Friday, January 23, 2015

Why local gubmint 'dithers'

Local Government 'dithering', while an accurate description as seen from outside the tent, is in fact structural.

LG is a creature of statue, and 'consultation' is firmly entrenched in those statutes.  Plus, there are three competing streams of playaz whose interactions create, extend, and perpetuate the dither:

1 - Central Gubmint, who can (dimly and fitfully) sense the macro-economic picture which emerges from the 70-odd LG layers whirling away beneath them.  CG is purposefully designed to be movable only incrementally, so observing an unwanted, emergent effect (like the AKL hoosing bubble) has no timeline for the fix, even if the causes and cures are clear (which is rare...).

2 - LG pollies, like Len the Bruin, have particular positions to cleave to, and need to not offend enough electors, in order to get elected next time around.  Pollies can only set Policy, not Manage, and particularly not micro-manage.  So they rely on unelected staff to do the heavy lifting (in every sense, including intellectually) with regard to policy options for proposed changes, day-to-day implementation for existing policy, and reporting to and from on the results of or issues with, existing policy.  Most LG pollies are to be frank cowed by the superior horsepower of staff, so tend to occupy an uncertain DMZ between staff and ratepayers.  They are essentially cheerleaders for whatever the staff du jour have dreamed up, done, or screwed up.

3 - LG staff hold most of the cards except the money one.  As a bureaucracy, they run by two immutable principles:

  • Peter (rise inexorably to one click above their level of competence), and 
  • Preservation (defend turf, extend it where possible, never yield ground.)  
This guarantees three observable aspects of LG staff culture:

  1. a united front, 
  2. a heap of dead wood, and 
  3. a rigid observance of 'rules'.  
So staff will unblinkingly decline to use discretion (not in the rules), obfuscate (to divert attention away from their core incompetence), and back each other up regardless of the merits of the event, action, or emergent effect.   As they are not elected, they regard Councillors as a passing parade of buffoons, sitting at a distant table, and having only minimal effect on their own closed world.   As staff are employed by the CEO, who is in turn the Council's only 'employee', no cultural change will occur without a change of CEO.

Dithering, as should be clear, is structural.....the only real handle the Council has is the $ one.

Christchurch Geotechnical vulnerability

The Christchurch situation (highly varied pockets of riverine silt interpsersed with gravel bars and peat) was very well known by the early 1990's:  see for example this paper, where the uncomfortable conclusion was reached that (final para of Summary) "the draft code may underestimate shaking by a factor of 2 or more".

This makes the Bexley, Atlantis (yes, Virginia, one of the worst-affected streets was named just that...) etc. subdivisions all the more unexplicable.

An early (Waitaha) name for the area was 'Waima-iri-iri' - the place of many waters, and the early Black Maps show watercourses throughout the central city that later turned out to be areas of particular vulnerability.

Both the Regional and City Councils have never really acknowledged their compiicity in waving through much of the newer Red Zone subdivisions.....given the by then well-understood geotechnical vulnerabilities.

Hugh P lays the blame on the 1989 swathe of amalgamations, which wiped out much intimate local knowledge, diverted attention to organisation-building instead of community safeguarding, and introduced a quasi-corporate ethos which glorified 'growth'.  The attendant surge in rates, staffing, empires, and organisational layers is something which has come to bite the current Council, which faces a $1.2 billion shortfall in funding, against a rates income of around the $370-450 million mark, and with its head up against a debt-funding ceiling.

Hindsight is always 20/20, but the sad conclusion is that the whole shebang lacked the back-bone, the balls, and the brains to have done something to mitigate the known hazards.

The one shining exception was the electrical-supply organisation, which promptly reinforced every single one of its substations, resulting in minimal damage to that infrastructure compared to (say) the three-waters administered by the Clueless Council.

So in the light of the above, one must ask, would things be much different now, even with a shiny new RMA???

Tuesday, November 25, 2014

Robert Heinlein on Bad Luck

Glenn Reynolds (Instapundit) is fond of this quote:
Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as “bad luck.”

Saturday, November 22, 2014

A Little Battle hymn

What Labour needs is a Rallying Cry, so, to the tune of the Battle Hymn of the Republic, here's one.  That first line is filched from Tom Waits' 'Whistling past the Graveyard', in case y'all was a' wonderin'....

Mine eyes have seen the glory of the draining of the ditch
Which some aver we dug ourselves And filled with Carp and Bitch
But excavation's over it's a Brave New World of which
I'm Leader! Marching On.

Glory! Glory! Hallelujah!
Tory! Tory! Sock it to ya,
Glory! Glory! Hallelujah!
The Left is marching on!

The housing bubble rattles on, All FHB's aghast
Their Kiwisaver pot falls short of Land Inflation's Blast
The worker suffer at their desks, Poor dears, their lot is Cast
With Labour's fate. March on!

Glory! Glory! Hallelujah!
Labour's here to listen to ya
If you're Boss-class, gonna screw ya
O-ver you, we'll March On!

The cleaners and the rest-home workers slave away each day
Their toothless unions cry aloud 'We can't live off their pay'
The power bills are swingeing, and the rents have shot away,
The Destitute March On!

Glory! Glory! Hallelujah!
Labour's here to dish out Moo-lah
Where it comes from, well, Petunia,
Trust Us, March blindly On!

Monday, November 10, 2014

RMA and Housing Unaffordability

 This (RMA and housing unaffordability being linked) is a sad but in hindsight predictable trajectory.

I won't retrace all the steps (I've thoughtfully assembled them all here) but two great streams are evident.

1 - The RMA was intended from the outset to be Effects-based.  This should have meant that small effects = wave it through, effects offset by e.g. paying off those affected = problemo solvato, and in general, a risk-based approach to everything.  Small risks = small costs, quick process times, small economic externalities.

But the TLA staff of that time, and indeed ever since, would not adjust to this (admittedly, radical) methodology.  They had always run off Plans, Zones, Rules, Regulations and in general, 'things wot could be looked up'.   Risk assessment and judgements about Effects, (including the first and most obvious question:  'So What?' ), were and remain completely beyond their training, intellectual capacity, experience, and inclination.  So none of the effects-based stuff really ever happened except for nationally significant cases.  Where, and by no coincidence, the intellectual horsepower was indeed available.

So, in reaction and by (staff, not elected Councillor) design, what we got saddled with was what we have (and which the Productivity Commish has brilliantly skewered in their latest tome):
  • Arbitrary, lengthy, costly and opaque processes
  • Thousands-pages long Schemes and Plans which take expensive consultants weeks of paid-for time to interpret for applicants
  • Schemes and Plans which rely totally on spatial zoning, massive schedules of haram and halal uses, (most of which are cheerfully ignored by those with high fences and quiet work habits):  the old, repealed Town and Country Planning Act schtick, revivified and shambling around like - well, in fact, Being - a baleful zombie attack.
  • Schemes and Plans which are frequently internally inconsistent, are subject to constant amendment via scheme changes and case law, and are, maise naturellement,  wildly inconsistent across TLA boundaries.
  • All of which imposes simply staggering economic deadweight costs on unfortunates such as your good self, who get to wrestle the Hydra and pass on the associated costs into house /plot purchase prices.

2 - As if this was not sufficient, there is a further, more subtle and even more dispersed economic externalilty caused by the TLA's adherence to spatial zones.

Zones and monoculture uses, cause commutes.  It's as sad and as simple as that.

So by not being able to live over the shop, bunk down in an employer-supplied donga in the far corner of the yard on a construction site or meatworks, live a bike ride away from the mall, walk to the brewery, and in general do everything that any of us Boomers can remember from their youth, there is Cost upon Cost imposed upon, oddly enough, the least able to accommodate it:  the young, poor, indifferently skilled, or really old.

In darkest Invergiggle in the late 50's, within walking distance of our Ythan Street home there was:
  • A church across the intersection
  • A fibrous plasterer's yard next to that
  • A garage-sized small grocery right next door (milk dipped out of the can, flour out of the bin)
  • A flour mill
  • A butcher
  • A fishmonger
  • A primary school, a Tech, an intermediate and a High school
  • A railway line (unfenced)
  • A Municipal Baths
But, in them far-off days, TLA's did roads, streets, drains, three waters, bridges and a very few Parks.  Nothing else.

Mixed uses.  No apparent zones.  And, hey, it worked a treat.  Until the Planners and Improvers (UK motto"  'We Finish what the Luftwaffe Started!") got a hold of everything.

For our Own Good, of course.

Monday, November 03, 2014

Plans 'Inadequate' - Gubmint to CCC

Response to a Stuff article:  Govt-slams-planning-changes-as-inadequate

The plannerista do not understand four fundamental things about our world:

1 - the RMA talks only about Effects of any activity.  There is nothing, zip, zilch, nada, about spatial Zones and other squiggles on maps.  Zones are an artifact of the old Town and Country Planning Acts which were repealed coupla decades ago.  Time the real intent of the RMA, there from Day 1 - to measure Effects and effects alone - was recognised in practise.

2 - Economics 101.  Several effects:

2a:  Zoning (say a rural/urban boundary) immediately causes massive economic value movements:  urban zoned land completely unimproved is worth around 10 times rural land.  Guess who pays the difference?  Guess who benefits from the unearned increment?

(This is, BTW,  a prime driver of housing unaffordability:  your 600 sq m section is worth, at rural land prices of $50K/ha, allowing 1/3 loss to roads, reserves etc, around $4,550.  Guess who Pays)

2b:  Time=money - a fact universally acknowledged, especially by your Banker.  Yet planning, consenting, inspecting and other Council flapdoodlery cheerfully injects massive Time into processes.  This causes costs but, quelle surprise, not to the Councils.  So they have zero incentive to minimise Time, yet are oblivious to the costs caused elsewhere.  Ask any builder or developer what these delays cost.  Guess who Pays?

2c:  There is a massive number of staff, all beavering away at monstrosities like the District Plans.  This has two results, neither useful.  One is that rates and/or recoveries need to fund a large staff base.  Guess who Pays?  The second is that very little actual value is added from all this busywork.  Take a single-storey residential build.  The risk is absolutely minimal:  no-one was killed in the quake sequences because of catastrophic structural failure (exogenous factors, chimneys and URM excepted) in a single-storey house, yet most were either unconsented (too old) or lightly consented (1950's to 1980's).  Added value is negligible, cost is substantial.  Guess who pays?  A risk-based approach would be preferable.  Both of these outcomes can be classed as Deadweight in an economic sense (ask Dr Google for a definition).

3:  Plans. regs, and other screeds of paper, have become so voluminous that even the Plannerista cannot always follow them.  The Plans are frequently outmoded, internally inconsistent, or simply badly expressed.  The response is - always - "well, this stuff is So Complex that we recommend you use Consultants, have a long series of Pre-Application Meetings, and we'll come to some arbitrary decision in six or seventeen months".  Guess who Pays.

4:  The pity of it all is that, for all the Planning, Planners and Plans, they still don't understand that Councils compete with one another.  While CCC spnds $33m on the Plan Revamp, Waimak, Selwyn. Ashurton and Hurunui DC's are busy eating CCC's lunch, as evidenced by consents issued, population shifts, and expressed human preferences.  After all, why subject yourself to a Planning Nightmare, when just across yet another squiggle on a map, a much easier future awaits?  Preferences trump Plans.....

Now, what would a sensible Plan say?

Build anything Anywhere, subject only to the RMA and Building Acts.

But that is far too sensible, and besides, scores of Planners have a Patch to Protect.


Guess who Pays?

Wednesday, October 08, 2014

A Fool speaks out

The Left Honorable Sir Larry Fool, president-for-life of the Small-Nation Association For Urbanista (SNAFU), has taken strong exception to Wild Bill Dipton's recent pronouncements about the role of Councils in causing various social woes.
The Fool notes, in protest, that Councils cannot be expected to take into account the economic consequences of activities such as planning, subdividing, consenting, building, or inspection.
'Our duty is quite clear', he said, hands visibly trembling and ashen faced.
'It's to minimise anything - Anything - that falls into the 'Rates Required' bucket in our LTP's.  Our democratically elected masters - Councillors - have made this consistently clear.  And who are We - mere unelected Minions - to subvert Democracy by thinking about anything else?'
'And, so there,  it isn't as though we have any economic expertise anyway.  Why, the sight of anyone with Economic Credentials throughout Local Gubmint, is as rare as Rocking-horse Poo.  (Which, by the way and let me be Perfectly Clear, is banned from deposit on Roads, Verges and Public Parks, anyway in the interests of Public Health and Safety - have you any idea how slippery that stuff is?)'
' Until such time as we have a better understanding of such arcane things as why it happens that land one side of a squiggle on a map is ten times the value of that on the Other side - a subject that will take a great deal of expert assessment, public consultation, numerous reports, and finally a considered decision to find the nearest carpet edge and sweep the whole stinking mess under it - '
'Hey, wait - is that mike ON?  Right, boyo, I'm outta here, and one word, ONE WORD in the Media, and , and, - well I'll never give You another interview again.'

Tuesday, September 30, 2014

TLA's are oblivious to two aspects: UOMI and CG created by lines on maps

There are, RMA reforms apart, two lines of action available to start to effect the needed changes.

1 - impose a UOMI calculation and reporting regime on Councils.  At present  (and quite apart from the injection by TLA's of direct cost into e.g. land subdivision via DC's and other levies) there is no measurement of the economic costs TLA's impose by the injection of Time into processes.  Most land development involves significant, early costs, and rather extended timeframes.  So, as a thought experiment, a land purchase of $10M on Day 1 of a seven-year process, at a commercial WACC of 10%, is going to double that single cost by the time the seven years are up.  Land $10M, interest on that another $10M.

TLA's are oblivious to this rather basic Time=Money equation.

It's time they were made to think it through, measure it, report it and (another delicious thought) be taxed on it.

2 - It is a truth universally acknowledged that a squiggle on a zoning map creates CG out of thin air for owners on the right side of said squiggle.  The Productivity Commission puts the ratio (measured a few clicks either side of a MUL/RUB) at 8 to 10 times.  So a rural raw land price of $50K/ha transmogrifies into $500K/ha.

Cui bono?

The landowner on the urban side of the RUB.
Via revaluations, sales, hearsay and pure osmosis, every existing landowner in (in order) the vicinity, the suburb, the city gets an unearned CG kick on the land value alone.
The Council, via rates levied on the now increased values
Who pays?

To the extent that value increases factor into rates and then rents, Renters
Who mostly comprises FHB's and renters?

the lower deciles.

So, a Re-distribution of said CG would seem to be in order.  But as a CGT on property-holders seems politically out of the question, complex, easily avoidable (e.g. by never selling), why not head to the Source of the CG:  the TLA map-spigglers?

Tax away, from the Councils who create it, the CG their MUL's, RUB's and Zones create.
Make it a Deemed value, using e.g. a Productivity Commish-style annual survey of current market rates to avoid the 'realised increment' loophole on a CGT.
Use the taxed-away CG to pursue policy that actually assists FHB's:  multi-proof factory builds would be a good and do-able start.
This action will, and possibly quite rapidly, significantly alter the incentive structures around TLA's, their Plannerators and Zonerizers, and several useful outcomes might even come to pass:

Zones, MUL's, RUB's cease to be attractive and the drawers-up of these economic distortions could be released to productive work:  factory builds for FHB's for example.
Environmental effects can be handled by the RMA - that's why it is worded the way it is.  A Build-Anywhere-Appropriate ethic would soon arise, and drive away the current 'Build-Anywhere-We-Unelected-Staffers-Tell-You-To schtick.
The judicious re-distribution of the Confiscated Council-Generated CG's (perhaps we need a new acronym:  CCGCG?) to Worthy Causes would soon arise:  politicians are if nothing else, expert at sniffing out the best electoral results for a given dollar.
The taxed Councils, meanwhile, would after the initial shock passed, quickly realise that rating so as to penalise the land-bankers who are sitting on perfectly buildable land, to recover that tax just levied, could be a useful spur to getting it built on....

Now this is all just a rough draft, but what's not to like in the general concept?

Wednesday, August 27, 2014

Why does an urban section cost $200K plus???

Posted as a Stuff comment to a David Killick article.

This is something the Productivity Commission noted in their Housing Affordability report. Land values 2 km outside a rural/urban zone boundary are something like 10% of the urban side of that squiggle on a map. 

Good rural land is worth around $50K/ha - that's $5/sq metre. Allow 33% loss for roads, utilities and reserves, and that one hectare will yield 11 600 sq m plots: that's a raw land price of 50,000/11 or $4,545 for your urban section.

 What pumps it up to (typically) $180-$300K?

 Well, first of all, that zoning boundary instantly inflates the raw land cost by say 8 times: $36K

 1 - Time taken - interest will double any early costs (like land purchase, survey, consenting etc) every 6-7 years. Allowing say $5K/plot for plans, survey etc, so land value is $41K. Allow 7 years from pony paddock to sale, and the raw land cost is now $82K for that one plot.

 2 - Council development contributions. Ostensibly for reserves and green space, these have blown out over the years to include all manner of social and cultural objectives. Allow $40K per section. Raw land cost is now $122K/plot.

 3 - Of course there will be services, roads, etc to apportion. Allow $50K per plot. Raw cost is now $172K/plot.

 4 - Nobody does any of this for free, so allow a developer's margin of 20% or $34K/plot. Cost is now $206K/plot.

 5 - And then there's GST on the sale price at 15% so add $31K tax" plot price is now $237K.

 See? The magic of compounding.

 Now if any developers are reading this, I issue a challenge. As a comment, tell us a typical per-plot breakdown......

 And if any planners are reading this, tell us, with a straight face, that your squiggles on maps don't have an inflationary effect on raw land prices, and have arguably set off this baleful ratchet effect.....

 And if any consent wallahs are reading this, tell us that injecting Time into processes does not incur use-of-money costs via direct interest on capital committed, or opportunity cost if funded from raw cashflow (could have banked that money and gotten interest).

 It's a simply dreadful cycle of local authorities' economic cluelessness, I'm afraid. Firstly by creating artificial boundaries which create capital gain for the landholders and a direct cost to home purchasers, secondly by injecting direct cost (DC's, consent fees, etc), and thirdly by injecting Time (= money in the real world) into each and every process step.

Thursday, July 24, 2014

Councils and Consents

The issue with consents is quite simple:  there is zero risk-assessment in the process, the way Councils run them.  Schedule 1 IS risk-based:  it exempts small structures, unattached, garden sheds and low decks.  

But Councils are terrified of a risk-based system where low-risk=low fees, minimal inspection, and hence lower Power to Obstruct.  

And one can imagine their intake of breath once they realise that the world is gonna haveta go multi-proof consent (Councils don't get a look in except for foundations), for factory-built houses, to end-run the slung-up-by-drug-addled-hammer-hands-at-massive-expense approach currently en vogue.

Christchurch has demonstrated to the world that single-storey residential construction, whatever the method (and of course excluding URM chimneys and exogenous impacts like rockfalls) is perfectly safe in a risk sense:  it has not killed one single person.

Despite the many and varied 'qualifications' of the builders.

Despite the fact that many such houses (Norman Kirk's was the most famous) were buil;t by the owners.

Despite the fact that many of those houses did indeed become uninhabitable:  they took the hits BUT their inhabitants did not.   That's the definition of 'failing gracefully' which is the point of most design.

And despite about 60-70% of the housing stock being either unconsented at all (too old), consented during the post-war to 1980's period (when TLA's were responsive beasts staffed by common-sense folk).

The remainder, of course were consented (lately, expensively and interminably) by overstaffed empires full of cardy-wearing nit-pickers whose ideas of customer service came straight out of the Obstructiveness for Dummies playbook.


Additional note:  Schedule 1 Building Act 2004 has the following (and, I'm told, rarely used) clause (my italics):

2Territorial and regional authority discretionary exemptions(a)(b)
  • Any building work in respect of which the territorial authority or regional authority considers that a building consent is not necessary for the purposes of this Act because the authority considers that—
    • the completed building work is likely to comply with the building code; or
    • if the completed building work does not comply with the building code, it is unlikely to endanger people or any building, whether on the same land or on other property.

Thursday, July 17, 2014

Another cold-eyed but well-argued Spengler piece

In this magisterial article, David P Goldman argues that America has bungled everything for a decade-and-a-half, and is frankly now incapable of affecting much in the world.  Worse, and this has been an emerging theme, the USA has so burnt its old allies, from the Saudis through the EU to the UK, that it will find out about stuff after the deals have been struck, and after the events have occurred.
No-one could have walked into the Oval Office in 2001 and told then president George W Bush that his job was to manage the inevitable decline of Muslim civilization: to humiliate the Iranians, to hobble the contending parties and to leave as much power as possible in the hands of abhorrent military or monarchical governments. No-one could have gone to American universities and recruited the soldiers, spies and diplomats to execute a plan which preferred the slow and inevitable spread of human misery to a cataclysmic alternative.
In another thread from his recent thinking, he argues
It has become nearly impossible in America to ask the question: Which cultures are viable and which are not? Individuals of all cultures are viable Americans, but that is not necessarily true of the culture they left behind. 
This question, of course, is one that NZ must increasingly ask itself, as we are confronted with visibly destructive (albeit and mercifully, not widely geographically distributed) cultures.

Spengler's view is simple:
It is a fool’s errand to stabilize them; the best one can do is to prevent their problems from spilling over onto us. 

Friday, April 25, 2014

CBD rebuild stall - blamed on Private Developers!

There are two very fundamental reasons why the commercial rebuild of the Christchurch CBD has not occurred.

1 - the precincts idea and the amalgamation of smaller into larger titles, and the expectation that one Ring to Rule each Block could somehow thereby be plucked from the rubble. This is a deeply uncommercial proposition, because any development, large or small, needs 60-80% commitment from prospective tenants before funders will look at it. That has been the consistent stumbling-block for every single development. Even our sentimentalist (Sir Bob Jones' characterisation) who is building the Terrace complex has tripped over this chunk of reality. And the time taken to demolish, amalgamate, issue RFP's and consider the results, takes much Time. And time=money, a fact which CCDU and CERA are blissfully unaware of: their salaries arrive with the regularity of sunrise. So construction costs inflation rattles along at 10-15% pa: so a replacement build of say $30m in late 2011, is going to cost $42.5m today (assuming cost inflations of 10, 12, 15% over each of those three years respectively).

2 - Retail in particular has to sell stuff Today, to be able to pay staff next Week. So denying retailers access to their inventory, tools of trade, and back office systems in the early days of the CBD lockdown, was always a lose-lose action. Denied a living, there are only two choices: relocate and start afresh, or fold entirely and go work for someone else. Both have of course occurred: the business deaths from the lockdown are still being counted, and the New CBD - the Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the block bounded roughly by Victoria St/Cambridge Tce/Avon River/Bealey Ave - is roaring ahead and is extremely disinclined to decamp to some Precinct with uncertain foot traffic, years of construction disruption, and building values and hence rentals, 2-4 times their current outgoings. So, and inevitably, the Justice (Government) Precinct is the only one which seems to have tenants with deep enough pockets to stand the costs. And those pockets are, of course, full of your and my tax dollars, quel surprise.

This will all settle down in the decades to come, of course. But the notion that the Precincts will survive in the big-block dream sense, is surely fading away. It will be replaced by the Jane Jacobs (the Death and Life of great American Cities author) patchwork: many small plots, many smaller developments, each rhyming with its neighbours, and at human scale.

So, the Baron Haussmann notions are going to have to be deep-sixed, and sanity prevail.


But not before the current crop of ineptocrats have driven their steamroller right into the swamp.

Friday, March 07, 2014

Mike Greer and Spanbuild to do Factory House Builds

Great news. Factory builds are tighter, more accurate, use CNC machines instead of drug-addled hammer hands, and are manufactured under cover. Same as cars and boats, actually.

Yes, of course the factory builds will put some people out of work. That's precisely why the unit costs will be smaller, on the sort of volumes Mike Greer is talking about.

Another thing the article probably did not twig to is (and I'm guessing here...) the enterprise will be self-certified. No mo' CCC contracted-in inspectors needed for a Certificate of Compliance! Which is really only a ten-year warranty anyway. Heck, Mitsi cars offer that....

Now, to persuade the Clueless City Council not to levy the insane Development Contributions taxes, and we'd have ourselves a true game changer. Mike Greer (Press article coupla years back) estimated $75K per house for CCC charges. Roll That back too, and watch the punters roll through the doors!

Or, and sadly much more likely, watch from the CCC sidelines as Selwyn and Waimak take advantage, and continue to eat CCC's lunch....

Friday, February 28, 2014

MUL's, RUB's, Zones and other Unearned Capital Gain drivers

The thing the Clueless Councils have never twigged to, is the economic effect of a zoning squiggle on a map.

The Productivity Commission Final Housing Affordability Report estimates the rural/urban price differential for Auckland at roughly 10 times - P9 - a direct quote follows:

"In Auckland the MUL is a binding constraint on the supply of land for urban growth and has increased section prices within the city. This is indicated by the large differential between land prices 2 kilometres inside and 2 kilometres outside the MUL (Figure 0.9), which suggests that Auckland Council’s proposed compact city approach, based on containment of the city, undermines the aspiration of affordable housing."

  • Instant CG handed to the landowners of 'urban zone', the moment the squiggle is put into effect. Rural land prices (say, top-end dairy) run around $50K/ha. Urban undeveloped land prices, using the PC's figures, start at around $500K/ha.
  • The Urban land price (thus inflated) transmits successively across the market for the adjacent area, the suburb, and the city. After all, if you owned a shack on a formerly rural plot, for which you paid $17,500 in the days of yore, whaddareya gonna sell it for now that it's Urban zoned, and the neighbours on a subdivision where average house/land prices are $750,000?
  • The price is also transmitted directly via the operation of land agents (recent sales), city valuations (entire areas, also based on sales and rules of thumb), and hearsay (did ya hear what ol' Bloggsie got for that darned Shack???)
  • Every such price increment is a minor CG (for the accounting types, a Revaluation rather than a Cost asset component), and added across all sites, this becomes a substantial sum.
  • Now, what do we expect our FHB to buy? Why, a Modern Shack, at Urban land prices which inevitably contain a massive CG component (as distinct to actual rural-land raw costt). And pay for that via a mortgage, delivered by bankstaz eager for the interest revenue stream on that inflated sum, whereupon as much will be expended in Interest as was paid in Principal.

So ignoring, as the Clueless Councils do, the economic effects of artificial squiggles on maps, nevertheless has real-world results, which in the way of this wicked old world, fall mostly heavily upon the young, the poor and the start-ups.

The accounting equation is startlingly simple.
Starting Position:  Raw per ha cost of rural land:
50K debit, asset.  Other side: 50K credit - Landowners equity.

Event 1:   Revalued once urban boundary moved: 
Debit 450K Asset Value      Credit    450K landowners equity Revaluation Reserve  (this is Unearned, just a book entry)

Event 2:  Owner sells the plot:
Debit Landowners Bank Account 500K (which for youse non accounting types is a Credit on der Bank Statement - yum yum), Credit Asset Value 500K

The Asset is now zero for the original landowner, because it's sold to someone else.
(That somone else (assume paid in cash) will then have a Starting Position of:
Debit Asset $500K, Credit Bank 500K.
Note that this new owner has had to account, and fork over cash, at the cost price - this is how CG crystallises).

Original Owner's equity is still 500K - it's now just in the form of Cash, not Fixed Asset. In effect, the $450K Revaluation Reserve has been cashed up.....hence my characterisation as Capital Gain (CG).

Unearned by the original owner.

Untaxed by the Benificent IRD (if the landowner is correctly structured...).

Placed there by a squiggle on a map caused by Planning Fads in a Clueless Council.

Multiply this small but perfectly formed example, by the number of land plots in Auckland, to form some opinion as to the extent of the Unearned Capital Gain which resides within the Cost of Housing.

Placed there, unasked for, by the Economic Cluelessness of Councils, and their Zonerating and Plannerising Teams of Earnest Drones.

And we call this 'Godzone'......

Thursday, February 27, 2014

Roads, Cars, Tiwai and EV's: a Singularity approaches?

I'm always amused by the antics of the anti-roads brigade.  My initial reaction is simple:  don't these clowns realise that public transport (buses, taxis, and rentals) plus essential freight (food, exports, FMCG to yer local supermarket) all need - Roads?  I mean, whadda they expect - a Light Rail branch to every shopping mall?  Pallets of food (organic, naturally) carried hither and yon, on Cargo Bikes?   Bikes and rails chuffing up hills like wot they have in Dunedin, Wellington and Auckland?    Gaah....

So it is with Great Glee that I stumble across an article trumpeting yet another breakthrough in EV's which leads straight on to thoughts about an Impending Singularity here in Godzone.

Just the facts, ma'am.

  1. Tiwai Point smelter (Rio Tinto owned) is marginally economic:  it's COGS is around $USD16-1800 per unit, while the world price for the stuff hovers around $USD1900.  Once transport is factored in, it's hard to make a buck where SALES = COGS, no matter how much volume ya pump through. 
  2. Tiwai is a way of exporting electricity, as the NBR article notes.  It is around 1/7th (that's 14.28% for youse metric types) of total NZ generation capacity.
  3. Now, let's assume that Tiwai (disclosure, I carted  fabricated steel stuff there in ma Tonka Toy phase during TP's construction, so I have an interest in the show, plus I'm a Meridian shareholder) closes sometime between 2017 and 2022.  That releases a lotta electrons from potline slavery.  Hmmm.  What to use 'em for?
  4. EV's, of course.  My guess is that, over that same planning horizon, the likes of Zytek, the hundreds of Chinese makers of everything from forklifts to trucks to cars to scooters, the Japanese, not to mention Ford, Toyota, GM and Tesla etc - will have such volumes and width of product lines available, that EV's will be the Cars and Trucks of the new era.
  5. So we have ourselves a Potential Singularity here:  the EV cavalry (vehicles, power supplies, roads) ride into town at just the point where dino juice starts its inevitable price climb/volume degrade.
  6. Hmmm.  I'd been hankering after a small hybrid (Prius C or similar).  Mebbe I'll just wait and see:  run the existing fleet into the ground....and go pure EV, to heck with hybrids.

Wednesday, February 19, 2014

The stock reply to the Unaffordable Houses threads everywhere...

So, go convince your local Clueless Council not to do the two things that have done most to make houses unaffordable:

1 - draw zoning squiggles on planning maps, thereby ensuring a 10 times raw land price differential between one side of the fence (rural, no builds) and t'other (urban, build away). The difference is pocketed by the lucky land-owner, and guess who pays? Right, the eventual house/section buyer.

2 - levy development taxes on every section/house. Mike Greer, here in Christchurch, estimates direct Council costs as $75K per house/land sale. Guess who pays. Right, you, the house/land buyer, and with oncosts, interest, developers margin on top.

Of course, banks just love increased costs, too, but they aren't the ones who set this whole dreadful ratchet effect in motion.

The Economically Clueless Councils did.

There. Fix these two things, get Affordable houses.

Easy, weren't it?

Wednesday, February 05, 2014

The Christchurch rebuild.

Can Cera handle the Christchurch rebuild?

The rebuild has already happened in commercial terms.

The New CBD (the Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the block bounded roughly by Victoria St/Cambridge Tce/Avon River/BealeyAve ) are all humming away.

And, fairly precisely, because they don't have the CCDU and CERA trying to micro-manage these areas.

No commercial enterprise that's survived (and thanks to the Old CBD debacle, some have not) is terribly eager to get back to the Old CBD, and pay 40-150% more in rent.

So that leaves the Precincts as a Government-dominated area: Health, Education, Justice, IRD etc. There will, of course, be ancillary businesses around: lawyers and maybe accountants, and anyone else whose revenue streams flow primarily from the taxpayers generous teat.

And there will, inevitably, be the hospitality and tourism sectors, and with the establishments which seek to scratch the itches that that combination of Government drones, tourists, convention-goers etc, will have.

But the real commercial pulse of the city beats elsewhere...and has done for three years.

It's just taken the clueless empire-builders this long to notice.....

Monday, January 13, 2014

Families determine academic progress, and lifetime earning capacity

In a single, well-referenced article, George Will nails the causes of inequality.

Families.  And, to a lesser but still significant extent, peers.

So all of that blather about 'the Gubmint's gotta Do something about ', completely misses the point.  External agents (Governments, Councils) can do little or nothing to create a positive influence, because the roots of inequality, and hence poverty, lie deep within the oldest structures of them all:  the family, its immediate context (tribe, location, peers) and its culture (what we do around here).

Sunday, January 05, 2014

The Christchurch CBD Precincts

The road to hell is paved by Good Intentions (not an original thought) but let's count some of these 'intentions'.

- Commerce needs to be planned. By Planners. With Degrees. So let's hire a few dozen and see what they produce. And, as John McCrone notes, what they've duly produced is a whole bunch of pretty drawings, some spatial thoughts, and little else. Whereas, as anyone with commercial experience knows, a classic strategy for building a business is simply to start any old where, NOW. Then, constantly tune products, prices, places and propositions,. That way. people (customers) actually shape your business into something that is good for them, and in the process make you profitable. But this approach (which relies on short feedback loops, business nous and a willingness to abandon unprofitable ventures) is simply not understood by Planners, who have rarely run a business in their short, cloistered lives.

- Spatial Plans (the frames, precincts etc) have a nice logic to them, and feed the illusion that Progress is being Made. This is largely what Share-an-Idea turned into - precincts, compulsory purchases to enable a pure occupation of the spaces, and yet more pretty drawings. But, (and John, this is an avenue to explore) the precincts seem destined to be inhabited by Government (the only large tenant with deep enough pockets) - so Justice, Health, IRD, WINZ, and their accessories - cafes, meeting spaces, are destined to be the main occupants of said Frames. The collateral damage (NG gallery, the car yards, any business still hanging on in there) is already apparent. And because the per-square rents for these large chunks of land and their largish buildings are so large compared to those in suburban and new-CBD (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip (Montreal/Victoria street, non CCDU...) locations, most potential tenants outside Government have opted for the lower rents and immediate availability there. This may change, but only at the rate of contractual review. And the high old-CBD rents, identified as the commercial killer three years ago by the original Sir Bob (Jones), will surely not have gone down in the meantime.

- the notion in John's article about the creatives going first is a partial and I would argue incorrect rendition of an idea better developed in Stewart Brand's (SB put together the Whole Earth Catalogue last century) 'How Buildings Learn'. Brand's argument was that creatives need cheap, uncared-for spaces to colonise, and bend to their own whims. This kicks off a cycle of what John's article rightly notes as 'Buzz', money starts to take an interest, the nature of the area slowly but subtly changes, the creatives move on to more old cheap premises and the cycle turns. But an overall regeneration has occurred.

These spaces, of course, (High Street was a local example) are precisely the 'old dungers' that fell down. And no-one is planning more old dungers - they will by definition be new dungers, and not cheap ones at that. So bye-bye creatives, especially since spaces where, as Brand notes 'the landlord doesn't care what you do in there' are not going to be countenanced by new landlords, CCDU, CERA or whoever. Imagine the EPIC building getting modified by its tenants (as was the famous innovation hub that started it all: MIT's Building 20). Hmm, not gonna happen, is it.

- the large Precincts run exactly counter to an interesting streetscape. Jane Jacobs, a half century ago, identified one key to varied-but-rhyming streetscapes: small plots, many owners, hence many ideas and the ability to put them into practice. The precincts are the polar opposite of this.

Finally, a quote from the great lady herself:

“There is no logic that can be superimposed on the city; people make it, and it is to them, not buildings, that we must fit our plans.”
The road to hell is paved by Good Intentions (not an original thought) but let's count some of these 'intentions'.

- Commerce needs to be planned. By Planners. With Degrees. So let's hire a few dozen and see what they produce. And, as John McC notes, what they've duly produced is a whole bunch of pretty drawings, some spatial thoughts, and little else. Whereas, as anyone with commercial experience knows, a classic strategy for building a business is simply to start any old where, NOW. Then, constantly tune products, prices, places and propositions,. That way. people (customers) actually shape your business into something that is good for them, and in the process make you profitable. But this approach (which relies on short feedback loops, business nous and a willingness to abandon unprofitable ventures) is simply not understood by Planners, who have rarely run a business in their short, cloistered lives.

- Spatial Plans (the frames, precincts etc) have a nice logic to them, and feed the illusion that Progress is being Made. This is largely what Share-an-Idea turned into - precincts, compulsory purchases to enable a pure occupation of the spaces, and yet more pretty drawings. But, (and John, this is an avenue to explore) the precincts seem destined to be inhabited by Government (the only large tenant with deep enough pockets) - so Justice, Health, IRD, WINZ, and their accessories - cafes, meeting spaces, are destined to be the main occupants of said Frames. The collateral damage (NG gallery, the car yards, any business still hanging on in there) is already apparent. And because the per-square rents for these large chunks of land and their largish buildings are so large compared to those in suburban and new-CBD (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip (Montreal/Victoria street, non CCDU...) locations, most potential tenants outside Government have opted for the lower rents and immediate availability there. This may change, but only at the rate of contractual review. And the high old-CBD rents, identified as the commercial killer three years ago by the original Sir Bob (Jones), will surely not have gone down in the meantime.

- the notion in John's article about the creatives going first is a partial and I would argue incorrect rendition of an idea better developed in Stewart Brand's (SB put together the Whole Earth Catalogue last century) 'How Buildings Learn'. Brand's argument was that creatives need cheap, uncared-for spaces to colonise, and bend to their own whims. This kicks off a cycle of what John's article rightly notes as 'Buzz', money starts to take an interest, the nature of the area slowly but subtly changes, the creatives move on to more old cheap premises and the cycle turns. But an overall regeneration has occurred.

These spaces, of course, (High Street was a local example) are precisely the 'old dungers' that fell down. And no-one is planning more old dungers - they will by definition be new dungers, and not cheap ones at that. So bye-bye creatives, especially since spaces where, as Brand notes 'the landlord doesn't care what you do in there' are not going to be countenanced by new landlords, CCDU, CERA or whoever. Imagine the EPIC building getting modified by its tenants (as was the famous innovation hub that started it all: MIT's Building 20). Hmm, not gonna happen, is it.

- the large Precincts run exactly counter to an interesting streetscape. Jane Jacobs, a half century ago, identified one key to varied-but-rhyming streetscapes: small plots, many owners, hence many ideas and the ability to put them into practice. The precincts are the polar opposite of this.

Finally, a quote from the great lady herself:

“There is no logic that can be superimposed on the city; people make it, and it is to them, not buildings, that we must fit our plans.”

Friday, December 13, 2013

Four Thoughts re First Homes

The interlocked factors (I ranted aboot this yesterday here) are just too hard to tackle, even individually.
One alternative (which may happen anyway) is letting the whole schemozzle run into the inevitable immovable object. Tempting as that is to those with apocalyptic/Malthusian tendencies, it would cause a lotta grief to a lotta bystanders. Collaterla damage.
I see (feeling more optimistic today, y'see) four aspects which can, together, make a bit of a breakthrough.

1 - wipe the zoning nonsense. MUL's etc cause price differentials, which firstly crystallize as CG to the lucky owners, then propagate to all and sundry (who, after all, would sell their hoose for an agricultural land price when your despised but now cashed-up neighbour has just made a cool $300K cf his original purchase price?). Luvverly free CG all around - after all - we didn't buy the house to Sell it! - but of course paid for by you-know-who. Guibmint by fiat could accomplish this by lunchtime tomorrow if it put its mind to it. What Constitution?

2 - Factory builds. Proper QC, can be erected in hours not months on site, will standardise foundations etc (one of the beefs in Chch is the continuing dither over TC3 founds, which need individual geotech to establish), and being built to tight tolerances and under cover, are a generally superior product to yer average chippie-hammered together set of frames (one of which, just down my street, has been sitting out in the weather for six weeks now with no roof and no wrap - nice.)

3 - GST exemption to factory builds from accredited suppliers. This avoids the obvious problem with a blanket 'GST exemption for new builds' which will be an easy route to no-GST decks, pergolas, baches, new rooms and re-roofs - because as GST has to be taken on raw materials, who can police what they are used for? No such issue with factory builds, which will have a BOM, a nationally valid type certificate of compliance, and a serial number.

4 - The cultural attitudes and legal provisions which make such builds acceptable to buyers (who, let's face it, have wildly inflated expectations of first homes, fed by TV house pron, and egged on by the usual bevy of marketeers), and to developers who are rather fond of placing CCR's (covenants, constraints and restrictions) on their conditions of sale. If we are serious aboot FHB's, then fer crying in the sink, let them set up next to You.

Thursday, December 12, 2013

Hoose prices.

There is a Gordian knot here: a myriad of interlocking and mutually reinforcing factors. No use tackling any one alone.
  • Zoning which by prescribing allowable uses, immediately causes price differentials either side of a squiggle on a map.
  • TLA's benefit (with a time lag) in their revenue streams, as those squiggle-caused prices work their way into valuations. So are disclined to look any closer, let alone kill the Golden Goose which lays Rising Valuations.
  • Any price rise anywhere (an outlier sale, a zoning change etc) immediately propogates to the locality: suburb, area, city, province in a diminishing ring of value effect as the circle gets wider.
  • Any householder with suitably structured credit lines can cash up some increment of these value gains. Many do (ATM-bolted-to-house effect).
  • Banks encourage this: more collateral = more credit availability = greater interest revenue streams.
  • Land agents encourage the general rise in values: being commission-based, generally 2-5%, This promptly reinforces any general rise by cementing in recent-sales actual figures, on which everyone else in the loop relies.
  • Builders benefit from higher prices for existing homes, as it allows them to build to the high end of the market. There's no profit in a 90-squares kit erection, compared to a 300 squares architect-designed mansion.
  • Architects, now we mention them, are another Mr/Ms x% deal: the higher the general price level, the better their incomes get.
  • Building suppliers, that cosy duopoly, benefit from the revamps, the new builds, and the ATM-on-house syndrome. New bathroom? Just draw down that revolving credit line and spend 'er at the nearest duopolist.
  • ComCom is asleep at the switch, so there ain't no cavalry to ride in and Save anyone.
  • Building regulation ( codes tightening, LBP's needed for practically everything, Elfin Safety up the wazoo on sites- it's a Very long list) all has Good Intentions, but a few grand here, a few grand there, pretty soon, it adds up to Real Munny. From the end customer's pocket, of course. That's what that there Credit Line is for.
  • TLA's again, just to complete the loop (they, arguably, have set this whole mad shambles a-trundlin' down the track) clip the ticket to the tune of $75K per house/land package (Mike Greer, Press coupla years ago, Google it yer lazy sods). DC's fees, levies, consents, inspections. Nice racket.
  • And all this is, of course wonderfully rounded off by the rise on average incomes which supports it all. Or not, as the case may be.
But when yez stands back and looks at the whole sorry picture, and asks oneself - Where ter Start? - well, it has to be said, there's no one action, no one sequence, and certainly no painless way to do much about any of it. And zero political will - there's too many voters would get badly burned - many of them the working class. After all, who puts up the scaff, staffs the duopolies, swings them hammers, transports stuff, induces hapless bank customers to extend their indebtedness, mines the steel, etc? S'not the 1%.

We'll just haveta let this runaway train hit the buffers at the end of the track.,

Because all tracks (Thomas excepted, perhaps) have Ends.

Ah, but When?

Sunday, December 08, 2013


The Pope has ruffled a few feathers....

Many of the more history-aware readers of the early capitalists (Smith, Ricardo etc) have pointed to the societal value systems that originally surrounded the practice of capitalism itself.  As they were to an amazing extent Scots (a useful text here is Herman:  How the Scots invented the Modern World ) this world-view incorporated Calvinism and the rather severe religious affiliations that arose out of this.

Those Christian ethics informed business for a good chunk of the first century of the Industrial Revolution, a point made by such recent commentators as P J O'Rourke.  Smith's earlier work, for example, was 'The Theory of Moral Sentiments'.  Along with the 'Wealth of Nations' and a never-published third tome, Smith had intended the three to be read as a triptych of sermons.  Yes, sermons.  That's why the damned books are so wordy.

That intimate association between a stern but ultimately sympathetic value system, and the practice of industry and trade, was somewhat broken by the late 19th century (vide Engels and Marx), and finished off comprehensively by the mid-20th, as competing religions which were essentially (as David P Goldman argues) tribal/nationalistic, brought different value systems to great swathes of the globe.

We are still reeling from the turbulence this competition generated, and the virtual disappearance of organised religion and its value systems, from any association with trade and commerce, has led to two observable aspects of the zeitgeist:

1 - A Chestertonian plethora of quasi-religions (from AGW to enviromentalism in general, not to say Marixism, Leninism, Pan-Africanism, Third caliphate Pan-Muslimism) which all demand faith, have ways of dealing to apostates, and none of which have anything like the spread or ritual attractiveness of the old ones.
2 - a value-free trade and commerce, which tends to an explicit disavowal of any larger pretensions:  societal good included.

The first thing is, given that we have dug ourselves this hole, gotten into it, and burnt the ladder, how do we get out?  And the second thing is, do we have to hit some sort of wall (sorry about the mixed metaphor, we are down a hole, must have walls down there too) to wake us up enough to build a new ladder, and climb out?

And just being nice to Gaia, alone,  won't cut it.  That's another faith-based initiative.  But just like the new Pope may have been trying to warn us, we may have to be much, much nicer to each other first.

Or, possibly, much, much nastier.  Because a whole lotta people will want to jump on that ladder to a Better Life, however defined.  And the laws of Ladder Physics still apply.

Wednesday, September 11, 2013

RMA Reform?

Amy Adams makes a key point:

"When the RMA becomes the basis on which Councils look to
• Take their own stance on national laws they don’t agree with or
• make rules about how big the front windows can be in our homes, or
• the placement of lounges within houses or
• whether a kid can build a tree house...
…we have to ask whether that really is the enabling, effects-based regime that was to allow almost anything to occur as long as the effects on the environment could be properly mitigated, that the original architects of the Act promised back in 1991."

The RMA has been thoroughly subverted by a noxious combination of:
  • old spatial-style Town and Country Planning Act zonerators and map-squigglers. Hence the MUL's, RUB's etc which have massive economic effects but which are sacrosanct under the present regime.
  • NIMBY's who, without needing to put up much in the way of actual arguments, were able until quite recent decisions re costs, to drag out the consenting process by years and years. This has led, quite inevitably, to the EPA which end-runs this nonsense by taking some decisions up and out of the clueless hands of local authorities. Not that a centralised Gubmint bureaucracy is likely to perform much better, but at least they have less spatial-planning deadweight.
  • A fundamental failure to implement anything resembling the effects-based tests which should have been applied from Day 1.
The effects-based tests Amy refers to are actually much sterner than the zoning-and-rule-based processes which persist now. But this failure has lead directly to the tyranny of zoning: no mo' living over the place ya work at, no possibility of e.g. OAP's living over retail or indutsrial buildings (entertainment during the day, watching over the night), no possibility of building a high-rise apartment in Brighton because the zones didn't permit it, but ya can't see over the dunes at three's a long and extremely sad list.

It leads fairly directly to:
  • 'industrial' dead zones which are an extremely inefficient use of resources (commuting, buildings used 33% of the day, security and miantenance issues)
  • illegal actions (it's amazing how many suburban businesses flourish where owners have high fences, good relationships with neighbours, and quiet work habits) which does not do wonders for trust in officialdom
  • a complete inability to police truly noxious activities (tinny houses, P-labs) - after all, they are breaking no Zoning laws because there isn't a Tinny House Zone on some best to turn Nelson's eye...
  • massive economic deadweight costs as SME's either struggle through protracted and expensive processes to achieve some minor tweak to some squiggle or zone, or just give up in disgust and reduce activity to suit the strait-jacket

YMMV, and other common taters may have different views on the reforms, but there is no doubt in my aged mind that the old RMA is a mare's nest, a fabulous feeding ground for Legal Eagles and other Birds of Prey, and needs a fundmental re-think.

Tuesday, September 10, 2013

ACC Deputy Mayor on the Housing Accord

“I’m very comfortable that we haven’t started to bleed out into the countryside.”

Ms Henny Pulse, chair of the Auckland First Unionaterised Council / Unitary Planners (AFUCUP) made this astonishing statement in response to the Central Government's total steam-rollering of the Auckland First's "Unit Rabbit Hutches plan for Urban Densification, Train Sets and Fees/contributions/levies/but/not/rates! funding".

Your humble reporter reminded Ms Pulse of the thousands of 1-10 Ha lifestyle blocks in the immediate vicinity of Auckland, which have served as the expansion outlet for their inhabitants, blocked from easy expansion inside the MUL/RUB/squiggle-du-jour.

"Pouf" she replied, and waved her hands in a gesture which seemed practised.

"We don't concern ourselves with those who choose to escape the City and go play Good Life in the sticks."

"We are here for the downtrodden masses inside the RUB, and we plan Lotsa Affordable Housing for them as part of this Marvy Plan."

"Once, of course, we reach deep into the pockets of those Awful Land-bankers, Greedy Developers, Cowboy Builders, and of course the Marketers, and extract some long-overdue Fees/contributions/levies/but/not/rates! funding from their capacious pockets. We term this 'robbing the rich' but I probably don't want That on the record.."

Your intrepid reporter, hastily concealing the return trip ticket to his Pukekohe lifestyle block, then ventured a follow-up question.

"But, shurely, Ms Pulse - may I call you Henny? - the immediate effect of any such development tax will be to add, and cost-plus at that, to build costs, as these types simply pass it on?"

Ms Pulse paused, then answered carefully.

"Why, we had anticipated That, of course. We've entered into an arrangement with an un-named but gigantic building company as part of our Accord, and for a Modest Fee, this company will have exclusive rights to all such development for three generations or Ragnarok, whichever shall come first."

"This will of course ensure low unit costs, a good deal for our downtrodden masses, and did I mention lotsa Fees/contributions/levies/but/not/rates! funding for our poor yet sagacious Council."

Your by now aghast reporter started to mumble about Cartels and Monopolies, but the Pulse had by now departed, exercising her arms in what seemed like a parting gesture, and counting to herself - one Million and One, two Million and Two, Three Million and....

Tuesday, September 03, 2013

Commissioners to administer challenges to TLA Development Contributions.. Egads, Transparency and Appeals. Will the madness Evah stop?

The Left Honourable President-for-life of the Union of Local Gubmint Drones, Larry Fool, has slammed the introduction of Commissioners for the oversight of Development and other contributions.

"Since time immerorial - well, actually, since that lovely Sandra Lee handed TLA's the power to make charges up for 'social and cultural wellbeing' and other chimerae, back in 2002, but I digress - Local Gubmint has proved a marvellous steward of the ratepayers money. We've provided wonderful festivals and entertainments, had a busker on most street corners, and provided Art in every Council-owned chunka dirt that's possible. We've brought happiness and contentment to many lives.

And now this heartless, heedless Gubmint is gonna bring this marvellous outpouring of human creativity to a crashing halt.

And the best part about the Development Contributions which funded quite a lot of this merriment is that Ratepayers didn;t Pay for it! Greedy developers did! "

When your intrepid reporter pointed out to the Fool, that DC's are a cost component of either homes (if residential), businesses (if commercial) or industry (if - er - Industrial), and that therefore by the simple notion of Cost-Plus Pricing, the homeowners are gonna pay anyway via increased housing costs, increased commerical prices or less industrial jobs, he waved his arms airly.

"I;ve practised this arm-waving for - oh - about a decade now. Good, Aren't I?"

Your scribe reminded him that there was actually a question implicit in our last exchange.

Larry waved his arms again - a smooth and clearly well-choreographed gesture.

He narrowed his eyes and answered slowly.

"Well, put it like this. Try and find a Source and Application of Funds statement in our voluminous Financials, which clearly sets out in one place, who pays DC's, and how they are used. There's yer Answer!.

Now, must be off. For some completely unconnected reason, I seem to have a whole pile of Subdivisions to assess for Contributions-that-definitely-aren't-Rates-oh-no-never.


Wednesday, August 28, 2013

Local Gubmint receives another planning shock: complulsory 30-year asset horizons

The Left Honourable President-for-life of the Union of Local Gubmint Drones, Larry Fool, has slammed the new 30-year planning horizon to be legislated for tomorrow lunchtime.

"This is a heedless, expensive and totally unwarranted intrusion into local democracy", he opined.

"For half a century, Local Gubmints have not worried about this sort of expensive overhead. We maintain infrastructure as best we can with the pittance we receive from an uncaring public by way of rates, fees, levies, contributions, charges, and not to mention dog registration imposts and library fines. We are very proud of the fact that we manage to do so much with so little."

When your intrepid reporter reminded the Fool about a string of infrastructure accidents over the years - Abbotsford (leaking storm and potable water, at the top of a clay face), Wellington (leaking pipes at the top of inadequately consented gully infills), the occasional sinkhole when old, brick-barrel sewers unaccountably collapse, the more occasional water-main fountain when the termites stop holding hands, the frequent discharge of raw sewage into estuaries, rivers and harbours, and other small incidents, the Larry was quick to defend the status quo.

"Why", he said, splutteringly, "It isn't Every council who can actually afford to mount a cellphone camera on a child's radio-controlled Cat D9 model, and photograph every last blooming pipe. This gear is Costly, takes teams of highly paid engineers Months to work through the images, and we can never be sure just where the so-called cracks and collapses are when we start digging, so we just start any old where.

We much prefer the time-tested, age-old methods: we simply rely on our trusty ratepayers to drive into the holes or over the slips, or to notice nasty smells or the sudden absence of a key hillside road, they then tell us, and then we blame the dairy farmers for everything."

The interview was, unfortunately, cut short at that point. It seems that the Fool had parked on a double yellow line, had been towed, but the towtruck and its precious cargo had then fallen down a large sinkhole caused by dairy farmers.

We promise to resume transmission once the offending agronomist has been dealt to.

Sunday, August 18, 2013

Development Contributions to be limited

Transcription of Lawrence Yules' (Chair, Local Gubmnint Apologists' Association) remarks (remember I did predict wailing and gnashing of teeth...) re the shutting down of their Devepment Contributions rort.....

You mean we gotta treat our new residents as Customers?

C'mon, folks!

For years, we have managed to treat them as Serfs, Minions, and Cash Cows.

We'd like to keep up this proud tradition.

By inventing ever yet more Artful (pun, geddit?) charges, fees, levies, contributions, and please note I did NOT say back-handers.

And also please note that None of this affects Rates up till now! Because our elected representatives (we send 'em a postcard each Christmas to make them feel a bit noticed) keep an Eagle Eye on the Rates roll-up, and it's darn hard to get anything clever in there.

So we just have all these other revenue buckets - a one-liner on the Annual Report, if'n' yer really lucky and we don't hide it all in a Note to the Accounts! "Other fees and charges' is the name, and there's so much in there that the poor Councillors (who are not, I must confess, the most financially literate bunch in the burg) just swaloow it whole. They probably think it's all Parking Meters or something.

And we have had a Glorious Tradition (well, decade, really) of accumulating yet more costs for which we need Revenue Streams - Rivers, actually. Buskers, Community Development graduates, City Planners, MUL-Measurers, Business Development Assisterators and a host of other Vital Individuals, who, BTW, all need paid next Thursday.

Someone's gotta stump up - and who better than the first-home-buyer, who is so darn grateful to get their own leetle Castle that they'll crawl over broken glass to kiss their bankster's cheeks and sign away their next thirty years of discretionary moolah.

Why the poor suckaz - whoops - I mean these Fine Upstanding Citizens (we have a TLA for them but that's BTW) don't even realise that (as Mike Greer has said re Christchurch) $75K of their new house and land costs is solely down to the Council - we salami-slice it and disguise it sooo well. We Certainly don't give 'em a detailed itemised invoice....

But, and I give this Government clear notice - if we Have to start doing stuff transparently, then Rates are Gonna sky-rocket. As we are forced to disgorge all the hidden revenues outta them hidden Buckets and put 'em in Rates.

Well everyone will know who to blame - that's right - the Government!

Like I said, fair warning!

Well, can't hang around all day justifying what we've done since time immemorial, to you bunch of picky inquisitors.

Besides, I can already smell freshly minted Plans in that there Inbox - time to Have some More Fun! While we can....


Sunday, June 23, 2013

New Christchurch International Convention, Gambling and Pleasure Centre Announced

Sir Very Clownley, ably flanked by Dodger Button with Hob Carker bringing up the rear of the entourage, today swept into town to announce the imminent construction of the VOSCO-WalPart-QuantityBins-Yakuza-BurstRail International Convention, Gambling and Pleasure Centre.

'We are pleased to have been able to secure the services of this prestigious international cartel, for our fair city', Sir Very said by way of introduction.

'Not only are we going to enjoy the patronage of a vast number of international gamblers, convention-chasers, organisers, and 1-percenters, but we have been able to negotiate a number of additional benefits.'

' For a miniscule 10% of the facility's turnover, the Yakuza-BurstRail part of the consortium will push through an Airport-CBD light rail system which will incorporate the much-talked-about University-to-CBD link'.

'So, not only will international playaz be able to whizz in and out, as it were, but the fine young students of our esteemed Halls of Learning will be able to partake of the multitudinous delights of this facility, and perhaps to pay off part of their vertiginous student debts via a flutter on the tables, or of course by taking up one of the many employment opportunities offered. Waitpersons, croupiers, security, IT, chefs, drivers and many other menial if not actually horizontal positions are envisaged.'

'The bulldozers for this rail extension are due to start Thursday next week, so if you are a Fendaltonian, and the house next door suddenly crumbles before the onslaught of a large yellow machine, you'll know what's going on. It's called ConsultationLite.'

'The rates, employment, choo-choos and general ambience offered by this proposal were simply too good to walk away from.'

' So we haven't.'


(I know We will - we are all Honarary Life Members)

Where we sit....

 I'm a conservative in most matters now - markets work - why supplant them?

But we don't and never have had a 'free market' - it's always been a Mixed/Hybrid beast, and the early religious restraints and latterly Gubmint codes and regulation, are needed to keep everyone honest. Ish.

Markets work just fine and have done since the dawn of trading around 4000 years ago: they are nothing but a switchboard between people with something to sell (like the copper miners at Great Orme in North Wales) and other people with something to sell (the traders from the Mediterranean who travelled all the way up there with foodstuffs in amphorae), the former lacking what the latter have in surplus and vicky verser.

A massive plus in markets (gentle commerce, in Adam Smith's phrase, recycled by Pinker in ''Better Angels') is that they innately if slowly build mutual trust and kick off a Civilising Process. We're at the far end of that now (see below, it is possible to discern a De-civilisng process at work in our fair land...) so all this progress is somewhat taken for granted. But the main alternative, which tends to be control by a (male, quelle surprise) elite, by fear, violence, repression and tyranny, has been the default setting for most of modern humanity's (last 50K years) history. And it is frighteningly easy to push that 'Factory Reset' button: PNG being a current example.

Culture has almost everything to do with everything, as any competent manager will attest. A common case-study in MBA-land is the new manager, determined to change culture in a business, firing, fairly much randomly, 10-20% of staff to kick-start the change effort. It puts down this marker: 'Things are gonna Change around here'. But what we have in funky l'il Godzone is a set of two cultures vying for the minds of the young.

There is or was a much older, formerly better-civilised European-derived culture which in its heyday valued adherence to widely held norms, reinforced by a religion that had itself shed most of the excesses yet retained the ability to bind (religare). It valued deferral of reward, hard work, a spiritual journey based on an individual's response to wise books, and a self-introspection that gradually but firmly expanded the circle of empathy, squeezed out excesses like torture-executions, rewarded simple states of being like marriage and the delight in children, and mandated fair dealing and trust in commerce.

But this culture cannot now be said to exhibit much if any of these qualities: viewed from that high point, it can be said to be degenerate, hollowed out, unattractive, and failing.

The other culture is of course indigenous - a communal, pre-literate, tribal culture which has been propelled over 10-15 generations into close and unrelenting contact with the above. Its historic version values Tribe over Other, strength and dominance over compassion, and in general exhibits all the hallmarks of the Factory Default setting which we all came from. For a primer: Nicholas Wade's 'Before the Dawn'.

The mixing has been as one would expect, very patchy. We are left with a decayed and decadent Euro fragment, an abiding and unrelenting distrust of religion or indeed any other dominant binding philosophy, a present-centred mind-set which steeply discounts the future, a Partner culture with distinct tribal reversion tendencies especially at political level, attitudes generally which tend to favour dominance and lack of empathy over the alternatives of gentle commerce and trust, and a financial utter dependence on intensive food production for a newly dominant China, itself flexing international muscle, and approaching carrying capacity in order to do this on our land.

So, 'culture matters', and 'incentives matter'.

Tax only affects the latter, and I somehow do not think that fiddling with IRD codes and deciding whether and how to tax who for what, is gonna tackle the wider issue of Culture - what we do around here.

Now, if only it were as simple as firing 10-20% of the population , to convince the rest that "Things Have Changed'.

Bob Dylan sang:
'People are crazy and times are strange,
I'm locked in tight, I'm outta range,
I used to care, but
Things have Changed'

I don't think it's that simple. Especially not on such a small set of islands....

Tuesday, June 11, 2013

What Local Governments Do

New Central Gubmint legislation could "potentially neuter a big part of the what this country's local governments currently do"

Which is (e&;oe):
  • restrict land supply against a rising demand thus causing ECON101 price rises
  • as the first side effect, handing a luvverly CG to a selected lucky few landowners
  • as the second side effect, watching as that vastly increased land price for undeveloped land instantly transmits itself across all comparable developed land plots in the adjacent market, thus multiplying the initial if localised CG thinly across that entire market.
  • as the third side effect, handing banks and financiers a vastly increased interest revenue stream, as eager or desperate buyers borrow to buy said plots (existing or new)
  • effectively lock out new entrants to the housing market
  • effectively transfer development to the many thousands of lifestyle blocks outside the MUL/RUB or other squiggle on a map
  • levy fees, contributions and other costs upon any and all attempts to develop the land or densify existing properties
  • add multiple cost layers to any attempt to develop, densify or otherwise improve properties in a way which attracts a resource consent (a sampling: pre-application consult, require engineers/surveyors/feng shui consultaterations, inject time into processes, impose conditions during the process)
  • display a breathtaking ignorance of such basic economic fundamentals as supply and demand, or the time value of money
  • make decisions, plans, policies and processes which (what else) ignore economic fundamentals
  • act rilly, rilly surprised when one of the following occurs:
    • massive public opposition to cherished policies and plans
    • first home buyers throw in the towel
    • developments Unexpectedly are cancelled or deferred (Always the U-word!)
    • people don't want to live where and how the Planners want them to live

For the life of me, I just cannot imagine why a Gubmint would want to clamber in and alter Any of the above.....

Monday, May 27, 2013

Modular Housing, Factory-produced.

Factory produced housing components have been around since the 1870's (look at early Kauri Timber Co catalogues....) but the transition to producing sections is painfully slow (roof trusses, some pre-built simple walls, some exceedingly simple modules).

Benefits of real production-volume and high-design-quality builds of this sort would be:
  • Real QC. On the factory floor. Instead of which we get 'Inspections' on site by underpaid, ratty, barely competent TLA staff, who do however have the fulll power to halt the job until that weather seal or bracket or widget is tweaked, adjusted, or otherwise have Yet Mo' Cost sunk into it. And the Next 'Inspection' will be by a different minion, with different ideas, but just as much Power to Obstruct.....
  • Real assembly, by staff who can be closely supervised, timed, who use highly automated tools, and a whole lotta CNC wizardry. Instead of the slapped together on site approach, by drug-addled hammer hands, loosely supervised, but of course wearing HiVis, and wearing Approved Safety Hats (tin-foil lined on Karamea and Waiheke jurisdictions) and Steel-capped Boots. Talking around with earthquake repair guys, it seems that having floors 30-40mm out of level, gibbing ceilings that are the same out of square, etc, is par for the course in new on-site builds....
  • Real design. Conduits and designated ducts for all services (black/grey/potable water, electrics of various voltages (solar, 12vDC for marine-style LED's, 400V or 230V AC for appliances, workshop etc), gas, refrigerant (for heat transfer from fridges, driers, hot water etc to where it's needed) and so on. Maintainability is just so poor (because not designed in) in most current housing. Doesn't need to be this way.
  • Real cost advantages. High-volume, yet customised production lines. Low, but highly skilled, labour requirements. Low margin possible if enough volume passes through. Possibility of deals with financing to provide an end-to-end type cover, and cut out the plethora of middle layers (ranging from the TLA Pre-Consent Discussion session (un-needed), through architects (replaced by CAD design, imported electronically), quantity surveyors (replaced by a BOM), and of course those Hammer Hands (and their local Tinny House).

But this approach will be thwarted, obstructed and outright blocked by the usual suspects:

  • TLA's and employee guilds, who are not gonna let the real 'inspection' pass out of their clammy ineptocratic hands, into whole-product factorys' certification....
  • TLA's who see a luvverly lucrative revenue stream, produced by demanding Extra Time Everywhere at an Exorbitant Hourly Rate, threatened.
  • Building Standards wallahs, who will have about as much to do with eventual housing quailty as happens with vehicles or boats (Peter Cresswell's favourite example)
  • The materials cartel, who have a really nice lock of the individual-component market, and who will find ways to either take over or block any such real 'competition'
  • I'm sure eager common taters can thinka more along these lines.

So I have a confident Prediction.

Nice thought.

Won't Happen.

Thursday, May 23, 2013

A Tale of Two Scrapers

A follow-up piece - how Did I manage to Break a Scraper in Half?

First up, I was working for the Copulating Spiders - the ol' MoW insignia. The gear was probably 20+ years old (in 1972-3), and instead of a proper Cat tow-pin between dozer and scraper, MoW being the cheapskates they always were, had thoughtfully supplied a shortened piece of truck axle. Didn't quite fit the hole - rattled around a bit.

A fully loaded scraper could hold around 15-20 cubic metres of spoil (roughly a 3x3 floor pan, and could be crowded in good stiff clay to 3+ metres high) so I guess total weight could run 35-45 tons all up. A twin-drum winch on the dozer needed for the two operation cables: one for blade height, one for apron trim and material eject/spread.

The usual round (this was topsoil stripping, to a temporary heap) was

  • run the dozer in high gear to the pickup, 
  • change (on the fly, yes, possible) to low, 
  • drop the blade into the material, 
  • let the material crowd (if it would) until it spilled over, 
  • raise the pan to travel position, 
  • crawl back to the heap and up it, 
  • wind the dump winch which first raised up the front apron and let the material out, and then pushed the whole rear wall of the scraper forward, ejecting all material. 
  •  Bring 'er back to travel mode, high gear, off the heap, 
  • wash, rinse, repeat. 50-100 times per day - an average round was perhaps 3-5 minutes.

Working this gear gets quite repetitive, so the old mind tended to wander.

So it was, coming off the heap in high gear, with quite some surprise that I was awakened from my reverie to hear both winches screaming their heads off. Turned around to ascertain the cause.

Oh dear.

The tow-pin had sheared. The scraper was in two pieces, quite a few metres back from the accustomed position. The cables were running out against the brakes, hence the screams.

The scraper, empty but running down a 20-degree slope, had promptly dug in the towbar to the ruffled surface of Gaia, run clean over it tilting it around 180 degrees so it ended up facing backwards, and comprehensively foobarred the ball joint that joined the front set of wheels plus towbar, to the rest of the scraper. Not a good look. A two-piece scraper.

What to do?

Uncouple the cables from the winches (hammer and wedge), run back for the dozer blade and hook it on, string its cable onto one winch, and proceed to move the pieces out of the way of the heap.

Then confess all to the bosses, but point out that a Real Caterpillar Towpin would be henceforth a Good Idea.

We ended up (days later, this was Gummint work, y'unnerstand) going way out to the backblocks of Fortrose, and bringing back another even more ancient scraper, with which I (lopsidedly - darn thing had two different sized tyres on the back, which controls cutting attitude) completed the earthworks.

With (what joy!) a Real Caterpillar Towpin which appeared, along with the immortal words 'Let's see if you can manage to f... This one Too!'

A little addition, about Elfin Safety.

The old D7 had zero electrics: it was a hand-crank petrol pony motor start.

But the crank handle was vertical.

So, the Elfin Safety issues to start the beast:
  • stand, in yer gummies, on an iced-up top track, in a typical Invercargill frost.
  • prime the pony motor and offer up a small prayer to the appropriate deities
  • Insert the crank handle from on top of the bonnet (about chest height IIRC)
  • Pull it gently around to compression on the pony motor.
  • Take another purchase on the crank (no thumbs around the handle...) and mutter another smaller prayer.
  • Pull the crank smartly towards you.
  • If lucky, pony fires and runs. Trim it, engage the clutch and turn over the main donk.
  • If not lucky, pony backfires and pulls you straight into the edge of the bonnet (curved, fortunately).
  • If really not lucky, bounce off bonnet, slip on top track, clobber appendages on the way down to the cold hard ground a metre below.
  • If inclined to Push the crank to start, expect the backfire to merely throw you off of the track. No bonnet edge. Take yer pick.

Ah, and they call 'em the good 'ol days....