http://www.interest.co.nz/ratesblog/index.php/2010/01/29/rbnzs-bollard-d...

A similar argument always was running over there.

@PhilBest Thanks, following them all.

@PhilBest

Thanks, following them all.

Nice little article in this

Nice little article in this mornings Sydney Morning Hearld... Study by Price Waterhouse Coopers...

"Economic modelling produced for the Herald by PricewaterhouseCoopers shows the task of building the new roads, houses, schools, supermarkets and recreation facilities needed by 2050 will be so great that the nation's current pool of savings will struggle to cover it, even with the help of foreign capital.

As a consequence Australians will have to make major lifestyle changes.

These range from dramatic increases in housing density and an end to our reliance on the car, to the creation of self-sustaining urban communities capable of generating their own energy to avoid the need for new power stations.

Planning experts say we must also consider whether population increases will be accommodated in larger regional centres rather than allowing cities such as Sydney to grow."

http://www.smh.com.au/national/australia-2050-is-a-future-we-cant-afford...

The Aussies are starting to think correctly!... shame we are'nt.