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Dr Phil McDermott

Will the Reviewed Auckland Unitary Plan Save Auckland from Itself?

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The Independent Hearings Panel has presented its recommendations for the Proposed Auckland Unitary Plan (PAUP) to Auckland Council.  The Panel faced a major logistical challenge[1] in trying to ground the PAUP.  A key question for me was whether it would focus on the policies and their application, or would it address the underlying principles?  We now know that the review focused on the former and, by doing so, effectively endorsed the latter.  The Panel loosened the strait jacket, but the patient remains tethered.  Indeed, we may come to regret the additional credibility that the Panel has given the plan.

I will address three areas in support of this pessimistic view: the new provisions for housing; the population projections; and investment, employment, and where people will work. (I have not delved into the detail, but have focused on the Panel’s overview report to the Auckland Council).

How many dwellings?

Much of the debate about the PAUP reflected the proposition, that Auckland’s expansion is best served by containing and intensifying development around a strong CBD. Like the Auckland Regional Growth Strategy (1999) from which it evolved, via the Auckland Plan (2011), the PAUP is committed to locating the majority of regional growth in the existing built-up area with transport investment focused on improving accessibility to the central city.

Despite constructive modifications the Panel to the mechanics of the plan (Report to the Auckland Council; Overview of recommendations on the proposed Auckland Unitary Plan, July 2013, pp.7-8), it the Review Panel reaffirmed the principle of a “quality compact city”, as its starting point.

Acknowledging that this vague term can only be understood through reference to context, the Panel defined it as:

a more quality compact urban form than is currently the case with intensification focused on centres and transport nodes, and along transport corridors …, and a wider choice of housing and more affordable housing” (Report, 47).

The “more” here apparently refers to “compact”.  In its deliberations, the Panel had to deal with the unhelpful council estimate of residential capacity in the existing urban area (258,487 to 417,079 dwellings) underlying the proposed plan.  Over several months of deliberation, an expert group appointed by the Panel came up with a more realistic estimate of 83,420 “developable feasible” dwellings.  This much more realistic estimate put capacity at just 32% of Auckland Council’s lower estimate and 20% of its higher estimate!

A flawed starting point could have justified a rethink of the Plan. Instead, the Panel decided simply to up the “enabled capacity” figure to 422,000 more dwellings through to 2041.  Achieving this requires changes to the proposed plan, the Panel recommending: removing density controls in residential areas, focusing even more growth on centres, nodes, and corridors; enabling more small town and village growth; and providing for some residential and business zonings on the edge of the urban area.

According to the Council’s staff analysis of the additional capacity, 64% of the new dwellings (270,000) will be in the current urban area.  This is 62% more than occupied the entire region in 2013.  Interestingly, the new figure of 270,000 is 10% higher than the figure modelled one month earlier based on the proposed new provisions (“Feasible Capacity of Recommended Plan” 8 June 2016; Annexure 1, Enabling Growth, p.42), suggesting a bit of a scramble to get the numbers up there.

Some 70% of the modelled figure comprises apartments, 8% terraces.  This is 190,000 new multi-unit dwellings compared with an actual figure of 110,000 in 2013.  This certainly sounds like “more”, but at what cost to quality?

Who will need the houses?

Not only that, but a little bit of attention to the nature of growth might have steered the Panel away from promoting this imbalance.  The latest (2015) Statistics New Zealand high population projection for Auckland indicates that just 16% of the growth to 2043 will fall into the 19-30 age cohort (11% in the medium projection), the group most likely to favour apartments.  32% will fall into the age groups most likely to be in family households, favouring the space and amenities associated with detached or terrace housing, and another 20% aged 55 to 64 moving into the empty nest segment (assuming, of course, that their children can afford to move out!)  Like younger families, this group is likely to sustain demand for detached or at least more spacious multi-unit dwelling away from the congestion of town centres.

A variety of paths will be followed by the 34% of additional population projected to be over 64.  Some may simply retain family homes.  Others may move into terraces, apartments, and detached dwellings in managed, largely suburban villages, and beyond that perhaps to multi-unit care facilities.

The point is, that at least 50% of the projected additional demand for dwellings (and probably much more) is likely to favour detached or semi-detached and terrace houses.  Hitting a notional (and arbitrary) growth target mainly by building apartments is denying demography and ignoring the likely range of preferences of future Aucklanders.  Given that projected growth relies on sustaining high levels of migration from overseas it also fails to heed the cultural differences that are likely to sustain increasing rather than diminishing household size in many parts of Auckland.

What about affordability?

There is nothing in the plan – and nor should there be – explaining how development, and construction costs might be lowered so that the new stock might actually be affordable.

The Council’s modelling indicates in fact that 55% of the projected dwellings within the urban area are likely to be priced above $1million, with an average price of around $1.1m, just above the latest QV Auckland average value of $990,000.  Only 10% are expected to fall below $600,000.  This confirms that apartments, like detached dwellings, are largely unaffordable.

The Panel acknowledges that the Plan is no recipe for affordability. Yet, the evidence of the past decade – and the economics of demand and supply – demonstrate that policies arbitrarily limiting the introduction of new urban land to cater for expansion play a key part in pushing up the price of what land is available.

Certainly, the Panel’s recommendations improve prospects for future greenfield land being brought to market, especially if sufficient land owners can negotiate their ways through the private plan change process and the Council can “streamline network infrastructure provisions”.  However, these are tasks still to be done: the IHP could never deliver on the urgent current need, or its consequences. By continuing to restrain the release of new land, the Plan will keep costs high throughout the city for some time to come, locking a generation of Aucklanders out of the housing market.

What will the effects be?

Given continuing high urban land prices (by limiting the land that might be brought to market) and the relatively high cost of developing apartments, the only way to improve affordability will be to build small, lower quality apartments.  Even with mass production and utilitarian design, the feasibility of such developments will be marginal, limiting the prospect of boosting housing opportunities through apartment development and prejudicing the quality of the urban environment.  (Highly priced, well located, and well-designed apartments should be feasible, but cater for a limited market and do nothing for people currently languishing outside the housing market).

This raises questions over the population projections informing the plan, especially given that they are heavily dependent on inward migration.

Compared with the considerable attention paid to housing supply, the proposition that Auckland will house between 700,000 and 1 million people by 2041 was accepted by the Panel at face value.  Yet, there is huge uncertainty around these figures, reliant as they are on migration assumptions (accounting for around 40% of the totals).

The recent boost to net international arrival figures was not forecast.  We are even more likely to get it wrong over the long-term, especially given the dependence of migration on volatile international geo-political conditions, as well as housing and labour market performance here and overseas.

Where will we work?

For the population to grow as projected, employment has to keep pace, with sufficient, suitable land and infrastructure to cater for it.  The employment land estimates informing the PAUP are not clear in the IHP report or its supporting annexure.   The Panel conceded that there was:

insufficient time … to test and develop the methods for estimating commercial and industrial capacity to the same extent as the residential methods and models.  Further, it is difficult to generalise about capacity across locations in relation to commercial and industrial requirements …” (p.62).

The Council’s Future Urban Land Supply Strategy (November 2015) gives some clues.  It suggested that a million new residents would need 277,000 additional jobs (p.4).  That’s a projected participation rate of just 28% of new residents working. A comparison with Auckland’s actual figure of 44% in 2015 rings alarm bells; does the Plan assume a dramatic turnaround in the labour market?  Or should we assume something like 40% of arrivals will want work, given that the migration behind Auckland’s growth is mainly about finding work (other than the transient, international student share)?  If so, the region needs to cater for around 400,000 more jobs.

There is no discussion of how and where this will occur.  The Panel acknowledges this, cautioning against definitive conclusions.  It does, however, suggest that “there is sufficient commercial and industrial capacity in the region for the next seven years” (p.62).

The Auckland Council estimate in Annex Appendix 3 to the Panel’s Overview Report suggests that there is 1,540ha vacant business land under the proposed rules. Even under generous employment density assumptions this would accommodate at best 200,000 employees.  The likelihood of all this land being available and suitable is low.  The prospect of conversion of even half of the additional 2,500ha vacant “potential vacant” land identified (residual land including parking and storage areas on already occupied sites) is much lower.

Failing to allow sufficient land for commerce, business, and government services leaves critical questions about providing capacity for employment unanswered.  A tight supply of industrial and commercial land means businesses struggle to find sites suited to their needs, raising costs and discouraging investment.  Seven years’ theoretical supply is inadequate if we accept that investors need choice.  It will to keep the price of land and premises high, threatening future employment growth.

The failure to align additional business land with the locational needs of firms and their employees will also compound the city’s transport problems.  The costs of electrifying, reconfiguring, and re-equipping, Auckland’s heavy rail network and expanding arterial road capacity already demonstrate that the follow-on costs of trying to build our way our way out of the resulting congestion will be high.

Mission impossible?

The very idea of a long term, urban-focused plan for a large (16,100sq km), fragmented and 70% rural region containing a growing and diversifying city straddled across an isthmus is flawed.

The challenge is compounded by the fact that Auckland is stuck with a unitary plan.  It has to cover environmental, economic, and social policies in a single document across a wide range of physical and social circumstances.  In response the Council has chosen to set constraints on Auckland’s physical development as a whole, with little idea of what the future holds and how we might manage increasing complexity.

Regardless of the quality of the Panel and its deliberations, its mission was impossible to start with, the Council’s commitment to a “quality compact city” a mistake which the Panel’s report endorses.

The real issues

Auckland faces two underlying problems that mean a comprehensive plan will not deliver what its protagonists want and vested interests proclaim.

First, the region contains many diverse communities, each with its own needs, prospects, and possibilities.  Given an increasingly articulate, disparate, media savvy, and engaged population, crafting a plan that will satisfy the communities, cultures, and interests of Auckland and stand the test of time is well-nigh impossible.

The response to this complexity appears to involve becoming more authoritarian and rule dependent to deliver a simplistic land use vision based on containing the city.  There are formidable obstacles to implementing a plan, which will compound congestion, increase community resistance, inflate the housing market, and, by favouring current owners of assets, increase social divisions.

Second, a single unitary council is simply wrong for Auckland.  Rather than streamlining processes it disempowers constituents. Promised efficiencies are not delivered.  Costs blow out.  Systems become more complicated.  Regular restructuring and internal reforms distract staff.  Various subordinate organisations – branches, divisions, council controlled organisations, even subcommittees — take on a life of their own, pulling in different directions.  The weight of management increases, compromising the governance relationship with the board (or council), and the organisation loses its way.

Is there an alternative?

A minimalist or more measured approach to Auckland’s future would have serve the region better.  A plan that focused on setting the standards, facilitating development, and encouraging innovation and competition would be more helpful than one that purports to eliminate uncertainty and meet a variety of objectives social, cultural, environmental, and economic by prescribing what should be done, where (and when).

Rather than concentrating the impacts of urbanisation within a confined city, a plan for sustainability might start by identifying areas which environmental and cultural considerations rule out of development, set some standards for development elsewhere, and within those constraints allow the land market to operate to determine the most appropriate distribution of new activity.  This may be informed by a component of the plan dealing with coordination and streamlining of key infrastructure (as proposed by the Panel).  Such an approach may just start to see the mix of housing shaped and priced to meet the needs of Auckland’s various communities and their expansion while creating the flexibility needed to support a rapidly changing regional economy and labour market.

[1] Bernard Hickey documents it:

“On Friday, Auckland’s ‘Eagle’ landed in the offices of the Council and it’s a moment that will prove pivotal in the future of both Auckland and the rest of the economy.  The Independent Hearings Panel on the Auckland Unitary Plan handed 1,000 of documents, plans and recommendations over to officials after five years of work, including 249 public meetings and 21,210 pieces of written feedback.

“There were 13,394 submissions from members of the public and all sorts of interested parties covering 1.494 million separate submission points over 249 days of hearings on 70 separate topics.  Submitters made 4,000 appearances and submitted over 10,000 pieces of evidence.”

And that’s quite apart from the mountain of paper generated by the prior preparation of the Auckland Plan and the Proposed unitary plan itself.