By Hugh Pavletich*
Unlike floods, tornados and hurricanes, that are “oncers” and can be predicted with some accuracy, earthquakes and particularly secondary fault ones, are currently poorly understood by seismologists. These events persist over a long time frame as illustrated on Canterbury Quake Live - the most constantly viewed website in Christchurch.
We Christchurch residents (all amateur seismologists), waste much of our spare time, (wrongly) predicting where the next aftershocks are likely to come from and where the other fault lines are, we (including the seismologists) are completely clueless about!
More in depth technical information is available at Environment Canterbury -2010 Canterbury Earthquake technical information and the GeoNet websites.
It is now near 10 months since the first event - a 7.1 magnitude earthquake 4 September 2010, followed by a 6.3 Magnitude event 22 February 2011 and another 6.3 Magnitude event 13 June 2011. There have been approximately 7,000 aftershocks surrounding these events.
The magnitude of these major earthquake events has not been the most significant aspect of them. It has been that they are so shallow and in such close proximity of an urban area.
No doubt other urban areas on the Pacific Ring of Fire are carefully pondering the consequences of these unknown shallow and close secondary faults at the moment. Seattle, San Francesco and many others.
Ground conditions have played an important role – where in general terms, the east of the city (and particularly the north east) has experienced the most significant pockets of liquafaction, while the higher income west, with better ground conditions has stood up remarkably well.
The West and many other areas of the city, have in large measure continued to function throughout.
The built environment (mainly housing) in parts of the Port Hills area of Banks Peninsula, where the epicentres of the second and third events were, experienced significant damage, due to the massive peak ground accelerations (pga) involved.
The first event (1.26g recorded near the epicentre at Darfield) was further out to the South West, but it was thesecond event 22 February with the closer epicentre on the Port Hill's, that inflicted the most damage, as the peak ground acceleration at the epicentre was 2.2g, with the city experiencing 1.88g – well above what buildings are designed to withstand. The peak ground accelerations for the third 13 June 2011 event appear to be similar or slightly less.
Christchurch Central Business District experienced peak ground acceleration with the second event (with the third likely similar or less) of 0.574 to 0.602g. In contrast, the 7.0 magnitude 2010 Haiti earthquake had a peak ground acceleration of 0.5g.
Is density deadly?
By far most of the deaths and the destruction costs occurred in the dense Central Business District, which has subsequently been vacated (referred to as the “Red Zone”) since the second 22 February event. It is likely to be vacated for months and possibly years, as in excess of 1,000 (mainly commercial) building’s are demolished. In contrast, some 300 commercial buildings are likely to be demolished within the suburban areas.
Put bluntly – density is deadly, costly and excessively risky.
It would appear 12,000 homes may be written off throughout the three Local Government areas of Waimakariri , Selwyn and Christchurch – some 5.4% of the total housing stock of the 3 areas of approximately 220,000. By far most of these are likely to be in the Christchurch area where there are approximately 145,000 residential units (estimated 135,000 usually occupied owned and rented and 10,000 other / secondary).
Depopulation and capital flight
There is currently no great pressure on the residential rental stock, due to the outwards migration following the three major earthquake events.
During May (prior to the 13 June event), Stephen Sacker of the BBC Hardtalk programme interviewed Prime Minister John Key. Within this interview Prime Minister Key stated he estimated the population loss from Christchurch would be “in the order of 20 – 30,000”. The writers estimate is that it could be slightly higher at 40,000+ (particularly following the 13 June event), some 11% of the population of approximately 376,000.
This reduces the immediate housing need by about 16,000 – based on 2.5 people per household. The above estimates are nowhere near the unscientific, but nevertheless interesting, recent The Press “readers poll”, a few days after the 13 June 2011 event, suggesting 18% intended to leave (no doubt not counting those who had already left).
The population however will recover rather quickly, provided that sound political leadership “happens” and Christchurch is clearly seen as as an affordable and opportunity city going forward.
If this doesn’t start soon, the downwards spiral will continue.
Unlike the Japanese, who are well prepared and educated about earthquakes and have remarkable risk management procedures in place to deal with them, New Zealand on the urban governance and planning fronts, is nowhere near where it should be.
Indeed – if this becomes a $30 billion event, it would likely have been much less at something below $15 billion, if there had been sound urban governance and planning preceding it. If it works out to be a $20 billion event, it would likely have been below a $10 billion one.
This is without considering the massive and often unnecessary “disruption costs” and the realities of the poorly understood Broken Windows Fallacy (YouTube video). The destruction of the capital stock “costs”. People and businesses rarely come out of an insurance event “making money”.
These major unnecessary poor quality urban governance and planning costs can in large measure be attributed to:
(a) Strangling land supply at the fringes, driving fringe serviced residential section / lots costs up from approximately $30 - $60,000 to $200 - $300,000 and beyond, which in turn ripples through land values within the rest of the urban area.
(b) Inappropriately financing infrastructure required for new development, loading the capital costs (with subdivision and builders margins) in to the house purchaser, then forcing them to “gift” this infrastructure to the utility providers.
(c) Poor planning degrading the performance of the residential construction sector, so that construction costs on a per metre basis are currently double what they should be. This “degradation” and the downstream degradation ( e.g. leaky homes, finance companies going to the wall, cowboy construction culture etc) were covered within an earlier article by the writer - Houston, we have a (housing affordability) problem | interest.co.nz.
(d) Because of these factors above, the age and quality of the Christchurch housing stock is considerably poorer and less seismically resistant than it should be. Including too the new stock (referred to as “bubble stock”), which has been built well outside conventional Development Ratios (refer the Definition of an Affordable Housing Market atPerformance Urban Planning). New residential stock, such as that at Rolleston on the good ground coped remarkably well (as did most housing west of Hagley Park and in other areas) – even though it was located at the end of the first event of magnitude 7.1 on 4 September 2010.
(e) Council planning and the idiotic Greater Christchurch Urban Development Strategy (of which current Mayor Bob Parker was the major cheerleader) had effectively “banned” the provision of affordable land on the good ground at the southern, western and northern fringes of Christchurch, severely inflating the price of fringe lots / sections (a – above) and forcing development to the poorer quality swampy ground to the less favoured east. Sound geotechnical and engineering advice was persistently ignored by local politicians and urban planners, who’s only interests were in"birds and bees" issues.
(f) Christchurch urban planning and the regional Greater Christchurch Urban Development Strategy, through inflating land prices and artificially making housing considerably more expensive, forced greater intensification and CBD living. The earthquakes have proven that “density is deadly”. Natural hazards risk management was never considered. Earthquake and liquefaction risks were well understood within the development and engineering communities in particular.
(g) The Christchurch City Council had a long and sorry history of standing in the road of the demolition of much of the old (gerry built) commercial stock, it considered “historic” - that clearly was not. This gross over listing of historic buildings meant that there were not sufficient resources available for the necessary and adequate seismic upgrades of “truly” historic buildings, such as Christchurch Cathedral, the Catholic Cathedral of the Blessed Sacrament and the Arts Centre.
It degenerated pretty much in to a “power game”, with the drummed up active support of some of the “beautiful people” of Fendalton and Merivale, keen for commercial reasons to be seen as politically correct by the Council bureaucrats. This assisted in “smoothing the waters” for other developments requiring consent.
Limp wrist syndrome
The writer precipitated changes to National heritage management (New Zealand Historic Places Trust got cleaned out at the time) in the mid 1990’s, after, as a commercial property developer, I demolished 3 Category One heritage structures on the West Coast of the South Island. They got in my road and misbehaved themselves. The “message” obviously didn’t filter down to the local level in Christchurch. Likely because of the limp wristed advocacy efforts of the local Property Council and Chamber of Commerce (which in any event, had degenerated in to the PR organisation for the Council).
(h) The writer was the only person in Christchurch (while having no development or investment interests in the city at the time – as it was clear the Council bureaucracy was becoming increasingly bloated and destructive) to formally object to the Auditor General’s Office with respect to the Greater Christchurch Urban Development Strategy (many others quietly agreed – but were not prepared to take the political and commercial risks in supporting the writer publicly), that the processes followed and the underlying research were seriously deficient (the research can only be described as “drivel” and more specifically “indoctrinated lightwieght academic drivel”- common with policy papers generated in New Zealand – Nick Smiths RMA Reform discussion papers being a glaring example). The Auditor Generals Office rejected the complaint.
There had been a “rentals issue” complaint forwarded to the Auditor General’s Office at around the same time, which was also rejected. On subsequent appeal to the High Court, the Court found in the complainants favour.
Environment Minister Hon Dr Nick Smith (as are many of his Cabinet colleagues) is well aware of the reality the Auditor General’s Office should not be involved with Local Government and planning issues – but has failed to deal with this problem to date.
(i) During the early 1990’s, while the writer was President of the South Island Division of the Property Council, I led advocacy issues with respect to Local Government financial management, which culminated eventually with the enactment of the Local Government Amendment Act No 3 1996, forcing Councils to move from “jam jar” to accrual accounting, with provisioning for the depreciation of community assets.
While it seems about a third of residential and commercial rates bills are earmarked for depreciation, substantially less (with long term debt financing arrangements where appropriate) appears to have been used for the repair and replacement of infrastructure. The Christchurch Councils in ground infrastructure appears to be of a much poorer standard than it should be.
This issue requires urgent investigation by Central Government.
(j) The forced Local Government amalgamation of some 20 years is the “root of the problem” and this needs to be urgently reformed to the “One City – Many Communities” model.
In essence – the growing Council bureaucracy corrupted the whole commercial culture of the city, seriously retarding its growth and the standards of living of its citizens. Commercial interests in particular “learnt” not to take them on. Rule by fear.
If this had not happened – Christchurch would have been a growing and dynamic city, with a population in excess of 500,000 and household incomes well above the current $NZ55,000. So the above “costs” (which are huge) pale in to insignificant, when these “lost opportunity costs” are factored in. Importantly too, a wealthier city would have been considerably more “earthquake resistant”.
Public sector performance has generally been poor – particularly the Christchurch City Council, Civil Defence and the Earthquake Commission (EQC). Let’s hope we see a vastly improved performance from CERA, since the new CEO Roger Sutton started in this role 13 June 2011.
The extremely poorly treated people in the east of Christchurch had plenty to say with respect to EQC on the highly regarded TV3 Campbell Live programme Friday 17 June 2011 (refer here, here and here.)
Insurance disaster was forewarned
EQC should never have been allowed to “frontline” insurance, as it had no expertise and resources (just 22 staff) at the time of the first event. The 2009 Independent Performance Report on EQC was hardly laudatory. Prime Minister John Key and his Cabinet should have been acutely aware of this and taken the appropriate decisions at the time of the first event on 4 September 2010, allowing insurance companies and their assessors and brokers to “frontline” insurance issues.
The earthquake damaged area population only represents about 1.5% of the total population of Australia and New Zealand. There are abundant insurance resources, and most importantly, expertise available throughout the two countries.
Incompetence would not adequately describe the performance of Civil Defence – which has moved in to the twilight zone of idiocy. The way it treated CBD property and business owners following the 22 February event, can only be described as appalling. It was a great day when they rode out of town in May.
The “star performers” has been the engineering profession and the way most buildings have withstood peak ground accelerations well in excess of the loads expected of them. This has been the major reason for (in relative terms) the small number of deaths at 182, although this figure will likely increase slightly, as forensic investigations continue.
Canterbury University has one of the finest Engineering Schools in the world.
The contractors across the board have and still are, generally performing to a very high standard. And importantly – acting ethically and with great care.
Determined businesses bounce back
The CBD business community too was remarkable, in how it generally (where possible) quickly relocated to the suburbs following the 22 February event, and if required, set up businesses at home. Most of the suburban relocations were “sub tenancies” to other businesses, that worked in to assist their colleagues and business associates. Most were “up and running” within 7 to 14 days. This was spontaneous, requiring no bureaucratic grand plan.
Indeed – this is why this major “abrupt relocation” worked so well.
The “good news stories’ are very much about people and their communities “pitching in” to help one another, as Rebecca Mafie, columnist with the Listener and John McCrone and Martin van Beynon of The Press have explained within many articles, since the time of the first event. Special mention too must be made of John Campbell and his team at Television 3.
Imagine that on 3 September 2010, Christchurch, New Zealand, with just 376,000 people, was a responsive and an affordable city, with housing at or below three times household incomes.
Let’s consider Houston, United States, with its population of 5.9 million, where housing is about 2.9 times household income, as illustrated by this years 7th Annual Demographia International Housing Affordability Suvey and the latest Monthly Report of the Houston Association of Realtors.
The latest Demographia Housing Survey (data 3rd Qtr 2010) rates Houston housing is 2.9 times annual household incomes (median house price $US160,600 – median household income $US54,500), while Christchurch, with its unresponsive governance, straightjacket planning and starved fringe land supply is 6.0 times ($NZ55,600 / $NZ333,800).
As the Christchurch City Council Quick Facts Housing Graph illustrates, housing prices were around $NZ150,000 through the 1990’s to 2002, when due to land supply being strangled, because the Council bureaucracy expanded and became increasingly unresponsive, prices have exploded through to around $NZ330,000. As the graph illustrates, when the bubble peaked, transaction volumes began a relentless decline.
By the time of the first earthquake 4 September 2010, Christchurch in development and construction terms, was already on its knees.
If Christchurch had been responsibly governed as the open land market of Houston on 4 September (when the first of three major earthquakes struck), with abundant supplies of “construction ready” affordable lots / sections where good quality ground is on the fringes to the south, west and north, there would have been an immediate spontaneous response with new housing stock being built quickly.
It is remarkable how the residential construction sector can ramp up production when allowed to. Dallas Fort Worth during the oil boom some decades ago, at its peak, put through 37 consents per 1,000 population in one year. Translated to the Christchurch situation with its population of 376,000, that would mean 14,000 consents in a year - well above current national production.
If the Council had allowed new fringe construction, importantly, morale would have been maintained. It wasn’t.
Whither good governance in time of need?
Christchurch City Council governance and planning did not however allow this to happen.
Even with the further major earthquakes of 22 February 2011 and 13 June 2011, the Christchurch Council, due to its inability and unwillingness, failed to respond by releasing affordable fringe land quickly. The need for this of course was “blindingly obvious” to the writer following the September event – as explained within the New Zealand Herald soon after – and indeed had been since getting the Annual Demographia Surveys underway with Wendell Cox back in late 2004....... and much earlier.
Once upon a time
I had led the push in Christchurch in 1993, to open up more fringe land and it is thanks to the socially responsible Christchurch City Councils Environment Chairman Councillor Charles Manning at the time, that this did indeed happen.
Christchurch can thank Charles Manning for keeping house prices near affordable and stable through the 1990’s and early 2000’s.
These efforts on the land supply front led to my “excommunication” as President of the South Island Division of the Property Council by the industry protectionists – but that’s neither here nor there, compared with the personal satisfaction one gets, when looking at the $150,000 median house price straight line through the 1990’s on the Councils Quick Facts Housing Graph linked above.
In any event, the kind Australians within the Urban Development Institute of Australia (Queensland Division) (in particular its outstanding CEO Brian Stewart) have taken me in as an “industry refugee”, making me a Fellow for all the political trouble I have caused over the years. I have been asked back by the New Zealand Property Council, but will persist in playing “hard to get”!
Bureaucracy at all costs
Mayor Bob Parker and the Councils Chief Executive Tony Marryatt have instead chosen for their own reasons, to remain “blind” to these critically important issues. They appear more interested to increase rates by 7.1% and preserve at all costs the Council's bureaucracy, as I explained within a September 2010 article Christchurch: A Bureaucratically Buggered City.
Indeed, the management of the Council is so bad, that its City Care workers were deployed to tend flower beds in the vacated Red Zoned Central Business District, instead of being deployed to essential works in the east (refer Not PC: GUEST POST: “Sorry about the sewage, we are too busy gardening in the Red Zone!”).
Statistics New Zealand recently reported New Zealand building consents recorded a record low in the month of April with 927 consents nationally and 7 new consents related to the earthquakes – just some 21 consents related to earthquake events for the 8 months in Christchurch, since the first earthquake in September 2010!
On a national basis, the 927 consents for the month of April extrapolated out to a year is 11,124 consents. With New Zealand’s population of 4.4 million, this represents a consenting rate per 1,000 population per annum of just 2.5 – below where replacement should be.
This poor performance is due to the incompetent performance of New Zealand's Environment Minister Hon Dr Nick Smith, who should have ensured affordable fringe land was released throughout New Zealand’s urban areas well before now.
No doubt the Earthquake Commission and their reinsurers now being unnecessarily lumbered with these inflated costs are re rating and re pricing their risks with respect to poorly governed markets, that allow their housing to inflate.. And taxpayers too, as they will wear these bubble land costs through increased insurance premiums and taxation going forward.
New Zealand’s leading business website comprehensively discussed the latest Statistics New Zealand April consent issues 3 June 2011, within a report by Alex Tarrant - Trend for new home consents hits new low in April, but decline eases; Only 21 quake consents in 8 mths, Stats NZ says | interest.co.nz.
In short – the Christchurch City Council has been and continues to be a disaster.
Little wonder Christchurch resident’s feel helpless and not in control of their lives.
The Authorities at both the Central and Local levels, failed from the time of the first earthquake 4 September 2010, to recognise the critical importance of citizens maintaining control.
The Authorities primary role should have been to enable and support people in getting their lives back together, as quickly as possible.
New housing a solution?
To rate as “affordable”, a metro area / city’s housing median price must not exceed 3 times gross annual median household income. And to ensure this is maintained, new starter stock must be allowed to be provided on the urban fringes at 2.5 times a specific metro area’s median household income.
The Development Ratio’s of 20% serviced lot – the balance 80% the actual house construction, are critically important too – the more distorted they become, the more degraded the quality of the housing.
Therefore Christchurch, with its median household income of $NZ55,600, median house prices should not exceed $NZ166,800 (not the current bubble value $333,800), with new starter house and land packages on the fringes for $NZ139,000.
There will of course be the usual property and construction industry ignoramuses who will say this is impossible. They are obviously “slow learners”, as Bill Levitt, the “father of the modern production construction industry” we know today, had it all figured out soon after the Second World War. This amazing story unfolds within this Time Magazine article of 1950 - HOUSING: Up from the Potato Fields.
One should not need to do a 60 year course, to learn the basics.
Bill supplied new starter housing for $US8,000 to single earner young families on $3,800 annual household incomes – 2.1 times annual household earnings. It was largely thanks to the entrepreneurial skills of this great man, that the “democratization of prosperity” occurred following World War Two. The Authorities, out of fear, did not have the will to stand in the road of returning service people, in a hurry to restore their lives.
The New Zealand production residential construction sector has been seriously degraded (currently costs about twice as much per square metre as it should) by the past few decades of intrusive and damaging planning. It is therefore unrealistic to expect international standards of performance in the short term – but a start to restore performance must be made now.
Realistically, it should be possible to start in to providing new fringe starter housing packages for $200,000 all up - $50,000 for the serviced lot, the balance $150,000 for the actual house construction. Open and competitive fringe land markets will ensure that productivity will constantly improve, so that increasingly more affordable fringe housing is provided.
Nothing beats completion to lift performance.
Free up land
There must be “open land policies” on the urban fringes, where “no go” development areas are clearly identified and most importantly, solidly justified (spare us any more of the indoctrinated lightweight academic drivel please). It is naive in the extreme to allow Councils to manage land supply, as they have clearly proven themselves to be disastrous at this - both in New Zealand and internationally these past decades.
Then zone it after development. Call this “post development zoning”.
Councils simply cannot be expected to be sufficiently responsive to changing market conditions. They only act as “housing bubble creators” if allowed to meddle with land supply.
This is too important to be treated as a “power game” and a “cash cow”, to be milked by incompetent Governments at all levels
"Oodles" of space
New Zealand has abundant supplies of land available for urban development – with well less than 1% (about 0.70%) of our land area as urban areas, towns and settlements (refer Land use environmental snapshot Environmental Snapshot | New Zealand Ministry for the Environment). I had discussed this years ago as well - Lifestyle Block Mythology.
We couldn’t urbanize a further half a percent of our total land area over the next fifty years if we tried.
This “land supply” issue is a bureaucratic beat up, because they are more interested in power, bureaucratic expansion and are prepared (thanks to poor quality governance) to sacrifice higher standards of living for the people who pay their wages.
Importantly too, within our urban areas, “flexible zoning” must be allowed, so that current zones can expand and contract as required by ever changing market conditions. In other words, if neighbours consent can be obtained say 50 metres out (roads excluded) from a development proposed just outside an existing zone boundary and provided this proposed new development meets reasoned and reasonable environmental and building standards, it should be allowed to proceed.
The Christchurch earthquakes have highlighted the urgent need for open fringe post development zoning and internal flexible zoning, as the city is now likely to shift abruptly to the west.
NEW CHRISTCHURCH – A COLLECTION OF COMMUNITIES
The city will become very much a “collection of villages / communities” with no Central Business District as we have known in the past. CBD’s, already dying, like grossly expensive covered Malls (only still around due to political and planning protection – which is a major on going cost to Mall owners), are obsolete.
The current central area will become the major service centre for the lower income (median household income about $NZ45,000) and shrunken east, where many of the remaining structurally sound central buildings, will be redeveloped to visitor accommodation, surrounded by supporting services and businesses.
Quite why tourism is “glorified” is a mystery, as it is a low paid sector, better suited to transitioning emerging developing countries.
The Riccarton area will become the major service centre for the more affluent west (median household incomes about $65,000) and the commercial activities must be allowed to expand in to the adjoining residential areas as quickly as possible.
The Canterbury Earthquake Recovery Authority (CERA) was created in large measure, because the Christchurch City Council is so seriously dysfunctional. It is in urgent need of reform from a failed centralized to a “One City – Many Communities” model, as I explained late February within Christchurch earthquake: Sound political leadership required.
Within the above article, I had suggested Roger Sutton (then) CEO of the local monopoly electricity network provider Orion, should be considered as a replacement for the current Council CEO Tony Marryatt. It is however pleasing to see Central Government appointing Mr Sutton as CEO of the newly formed CERA, responsible to the Recovery Minister Hon Gerry Brownlee.
I hold Mr Sutton in high regard, while recognising that he has no experience leading an open market competitive corporation and that he has no property development experience. He will be as good as the people he surrounds himself with – those with different skill sets to his own. He must however keep the leading positions clear of bureaucrats. It should be a very small and focused operation, with a short term (five- year) life.
CERA needs to see itself as the small lead organisation, ensuring much improved regulatory and recovery performance, so that the earthquake recovery can happen as quickly as possible. It needs to be careful to ensure the Local Authorities do not abrogate their own responsibilities, in attempting to expect CERA to do, what a Local Authority should properly be doing.
CERA becoming “principal” of the Grand Chancellor demolition was a mistake – something that doesn’t not appear to have been considered by CERA’s Review Panel.
One particular area we do not want to see CERA and the Christchurch City Council get involved with, are redevelopment issues or grand development fantasies (nightmares to the rest of us).
If they are tempted – Christchurch Mayor Parker with his architect colleague Ian Athfield, need to explain the Magazine Bay Marina fiasco (still in ruins 10 years later) they were both involved in. And the “not fit for purpose” and likely severely damaged new Civic Building for good measure.
We do not want Christchurch City to look like the still destroyed Magazine Bay Marina ten years down the track Mr Parker.
It is to be hoped Christchurch Councillor Tim Carter’s suggestion for an investigation in to the Civic Building redevelopment fiasco is followed up on.
The Authorities at all levels should see themselves as competent, fair and enabling regulators, allowing people, developers and property owners to get on rebuilding Christchurch, so that it can become as quickly as possible, an affordable and opportunity city.
Lessons from New Orleans
In this regard, we can learn from the successes and failures of New Orleans, that prior to Hurricane Katrina, had become a political failure - like Christchurch prior to the earthquakes.
New Orleans (city and parish population 343,820 MSA 1,235,660) has surprised most commentators, in how it has now become an “opportunity city”, where housing is 3.5 times household incomes.
Joel Kotkin, prolific and highly respected international writer on urban issues and Executive Editor of the pragmatic website Newgeography.com, explained recently the progress in New Orleans with The Katrina Effect: Renaissance On The Mississippi.
Mr Kotkin spoke with the founder of a 45 employee firm Turbosquid Matt Wisdom who said: “Now instead of people being amazed we are here, they want to get here to ride the wave."
“We used to have this brain drain to the Northeast, the West Coast and Texas, but this has changed........After Katrina everyone was forced to become an entrepreneur, the dominant concept for the rebuilding has become one of resiliency and self employment – it’s been bottom up”.
I had the honour of discussing these matters recently with Michael Hecht, President and CEO of Greater New Orleans, Inc - Regional Economic Alliance. Michael (who travelled through the South Island when younger and is following Christchurch events with much interest) very much mirrored Matt Wisdoms perspective.
*Hugh Pavletich runs Performance Urban Planning