In my blog of 21 October 2018 I developed a thought experiment of how the city redeveloped in a series of steps as areas aged and land values rose. The result is a ‘southern alps’ type profile of building density / height (as it responds to increased land value). The tallest buildings are not necessarily in the middle, and the profile of height (or density) is not a smooth curve from the centre to the fringe.
In short, while land values may present a smooth curve from centre to edge, with some ups and downs around sub regional hubs, the city skyline is jagged.
A question prompted by the exercise was what if one area of the imaginary city had a constraint placed on it? What if a height limit, density control or similar meant that buildings could not be built to a height that is reflective of the land values present? The height profile will be different in the area affected by the constraint.
Often when considering a planning constraint we get presented with a figure similar to the one below. Rather than a smooth curve of reducing land value as distance increases, there is a disruption created by a planning constraint. In this case the constraint is represented by the grey bar. The constraint creates a ‘cliff’ along the curve.
- The supply of Class B space is less than what is demanded and a bit more expensive for all those offices space consumers in the Class B space area;
- Class A space expands to accommodate the office space that can’t get into the Class B area. This extra demand may increase prices, less so if supply can also expand easily;
- The displaced Class B space consumers who occupy Class A space end up paying more for their office space than might otherwise have been the case, or perhaps the Class B office space users need to consume less Class A office space than they might otherwise do, to keep their costs down.
1km - unconstrained (Class A area)
Higher, depending upon supply
2km - constrained (Class B area)
Landowners in the unconstrained area are likely to see a benefit, but landowners in the constrained area will see lower values than might otherwise be the case.
The above are the 'costs', not the 'benefits'. Working out the benefits of the constraint is beyond me. There is the direct benefit, but there may be other, off-setting benefits from more floorspace in the Class A area:
- Public transport services may be better. Big investments like the Central Rail Link in Auckland may be made sooner if there is more floorspace . This investment in transport accessibility benefits all landowners and tenants.
- Some redevelopment of sites may be brought forward if there is more demand
- The Class B occupiers may fill up ‘hard to rent’ areas in the central area.
- The unconstrained area may be a busier and more lively place with more cafes and lunch bars, helping to generate more vitality.
However, overtime, as the wedge between what might otherwise happen and what does happen in the constrained area gets bigger, it may be harder to put in place these compensating actions.