The following is a copy of my submission on the Urban Development Authorities discussion document put out by MBIE. It follows from my blog of the 17 February 2017 where I put down some initial thoughts.
The proposal to set up a legislative framework for urban
development authorities (UDAs) is potentially beneficial.
Such authorities will be given access to substantial powers
in relation to:
- Planning and development control
- Compulsory purchase of property
- Access to trunk infrastructure
- Funding and financing.
These are useful tools.
The two key issues I have with the proposals are:
1. What is the social / public benefit from having access to
these powers?
2 How are the activities of the development agencies to be
funded to ensure that they can take a long term, sustainable approach to urban
development?
Public Good Outcomes
The discussion document seems to imply that it is more and
faster housing development that is the social payoff from the special powers to
be granted to UDAs. But is this sufficient justification for the deployment of
these powers?
There is mention of social goods like affordable housing
being part of the mix, but this is far from a certain outcome.
In my view the social dividends from the use of the powers
listed need to be bolted into the legislation. In other words, use of the
powers needs to be tied to the provision of demonstrable public benefit. To my
mind this would cover:
- A range of housing types and business/commercial spaces within a development (ie mixed community outcome)
- Direct provision of affordable housing with suitable retention mechanisms (i.e. equity outcome)
- High quality urban design /place making (i.e. quality outcome).
- Environmental restoration and enhancement (sustainability outcome).
- Redevelopment of lower income / lower value housing areas in the name of ‘renewal’ resulting in displacement of low income households and reduced access to affordable housing
- Trading off the natural environment for more housing/businesses. For example, if not well specified, the plan making powers could be used to water down or remove rules that protect the natural environment, local heritage and important landscapes
- Consumption of open space / reserve land for development. Open space land is often seen as a soft target for housing development (such as suggestions that publicly owned golf courses are re purposed for housing). Especially if funding for UDAs is limited, then there is likely to be great pressure on the UDA to find ‘soft targets’ to develop
- Inefficient patterns of trunk infrastructure provision resulting in extensive infrastructure that is vested in / upgraded by councils and expensive to maintain into the long term
- “Flag ship’ private development receiving a substantial subsidy in the form of public infrastructure funded by the tax payer or rate payer, such as new motorway extensions and interchanges, new schools, open spaces and the like, with that funding seen to be needed to ‘kick start’ marginal developments, potentially to the detriment of other areas that receive less investment, but which have higher needs.
Throughout the 1970s, the 5,500 acres of former dockland was a bone of
contention. The Conservatives saw it as a national resource for private and
public investment. Labour planned to build council housing on the derelict
sites, but appeared to have no idea how to regenerate the Docklands
economically. Ultimately, it was the former vision that won out, bringing in
international interest via Canary Wharf and City airport, and introducing
transport links via the Jubilee line and the Docklands Light Railway to make
the territory more accessible to residents and visitors.
It fell short by placing too much emphasis on the private sector and not
staying true to its original promise to the public sector. This is something
the government needs to address with the regeneration of the Thames Gateway
today, says McAuley. "It can create the conditions for the private sector
to regenerate the economy of the area, but it must step up to the plate on
issues such as education, housing and health."
The Docklands redevelopment did
provide for many high end jobs and new, expensive apartments. These are good
things, but there were costs involved:
- an expensive tube line extension was funded by the public
- affordable / social housing was lost
- there were few jobs suitable for the local, less skilled
population
- much of the new public spaces created are in fact semi public
spaces controlled by private landowners.
Rowan Moore in his book Slow Burn City makes these points.
The above issues could be addressed by clearly stated public
good objectives for UDAs which are part of the enabling legislation.
The discussion document states that “development projects
will be required to achieve clearly-defined strategic objectives, which will be
set by central government and territorial authorities when the project is
established”.
However, there is no statutory requirement to provide these outcomes,
while the nature and extent of these ‘strategic objectives’ would appear to
vary from project to project.
For example at page 19, there is the following statement:
“These objectives can include requirements for public good outcomes
(such as a certain proportion of social housing). A key strategic objective of
all development projects will be to ensure the relationship of Māori with
their land and other taonga is maintained. The choice of development powers
must reflect those strategic objectives”.
However, the objectives may be as simple as ‘provide x
number of houses, or y area of serviced land’. As an example, at page 25 it is
noted that:
"In exchange for benefitting from the proposed development powers,
the profits that private sector development partners seek can be offset by
public good outcomes that the Government can require from the development project.
These can be stipulated as part of the strategic objectives that the Government
sets when enabling a development project. Potential requirements could include
the volume of housing supply, the
speed of delivery, better infrastructure, affordable housing and
improvements to local amenities (such as investment in local heritage or
installation of public artwork)".
To my mind, speed and volume of delivery and better
infrastructure are not public good outcomes. These are private benefits which
have a collective benefit, but these are not ‘public good outcomes’ in the
normal sense of the word.
I think the lack of specification and requirement around
public good outcomes is the major weakness of the proposal and needs to be
addressed by appropriate objectives and outcomes included in the legislation.
The need for clearly stated public good statutory goals is ever more important
if the UDAs are to incorporate some form of public –private partnership. The discussion
document notes:
Both private developers and publicly owned urban development
authorities (or a combination) could access development powers for their
development projects. However, in the case of private developers, even once the
project has been established the Government proposes that they must apply to a
publicly controlled urban development authority, who would decide whether to
exercise the powers.
Without some clear specification of what is a public good
and some form of cast iron agreement as to their delivery, it is not clear how any
private developer who can access the required powers can be made to honour
public good outcomes that may be established for the project.
Funding and Financing
There is plenty of evidence to say that good urban
development (development that creates lasting value, which is sustainable and
does not create problems for future generations) needs ‘patient capital’.
It is not clear at all how the funding arrangements for UDAs
will work; how will the agencies be capitalised and the extent to which any
agency will be expected to pay a dividend to government, should it receive
funding from them?
The discussion document talks hopefully of a range of tools
to raise capital, all of which appear to avoid direct capital injection by
central government. There appears to be a hope that the agencies will be self
funding. This approach does not inspire confidence.
Under the heading funding and financing, the discussion
document states:
An urban development authority needs access to powers to independently
fund new, and to upgrade existing, infrastructure systems and services, either
directly or under contract with others. In particular, the Government proposes
that the costs of developing new infrastructure be passed on to the eventual
purchasers of individual properties and to any existing properties that benefit
from the upgraded services within the development project area, either in the
sale price or through a separate, targeted, property-based infrastructure
charge.
There is no mention of funding to acquire and hold land, or
to actually develop housing or business premises, apart from a vague reference to
“receive and issue grants from the Crown and others”.
Land and housing development are very capital intensive
activities. For example, the recently announced housing programme of the
government to build around 2,000 homes per year in Auckland is reported to
likely to cost upwards of $2.23 billion in the first four years and be funded
through Housing NZ’s balance sheet and $1.1 billion of new borrowing that the
Government has approved as part of the business case. This cost does not
involve land costs and related infrastructure, as public land is to be
developed.
One of the weaknesses of most urban development schemes is
the inability to access long term capital. This severely hampers good outcomes.
Short term demands to sell product tend to dominate.
The lack of any detail on the issue of capitalisation is
baffling.
In terms of infrastructure funding, there is also some mixed messages. As an example, a foot
note at page 13 states that the Britomart transport centre was funded by land
sales. If my memory serves me correctly, the council owned the land as it was
reclaimed from the harbour and previously administered by the harbour board. But
there is limited public land like this in Auckland. Hobsonville air base is a
further example, but again it is a one off.
In relation to a user pays approach to infrastructure, I
agree with the general principle, but note that in the past councils (to facilitate
urban development) essentially ran an ‘average cost’ model to infrastructure
provision. While arguably leading to
development in the wrong area, in the right areas development received a form
of subsidy that helped deliver a degree of equity across urban areas in terms
of the level and type of infrastructure provided.
Without this subsidy, many areas that the discussion
document says should be developed may not be financially feasible to develop or
will only be feasible if infrastructure
is stripped back to the bare bones. An example would be an area of high
deprivation. Such an area will not attract a market premium, nor is it likely
to be able to sustain a ‘user pays’ approach to infrastructure, given likely
income levels. Alternatively the redeveloped area may only be able to sustain
repayments if high deprivation is replaced by low deprivation, with the high
deprivation population displaced.
Somewhat contradictory to the user pays approach to
infrastructure funding, at page 74 the following comment is made:
The proposed legislation includes powers to require the relevant
territorial authority to alter or upgrade any remote trunk infrastructure
systems that are necessary to support the development project, if that work is
not being undertaken by the urban development authority.
Extending trunk services is the major infrastructure cost
involved in urban development, not local infrastructure within a development
area. For example in the central Isthmus area of Auckland, the major trunk
infrastructure that needs upgrading to cope with growth is the new central
wastewater interceptor and the passenger transport system. Both of these are
multi-billion dollar projects. These types of projects cannot just be ‘called
up’ in the space of a few months and paid for by the Council out of current
revenues. Giving the power for the
authority to require trunk infrastructure to be provided provides a very strong
incentive for the authority to minimise its investment in infrastructure and
raises major issues in terms of a user pays approach.
Considerable more thought needs to be given to the funding
and financing of urban development authorities so that constrained funding or
rapid financing agreements (quick pay back) do not end up 'driving' design and
development proposals to the detriment of quality and sustainability.
