Saturday, September 15, 2012

Phil McDermott: The Answer Is Urban Consolidation – What Was The Question?

Perpetuating the Myth
The Green Party is perpetuating the claim that development beyond Auckland’s “city limits” imposes a high cost on ratepayers.  A spokesperson claims that the current Auckland plan which allows for some new development outside the current urban area, “will cost ratepayers $42b billion to 2042, an annual levy of $200 per ratepayer”  according to a report in the New Zealand Herald.   

But is just so happens that  study on which these calculations are based is a flawed commissioned report rather than a peer reviewed academic study.[1] 

Oops – Contradictory Claims
The authors of the Curtin report acknowledged at the outset that

"The challenge ...  is that infrastructure costs are so heavily dependent on area-specific values.  For instance, road costs among different prospective development areas may vary based on the necessity for major arterial roads, costs for sewerage and water infrastructure could vary immensely depending on terrain and trenching conditions, and many infrastructure components will differ depending on the level and degree of excess capacity” (p.4)

So why did they try to develop a generic tool for estimating the cost of urban development in Australian cities based on a mishmash of evidence from different cities and suburbs in Australia and the United States?  And why would anyone even contemplate applying such “findings” to Auckland with its distinctive physical geography, so different from its Australian counterparts? 

A Quick Critique
The Productivity Commission actually considered the study, among others, in a brief review of housing costs and urban form (Appendix B of the final report).  It noted substantive differences in the physical and social settings  behind the data assembled to support the  study’s claim to some sort of universal cost relationship between development and distance from the city centre.

And there are glaring methodological deficiencies:

An obvious one is mixing discount rates (zero for infrastructure capital costs, 7% for transport-related costs, and 3% for health and emission costs), and omitting operating costs for some items (non-transport infrastructure) and not others (pp. 295-296)

To these flaws can added the assumption of a cost of Aus$170/tonne for carbon emissions when the carbon floor price set by the Australian government (of $15) has since been rescinded and figures at or below $10.00 may be more appropriate based on today’s European prices.  So the environmental argument is seriously overstated.

And the analysis fails to deal with the costs of expanding the capacity of ageing infrastructure in long-established urban areas, of remediating services designed for far lower loadings than they are now expected to sustain, of the health impacts of apartment living in an increasingly brown – not green – environment, and of reductions in the physical and social resilience of high density and often congested urban areas in the face of possible natural disasters or infrastructure failures.

Penalising the Household - is that Socially Sustainable, or Politically Justified? 
Even if it can be proven that the balance of public benefits favours medium or high density living, is there any evidence that such savings will not be offset by the better affordability of traditional suburban housing and the benefits residents derive from living into it?

Putting aside the flawed data and methodology for the moment, the results indicate that 70% of the differences in costs between decentralised and central locations is attributable to travel and transport.  Over half of these comprise travel costs and time carried by households.  If we take these private costs out of the equation the authors' estimate of the difference between centralised and decentralised development falls by 40%.  

The resulting "present cost" for the average household (whatever that might be) of A$22,000 is easily  justified by savings on land and housing in “outer” areas, the benefits households get  from  additional space, greater choice over housing style, and the security and community benefits of suburban environments.

So who pays if we deny people the choice of living in medium to low density housing?  Mainly new households through exclusion from household ownership, or commitment to punitive mortgages, or through the insidious extension of housing poverty through ever higher income brackets. 

So what about the Auckland case: where does the evidence really lie?
Surprisingly-- given the obstinacy of the planners and politicians pushing the consolidation barrow --   no-one has actually done the analysis required to determine the relative economic benefits of different urban development paths for Auckland.  

A technical analysis of the gaps in the Auckland Regional Growth Strategy made the point that the planning model that informed it was hardly up to the task.  The principal conclusion that came from using the Regional Councils land use and transport model was that there is “little [identified] economic difference between growth options”.[2]

The failure of the model to demonstrate economic differences between alternative urban forms was used to suggest that intensification imposes no additional costs than traditional decentralised development.  Of course, the converse is true – although it has been conveniently ignored: there were no demonstrable economic benefits from consolidation or net cost penalties to decentralisation.  This suggests that it would make most sense to let the market prevail, subject to broad environmental standards and fiscal constraints.   

The conclusion  that consolidation was the best option for Auckland ignores other shortcomings  in the  model that could  tip the balance  in favour of strategic decentralisation:
·         The failure to actually define realistic alternatives that would clearly demonstrate economic differences;
·       A failure to evaluate the marginal rather than average impacts of differences in urban form;
·       Ambiguous measurement (both omissions and double counting);
·       The failure to identify the costs of implementation.
To this list we can add underestimation of the high infrastructure and development costs associated with brownfield development and urban consolidation.  These are turning up today in high financial and development contributions for inner city projects.

Calling for Consolidation – a Case of Artificial Intelligence
So why is the Auckland Spatial Plan so fixated on consolidation –despite the begrudging lip service the final version pays to decentralisation (and even that appears to have  upset so upsets the Green spokesperson)?

I can only think it is "artificial intelligence": if enough people say the same thing, it must be right.  Consensus becomes an excuse for lack of evidence, critical analysis, or even common sense.  Groupthink prevails: a phenomenon defined by psychologist Irving Janis as:

A mode of thinking that people engage in when they are deeply involved in a cohesive in-group, when the members' strivings for unanimity override their motivation to realistically appraise alternative courses of action.[3]

Contrary evidence is dismissed while reports favouring an emerging consensus, such as the Curtin one, obtain a degree of currency which, while unjustified,  plays into the hands of policy makers looking for easy (or ideologically comfortable) answers to difficult problems.

And so we blunder on, potentially building our cities on myth and misconception and reinforcing the gap between generations as we do it.

1.Roman Trubka, Peter Newman and Darren Bilsborough  (2008) Assessing the Costs of Alternative Development Paths in Australian Cities, Curtin University Sustainability Policy Institute, Fremantle, Report commissioned by Parsons Brinckerhoff Australia
2.McDermott Fairgray Ltd (1999) Gap Analysis, Review and Recommendations: Auckland Regional Growth Strategy, Technical Report, Auckland Regional Growth Forum .
3.Janis, I L (1972). Victims of Groupthink Houghton Mifflin p.9

Phil is a consultant in urban, economic and community development. He blogs at Cities Matter.

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