Thursday, April 30, 2015

Beyond constraint - urban form and housing affordablity

Resolving the housing affordability crisis

New Zealand’s rock star economy might just get deflated.  Prices in the Auckland and Christchurch housing markets are growing at unsustainable rates.  And when the bubble bursts, the implosion will be far-reaching.  The solution proposed here addresses the critical issue – how to get the land market working effectively and efficiently.  Without that, abstract aspirations for liveability in our main cities will, like a bubble, burst.

The solution is multi-faceted.  It lies in:
·     acknowledging the centrality of land supply;
·     changing how we think about urbanisation;
·     bringing multiple sites forward for development;
·     moving on six related fronts
  • change traditional mindsets
  •  realign institutions
  •   regulatory reform
  •   rethink infrastructure
  •   rethink funding
  •   back off excessive prescription
·     Moving to “why not?”

I expand on these points below.  If we can pull all this off, we might not only create a more productive, liveable city, we might also save the bubble blowers.

Sort the supply problem and the rest follows
It’s no news that that the housing affordability problem is multi-faceted. It’s tied up with fiscal and financial conditions, incomes, the size and structure of the market, inter-generational “competition”, the unpredictability of migration, the configuration of the building industry, and so on.   But without resolving supply constraints, and especially land supply, forget initiatives in these other areas. 

Get land supply right, though, and some of the other impediments might just melt away.
The issue really is land.  It is simple minded to think we can simply build our way out of a supply problem by Increasing building coverage and heights.  Boosting densities within cities might help, but raises a number of other issues: the cost of replacing or extending ageing and under-capacity infrastructure, how to spend our way out of congestion, redevelopment of transport corridors, and obesity and other health and social issues associated with confined and crowded living conditions.

My suggestions focus on Auckland but with relevance, I believe, for other settings.

Changing how we think about urbanisation

Get away from the obsession with contiguity.  Places aren’t urban simply because they are all joined up.  Urbanisation has its roots in transactions, not simply being there. Better to think about cites as networks – a mass of corridors linking nodes across a variegated landscape.  Take this approach and urbanisation and nature need no longer be in conflict. 

Think outside arbitrary administrative constructs. In Auckland, we might start with a focus on the super-regional corridors, and the quality and strength – or potential strength -- of our linkages with the smaller cities of Hamilton, Tauranga, and Whangarei.  Through this we can act beyond local constraints, as part of a potentially powerful and extensive crucible for New Zealand’s next round of development.

Breaking out the land
A growing city is not homogeneous.  Increasing land supply for urban development can and should take multiple forms.

Bring aboard multiple sites and forms of greenfield land. Within Auckland these can readily access and strengthen the region’s well-defined north-south access corridor.  They can also be distributed in such a way that they extend but work within the realities of sub-regional and sub-urban housing and labour markets. 

Think of townships as well connected urban nodes, without necessarily enveloping them within a creeping built landscape.  In Auckland we can apply well thought through extensions to villages and townships – Wellsford, Warkworth, and Waitoki in the north, Waimauku and Helensville in the west, Whitford and Clevedon in the east, Pukekohe, Tuakau, and Pokeno in the south, all surrounded by bush and farmland, linked to each other and to the urban core by a dense network of roads and, for some, by rail.   

And we can envisage of larger settlements closer to the existing built up areas, creating sub-urban communities with character as well as mass, some building on incipient development.  In Auckland we have multiple opportunities that align with existing sub-regional communities but assume their own form and character: Think Dairy Flat and Riverhead in the north, Kumeu in the west, Beachlands-Maraetai in the east; Drury, Ardmore, Runciman, and Karaka in the south.

And for traditionalists still wedded to singular edges, contiguity, and sprawl, seeking to preserve the city within arbitrary limits there are still possibilities for pushing existing suburban boundaries outward beyond, say, Albany, Orewa, and Silverdale in the north;  Massey and Hobsonville in the west; Wiri, Weymouth and Papakura in the south.

Suburban opportunities for selective intensification are still around.  They will increase as boomers age and voluntarily or otherwise relinquish their particular legacy of modest houses on large plots.  Medium density housing – perhaps by way of terrace houses and duplexes, low rise apartments, and especially residential villages (the retirement industry leads the way here) – offer the prospects of modest intensification without undermining communities or destroying the amenities which make the suburbs attractive in the first place.  But the costs can be high and progress slow.  Growing cities cannot wait around for successive generations to be bought or simply die off. 

Brownfield development may be seen as the silver bullet at the moment, because it implies swathes of already urbanised land simply waiting for the first sod to be re-turned and deliver intensive inner city settlement. Well that’s not so easy.  Issues around title consolidation, infrastructure rehabilitation, decontamination and the removal of hazardous materials, impacts on households and businesses in adjoining and proximate communities, the consequent battles for consenting, and the cost associated with often prolonged holding periods all-too-often turn brownfields into red ink or black holes.  Brownfield development is no solution for a supply constrained city.

While we are at it, let’s put the CBD into perspective.  It’s the leading office, visitor, and entertainment precinct in a city.  But it’s not where many of the city’s population lives, works or plays.  Sure, it may make sense to surround it with cheap apartments for Generation Zero to pass through, and where a very small group of the privileged may purchase a water-view, high amenity apartment.  But even in our wildest dreams, that’s not a path to the affordability or the capacity that a growing city requires.

So resolving the supply and affordability housing crisis presumably requires action on all those fronts, and in a wide range of localities.  One consequence of such an approach would be to reduce the capacity for speculative gains and land banking.  Another might be to encourage and sustain the development of significant, medium sized developers and builders, moderating current reliance on a small number of large developers on the one hand, and a large number of very small builders on the other. 

What to do?

All this is easily said.  So how is it to be done?  Here are some ideas.
First, we have to change from the traditionalists’ mind set.

What we have today, or what we thought of yesterday, may not suit tomorrow.  Tomorrow’s urbanisation may be more connected but less contiguous.  Greenfield development need not raise images of never-ending suburbs or houses to the horizon, but of settled landscapes that are penetrated and defined by natural features and green corridors.  Fields of green will stretch away from a diverse urbanised core interspersed with supplementary settlements – towns, villages, suburbs – connected to corridors that link a network of cities into a coherent economic and social unit across multiple administrative boundaries. 
But that’s getting ahead of ourselves.

More immediately, let’s throw off an outmoded mind set, and think about communities, not just housing.  Urbanisation involves business and work settings, community centres, local transport and recreational networks, and houses – detached, semi-detached, multi-storeyed, high and low density.  Don’t just count house sites when assessing potential; allow the land for a whole community.   Then let the landscape, the designers, the developers, and the market –future residents – bring it about (subject, always, to appropriate environmental constraints). And think about how connections with other centres work rather than how to maximise densities in any one of them.
Second, we need to realign our institutions.  Simply moving planners from one Auckland Council office to another was never going to ramp housing supply up quickly in Auckland.  Changing planning rules around Auckland’s plan may have slowed the process and dimmed the prospect for significant early movement as well.

How about setting up a government agency charged with assembling or defining the areas of land throughout Auckland and adjoining regions that might be brought to market?  A development corporation might tag or even purchase, consolidate, and then on-sell land for urbanisation, or put it out for tender to develop with some clear social objectives included. 
A complementary approach would be to draw on development agreements reached between council on behalf of community and developer.  These would spell out required (and realistic) outcomes as a condition of proceeding with the development of substantial parcels of land.  This approach should give more satisfactory outcomes than relying on the long-winded consent and appeal process encouraged by the Resource Management Act which may only achieve a compromise between public and private objectives. 

The proposed approach would need public input, though, so that as the agent of the community the local council would have a clear mandate regarding what provision for community amenities and infrastructure should be provided for in a development agreement.
Third, we need to change the regulatory framework within which it so is comfortable for traditional minds to remain wedded incrementalism and yesterday’s answers.  I have discussed elsewhere an initiative that might help, the rejigging of New Zealand’s environmental and local administrative legislation. 

Fourth, rethink infrastructure supply.  It may be time to get away from monopolistic suppliers and entrenched wedded to old technologies and allow the innovative to seek out and apply more localised solutions to such matters as water supply, wastewater disposal, solid waste handling, and even power generation and distribution.  Of course, most alternative initiatives tend to be small in scale and currently relatively expensive to implement.  Costs tend to be dropping, though, and people may be prepared to pay a little more if resilience is increased and running costs are low.  One way or another the door needs opening to innovation, modernisation, and increased resilience, if for no other reason than to push current suppliers down this path. (I also wonder whether localised solutions are really more expensive than gold plating the capital works applied to large scale, monopolistic services).  
Fifth, rethink funding.  Why should future owners fund upfront the long-term infrastructure required when purchasing new homes given the value they bring to a community by playing an active role in its social and economic life as well as assuming a share of current fiscal liabilities. 

The real beneficiary of development is the party that sells land into a higher value use.  So a development levy on the profit realised from the sale of rural land into urban use, an underutilised brownfield site into intensification, or a large single-dwelling suburban site into apartments might be a more expeditious means of funding the works required to realise the enhanced potential.

Another possibility is to promote the commercial funding of infrastructure.  Privatisation of energy companies has facilitated this. Competition has been allowed into solid waste collection.   The creation of council controlled organisations for the provision of local infrastructure, however, hasn’t necessarily achieved improved funding. 

Commercial entities, whether investors or operators, can be expected to define an appropriate level of service and find efficient means to achieve it.  The long-term income streams may be an attractive proposition for bank lending (especially in deflationary times) or for the issue of high ranking bonds to raise finance.  They might also attract private and public equity.  There are plenty of examples – but we need more effective coverage of local infrastructure.  Regionalised entities for basic services can reflect the particular needs and circumstances of communities and tailor development options rather than simply extend the old system to new users.

Sixth, back off prescriptive plans by local councils and instead require that spatial plans set out long-term, broad-brush land use options and a commitment to where public money will spend money on public services and amenities.  This should help shape a city in ways that the community wants.  It should also supply sufficient certainty for providers of infrastructure and services to plot their own investment priorities and programmes subject, of course, to their capabilities and risk management.  And where they fall short, expect other suppliers to step in.

The role of risk: moving to “Why not”
Risk and how it is treated may well lie at the heart of the problem.  Rather than evaluating risk and adopting protocols which allow for it without undermining the capacity to innovate and extend, policy makers in public institutions and monopolies appear to manage it by sticking with what they know, through imitation, replication, and repetition, and by the simple expedient of saying no: “Why should we?”  This is a sure recipe for constraint – of supply and of opportunity. 

I wonder if the biggest risk, the one that explains this conservative attitude, is that in pricking the housing bubble we might just bring the bubble blowers down.  Any significant readjustment of the housing market would hit the banking sector the hardest.  The American experience shows us what the banking sector does when it gets hit.  The community, economic and the political consequences of widespread mortgage foreclosures and business failures loom large over the whole housing crisis. 
If nothing else, an approach to managing the release of additional land supply that identifies and works through multiple sites and agencies, that helps to free up and fund the infrastructure sector, and boosts the development and construction sectors would moderate any such impact.  It might even allow the banks, by moving some of the current funding from houses to infrastructure, to themselves participate in the transformation we need in the housing market.

Monday, November 3, 2014

Credibility on the line: time to get real about Auckland transport and land use options

Councillors are getting nervous about the planned central rail link (CRL).  So they should be.  And while planning is well down the track, it’s not too late to apply the brakes.

This post strings together some of the arguments I have raised against the CRL over the past several years[1], and adds another one –the likelihood that technology gains will further undermine it.

But first some basics. 

Moving more and moving further
Transport is a derived demand: you only get it in response to the demand to move people or goods.  And as information flows more and more freely around the world, so growing demand for travel and trade -- locally, nationally, and internationally -- drives investment in transport. 

As nations, towns, and cities prosper, we travel more and further.  We exercise greater choice in where and how we live.  We consume a greater variety of products and services at lower prices.  And the transport sector responds with ever increasing products, services, and capacity.

Of course, it’s not just a one-way street. Transport innovations facilitate new trading relationships and expand travel demands.  Innovation-driven gains in mobility have enabled the masses and not simply the rich to enjoy the benefits of access to more space, more places, and more lifestyle opportunities. 

For example, the arrival of the wide-bodied jet in the 1960s and the more recent emergence of the single aisle, light weight, twin engine long-distance jet have increased the affordability of long distance travel and supported the emergence of many more international travel destinations for many more travellers. 

Similarly, the globalisation of production has been facilitated by transformation of the freight industry into an integrated transport, storage, and fulfilment logistics sector operating seamlessly to deliver lower priced goods from producer to consumer regardless of the distance and borders between them.

Urban transport – a history of increasing personal mobility
This is not the place to detail the history of urban transport, but it’s worth noting a legacy of occasional step changes resulting from disruptive new technologies interspersed with long periods of refining existing technologies.  These two have offered people the opportunity to enjoy more space, better health, and better lifestyles through progressively improved access to housing, services, work, and recreation. 
Hence the displacement of horse and carriage with steam-driven and tracked vehicles in the second half of the 19th century, the replacement of steam engines with internal combustion engines late in the 19th century; the introduction of the omnibus at the beginning of the 20th; the development of mass-production techniques for automobiles in the 1930s; and their proliferation in the 1950s and beyond.

Innovations in engines, propulsion, and materials have led to continuous automobile performance improvements. Even so, concerns about congestion, threats to oil supplies, pollution, and the costs of providing more road capacity raise questions over just how much more car use we can sustain. 

Despite its own gains in distribution, comfort, and speed, mass transit remains an alternative limited by fixed routes especially in today's complex and often fragmented cities.  The problem is less acute for buses than trains, although the economics of providing routes and schedules to suit diverse needs in large cities are entrenched in both modes.

So, where does the next step change lie in urban mobility?

Driving innovation
Perhaps the rate of advance to existing technologies has reached the point that disruptive technologies are less likely.  Ongoing innovation in car operations (built most recently on revolutions in information technology) and advances in engines are likely to deliver major capacity gains from infrastructure and lower the cost and impacts of private motoring[2], lifting personal mobility and reducing the likelihood of step change.  At the same time the propensity to use cars is stabilising, if not diminishing. [3] The threat is that the fixed route options for public transport will become even less attractive.

Of course demand will be  continue to be driven up by population growth, even if individuals drive less.  Herein lies the challenge: we are not talking about the mobility of current Aucklanders, but that of perhaps a million more seeking their share of transport infrastructure. 

How do we cater for this: promote a return to the old technology of fixed route rail capacity?  More roads? Or by managing transport demand through effective land use planning?  I prefer a combination of all three, but it’s a preference based on (1) understanding the particular limits to and costs of continued obsession with rail and particularly (in Auckland) the CRL, and (2) returning to an emphasis on sensible land use as the engine of this particular train, not transport.

The limits to rail
At the risk of being repetitive [4] here are some of the reasons to reject major expenditure on the CRL (or a rail-based airport link or harbour crossing for that matter):

(1)  Demand will be limited.  A doubling or tripling of rail patronage will not go far in terms of total commuter demand given the very small base it operates off; 9,000 Aucklanders commuted by train according to the 2013 Census.  That's 2% of commuters.  Currently 10% of Aucklanders commute by public transport, 80% of those bus.
Boosting public transport demand though park and ride facilities or integrated ticketing is limited by the relatively small number of destinations served.  Public transport travel time costs are already high and multi-mode travel inevitably lifts them no matter high efficient. 

Boosting public transport demand by providing inner city dwelling capacity is largely irrelevant as inner city commuters already have a high propensity to walk, cycle or take public transport to work (only 55% use a private vehicle).  That market is tiny anyway, and likely to remain so.[5]  

Promoting high density dwelling around stations at key suburban centres to boost train patronage will meet market resistance.  And, if successful, it will lead to conflicts between local activity and park and ride facilities, adding to local congestion. 

Focusing employment on the CBD to boost the use of public transport ignores the needs of the majority of businesses (only 12% of Auckland employment is currently in the CBD).  It also ignores questions over the resilience of the CBD. its ageing, often capacity-constrained infrastructure. and the vulnerability to extreme climatic events of low lying and reclaimed land on which much of it is built[6].

Promoting higher employment densities around stations to lift the viability of rail will generate additional road congestion as much of the interaction around businesses still requires point-to-point vehicle access, the majority of commuters are likely to remain car-bound, and the more people that live in and around the CBD the more of them will need to commute outwards to employment as well as for recreational reasons -- by car.

And there is a real question mark over what those many more white collar workers in the new towers might be doing,[7] especially as high tech employment increasingly favours low rise, green working environments.

(2)  The impact on congestion will be minimal. Creating additional road capacity by diverting some commuter trips to public transport reduces the costs of private transport, encouraging greater car use until such time as unacceptable levels of delay once more set in.  Such evidence as there is for developed cities in North America, Australasia and Europe does not support the proposition that public transport reduces congestion.[8]

(3)  The Capital costs will be high – almost inevitably higher by hundreds of millions of dollars than current estimates;[9].  Even without the usual "large project blowout" the marginal costs will be very high: if the impact was to triple daily commuting patronage to, say, 30,000 people a day a capital cost of $2.4bn (both optimistic assumptions) represents $120,000 for each additional commuter.
(4)  Overheads will be high – fixed costs are a large component of rail overheads.  These include operating costs, maintenance, and renewals (for rolling stock in particular), interest on capital, and depreciation.  Any demands on ratepayers or road users to subsidise this are still costs, costs that are likely to reduce the attractiveness of Auckland as a place to live or invest. 

In addition, pricing public transport to recover even a constant share of higher costs from users is likely to lower demand. This, in turn, is likely to reduce income more than costs, potentially leading to a subsidy (public cost) blow out.

(5)  The business case relies on heroic assumptions about the future of work and housing.  Building a case on assumptions about a shift to high density housing on suburban stations and new towers of white collar employees around inner city stations is highly risky, with no evidence that the risks have been factored into decision making. [10]  And there seems to be little consideration given to the risks to rail resulting from technical advances taking place in the automobile industry that should increase the efficiency of roads, lower the costs and boost further the convenience of cars, and improve the performance of buses  [2],

(6)  The economics do not stack up and consequently fiscal risk is high.[11][12]  The legacy of the CRL is likely to be enduring debt and costs that potentially reduce the appeal of Auckland as a place to live without reducing the problem of congestion. And they will be so much higher if the optimistic projections on which the business case is based fail to materialise.  When costs substantially exceed benefits productivity suffer and the Auckland economy is the loser. 

There’s got to be a Better Way
The aim of this post was to contribute to the current debate over the future of the CRL.  Whether or not it goes ahead it is not going to solve Auckland’s transport problems.  Nor will an integrated transport system based on common ticketing and interchange stations with their substantial land demands and impact on local and arterial road congestion help much.

The long-term solution may best be based on a return to basics: identifying the land use pattern that is in accord with both the city’s geography and the ambitions of the council to house another million residents (an ambition that seems to have gone un-debated in the lead up to current plans).  The transport system needs to be organised to serve that. 

Planning land use to serve an outmoded transit model based on an increasingly dated transport mode justified by the view that Auckland can continue to grow as mono-centric city is a recipe for disappointment  - and not just in transport.

[1] Starting on this blog with Buses or Bust? April 2011 and Rethink the Link: Does Auckland Really Need to Pour Money into a Hole in the Ground, December 2011  To get an alternative point of view, visit
[7] See, for example, Whither White Collar Services? December 2011
[11] This is the sort of contingency that a Business case should address as a matter of course.

Thursday, October 23, 2014

Driving Blind – Driverless Cars Ramp up the Risks for Rail Transit

In a brief radio interview yesterday I was asked about the possible consequences of driverless cars for Auckland’s planned big spend on its rail transit system.  My sound bite wasn’t too coherent, so here are some follow-up thoughts.

Driverless cars are coming

The driverless car is with us today, and its working.  The Minister of Transport’s expectation that it is “moving closer” is in line with international expectations and experience.[1]

In fact, the fully autonomous vehicle is just a further step – admittedly a big one – in the progressive reduction in the driver’s role in vehicle operation.  Automated train systems have operated since the 1960s.  Even aircraft today perform most operations automatically, and we are well on the way to the technology where they even interact to manage air traffic movements.

We can look forward to driverless road vehicles within the foreseeable future.  We are already well on the way.  Consider gains over the past 30 years by way of automatic transmission, power steering, automatic braking systems, electronic stability control, backing sensors, and most recently automated parking.  These innovations, while taking time to diffuse, reduce driver-related accidents and lift the efficiency of vehicle operation. 
Throw in the gains readily available from enhanced traffic management technologies, the use of GPS for better route planning and of GPS-derived Floating Car Data for real time traffic management and we have the promise of ongoing gains in efficiency in on-road vehicles and the prospect of a revolution in personal mobility.  And that’s on top of the promise of further gains in fuel efficiency following the 25% lift recorded by the US EPA between 2004 and 2014 and the impact of alternative fuels.

What are the consequences?

The Rand Corporation recently published a comprehensive study on Autonomous Vehicle Technology that is worth a look.

From this and my take some of the gains we might expect from driverless cars include: 
  • The costs of travel will diminish as drivers are frees up to engage in other tasks and as greater travel efficiencies are realised;
  • Lower accident costs because there will be fewer of them;
  • Vehicle efficiency will improve as a result of: the capacity to use lighter materials; easier uptake of alternative fuels; smoother acceleration and deceleration;
  • Development of more efficient parking facilities;
  • Network productivity gains from higher vehicle densities and fewer disruptive events. 

This may not mean less congestion.  Numbers on the road may increase as people currently transport disadvantaged find it easier to access and operate motor vehicles.  Cost reductions are likely to boost car use.  And such gains may encourage more long-distance commuting.

On the other hand, the use of driverless vehicles is part of a convergence changing the environmental impact of motoring.  Together with the shift to smart cars for urban travel and to alternative fuels, driverless cars will contribute to a fall in the emission of particulates and CO2 .

A new mode of public transport?

Driverless cars offer a new take on public transport by providing for shared vehicles that respond to individual demands.  They may be held in private pools; widely accessible vehicles may be in public ownership, or vehicles may held and maintained by a variety of organisations, including specialist operators (equivalent to today’s taxi or rental companies), bodies corporate on behalf of residents of apartments, or businesses on behalf of employees.  

Such arrangements will support the higher densities favoured by urban planners, reduce the costs of car ownership, and maintain efficient point-to-point travel.  In addition, vehicle pooling may encourage more trip sharing, lifting car occupancies.

Supporting fixed route public transport

So what will the consequences be for buses and trains?  Buses should benefit, both in terms of enhanced vehicle flow and, in due course, through adoption of the technology.  This could lead to smaller, more flexible buses with variable routing better meeting demand.  In other words, buses will be part of the revolution in personal mobility resulting from autonomous vehicle development.

Rail is a different matter.  In increasingly fragmented cities, fixed route transit is at a distinct disadvantage, especially when it is based on a limited network.  For rail to penetrate in Auckland it requires either effective feeder road access to park-and-ride facilities or the clustering of high density dwellings and jobs around already busy stations. 

Driverless cars could contribute to both of these.  The intensity of local cross-commuting required to support park-and-ride facilities may be eased by use of driverless cars.  The heightened congestion associated with higher densities in the inner city and on arterial roads targeted by the Auckland plan might be similarly eased by their adoption by residents as well as commuters.

But will driverless cars save rail?

While the adoption of driverless cars might marginally improve the effectiveness of rail transit, this will still be constrained by the intrinsic limits of rail .  Unlike rail, personal vehicles do not run empty for much of the time.  They operate from point to point and largely avoid the high time costs of transfers.  There may be some waiting time in accessing shared cars, but the inconvenience is a lot less than that associated with fixed timetables.  And with technical gains the externalities associated with car use will continue to fall.

Traffic flows should improve, costs fall, and convenience increase for car users.  Car-based transport will be more accessible, reducing the numbers dependent on traditional public transport.  Buses will also be more effective.  None of these positive outcomes bode well for rail with its high capital costs, the lumpy nature of investment, and high operating, maintenance, and depreciation costs.  What they do is increase the fiscal risk associated with Auckland’s plans for an inner city rail loop or extensions to the airport or North Shore as the alternative of road-based transport becomes that much more attractive.

The risk profile of rail investment is already high.  The prospect of driverless cars raises it higher.

Driving a revolution?

In just 25 years we have seen revolutions that have fundamentally changed the ways in which we deal with information, communicate, work, socialise and recreate.  There is every reason to expect the advent of driverless cars to signal a similar revolution in personal mobility. 

Who today would buy a typewriter, a telex machine, or a floppy disk?  So why buy a railway?


[1]              See for example recent articles in The Scotsman and Forbes Magazine.