Thursday, 9 February 2017

Has planning been worth it?

There was a big turnout on Tuesday night in Auckland at the latest Law and Economics Association of New Zealand (LEANZ) event - a panel discussion featuring three members of the Auckland Unitary Plan Independent Hearings Panel. In fine interdisciplinary LEANZ style, they were Judge David Kirkpatrick (the Panel chair), planner Jan Crawford, and economist Stuart Shepherd.

Chatham House rules, so I can't say anything specific about who said what, but I can safely say that all three were very good speakers - informed, persuasive, congenial, thoughtful, and able to put technical stuff into plain (or at least a good deal plainer) English. So full marks to the organisers, Richard Meade (AUT and Cognitus Advisory) and Andreas Heuser (Treasury) for putting it all together. Special thanks to Simpson Grierson who kindly hosted the event: the LEANZ caravan would be unable to travel on without these corporate oases.Though you can help, too: here's that LEANZ site again, so you can pay your $75 sub ($50 for students).

So, noting again that these are my views and not what the presenters may or may not have said, what did I take away from it?

Clearly the members of the Panel did the best they could with the machinery they had to drive, and in particular they aimed to get the availability of housing land up to where it needs to be (though there may be a developing, and less known, shortage of land for business purposes). And they had the added complexity of having to amalgamate the previous jumble of territorial authority plans into one overall plan for the new one-city Auckland, as well as being lumbered with a process not of their choosing. In the circumstances, they did a fine job.

But it's also clear that the planning process for Auckland has become enormously top-heavy and inefficient. Like other parts of our regulatory apparatus (such as the price control 'Part Four' bits of the Commerce Act) it badly needs paring back to something quicker, more targeted, cheaper, and more efficient.

In part the current clunkiness comes from importing an industrial-strength First World planning policy infrastructure, without paying enough mind to what might work for a small distant economy with not-quite-First-World incomes to pay for it. And in part it's because plans have been allowed to become voluminous grab-bags of miscellaneous agendas (price control, income redistribution, architectural design preferences). I've written previously about one bonkers 'food security' provision, where growing vegetables was prioritised over housing development.

The complexity largely speaks for itself, but here, as just one tiny example, is the legend you'll need to understand the Unitary Plan maps.

Six kinds of residential zone. Five kinds of 'open space'. Ten - ten! - kinds of business zone. Five kinds of rural zone (not counting the Waitakeres and the Hunuas, which are two more zones of their own). And seven kinds of coastal zone. 'Micromanagement' doesn't even begin to describe it.

And it's not just a matter of economic inefficiency, though the purely economic costs must surely be substantial: a fair slab of potential housing development, for example, reportedly got put on hold until the Unitary Plan finally saw the light of day at the end of a nearly three year process. It also carries social costs. The process is now so cumbersome and protracted that it is very difficult for non-experts to have their say - a level of difficulty that could threaten to undermine the perceived legitimacy of the outcome amongst the wider public. .

I'm also not sure that the planning process has fully got to grips with what you would imagine would be one of the core outputs of any plan: integrating the plan, infrastructure provision, and the intentions of owners/developers of resources. All three need to be aligned for anything significant to happen. Nor are enough people making even back of an envelope attempts to estimate the net benefits (widely defined) of plan provisions. What about those 'volcanic viewshafts', for example, which protect people's ability to see (say) Mount Wellington from their home? I wonder how Tokyo would have got on if it had to be designed so everyone could see Mount Fuji: not very well at all, I'd say. And if people were given the choice of their kids getting houses (say) $200,000 cheaper but without a view of Mount Albert, which would they pick?

Which brings me to my final point - the role of markets. Yes, we all know that plans may be needed to help address the externalities and coordination issues that can crop up in dense conurbations. But the role of markets and prices (and indeed economic analysis) hasn't been so much assisted as largely displaced. In particular, the housing market has been distorted and suppressed.

The Salvation Army's latest State of the Nation Report, for example, says (p50) that
based on an average occupancy of three people per dwelling...and given that Auckland’s population grew by an estimated 45,000 people for the year to 30 September 2016, accommodating this number of people required 15,000 additional dwellings. Consents for new dwellings over the same period lagged this number by 5000.
Over the past five years, the cumulative shortfall in new housing to cater for Auckland’s population growth is estimated to be almost 18,000 dwellings. 
The Sallies snarked that the recent level of consents (10,000 a year) "has been celebrated as proof that Auckland’s housing problems are being resolved by the market", but that "in a slightly longer context this record is, however, not remarkable". The reality isn't that the market has delivered, but inadequately. The reality is that the market has not been allowed to work properly, or, for some places and activities, not allowed at all.

In sum, on the one side, you have an uncertain quantum of planning benefits, and on the other, clearer and large costs. I wonder what the net outcome has been?

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