Monday, May 23, 2016

Why housing supply is strangled

Common taters seem to assume that it's purely a Gubmint issue - ban furriners, build anything anywhere, tax the living daylights outta Them As Wot As Deemed Bad. Essentially, take one or two simple actions, wave the wand, and presto, Nirvana is delivered. Etc., etc.
The issues are much more numerous, intertwined and complex than that. A sampling:
  • The price of land, as the Productivity Commission has long since noted, is wildly distorted by MULs, RUBs and other emissions of Plannerz Feeble Brains.
  • The price distortion is of such long standing as to have become structural. That is: inflated land prices have spread to neighbouring properties, suburbs, localities and cities.
  • If the land price is wrong (ht the much-missed Hugh Pavletich), everything on top is wrong.
  • Gubmint policies to "help the FHB" such as Welcome Home loans have instead served to cement in a price floor, thus institutionalising the price ratchet effect.
  • Building material prices are in the steel vice-grip of a cosy duopoly, so materials alone are much more expensive than they need be. A quick Google of Bunnings, the and the, should serve to convince the unbelievers.
  • The LBP mania rules out self-builds, sweat-equity and other self-help possibilities. Time was when anyone could build their own. Norman Kirk did. No more.
  • TLA 'contributions' can be measured at close to $100K per dwelling, for all manner of things, on a take-it-or-leave-it basis. A natural monopoly, completely unregulated...
  • Elfin Safety adds $5-10K layers at every turn: for such innovations as scaff, fall protection, site meetings, inspections, certifications of scaff and electrical cords and tools, Most completely unknown (and, arguably unnecessary) 15 years ago. Ask older tradies (who have, sensibly, quietly faded into the shadows or gone under the radar)
  • Building inspections and other regulation is mainly concerned with liability avoidance, not actual structural assessment. Witness the mountain of Producer Statements for every bracket, beam, bolt, fitting and component. Easy to count and file to get the ticks, very little relationship to (say) the performance of the structure in a severe earthquake. There's little to no dynamic testing (e.g. exerting a 0.5 tonne upwards force on a purlin to test security in a gale or pushing a corner of a building sideways with a known pressure) All cost, close to zero benefit.
  • Few builders exceed 100 units per year, and most is done outside, in the weather, with close to zero QC, by indifferently skilled hammer hands (drug-tested, if you're lucky). Contrast that to the build regime for boats, aircraft, caravans and portable structures: indoors, tight QC, tight tolerances, done in volume and serial-numbered/guaranteed. Spot the difference? Check a local build, and count the weeks the frame stands outside, unprotected, in the rain...
I've touched on only a few of the major aspects of the whole shemozzle, but perhaps y'all get some idea of why Gubmints are so reluctant to grapple hard with this tar-baby......

Friday, May 20, 2016

Auckland Under Fire

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the challenges recently made to the proposed Unitary Plan.
Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, was positively crowing about the proposals.
‘As you know’, she intoned, ‘we already have a Plan, which includes a RUB.  It’s taken years and years and a whole lotta pellets kindly supplied by our ever-giving funders, to get this to the starting point.  We have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.  And we have a Hendependent Hearings Panel to make sure it goes through just like we want.  And there are 23,000, no wait, 23,005 new plans consented.  So the challenge is just piffle - there's no shortage of Potential HenHouses.’

Your scribe reminded Henny that the point of the challenge was that the land pricing was All Clucked Up because of the RUB, as shown by the Productivity Commissions Hextensive research.  This shows price differentials for raw urban land inside the chicken-fencing, that were around 10 times the price of the cow paddocks Outside the Caforesaid fence. Plus, your scribe boldly asserted, the assorted CluckFusters had caved to the NIMBY and BANANA types who infest the Wider Chicken-run.
Henny was quick to bounce this away.
‘Why’, she warbled, ‘there just hasn’t been enough thought given to the working poor and those who need to get their tiny claws on the first rung of the Ladder to Permanent Perchdom, not to mention laying the odd Egg or three in a Suitable Nesting-Box.  That's what those 23,005, no, wait, 23,023 new consents are all about.  Perches for All!’
Assuming the royal ‘we’, we then reminded Henny that this didn't at all address the two Unfortunate Obstacles to Affordable perches:  the fact that artificial chicken-fencerating raised HenHouse prices everywhere, and that practically every one of those 23.040 consents vould not be afforded by younger two-tooth chickens, or by those with Insufficient Chicken-feed to - er - Deposit.
‘Oh, that’, she waved an arm dismissively. ‘Well, as you will be aware, we now have a Team of Henconomists who have clucked around with this notion, subjected it to Henpirical Tests (I think that’s the phrase), and have advised us of their findings.’
‘It seems a rare phenomehen they are terming Henflation, has condemned a whole generation of hatchlings to nesting under bridges and at the top of power poles – all Elfin Safety Hazards in the Extreme.’
‘Therefore we are determined, after more, careful Henconomic Research, to put a stop to this in the Interests of the Wider Flock’.
We then reminded Henny that the rare phenomehen had already caused Nesting-Box prices, expressed in terms of years of pellets per annum, to rise way above 10 years’ supply:  in the Severely UnHenFordable range.  And what did she propose to do about That, given that there was, whodathunk, a link between Planning and Price?
‘Well, nothing immediate’, Henny replied.  ‘We have to rely on the Sage Advice of our Henconomists and Planners to get ourselves out of this’.
‘Now, sorry, must fly, there’s Perch Contest soon and I wanna be Head Hen for once’, and so she departed, leaving your faithful scribe to ponder why it was that the very same Cluster-Flock who had propelled us Into all this schemozzle, were gonna be relied upon to get us Out…..

Thursday, March 31, 2016

Christchurch Old CBD Precincts' fate

Press article refers.
The Precincts idea has crashed and burned, mainly because of ECON101. The Health Precinct is there all right - but between Kilmore and Bealey - not quite where the Planners Planned, but where the private health players decided to cluster.
The Justice precinct is there all right - amply funded by the person you can see in any mirror.
The rest of the Precincts are toast, because anyone with a calculator and three brain cells can see that paying $3-400 per square per year in the suburbs, leads to higher profits than paying $6-900 in the Old CBD.
And the CCC is perfectly fixated on the Old CBD.
In so doing, it is neglecting its core objective - to Serve its Customers. And, that means wherever those Customers have chosen to locate themselves. This is an abject and serious dereliction of its duty to We, the People (and, not coincidentally, the Funders.)
CCC should be concerning themselves with servicing the New CBD ( (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip and Montreal/Victoria Street), which has forged ahead, safely out of the cold dead hands of CCDU and CERA, and has thereby taken most if not all of the potential business tenancies.
 Just as Selwyn DC's IZone has eaten CCC's industrial-land lunch, the New CBD has eaten the Old CBDs'.
To be sure, the Old CBD will evolve into an interesting space over the next 20-40 years.
But this evolution will be Organic, not central-planner driven.
Because, as the article clearly demonstrates, Preferences trump Plans..

Monday, February 01, 2016

NZika virus

A new variation of a very old virus has hit Auckland. It is being dubbed the NZika. It manifests by a curious shrinking, or indeed complete atrophy, of the financial brain, but seems confined only to property owners, real estate agents, and the assorted other parasites which inhabit the property ecosystem.
It results in frenzied bidding at property auctions, seemingly without regard to income, yield or cash-flow considerations - in effect, an instant lowering of financial inhibitions. The virus has rapidly accelerated through the property-owning class in Auckland, but as the transmission mechanisms (still apparently unknown) mature, it seems to be gaining a foothold in adjacent areas, thus giving rise to speculation that it is in fact spread by intimate financial transactions.
The Reserve Bank of New Zealand has made several attempts at controlling the spread of NZika.
  • It has tried an inoculation campaign, by temporarily raising interest rates so as to inject some financial reality into the afflicted subjects. However, before the results could be ascertained, it was forced to drop rates yet again on the advice of the Combined US-China Plunge Protection Team, leaving the results indeterminate.
  • It has tried a Financial Prophylactic Device, being an IRD-registered and surgically inserted Cap on certain parts of the Financial property Anatomy. Early results were promising, but as with many medical and social experiments, the potential for unintended consequences is large and there are too many uncontrolled variables (not to say, Financial body parts) to be able to say with certainty that NZika has been contained, let alone diminished.
  • It has been confounded by the fact that NZika seems also to have an intimate link with the land-use, zoning, consenting and other policies of local authorities. These institutions are staffed by people with zero financial brain capacity as a condition of employment, and thus are completely immune to the financial effects of whatever policy fad they embrace, and indeed, to NZika itself.
  • Having regard to the foregoing, financial medical researchers suggest that local authorities and NZika form a symbiosis - a mutually beneficial relationship between two otherwise completely unrelated species.
Under these circumstances, the Reserve Bank is, apparently, considering compulsory genetic modification to local authority staffers, to confer a heightened (rather than an absent) quotient of financial intelligence.
However, and at this writing fatally, the Die GrĂ¼nen Collective have barred the necessary preliminary research. They aver that local authority planning staff, like the fabled Stockton Snails, are a rare and endangered species, and that the Precautionary Principle should Prevail. Preservation of said planners, no matter, it seems, how disastrous for the millions outside the Property Ecosystem, trumps any possibility of combating NZika.
Truly, some Ecosystems are more Equal than Others....

Thursday, November 19, 2015

Why it is nigh impossible to put up cheap accommodation

Roelof asks "Why can't Salvation Army be allowed to build cheap roofs over peoples heads.... Why can't we have more garages/sheds.... anything... that makes sleeping in a car or outside simply a choice rather than a brutal necessity..???"

Thinking through that very pertinent question out loud is useful, because it exposes the relentless creep of issues that have completely foobarred the housing industry in general, and quick, low cost housing in particular.

There's absolutely nothing technical about getting a living space together that is beyond the capabilities of a modestly handy bunch of people. Tiny houses and caravans are exemplars precisely because they dodge the issues which bedevil the construction of larger spaces. The sorry list commences.
  • Five sorts of LBP needed to touch a conventional house: founds, weathertightness, structure, carpentry, roofing. Hiring LBP's does not come cheap even though most of 'em were created by a mail-in form from building trade mags. Equivalent of packing the cert in with the WeetBix....
  • working at heights for anything over 2.4, which in practice means everything roof-related plus fall protection. Expect the bill to run $5-15K.
  • fencing of site and those 'Sign has Sharp Edges' hazard notices. Expect another $4-8K.
  • Electrical and plumbing need certified tradies (the attraction of tiny house 12/24v everything plus cassette loos, suddenly makes sense)
  • Use 230v tools anywhere on site? Every cord, tools, connection, distributor box etc needs tagged. It's for your Own Good, see. Expect $20 per item per year. Easily a grand a year if you are tool-addicted....
  • Oh, and the local avaricious authority will want anywhere between $10 and $80K to hook you into services like power and the three waters.
Notice, dear people, that we have not yet started to acquire the land, or buy materials. You have the pleasure of dealing with a local monopoly (the planning authority) for the former, and a cosy duopoly for the latter (Fletchers and Carters).

Now, sing me a sad song about all a them Poor Folks without a roof over their heads.....but that list above sure answers most of Roelof's very good question.

Right to Build??? Ha.....

Monday, September 28, 2015

Why Central Christchurch is still tumbleweeds

The Press appears to be mystified as to why this should be so. 

The reasons for this schemozzle are simple and unpalatable.

1 - The bureaucracy running things in the Old CBD has no notion of Time=Money. A building proposed in 2011 for $30m will now cost $40m (construction cost inflation runs at around 8-12% per annum).
So the pure elapse of time renders proposals unfeasible by the time the final box is ticked.

2 - The New CBD ( (Sydenham/Addington/Middleton/Riccarton/Hornby/Airport arc, plus the Oxford Terrace to Bealey Ave strip and Montreal/Victoria Street) has forged ahead, safely out of the cold dead hands of CCDU and CERA, and has thereby taken most if not all of the potential business tenancies.
Just as Selwyn DC's IZone has eaten CCC's industrial-land lunch, the New CBD has eaten the Old CBDs'. And even there, vacancy rates are not zero: there is plenty of $300-ish per square per year floor space for rent...

3 - The Precincts are too big. Getting tenants for a single existing New CBD floor plate is hard enough now at $300-400 - try getting an entire blocks' worth at $600-700 in the Old CBD.
If CCDU and CERA had read their disaster history (great Fires in London, Chicago) they would have realised that individual owners drive regeneration. Not city-block-size behemoths. So the Baron Haussmann fantasies are just that - fantasies.

4 - Share-an-Idea placated the masses by seeming to promise their 'input', and disguised the ineptitude that actually existed. It also promoted an absolute fantasy that building design and contract commercials could somehow be democratised. This accounts for much of the later disillusionment with planners, schemes, precincts et al.
Buildings need haggle, tenants, financiers, and persistence. Not one soul per 10,000 who Shared their (often hilarious) Idea had any skin in the game except as a passive consumer of whatever eventuated. A total failure, yet a useful circus act.

Wednesday, July 22, 2015

SquawkLand Densification

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the proposed re-densification changes to the One Plan to Rule Them All (Optrta)

Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, was positively crowing about the proposals.

‘As you know’, she intoned, ‘we already have an Optrta.  It’s taken years and years and a whole lotta pellets kindly supplied by our ever-giving funders, to get this to the starting point.  We have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.’

Your scribe reminded Henny that the previous Cluckfusters had turned down a very similar proposal just two years ago, right on the eve of the Perch Priority Contest to establish the new pecking order.  Worried about the possibility of Falling off the Perch altogether, the assorted CluckFusters had caved to the NIMBY and BANANA types who infest the Greater Collective Catchment.

‘Why’, she warbled, ‘there just hasn’t been enough thought given to the working poor and those who need to get their tiny claws on the first rung of the Ladder to Permanent Perchdom, not to mention laying the odd Egg or three in a Suitable Nesting-Box.’
‘So, with Greater Density, there will be the opportunity for More Perches, Collective Warmth, and the growth of Nested-together Community.  Win-win-win, I say, what,  What, what, what?’

Assuming the royal ‘we’, we then asked Henny why this apparently simple approach had not been adopted years, nay, Decades ago.

‘Oh, that’, she waved an arm dismissively. ‘Well, as you will be aware, we now have a Team of Henconomists who have clucked around with this notion, subjected it to Henpirical Tests (I think that’s the phrase), and have advised us of their findings.’
‘It seems that restricting the supply of Nesting Boxes, and making onerous conditions about their Appearance, Size, Cladding and Colour, has caused a rare phenomehen they are terming Henflation, and has thereby condemned a whole generation of hatchings to nesting under bridges and at the top of power poles – all Elfin Safety Hazards in the Extreme.’
‘Therefore we are determined, after more, careful Henconomic Research, to put a stop to this in the Interests of the Wider Flock’.

Your scribe then reminded Henny that the rare phenomehen had already caused Nesting-Box prices, ezxpressed in terms of years of pellets per annum, to rise way above 8 years’ supply:  in the Severely UnHenFordable range.  And what did she propose to do about That, having virtually admitted that there was, whodathunk, a link between Planning and price?

‘Well, nothing immediate’, Henny replied.  ‘We might have Caused this, well, Partly, but we will have to rely on the Sage Advice of our Henconomists and Planners to get ourselves out of this’.

‘Now, sorry, must fly, there’s Perch Contest soon and I wanna be Head Hen for once’, and so she departed, leaving your faithful scribe to ponder why it was that the very same flock who had propelled us Into all this schemozzle, were gonna be relied upon to get us Out…..

Wednesday, June 10, 2015

German versus NZ builds

A response to another idealistic article in the Press.

Consider the following differences between Germany and NZ:

1 - Germany has a 'right-to-build' in its Constitution.  A good summary is here.    Contrast that to NZ, where self-builds are effectively ruled out:  5 different LBP licenses are needed to build a typical dwelling:  Foundations, Structure, Weathertightness, Roofing, Joinery.    And the Planning and Consenting needed for a build is bordering on the insane:  a nice, recent example:  an acquaintance with a new home had its final inspection turned down because....the shower door was not present.  Against this sort of bureaucratic stupidity, the Gods themselves rail in vain, to mis-quote Schiller.

2 - the restrictive land-use policies of the old Town and Country Planning Act (long-repealed but casting a long and spiteful shadow) mean that the land price is inflated by delays (interest/carry costs), fees, levies, contributions, and scarcity.  The Productivity Commission notes that the ratio of rural bare land to urban bare land prices is around 1 to 10:  the 'urban zoning value boost' is solely a Planning-caused phenomenon.  If the land price is out of whack, so is everything else.  Germany was never infected by the Brit Planners (motto:  'We finish what the Luftwaffe started') disease.

3 - Building is, as the Planning Commission notes, a 'cottage industry' - only 5 builders in the whole of NZ put up more than 100 houses per year.  This is in contrast to Germany, where factory-built houses or large components/modules thereof, is the standard.  And factory build mean quality control, tight tolerances, building under cover, and fast build cycle times.  Whereas clonking together raw timber frames, as is the wont of 'builders' here, carried out by a motley crew of drug-tested hammer hands, with intermissions where the frames stand out in the rain for weeks, and where Elfin Safety adds $5-10K layers of cost at every turn:  scaff, fall protection, fencing, power tool certification, credentials needed to wipe noses, is the norm.  And then we wonder why builders concentrate on the top end and large builds if they possibly can.

To be certain, I would just love to see the sort of builds you mention, David.

But we are not going to get them, affordably, given current policy settings.  Starting with land prices.

Sunday, May 10, 2015

Henny's latest Squawk

Henny Pulse, Deputy Squawker for the Associated Cluckfusters Collective, is all a’flutter about the proposed Special Henhouse Areas.

Your humble scribe interviewed her on the background. Henny, resplendent in polished wattles and her customary bright pink legband, came out firing.

‘Why’, she warbled, ‘there just hasn’t been enough thought given to the infrastructure needs of new Henhouses. Nesting materials, for example. Without a prior delivery of this material, no SHA can possibly be started. So, it’s simply the Responsible thing to do, to demand a commitment from those pushing the SHA’s, to stump up with nesting and other materials. So, along with my fellow Cluckfusters, we just won’t permit any new henhouses until this happens.’

Assuming the royal ‘we’, we then asked Henny what about the issue of Homeless Fowls, and the recent wave of immigrants from Other Farms, attracted by our local culture, the prospect of free-range dwelling, and the not incidental prospect of massive Nest-price Gains (non-taxable).

‘Oh, them’, she waved an arm dismissively. ‘Well, we already have a HenHousing Unitary Plan for that lot. It’s taken years and years to get this to the starting point, we have a whole team devoted to it, the grey-leg-banded ones. We call them the ClusterFlock.

The Plan envisages that we just stack a whole bunch of little cages up into the sky and invite these new flocks to take up residence. No need for new HenHouse Areas at all. Why, on a Good day, they can, with some effort, turn around in their tiny piece of real estate, and see the Sea!’.

At this point, a very Flustered PR Flackbird flew in, alighted on Penny’s back, took a mouthful of wattle and a right old henfight ensued.. The upshot of which was that ‘cages’, hutches’, ‘battery fowl’ and any mention of square centimeters per fowl were deemed ‘prohibited speech’ and were to be stricken from the record. The replacement phrase was, evidently, to be ‘sustainable sky-home’.

Armed with this sitrep, your scribe then turned to the Head Farm Rooster – a rare bird, sporting matching Blue and Green legbands, and asked for his reaction.

‘Henny, I regret to say, he intoned, ‘is on a hiding to nothing. Not only do the CluckFusters lay enough eggs to buy all the nesting material they need, but they actively sustain a nest-banking industry by dribbling out new-nest permits at a frankly appallingly low rate. This keeps the nest pricing structure way out of whack with eggs-per-day income possibilities. So, it’s up to them.

And, anyway, as Farm Management, we can overrule this shed any old time we feel like it. But which, to be perfectly honest, we don’t want to do. There may indeed have to be a few Omelettes, to teach this sorry flock their place in the pecking order. But you’re not ever gonna see any Blue-legband clawmarks on any of those broken eggs…..’

'We prefer to let Nature to take it's course. Red in tooth and claw, isn't that the way?'

Thursday, May 07, 2015

Awkland housing - again

Auckland City Council and the Gubmint are having a hissy fit.

ACC has overplayed a weak hand in any case.. They are infested with Brit-style Town and Country Planning Act 'planners' (the Brit's motto - we Finish what the Luftwaffe Started), who have not the slightest notion of economics, development cycles, affordability or the other aspects which, on the ground, determine what is built, where, when, and for how much. Planners are expensive in themselves, and they certainly add cost to the development cycle, if only via the injection of Time to all processes.

The build-out of the major world cities of yore was, in many cases, following infrastructure provided by private speculators, but with Gubmint incentives. London's tube (John Lanchester 'What we talk about when we talk about the Tube'  is a useful primer here, as is Kunstler's 'Geography of Nowhere' for the USA scene. Development followed the lines (tubes in London, horse trams, electric trams, buses in the US). The London tubes were private companies (and at each other's throats) until the early 1930's.

I'd point to another Gubmint aspect which is a significant contributor to housing unaffordability: regulation and licensing. Examples:

- Scaffolding (a recent and extremely expensive requirement)
- LBP - at least 5 licenses for various bits of a building = downtime, overheads, cost
- fencing and worksite safety in general - way out of kilter in terms of cost/benefit ratios. Ask an older tradie.
- tool certification (at least the battery-powered kit is proof against this madness - for now)

The question is, of course - how much benefit is actually derived from this very significant cost (I'd estimate not less than 10% of build, could easily be twice that)? Again, the older tradition of craftsmen builders has little patience with all of this: they operated in a time when one built Up to one's reputation, not Down to some Code.

The Christchurch earthquakes give us an answer.

I estimate that 70% of residential builds were done in a time when regulation was absent (pre 1950's), light (to 80's), or at least sensible (to the mid-90's).

No-one was killed by bad build structures in residences, once one excludes URM, chimneys and exogenous sources (rockfall etc). Structures twisted, tilted, and cracked. But they did not kill their occupants, in a 2+g vertical acceleration sequence.

So the 'old', lightly regulated practices and their built results, have withstood probably the most severe test Gaia could devise.

Modern codes add cost but little to no incremental benefit, compared to these.

And more cost = less affordability. It's as sad and as simple as that.

Monday, February 23, 2015

Quake Anniversary Feb 22

In the to-be-written economic analysis of the Canterbury quake series, there will be wonderful case studies for Public Policy, Management, and Engineering students, for decades to come.

Some streams/anecdotes:

  1. Most business that survived carried on.  There were no overall shortages of fuel, gas, food, power or FMCG beyond the first week:  the old adage of 'keep a week's canned food' was in practice fulfilled by barbecuing the contents of powered-off freezers.  There were certainly localised pinch-points.  But everything, basically, just carried right on.
  2. CBD businesses were decimated:  not because of the quakes, but the lockout that followed.  A few wise ones signed up as demolition workers, got their stock and records, then resigned.  Lawyers hired crane firms to swing them into their maroooned high-rise offices and retrieve case and client files.  But small busnesses either relocated and bought new plant and inventory if they could, or simply folded.  A good research project here.
  3. A Baron Haussmann frenzy then ensued:  the infamous 'Share-an-Idea' kept the masses happy typing ludicrously inept ideas about Grand Green New City, while the Planning Mandarins in CERA and CCDU hatched the equally shambolic idea of Precincts (entire city blocks) on the notion that this would encourage design elegance, uniformity, and high standards.  What they got, of course, was acres of car-park, a four-year wait with commercial construction inflation rollicking along at 12-15% per annum, endless '100-day' promises, no commercial takers and hence complete stasis on the ground.  The only tenants with deep enough pockets for all of this Poo-bah shtick are the Gubmint agencies, funded by, quelle surprise, you, me and Swiss Re.  Hence the Justice and Health precincts will survive.  The rest haven't.
  4. My own estimation of city-wide damage (my architectural eye-o-meter) is 85% just fine albeit with some ripples in the Gib, 5% totalled (say, 8,000 of the 160,000 rateable properties city-wide), and 10% somewhere in between.  This accords neatly with the business survival, which was instant (if possible at all) and which has been inestimably aided by the vast stupidity of the CCC relative to its country cousins.  Selwyn DC and IZone have, simply put, eaten CCC's lunch, as a glance at Rolleston will confirm.
  5. CERA has been rolled into DPMC, which assures it of micro-management and equally of doing nothing startling.  It has acted well over red-zone residential clearance, appallingly over CBD lock-down, and in the true spirit of unfettered bureaucracy grew to around 500 warm if doubtfully useful bodies or so at its peak.  Not counting consultants, PR, IT and other outsourced stuff.  My overall impression is that it was not bad at tactics, clueless about strategy.  But then politics (DPMC, remember) largely dictates all this.
  6. CCC is fixated on CBD-corpse-CPR.  All its traffic, planning and other energy has been poured into this (Bloomberg's words) quake-ravaged wasteland.  But the joke (and it's a bad one) is that no-one cares about the Old CBD: they have a New CBD distributed across points west (West of Avon to Bealey Ave, Riccarton, Addington, Middleton, Hornby, Airport, Rolleston, West Melton).  There's nothing to go there for except Ballantynes (an institution like K&S in Wellington, S&C in Awkland), it's painful in terms if memories, and the roads are dreadful, slow and have lost all their landmarks.  Yet CCC keeps right on pumping the chest.  In doing so, it has neglected the suburbs, their facilities, their population, and has alienated itself from them as a direct result.  Good luck with extracting swingeing rates increases from them in future....Sir Bob the Jones wrote an early article stating baldly that the CBD could not be rebuilt.  He was right.

As I said, great case-study material lies here.  People are fine or at least making do.  Their institutions, not so takes a generation or two to unremember all those mis-steps.

And, just in case yez feel in need of an alternative POV, try this:  notice the change in tone as the awful realization dawns.  It dovetails neatly, methinks.

Friday, February 13, 2015

Housing Supply - the blame game

Housing supply articles routinely ignore the tragic comedy of planning policy at the TLA level, which is where the majority of the blame lies.  This CityMetric article explains a London equivalent, and do notice that London is relatively decentralised (32 boroughs) cf Awkland.

My own solution would be threefold:

  1. Take away all local planning from the economically clueless TLA's and hand it off to local Commissioners (unelected).  Hey, can they possibly be worse than ACC's legion of brown cardies?  Thought not, but have a raft of KPI's to keep the Commishes - er - Commishing.  Like total costs not to exceed 1% of total build.
  2. Institute a risk-assessment approach to building (e.g. all single storey residential builds would be Schedule 1) to cut through the endless processing of very minor proposals.  The current rule-based approach is hopelessly Byzantine, costly, ineffective, economically disastrous in terms of misallocated resources, and easily circumvented by finding less stupid jurisdictions.
  3. Kick-start modularised, SIP, flat-pack, multi-proof-consented housing factories, partly to employ the hapless minions released onto an unsuspecting world by #1 above, partly to lower unit costs overall, and partly because I love CNC processes in general.  Cars, caravans, planes and boats are built this way - houses next....Could be funded by the zillions released from Council revenue streams by #'s 1 and 2

Next problem?

Monday, February 09, 2015

Territorial Local Authorities (TLA's) and Risk Assessment

One aspect which has quite a lot of bearing on TLA cost structures is that of the attitude to risk.

The current attitude is rules-based, which has a number of undesirable consequences:

  • Every single proposal, for anything, has to be 'processed' and set against known rules.  Cost #1, as such processing is staff-intensive.
  • Decisions resulting from this 'hold up against known rules' are not easily challenged.  So truly dire decisions are usually just swallowed by applicants.  Cost #2, as optimal solutions are almost by definition, not taken.
  • No clear or known rule = no decision, plus a protracted consultation to plug the gap with yet mo' Rules.  Cost #3 - mo' staff..
  • Time = money, a concept any banker will be happy to explain, and all of the above adds mucho Time.  Cost #4, but as this falls on Applicants, Council staff simply don't care.  Their salaries arrive with the regularity of a sunrise..
  • While discretionary powers exist (Schedule 1 to Building Act 2004 is a good example) to end-run Rules, they are so rarely exercised that in practice these worthy provisions may as well have been repealed for all the use they get.

The alternative is a thorough exercise in risk assessment, which acts as a drafting gate for proposals.  A quick risk assessment, if decided to be low risk, should result in applications being waved straight through.

A useful example is single-storey timber-frame residential builds:  houses to y'all.  In Christchurch, my estimate is that 70% of these pre-dated modern building codes:  they were either unconsented (pre 1970's) or lightly consented (1970-90's) by the old, sensible TLA's of the era.

These structures have, in Christchurch, been through a perfect risk assessment via a series of Gaia-initiated wobbly moments.

Subtracting exogenous sources (URM chimneys, rockfalls etc) no-one died from a cause attributable to a single-storey timber-frame residential build structural failure.  Therefore, such structures are demonstrably low risk, however constructed.

So, despite the plethora of new requirements for such structures, every single one adding its own layer of cost, the net benefit of today's build versus a 1950's comparable build in a future quaky event, would be close to zero.  All cost, no benefit.

The logical regulatory outcome of this should be to include single-storey timber-frame residential builds in Schedule 1 to the Building Act 2004, on the grounds that they are inherently (and demonstrably) low risk exercises.  Just like a verandah. pergola, carport, shed.

But this would require a number of attitudinal adjustments to TLA staff culture:

  • No Mo' 'our way or no way'
  • Assessments open to swift challenge (a Low-Risk Claims Court approach)
  • Low risk = low fees, fast turnaround, layers of cost removed.
  • Staff become enablers, not obstacles.

But enough already.  One can tell from this simple example that we will wait a long time to see such a change.  We'll see trailer parks with tiny houses (which end-run the PooBahs), before we see a risk-based TLA approach.....or lower rates.

Monday, February 02, 2015

Mo' Moolah Required

The Left Honorable Sir Larry Fool, president-for-life of the Small-Nation Association For Urbanista (SNAFU), has recently spoken out on behalf of the vast majority of TLA employees who feel under threat from public demands of accountability, austerity and productivity.

'Let me be perfectly clear', Larry said.  'Employees are not elected, so youz ratepayers cannot vote us out.'

'And, speaking for the sector as a whole, the unique mixture of temperament, capability and ethic which we collectively exhibit, means that we just so totally justify our current remuneration.'

'Plus, our union will bite the generative bits off of any person, body, association, company or collective, which publicly expresses a contrary view.'

'Our main issue is that we just don't have enough moolah to pay ourselves even more.'

'So we are looking for ways to reach deeper into your undoubtedly capacious wallets.'

'Please assist us in this totally essential endeavour.'

'And, as well, we as the embodiment of all local authorities, fully intend to devolve to small local groups, the multitude of tasks and of course costs, that we cannot be arsed to bother with any more.'

'And in doing so, it should go without saying, we will retain and extend our present perquisites.'

'Over to you, our funders'.

'Turn out your pockets!'

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.....