"However much it offended the sensibilities of design snobs and planners, we were there because our shoebox apartment was better than the alternative."

"[I]n 2005, Auckland city was ... dotted with cranes, many standing up so-called 'shoebox apartments.'
   "The phrase was not meant as a compliment. They were derided as 'future slums' ... [which] ultimately led to a rule change ... making the minimum size of a two-bedroom apartment 70 square metres. ... [T]he change had a profound and lasting impact on apartment construction. ...

Chart by Apracitis Economics, from The Spinoff

"In 2005, I was only dimly aware of the furore, of the disgust shoebox apartments aroused. In 2005, I was living in one. ... In retrospect that apartment was where I started to get my shit together, started to have a sense that I could be something more than a fuckup....
    "The apartments were objectively ugly, though not so bad as they were made out at the time.
    "But the upside overwhelmed all that. I was right there in the city. ... It was what I needed at that time, however much it offended the sensibilities of design snobs and planners. I feel confident in saying many other residents, transient as we often were, felt the same way. We were there because it was better than the alternative. ...
    "Another characteristic of the inner city when I lived there was that homelessness barely existed. I remember vividly an extraordinary double-page feature in the 'NZ Herald' which looked at life among the unhoused then. It mapped specific characters, and if you spent a lot of time in the inner city, it seemed a near-complete survey.
    "The idea that you could now map the scale of human misery that a lack of housing has brought to Auckland is unimaginable. As the ’00s wore on, the GFC hit and the next decade began, the city acquired its current reality, with hundreds of people making lives on the streets of downtown and its fringes. It’s now a countrywide phenomenon.
    "That’s the backdrop of the reforms announced last week by housing minister Chris Bishop. I travelled into the city to see him deliver a speech about housing last week ... He spent long periods wading through the thickets of regulation, through the acronym soup of the MDRS and the NPS-UD, and paid compliments to Auckland’s groundbreaking 2016 unitary plan, which started the process of unshackling land for development and finally saw us surpass the heady mid-00s for construction of multi-units.
    "But the part which leapt out for me was not technical, it was moral. He announced an override of the minimum dwelling size standards – a return to plausibility for the kind of place I lived in 20 years ago. In front of a room full of people involved in construction and leasing, with tables for Colliers and CBRE and Crockers, he made a simple case. 'You know what is smaller than a shoebox apartment? A car or an emergency housing motel room.' That’s our current plan for dealing with people who don’t have a house, and it’s indefensible.
    "The rest of the reforms he announced are big. They are a continuation of an enormous body of work which started with Auckland’s unitary plan, was driven forward by Phil Twyford’s revolutionary NPS-UD which created a huge potential for urban density, and now reaches a powerful climax with Bishop’s 'Going for Housing Growth' package.
    "It’s not beyond criticism ... But to me those issues are less material, and likely to be less impactful, due to the return of the maligned shoebox."

~ Duncan Grieve from his post 'I lived in a shoebox apartment. I’m glad they’re coming back'

The record shows that to make more affordable housing that’s affordable, it’s better to build more OUT rather than up

 

 

The mandarins who have made Auckland housing unaffordable have decreed in their new Unitary Plan that the city shall grow up, not out, and other NZ cities are following suit.
    The same decree has just gone forth from Obama’s White House – instead of relaxing artificial constraints on horizontal development, the decree advocates even tighter constraints to force even denser housing in American cities.
    But the fact remains, explains Randal O’Toole in this guest post, that no matter how often urban planners chant, “grow up, not out,” the fact is that no urban area anywhere has ever made housing more affordable by increasing its density.

A new Housing Policy Toolkit from the White House admits that “local barriers to housing development have intensified,” which “has reduced the ability of many housing markets to respond to growing demand.” The toolkit, however, advocates tearing down only some of the barriers, and not necessarily the ones that will work to make housing more affordable.

“[Cities in the American sunbelt] with more permeable boundaries have enjoyed outsized growth by allowing sprawl to meet their need for adequate housing supply,” says the toolkit. “Space constrained cities can achieve similar gains, however, by building up with infill.” Yet this ignores the fact that there are no cities in America that are “space constrained” except as a result of government constraints. Even cities in Hawaii and tiny Rhode Island have plenty of space around them–except that government planners and regulators won’t let that space be developed.

Instead of relaxing artificial constraints on horizontal development, the toolkit advocates imposing even tighter constraints on existing development in order to force denser housing. The tools the paper supports include taxing vacant land at high rates in order to force development; “enacting high-density and multifamily zoning,” meaning minimum density zoning; using density bonuses; and allowing accessory dwelling units.[All of these things are part of Auckland’s Unitary Plan, or are promised by several of the leading mayoral candidates – Ed.]  All of these things serve to increase the density of existing neighborhoods, which increases congestion and–if new infrastructure must be built to serve the increased density–urban-service costs.

Urban areas with regional growth constraints suffered a housing bubble in the
mid-2000s and are seeing housing prices rise again, making housing unaffordable.
Source:Federal Housing Finance Agency home price index, all transactions.

Developers learned more than a century ago that people will pay a premium to know that the neighbourhood they live in will not get denser. Even before zoning, developers used restrictive covenants to limit density because they knew people would pay higher prices for lots with such covenants. When zoning was introduced to do the same thing, many neighbourhoods were built without such covenants, but that doesn’t mean the people in those neighbourhoods will be happy to see four- and five-story buildings pop up among their single-family homes.

Urban areas with few regional growth constraints see only moderate changes
in housing prices over time and still have plenty of affordable housing.

Planners argue the market has changed and more people want denser development. This is belied by the toolkit, which also supports the use of property-tax abatements and value capture incentives (i.e., tax-increment financing) to promote higher densities. If there really were a market for higher densities, such subsidies would not be necessary.

If there really is a market for higher densities, then developers should be allowed to build such densities in areas that are not already established low-density neighborhoods. But developers should also be allowed to build low-density neighborhoods at the urban fringe to meet the demand for that kind of development. Instead, state and local planning rules in California, Florida, Hawaii, Oregon, Washington, and most New England states have essentially made such low-density developments illegal.

Moreover, there is little reason to believe that “building up with infill” will make cities more affordable. Artificial constraints on urban growth make land many times more expensive than in unconstrained areas. Mid-rise and high-rise housing costs more to build per square foot than low-rise housing.

Increasing density generally correlates with decreasing housing affordability.
Source: 2010 US census.

No matter how often urban planners chant, “grow up, not out,” the fact is that no urban area in the nation has ever made housing more affordable by increasing its density. In fact, as the chart above shows, there is a clear correlation between density and housing unaffordability.

The urban areas that have been increasing their densities through artificial growth constraints are precisely the ones that are having affordability problems. For example, from 1970 to 2010 the density of the San Francisco-Oakland urban area grew by 43 percent while its median home value-to-median family income ratio (a standard measure of housing affordability) grew from 2.2 to 7.1. Portland’s density grew by 14 percent and its value-to-income ratio grew from 1.6 to 3.9. Honolulu’s density grew by 23 percent and its value-to-income ratio grew from 3.2 to 6.6. Growing up has made these regions less affordable, not more.

Ultimately, what is wrong with the White House toolkit is that it is focused on local zoning which it should be focused on urban growth constraints. If there are no urban growth constraints, local zoning won’t make housing more expensive because developers can always build in unrestricted areas. Dallas has zoning; Houston doesn’t, yet in 2014 both had house price-to-income ratios of 2.4. Only regional growth constraints make housing expensive. Every major city in America except Houston has local zoning, yet only those cities that have growth constraints have become unaffordable.

The increased regulation advocated by the White House will make those areas less affordable, not more, while it won’t do anything at all for areas that already have lots of growth constraints.

The White House toolkit calls its proposals “smart housing regulation.” [So too do Auckland planners decribe their Unitary Plan – Ed.] Truly smart regulation would rely on policies that work, not policies that only work in the fantasies of urban planners. The policies that do work would better be described as “smart land-use deregulation,” as they involve dramatically reducing constraints in unincorporated areas. Until that happens, housing will continue to become less affordable in constrained areas.

---

Randal O’Toole is a Cato Institute Senior Fellow working on urban growth, public land, and transportation issues.
This post first appeared at Cato.

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In Auckland, we’re still making affordable housing impossible

 

The authors of Auckland’s Unitary Plan took on the issue of how the city should be allowed to grow by the planners. Disallowing people’s freedom to choose themselves how the fuck they live, they characterised it as a choice between up versus out.

The best choice within this perverted planning framework would have been to say both-and.

The worst choice if you want to cure Auckland’s rampant housing affordability problem (for which, I remind you, we have the world’s gold medal) would be to largely prohibit building out in favour of building up. (“They don’t want people to have choice – they want everyone in an inner-city apartment.”)

The very worst choice of all would have been to largely prohibit building out while severly limiting where people will be allowed to build up – which is what the city has ended up with.

So we get the worst of both worlds.

The outcome reaffirms research conclusions that

Cities that have curbed their expansion have – with limited exception – failed to compensate with densification. As a result they have produced far less housing than they would otherwise, with severe national implications for housing affordability, geographic mobility and access to opportunity, all of which are keenly felt today as we approach the top of housing cycle.

Part of the reason is that, as urban-research economist Issi Romem finds, cities do fail to compensate for not building out by making it far too difficult to build up either.

But the other reason is that simple urban land economics means that because the planners’ ring-fence around the city “destroys the competitive market for land on the urban fringe,” the jolt in prices there feeds through to every single home in the city.

Discussing this disaster, Wendell Cox points out that this should hardly be news to anyone willing to remove their blinkers.

Near 50 years ago, legendary urbanologist Sir Peter Hall suggested that “soaring land prices …. certainly represent the biggest single failure of the system of planning introduced with the UK’s 1947 [Town and Country Planning] Act” (see: The Costs of Smart Growth Revisited: A 40 Year Perspective). Urban containment policy, the principal strategy of forced densification, cannot repeal the law of supply and demand. Seventy years of experience prove that.

The writers of Auckland’s Unitary Plan could not care less about that proof.

Now about Auckland’s would-be home-buyers locked out of the housing market by their strangling of it.

[Hat tip Hugh Pavletich]

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Hayek on (Unitary) Economic Planning

 

 

 

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