Author: Owen McShane

  • How Can Cities with Unaffordable Housing be Ranked Among the Most Livable Cities in the World?

    The Economist magazine’s “Economic Intelligence Unit” (EIU) has published its most recent survey of the most livable cities in the world.

    Vancouver, Canada, ranks number one, Vienna, Austria number two, Perth, Australia number five, Geneva number 8, Zurich, number 9, (both in Switzerland) and Auckland, New Zealand, number twelve.

    The comments on the EIU web page are plentiful and outspoken, most of them from people living in the ‘top-ranked’ cities explaining why the survey has got things ‘so wrong’ – or ‘so absolutely right’. Many point out that Vancouver, like so many of the top-rated cities, has severely unaffordable housing.

    Many also have high taxes, and some, like Auckland, have low wages by world standards. For most people, high wages, low taxes and affordable housing make a major contribution to livability.

    Anyone familiar with Zurich and Geneva knows that one has to be very wealthy to live there. For most of us, such cities are quite ‘unlivable’.

    However, the EIU is probably providing its customers with the right answers (or as right as such surveys can be) because their experts are ranking these cities according to their attractiveness to expatriate executives.

    Executives posted from New York to Vancouver or Sydney are unlikely to be concerned with the cost of housing because their housing will be provided free of charge, or subsidized by accommodation allowances. These rankings are not established by interviewing a random sample of residents, but are generated by a team of experts trying to assess these cities through the eyes of transferred executives setting up homes in new countries.

    This introduces another set of biases because even expert visitors have different priorities and preferences to long-term residents.

    Visitors to cities use public transport – especially shuttles, taxis and trains – if only because they do not carry their cars in their suitcase. Again, the comments on the EIU web page demonstrate that the public transport that serves visitors well may not be so impressive to the long term residents.

    Similarly, the Mercer Consulting’s Quality of Living survey ranks Auckland fourth, equal with Vancouver. Vienna, Zurich and Geneva are their top three, with Vancouver and Auckland fourth equal. Again, the Mercer ranking is designed “to help governments and major companies place employees on international assignments”. So housing affordability is not an issue. These are the best cities for ‘top’ people – and for government officials in particular.

    So, when pondering the rankings of these cities, we should understand they have been ranked according to the preferences of a high income, highly mobile, urban elite. This probably reduces their utility as a guide to overall public policy.

    Once we understand this perspective the rankings make much more sense. Whether this makes sense to people starting a career, or trying to raise a family on a middle or even upper middle class income, is dubious at best.

    Of course some will no doubt hail such surveys because they emphasize such things as physical beauty or cultural offerings. Yet they have precious little to do with what matters most, notably affordability of decent housing. For most migrants to these cities, the prospects of upward mobility – something not discussed or even considered – are probably less optimal than in places like Houston, Atlanta, and even New York.

    After all, for most people, the cost of housing is important in making location decisions, whether within their own countries or when considering migration to other lands.

    The 5th Annual Demographia International Housing Affordability Survey (2009) surveyed the Metropolitan Housing Markets of Australia, Canada, the Republic of Ireland, New Zealand, the United Kingdom, and the United States, so does not include the housing markets the EIU ranked in Europe, and elsewhere in the world.

    Even so, the list below shows that six of the ‘top twelve’ most livable cities prove to be ‘severely unaffordable’ as measured by Demographia’s Median Multiple Index. (Median house price divided by median household income.) A further two of the twelve, Toronto, ranked 4th, and Calgary, ranked fifth equal with Perth, are both ‘seriously unaffordable’.

    Most of us would expect housing affordability to be a key ingredient of livability. The list below included the eight EIU ranked cities (from top ranking Vancouver to 12th ranking Auckland) which were also surveyed for housing affordability by Demographia.

    1. Vancouver – 4th least affordable of all the severely unaffordable markets with a Median Multiple Index (MMI) of 8.4.
    3. Melbourne – Severely unaffordable; MMI of 7.1
    4. Toronto – Seriously unaffordable; MMI of 4.8.
    5. Perth – Severely unaffordable; MMI of 6.4
    5. Calgary – Seriously unaffordable; MMI of 4.8
    9. Sydney – 5th least affordable of all severely unaffordable markets; MMI of 8.3
    11. Adelaide – Severely unaffordable; MMI of 7.1
    12. Auckland – Severely unaffordable; MMI of 6.4.

    A survey that included housing affordability, per capita income, tax rates (central and local), and average drive-time to work, would almost certainly generate quite different rankings. Perhaps what has been missing is this acknowledgement that different factors motivate different kinds of people. The urban elite is very different from the middle class in its concerns. Pundits and planners would be well-served to note these differences before using such surveys as the basis for sound public policy.

    Owen McShane is Director of the Centre for Resource Management Studies, New Zealand.

  • New Zealand Voters Swing Right: John Key’s Shower Power

    Reason magazine’s Jesse Walker opens his commentary on the New Zealand election by saying: “At least one country is responding to the financial crisis by moving to the right, not left.” This is factually correct but may overstate the case.

    Certainly, New Zealanders elected a conservative National-led coalition government and removed from office a Labour-led coalition which had served three terms of three years. While it is appealing to contrast this move to the right with America’s move to the left, it is probably unwise to claim that these were contrasting responses to the international financial crisis. Indeed, I suspect the analysis of both the New Zealand and American elections is equally flawed.

    The key mood in the New Zealand electorate was simply that it was “Time for a Change”. And given that the incumbent Government was a left-of-centre Government, the change could only be to the right of centre. In this regard, there is a strong parallel with the American Presidential race where the mood was equally that it was “Time for a Change.” In the US this meant a move from the Republican right to the Democratic left.

    The mood for change was probably stronger in New Zealand because for a three-term government (nine years) to win a fourth term is most uncommon here; Helen Clark’s nine years as leader of that Government was a record, and had she won a fourth term as a Labour Prime Minister it would have been unprecedented. The historical odds were against her. On the other hand, all US Presidents must move aside after two terms, so change is thrust upon them.

    Now that both elections are over, the new US president and the new National Government, led by John Key, must face up to the harsh reality of the inevitable recession or depression resulting from the collapse of the housing and financial bubbles that dominated both economies during the last decade. This focus may encourage analysts to believe that the financial crisis was the cause of the electoral outcomes, even if the ideological swings were opposite.

    However, I believe that Barack Obama would have won the Presidential race had there been no financial crisis, and that John Key would also now be Prime Minister of New Zealand. But both their victories might have been less emphatic.

    In both countries voters were faced with a generational change. Obama is a young man in his early prime; McCain is an old man whose mortality worked against him. Helen Clark is younger than McCain (58 vs 72), but because she entered Parliament in 1981, became Deputy Prime Minister in 1989, and has been Prime Minister since 1999, she was seen as one of the old guard. She has stepped down as leader of the Labour Party as part of conceding defeat on election night. John Key is a young man of 47 who has been in parliament only since 2002, and Leader of the Opposition only since 2006.

    The role of the financial crisis in this New Zealand election was an ambivalent one. By law, our full-on election campaign is brief – only three months – compared to US campaigns, and Parliament goes into recess during the whole of the campaign. As it happened, the full impact of the financial crisis on the NZ economy became apparent at about the same time as campaigning began, although the collapse of the housing market had begun somewhat earlier. The campaigning politicians had little time to develop solid policies in response to the threat and, given that Parliament was in recess, could do nothing about it anyhow.

    Helen Clark argued that her Labour Government had successfully managed the economy for nine years and her team had the experience to manage the New Zealand economy through the next three years. John Key argued that his party had more skills in the field, and that the Labour party benches were full of academics and trade unionists, most of whom had never run a business.

    Clark’s response was that the National Party, and John Key in particular, were part of the problem. Her trade union base saw Key as a Wall Street banker and a cause of the problem. Key’s business base saw him as a man who understood the industry and had the skills and know-how to deal with the problem.

    National Party heavyweights included Don Brash, who had stepped aside as Leader of the Opposition to allow John Key to take over. Brash had been Governor of the Reserve Bank for 14 years; since resigning from Parliament in 2007 he had served as an adjunct professor of Banking at the Auckland University of Technology (and Chairman of the Centre for Resource Management Studies). John Key began working as a foreign exchange dealer at Elders Finance in Wellington, then moved to Auckland-based Bankers Trust. In 1995, he joined Merrill Lynch as head of Asian foreign exchange in Singapore. He was promoted to Merrill’s global head of foreign exchange, based in London, and was a member of the Foreign Exchange Committee of the New York Federal Reserve Bank from 1999 to 2001.

    On election night Key’s Centrist but Conservative National Party, (combined with the soft, somewhat libertarian Act Party as a coalition partner) scored a decisive victory – probably about as decisive a victory as is possible, given our system of Mixed Member Proportional representation (MMP).

    There is widespread agreement, at least among the supporters of the new regime, that Labour’s massive defeat was primarily caused by New Zealanders’ rejection of the “Nanny State,” which has increasingly interfered in our daily lives. And here may lie the real lesson for the new President of the USA.

    While the US is a genuine Super Power, and New Zealand is a mere pimple on the global body politic, we always aspire to punch above our weight, and frequently do. Helen Clark had decided that New Zealand would be a world leader in fighting climate change (anthropogenic global warming), and that we would become the world’s most sustainable economy with a carbon neutral footprint. So, for some time, New Zealanders responded with some enthusiasm to this new challenge of leadership on the world stage. We were proud to be Clean and Green, and of our Tourism Board’s promotion of New Zealand as 100% Pure – presumably we are free of even impure thoughts.

    However, as commentators as diverse as the late Aaron Wildavsky and Vaclav Klaus have warned, Global Warming is the mother of all scares because it enables Government to interfere in every aspect of our lives – to claim that no price is too high if necessary to save the planet for our grandchildren. Inevitably, the High Priests of “Sustainability” began to demand that we break our “addiction” to private automobiles and learn to love public transport; that we learn to love high-density apartments and abandon our home gardens; and that we stop doing anything which consumed fossil fuel. It soon became clear to many that the main concern of these New Puritans was that someone, somewhere, might just be enjoying themselves.

    Our unsubsidized grass farmers who pay most of our way in the world began to wonder why our belching cattle should be penalized by Kyoto rules, when subsidized European cattle were not. After all, cows have been belching since the first ruminants walked the earth, and they don’t run on fossil fuel.

    Rodney Hide, leader of the Act Party, began to argue that we should dump the Emissions Trading Scheme and withdraw from Kyoto because the whole Global Warming fear was a massive scam. This was supposed to be political suicide, but the polls showed that Act’s support suddenly increased. Act is now part of the new government, and their extra five seats consolidate John Key’s comfortable majority in the 120 seat Parliament.

    If President-Elect Obama becomes a High Priest of Climate Change, he too may find that 95% of Americans, just like New Zealanders, believe that other people should use public transport so that there will be more room on the road for them. He may also find that while the costs of Kyoto are scary and may drive even more energy intensive industries offshore to non-complying countries like China and India, it is the minor interventions in daily life which are the real irritants that could turn the electorate against him and make him a one term President.

    Because when it comes down to it, John Key’s majority may have been cemented in place by New Zealanders’ affection for taking a shower.

    A few weeks before the election, the Labour Government, largely at the behest of the Green Party on whose support they depended to maintain their majority in Parliament, proposed regulations which would limit the flow of water through a shower head to about 1.5 gallons per minute. The aim was to save both water and energy and thus make our houses more “sustainable”. The standard “low flow” rose in most showers at the time delivered about 3.5 gallons per minute.

    This proved to be the last straw. The grumblings about the proposed mandatory replacement of incandescent light bulbs with compact fluorescents, similar to the rumblings in the US, exploded into a furor on blog sites, talk-back radio and letters to the editor. A popular blogger drew up a list of 85 things the Greens want to ban. People recalled how a Green Party official had endorsed a petition calling for the ban of Dihydrogen Monoxide…which just happens to be water.

    The proposal was not just irksome; it soon became evident that it probably would not even achieve its objective. People would stay in the shower longer or alternatively run a nice deep hot bath. As is so often the case in political campaigns, this single minor proposal came to symbolize a whole range of discontents, and people could use it as a focus for their latent rage and fury against the Nanny State.

    So Jesse Walker’s comment that triggered the request for this commentary on the New Zealand election might more properly have read, “At least one country is responding to global warming alarmism by moving to the right, not the left.”

    Our recent experience in New Zealand should give Barack Obama reason to pause. A stance against Global Warming is popular, right up until it starts to bite. Then the American public too, might just bite back.

    Owen McShane is a Resource Management Consultant based in New Zealand

  • What does the end of cheap oil mean to our urban futures?

    The Contrasting Views.
    One of the most common topics on blog sites and newsgroups here and around the world is “What does the end of cheap oil mean to the future of our cities?”

    As usual, those who combine a yearning for catastrophe with a hatred of the motor car and the suburban lifestyle have leapt to their own “self evident” conclusion. They are convinced the suburbs are no longer viable and will be abandoned and left to decay into extensive ghost towns, home only to vermin and weeds.

    All those millions of of people who inhabit the metropolitan areas of Los Angeles, San Francisco, Houston, and even Auckland and Christchurch, will up-stakes and surge into downtown neighbourhoods where they will take up residence in high rise slabs from which they will be able to walk and cycle to work – or of course catch their bus or train. As James Howard Kunstler puts somewhat gleefully:

    “The US economy is crumbling because the way we conduct the activities of daily life is insane relative to our circumstances. We’ve spent sixty years ramping up a suburban living arrangement that has suddenly entered a state of failure, and all its accessories and furnishings are failing in concert. The far-flung McHouse tracts are becoming both useless and worthless in the face of gasoline prices that will never be cheap again. The strip malls and office “parks” are following the residential real estate off a cliff. The retail tenants of all those places are hemorrhaging customers who have maxed out every last credit card. The lack of business is now leading to substantial layoffs. The airline industry is dying and will probably cease to exist in its familiar form in 24 months. The trucking industry is dying, threatening the entire just-in-time distribution system of things that even people with little money to spend still need, like food.”

    All this because US gas prices may soon reach $5/gallon. We New Zealanders, like many others round the world, have been living with $5/gallon petrol for years, and have even survived $10/gallon petrol for close on two years. Yet Kunstler and many like-minded catastrophists state with total confidence that once gas hits $10/gallon all Americans will simply stop driving – and start rebuilding their cities.

    Fortunately, the simple sums suggest otherwise. Look up the population of your nearest city. Look up the housing replacement rate, and figure out how long it will take to transform present day Seattle or Auckland into a remake of 19th Century London. Then think about the costs of all the new buildings, all the new infrastructure, and the lost asset value of all those abandoned suburbs.

    Many of us believe that long before anyone has to consider such a drastic reshaping of our built environment new technologies and some minor behavioural shifts will make such disruption totally unnecessary.

    The alarmists respond that we do not have the time.

    However, we can develop new technologies and produce new products at high speed if we have to. Consider the rapid development of technology during WWII – jet engines, radar, V2s, computing and much more. By the end of WWII it was taking only five days to build a Liberty Ship in the US dockyards. When I first went on the Internet in 1994 there were only 70,000 of us in the club. Now there are over 1.6 billion of us.

    Off course we have the time. After decades of paying about $5/gallon for our petrol, the NZ urban landscape looks much like America’s although the average vehicle size may be somewhat smaller.

    Now that we are paying $10/gallon for petrol, sales of small, more efficient, cars are booming, and a few more people are cycling to work, car-pooling or taking public transport. But, hardly anyone, except our local Katastrophists, are talking about giving up their autos altogether or proposing that we rebuild our cities within the constraints of Extremist Smart Growth urban form.

    The most obvious change in behaviour is a boom in drive-away theft from petrol stations. Barrier arms or similar hardware will soon put a stop to this.

    Our Densities are Higher and uses more Mixed than in the US.
    Since the seventies, New Zealand has generally had ‘enabling’ Urban Planning rules which have allowed mixes of high, medium and low density housing and mixed uses of retail etc. Lot sizes have ranged in size but there would hardly be any suburbs built exclusively for single family homes on 1 acre lots. Consequently Auckland’s density per sq mile is about double that of most US cities of similar age and size. But we are already “densified” and further density increases are being strongly resisted because the kerbside parking is already in short supply and inner city districts are noticing the increased congestion, noise and loss of amenity.

    One effect of $10/gallon gas is that public transport prices are rising steeply too, and Councils are raising rates to keep up with the necessary subsidies. Some people seem to think that public transport runs on fairy dust.

    Our auto ownership is about the same as the US, we drive somewhat shorter distances on average but generally spend more time driving up and down hills.

    Of course we are now grizzling and complaining about the price of petrol. But the US need hardly fear any massive revolution while their gas remains at only half the price of ours.

    US consumers are reacting to a dramatic change in price. Many of those cyclists are still prepared to pay more for their litre of bottled water than they are prepared to pay for a litre of gas.

    A Force for Decentralisation
    Americans are responding to this change in price by reducing their driven mileage. (Americans drove 11billion fewer miles in March 2008 than in March 2007. ) Significantly the most dramatic reductions are taking place in the rural areas. My own experience suggests this is because the reductions are much easier to achieve in rural life. We tend to co-operate when it comes to long trips, we can more freely plan our times of day, and we spend no time at traffic lights, in gridlock, or looking for parking spaces. When gas prices are high such waste is infuriating.

    Hence, while none of us can be sure about future human behaviour, my own research and my own experience, suggests that high gas prices are a further force for decentralisation. Kunstler is sure we shall all rush to the city centre. Some people will, of course, but they will be watching many households moving in the opposite direction.

    Freeman Dyson’s book “The Sun the Genome and the Internet” identifies many present and future forces for decentralisation. My current position is that high gas prices are more likely to decentralise more people than centralise them. But no human behaviour is uniform. Some people will go downtown and some – probably more – will go to rural centres. Many will go to more remote locations for “the sea change, the tree change and the ski change.”

    Some people are convinced that this outmigration will be strongly resisted by the existing folk and even more so by people like me who will want to protect our piece of paradise. Not so – as long as the planners don’t force us all to crowd into high density settlements with no room to swing a cat or grow our vegetables. And they will probably try.

    When we moved to Northland eleven years ago there were few people in the Kaiwaka area and services were basic. Now we have a French restaurant, an Italian bread shop, a bundle of local newspapers, excellent butchers and delicatessens, the school rolls are growing and the medical services are better and nearer and so on.

    Most New Zealanders of my generation grew up in the country and we are returning to our roots. The media like to make much of a few hopeless cases who want to “de-moo” the cows and so on but I have never had any problems of that kind and frankly we are the ones who are driving many of the new rural crops such as olives, wine, truffles etc. and the new tourism establishments and so on.

    The Iron Horse will prevail
    For most of human history people have had access to private point-to-point history using things called horses, camels, mules, asses, lamas or whatever. Christ rode into Jerusalem on the current equivalent of a VW. Then, in the 19th C trains and trams allowed the development of far-flung cities in which large numbers of people could get into the central city for work. (The Manhattan model). The trouble was the horses, which dominated short distance urban trips, caused dreadful pollution of air water and soil, not to mention the stench at a NY gridlocked intersection in mid-summer.

    The car was a miracle. It got rid of the pollution, and released huge amounts of food to feed people.

    In 1910, 40% of the grain grown in the US went to feed horses. This “extra” grain fed the population explosion which followed.

    So the car the was the real “Iron Horse” – not the train.

    Modern trains are at a higher level of technology than the nineteenth century trains but their new technologies only increase their speed and reduce their pollution. They do not overcome the fact that trains cannnot provide the flexibility of rubber-on-road transport such as buses, cars, and taxis – or indeed, of the family horse.

    Anyhow, the rubber-on-road system is about to go through a development phase which will leave the train in (on) its tracks, or stuck at the station.

    The next generation of cars will be a computer with four wheels.
    Many people in many different research centres are working on new technologies which will mean you will be able to drive your car to the motorway where it will link to a position over an underground cable which will guide the car – you will be able to take your hands off the wheel and read, and even use your cellphone. The same cable may use an induction system to supply power to your electric drive system. (You will of course charge your electric car up in your garage overnight).

    Then, when you get near to your destination you will put your hands back on the wheel, leave the motorway, go back on to the surface street and complete the trip. If there is no parking you will get out of the car and tell it to go park itself and it will. When you leave your business you will phone it up to tell it to come and pick you up and it will.

    That it what we mean when we say the train is 19th century technology – it is stuck and cannot make the leap into the 21st century.

    No one can be sure that this total package will prevail but there are so many options being developed that cars will certainly leap to new levels of effciency and effectiveness over the next few years. If this seems like science fantasy image convincing your great-grandparents of the reality of modern computers on your desk and the power of the internet.

    Behavioural change.
    There will be some changes of behaviour at the margins. People who are tired of congestion may make their move to the regional centres earlier than they might have, while their children might move to a downtown apartment.

    But the technology will change much more rapidly than urban form and land use can change. If need be we shall electrify the private vehicle fleet and supply nuclear power and the car will be cheaper to run than ever.

    There will be more telecommuting.

    There will be more hi tech car pooling using GPS, iPhones and the Internet.

    A few more will cycle and ride in trains and buses but the changes in travel mode will not be dramatic.

    The worst thing that can happen is that our cities move from being “Opportunity Cities” to “Panic Cities” that insist on controlling where and how their people should live, based on knee-jerk reactions to change and a total lack of confidence in people’s ability to innovate and adapt.

    Owen McShane is a Resource Management Consultant based in New Zealand