Rod Oram: Twyford chases an illusory pot of gold

In this week's column, Rod Oram challenges the new Government's plan to remove the urban rural boundary around Auckland

With just 14 words in its Throne Speech on Wednesday, the Ardern government compromised Auckland’s growth plans.

“This government will remove the Auckland urban growth boundary and free up density controls,” it promised.

It claims these two actions will help solve the city’s housing crisis by building “up” and “out” -- more homes will be built in the city, and more on its far rural fringes.

But these actions would undermine the city’s Unitary Plan, the real, hard-fought, deeply researched, “up and out” solution to the crisis. The Plan will deliver up to 422,000 new homes over the next 25 years, the independent hearing panel’s analysis concluded.

The Rural Urban Boundary is crucial to the plan. It gives infrastructure planners, funders and providers some certainty about where to cater for growth; it provides some certainty about which areas remain rural over coming decades, which is important for the rural economy and urban-dwellers’ enjoyment of the countryside; and it reduces the adverse environmental impacts of urban development.

The RUB opens up much more land, and with more flexibility, than did its predecessor, the Metropolitan Urban Limit. The Plan identifies 15,000 ha of such land, sufficient for 137,000 homes, 1,400 ha for new businesses and 67,000 more jobs. Moreover, the RUB doesn’t constrain the growth of rural and coastal towns; and landowners can extend it via private plan changes.

The density provisions are equally important. They will help the city grow in ways that are broadly acceptable to many people. During the Plan process, fierce fights showed how intensely some people feel about what can be built where.

The government has better things to do with its political capital than to force council and citizens to painfully compromise all over again for the sake of achieving greater density in random places.

The strangest thing about the new government’s eagerness to overturn Auckland’s hard-won progress on growth is the role of Phil Twyford.

When Labour was in opposition, Twyford admirably immersed himself in Auckland’s growth issues, a diligence shown by few MPs in their spokesperson roles.

But now Labour’s in government and he’s Minister of Housing and Urban Development he’s hell-bent on re-litigating these two crucial foundations of the Unitary Plan. He seems to have largely ignored, or at least dismissed, the progress the city is making.

Doing so is a great distraction for government, council and citizens when all three sectors need rapid innovation, not more land, to build the city far faster.

The real task is to massively increase the volume of new homes and infrastructure. For example, meeting the independent hearing panel’s estimated need of 131,000 new homes over the next seven years would take a 3.8-fold increase in construction, estimates Tony Alexander, BNZ’s chief economist.

The infrastructure challenge is just as great. Take just transport. Within Auckland’s existing urban area there is already a $7bn shortfall in funding for the $24bn of projects identified for the next decade in the Auckland Transport Alignment Project.

On top of that, there is the cost of turning the 15,000 ha of rural land within the RUB into land ready for urban development. The council’s estimate is $20bn – or about $146,000 per dwelling on average. The main components are $5.2bn for water, wastewater and stormwater; $11.3bn for transport (including investment by the government’s transport agency and Kiwi Rail); and $3.5bn for parks and community facilities.

The council and the new government are working on additional ways to fund the hefty investment, such as targeted rates in developing districts, bonds, special purpose funding entities, and a regional road fuel tax.

As welcome as those are, they only increase the funding available. They don’t change a core characteristic of infrastructure investment: the most cost-effective way is to build at reasonable scale, with a pipeline of projects, to meet growing demand.

Indeed, Twyford says the new government will focus much of its housing and infrastructure efforts around existing urban centres, notably Manukau and Henderson, and along existing transport corridors.

But if the government biffs the RUB and opens up even more rural land for development, and removes density controls in existing urban areas, then the Unitary Plan loses two main aids to focusing growth and investment in a pipeline of projects.

The whole urban development process would become more random and diffuse. Economic efficiency and civic amenity would suffer, to the detriment of Auckland’s growth.

Cheap land at Paerata?

Why would Twyford fall into this trap? In the absence of convincing research from him, it seems he has been seduced by the chimera of cheap rural land. He points out a paddock outside the RUB cost a pittance compared to the paddock across the road inside it.

Infrastructure New Zealand, the sector’s lobby group, is similarly smitten. It recently propose a satellite city starting at Paerata, just north of Pukekohe.

It says 30,000 homes could be built in Paerata, making use of prefab construction, at an average cost of about $450,000 each, compared with the current median price in Auckland $825,000.

"Paerata’s land is still cheap, but rising quickly," it says. "If bought at today’s prices, an average section of raw land would cost $17,000. Three years ago, it cost $10,000 ... If authorities can move before the market in Paerata, land value can be captured and used to offset infrastructure costs."

It glosses over the fact this would only work if the council and/or government became a massive land-banker. To lock in low prices, they would have to forcibly buy vast tracts of land before the RUB was removed.

The chart at the top of this column shows what happens to land values as they escalate from farm land, to land within the Future Urban Zone inside the RUB but lacking infrastructure, to such land with infrastructure. The chart is from an Auckland Council report by its Chief Economist, using data from CBRE, the largest commercial real estate services and investment firm in the world.

INZ believes the satellite city could grow north to eventually house some 500,000 people. But such growth would take the new city up to Karaka and the Pahurehure Inlet to the west of Papakura.

Currently this area is not in Future Urban Zone because the independent hearings panel decided the infrastructure costs involved were too high. Big ticket items would include a 1km, $1bn bridge (when priced a decade ago) over the inlet from Karaka to Weymouth.

Yet, INZ believes that and other big investments such as $2 bn for turning the main trunk line into a four-track service and for the removal of level crossings are affordable. Buy the land cheaply enough, it argues, and growth, through the uplift in land values, will help pay for the infrastructure.

INZ is also proposing that the new city would be relatively dense. It’s good they see the merits of that. But it would be more economically efficient if they helped sell that message in the existing urban area, where there is still resistance to that urban form.

But as far as one can tell from the rudimentary illustrations it offers of its proposed new city, including elevated railway tracks over motorways, INZ has little idea of what an attractive 21st century city looks like.

Some of the hallmarks of such a city include delightful design, playing to our cultures, climate and geography, that makes the city a place people enjoy making their lives in.

That great task of city-making New Zealand style is already underway, helped by the Unitary Plan. The government and INZ can best help Aucklanders by getting behind them on this, rather than chasing the illusory gold they see in rural fields.