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Owen McShane

Why We Have To Learn To Love Subdivision – Again

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When did anyone last hear officials and professionals talking enthusiastically about the social and economic benefits resulting from the subdivision of land to create secure, clean and tradeable title?

Indeed, any Regional or District plan is likely to include a long list of the potential problems caused by subdivision, but will mention few, if any, of the benefits.

In Peru, during the eighties, Hernando De Soto and the Institute for Liberty and Democracy promoted land reforms that led to more than 1.2 million rural families being given titles to the land they worked. One major grant of titles to a whole village was celebrated on television. When the reporter asked a woman “Why is having title important for your family?” the woman replied “Having secure title means I can now go out to work.” She went on to explain that the family’s past “customary settlement” required continual occupancy and eternal vigilance. Some member of the family had to be on the property at all times or else someone else could move in.

During a recent TV news bulletin on the floods in Pakistan, BBC reporter Orla Guerin said “Many here are bound to their land and their livestock, and will live or die with them. We spotted one young boy, clinging to the top of an electricity pylon. He climbed down to collect a bag of aid, but refused to be removed from the waters.”

I suspect he was also concerned with the need to help maintain his family’s right to occupy.

I live in a District where no new titles have been issued over the last twelve months. There have been 88 applications to subdivide and over 90 percent have been processed in time. I suspect most applications have resulted in a consent being issued.

But these consents are not being translated into titles. The direct costs of reserve contributions (just increased by 50%), development contributions, and the costs of onerous conditions of consent are simply too high. The French Revolutionaries learned that when they fixed the price of bread at less than it cost to bake a loaf, the bakers simply stopped baking bread. When it costs more to gain a title than the lot can be sold for, we should not be surprised if people stop creating lots.

Many long-term employment opportunities are created by suburban residential development. It’s the land around the dwelling that enables so many of these projects to take place over the decades and to create so many jobs.

If Smart Growth policies force people to live in apartments, their opportunities to improve their dwellings are seriously limited.

While the economic and employment impact of rejecting large-scale developments is serious, the cumulative effect of a multitude of prohibitions is equally serious – especially to a small economy.

During the nineteenth century the key function of governments in the New World was to churn out titles as quickly as possible.

Surveyors were the true frontiersmen, enabling the migrants to arrive, put down their roots, and build. The post-war suburban boom repeated this experience, supported by an equal enthusiasm for creating a property owning democracy.

Then during the 1990s, “The Age of Environmentalism” persuaded decision-makers in the developed world that the creation of titles enabled polluting humans to possess the Earth Mother and must be stopped, or made as difficult as possible. Instead of encouraging the creation of titles, as history suggests we should, the Smart Growth central planners have persuaded our governments to penalise the creation of new lots by imposing highly expensive and highly regressive fines called “development contributions” – which are actually anti-development levies. These constraints on land supply created the short-term property boom, and the inevitable bust that led to the greatest financial crisis in recent history.

The developing nations, and their economists, continue to recognise the value of title. The Peruvian economist Hernando de Soto emphasises that the major problem facing people in poor countries has been their lack of secure title to land, which constrains their ability to borrow significant sums of money and put down secure roots. As he says, the family with title builds a dwelling; the family that squats invests in furniture.

At the recent conference of international surveyors in Sydney it was quite exhilarating to hear surveyors and officials from Peru talking of targets of 150,000 new titles per year. They knew full well that titles generate wealth.

Maybe its time for New Zealand regions and districts to set similar targets and share de Soto’s enthusiasm for the contribution of subdivision to ongoing liberty and the pursuit of happiness.

Numerous US studies over the years show that Black and Hispanic families who move to the suburbs and buy their homes soon end up with significantly more net assets than those who remain renting in the inner-city areas. These families use the security to borrow to send their children to college and secure the next generation’s position in the middle class.

Bankers have long recognised that New Zealanders’ main means of saving is paying off their mortgage. Equally, many New Zealanders fund their retirement by subdividing their large lots to create a nest egg for the future. Youthful central planners regard this as an “inappropriate” activity.

When District Plans suddenly make 20 ha (50 acres) the minimum lot size in rural areas they suddenly deprive thousands of people of a secure and active retirement. Of course the planners claim the landowners are still able to subdivide, but just have to go through an approval process – and then the same planners make sure the costs and uncertainties render the exercise prohibitive. Their so-called section 32 cost and benefit analysis ignores this destruction of individual wealth – and dreams.

I wonder if there is a planning school in New Zealand that has Hernando de Soto on the reading list?

Instead of encouraging the creation of titles, as history suggests we should, the Smart Growth central planners have persuaded our governments to penalise the creation of new lots by imposing highly expensive and highly regressive fines called “development contributions” – which are actually anti-development levies.

We tax cigarette smokers to discourage smoking, and we fine speedsters to discourage speeding. Should we be fining the creators of legal title if our aim is to encourage development, promote employment growth, increase savings and promote personal well-being?

Maurice Williamson, the Minister for Building and Construction is determined to reduce the costs of building consents and inspections. But these are trivial compared to the costs of subdivision and land use consents.

It is surely no coincidence that Councils are allowing their consulting engineers to write scores of onerous conditions of resource consent, conditions that are mostly related to construction rather than resource management, and generate huge fees, costs and charges.

But before any legislative reforms can be effective we need to learn to once again celebrate the creation of secure, tradeable, private title as one of Western Civilisation’s greatest contributions to our wealth, health and general well-being.

Tribal “customary title” just doesn’t cut it. As I. A. Rehman says in Dawn, Pakistan’s major daily:

A system of self-cultivated farms is required to break the suffocating rule of feudals who prefer dictatorship to democracy, obscurantism to ijtihad, and rule by force to supremacy of reason.

Just ask those Peruvian women who want to go out to work, and those Pakistanis desperately clinging to power pylons on their flooded landed.