Shane Phillips 0:05
Hello! This is the UCLA Housing Voice podcast, and I'm your host, Shane Phillips. 

We're taking a short break from our usual schedule to feature a few clips from a new one-shot series by friend of the pod, Michael Andersen, who works as the Cities and Towns Director at the Sightline Institute, which happens to be one of my favorite organizations working on North American urban policy and politics. 

Like many people interested in urbanism and housing policy, Michael has been fascinated by the land use reforms that have taken place in New Zealand over the past decade, starting with the Auckland Unitary Plan in 2016, and then spreading nationwide. So during a recent sabbatical, he took a trip to New Zealand with his family and talked to a bunch of the people involved in its planning, its political approval, and its implementation, and in the research documenting its effects. The conceit of the show is that New Zealand is at least a few years ahead of us on the other end of the Pacific, and there is a lot to learn about mimicking their successes, anticipating similar challenges, and avoiding some of their potential mistakes and pitfalls. 

The show is called YIMBY Country, or YIMBY Country, if you will, and six of its eight episodes are out as I say these words. Maybe seven or eight will be out by the time you actually hear this episode. Michael mentions early in the series how the Housing Voice interview with Eleanor West was one of his inspirations for the trip and for the series. So we're really excited to come full circle and share some clips from a few of his conversations there. If you haven't listened to that episode with Eleanor, number 81, or our earlier conversation with University of Auckland's Ryan Greenaway-McGrevy in episode 45, I would definitely recommend checking those out first, though it's absolutely not necessary to appreciate Michael's series. 

What you'll be hearing today are lightly edited sections from episodes three and five. First up, we'll hear a research update from Greenaway-McGrevey, who we spoke with more than three years ago on our show. So there's a lot more to share and update about how the Auckland upzoning affected the city's housing supply and affordability. After that, we jump to an actual podcast studio at the New Zealand Initiative with Eric Crampton and Benno Blaschke, two economists who have been thinking a lot about what comes next, what comes after the upzoning. They talk about the importance of adequately managing street parking after getting rid of minimum parking requirements, including a classic Don Shoup story about his willingness to always be there to support former students and anyone else fighting to end costly mandates, even if it means attending a victory party 7,000 miles away over Zoom. 

They also get into how you expand and upgrade infrastructure in the face of uncertainty when exclusionary zoning can't be used as a tool to restrict the pace of growth or limit it to a small number of locations. That is a topic that has been very much on my mind lately. They have a line that I love about how solving the big problems of scarcity and unaffordability doesn't mean the work is done. It just means that now you get to solve different and hopefully less intractable problems that arise in this new context. If only we could be so fortunate that crowded street parking was the worst of our problems. 

Anyway, I think that is just about enough windup from me. If you like the in the weeds nerdiness of housing voice, you are probably going to like Michael's show. And if you do like what you hear from these clips, be sure to check out the whole YIMBY Country series wherever you get your podcasts. 

The Housing Voice podcast is a production of the UCLA Lewis Center for Regional Policy Studies with production support from Claudia Bustamante, Brett Berndt, and Tiffany Lieu. You can reach me by email at shanephillips@ucla.edu, and our Substack is at uclahousingvoice.substack.com. Just last week, we posted our second reading list of research reports, blogs, articles, etc. on that Substack, so be sure to check that out as well. 

All right, let's get to some YIMBY Country.

Michael Andersen 4:41
Hi, welcome to episode three of YIMBY Country, a podcast miniseries about what happens after you legalize housing. In this case, in New Zealand. Ten years ago this November, Auckland legalized three to four story buildings on 75% of its residential land and larger apartment buildings in some transit riches. Areas, while eliminating parking mandates throughout the region. Today, another important analyst of Auckland housing, Ryan Greenaway-McGrevy. This University of Auckland economist has published a series of peer-reviewed papers that are probably the most prominent source of empirical information about his city's land use changes. Here's our conversation. Ryan, tell us about your work, who you are, and start with that.

Ryan Greenaway-McGrevy 5:32
So I'm an associate professor in the economics department at the University of Auckland, and a lot of my work more recently is focused on the impacts of various upzonings and zoning reforms in Auckland and also elsewhere in New Zealand, like Lower Hutt.

Michael Andersen 5:47
Could you summarize some of the findings in the series of papers you've released on the subject?

Ryan Greenaway-McGrevy 5:52
So, you know, after the entry plan was passed, it was just a massive construction boom. So, in terms of the numbers, I was just looking this up yesterday. So, we had just over 140,000 consents issued over 2017 to 2025, so over an eight-year period. I understand people listening will have no idea how big that number is, so compare that to the housing stock in 2016 when the unitary plan was passed. We had just over half a million. So just comparing the number of consents, consents being housing starts for new dwelling units, right?

Michael Andersen 6:25
Permits.

Ryan Greenaway-McGrevy 6:25
Yeah. So the dwelling stock, it's about 27% right? So it's a huge, it's a huge amount of activity that has been going on. Of course, when you upzone, there's this tear down and replacement. You might remove an old dwelling. It's not a representative of the change in the dwelling stock, the net change at least. So some other work that we've done is just looked at how we can measure the dwelling stock in Auckland on a more timely annual basis. So by last year, I think the dwelling stock was up by 20%. It's yeah, there's been this massive boom. Understanding the sort of the the lead up to it as well, I think is important. I mean, we just didn't build for so long relative to population growth. So between 2001 and 2018, population of Auckland, the adult age population increased by 42, 43 percent. The dwelling stock only increased by 29 percent. Right. So there's this massive shortfall prior to these changes. So you can kind of you get this picture of these pressures are building up. We're not building enough to keep up with population growth. House prices and rents are growing at a very fast rate. Then there's this massive construction boom once those land use regulations are relaxed to allow housing to be built. And then the question is, from a policy evaluation standpoint, is you know how much of that boom is attributable to the policy, or in other words, what would have happened if Auckland hadn't allowed those land use regulations to change? So that's where a lot of academic work comes in. It's you know it is difficult because you're not just looking at data, but some of my work that's used a method called synthetic controls to try and get an estimate suggests that you know just under half of all those consents, those 127,000 consents have due to the policy.

Michael Andersen 8:02
I think Gary Blick was using a figure, he was estimating about a third. Is that just a different way to describe the same number, or is that a different method?

Ryan Greenaway-McGrevy 8:09
That's a different method.

Michael Andersen 8:10
Okay. But that would also seem reasonable to you? It's something like a third or half would be a direct effect at your best estimate of these zoning changes.

Ryan Greenaway-McGrevy 8:20
Yeah. I'd say a third is a much more conservative estimate.

Michael Andersen 8:24
We were having lunch with my friend Salim Furth the other day, and he was raising the question of the relative elasticity of demand in New Zealand being different than in the states. So basically, in the states, if Seattle legalizes a bunch of housing and Portland does not, then Seattle is going to draw many people who would be drawn to the Pacific Northwest, and people will either remain or locate in Seattle when they otherwise would have gone to this close competitor, Portland. Whereas Auckland has fewer close competitors. There's a little bit of Christchurch, a little bit of Wellington, a little bit of anywhere, a little bit of Brisbane or Melbourne, but the membrane between all those different cities is thicker in Auckland, and so if Auckland legalizes a bunch of housing, it might have a bigger price effect.

Ryan Greenaway-McGrevy 9:16
That's right. So that that was something he was wondering about, and you sort of backing out very back of the envelope estimates of that elasticity. Yeah, I mean even outside of Auckland, there's been some academic work looking at New Zealand in its housing elasticity that came back with inelastic demand. Yep, that's right, more elastic than what some of my own workers suggested. So that that is a distinct possibility. Yeah, the housing demand is much more inelastic here, due to a yeah potentially due to an immobility relative to the U.S.

Michael Andersen 9:47
And you also mentioned the pent up demand was more severe in New Zealand, I would say, in 2020 than it was in the United States as a baseline, I guess general statement.

Ryan Greenaway-McGrevy 10:01
Yeah, that'd be right, and that and that's right because of those figures that I was telling you earlier. You know, we had this big increase in population at old age population. The dwelling stock did not expand nearly enough to accommodate everybody, and despite that lack of housing affordability of housing access, people stayed. Right. You know, there's a lot of churn in that number. Like a lot of Aucklanders will be leaving and everything else, but in terms of net in and out migration, there's still a massive increase in the population. So people are staying here, despite the fact that you know they might be in less than ideal housing circumstances. Maybe they're flatting with another group of young adults. Maybe they are the whole family might be sharing a house with another whole family. There's stories of this happening.

Michael Andersen 10:46
Yeah. So that is all to say there are plausible arguments that New Zealand's story might turn or Auckland's story might turn out to be more pronounced than you might see in various other places. Though on the other hand, it might cut the other way for some other reason. And to your point earlier, like, well, that's okay. You're most interested in New Zealand, and you're trying to say, well, was this good for Auckland? Was this good for New Zealand? And I think your research has found, if I had to put a value judgment on it, that it was.

Ryan Greenaway-McGrevy 11:13
Yeah, that's right. So it's, it's, I think for the rest of the world, Auckland demonstrates that you can have under certain circumstances a significant building boom has a material impact on the the price of housing, but that you know needs to proceed with caution and fully understand the the context.

Michael Andersen 11:31
Yeah, well, thank you for all your work, Professor, on all this and all the wisdom we've been able to draw on in the states, and I hope we'll continue to draw on Auckland's and New Zealand's trails and successes.

Ryan Greenaway-McGrevy 11:44
Yeah, more than welcome. Thanks, thanks very much for having me along.

Michael Andersen 11:47
Yeah, thanks a lot. Our fifth episode seems like a good time to confess that if you are very interested in a podcast miniseries about zoning reform in New Zealand. The one you're listening to right now shouldn't be your top priority. Instead, you should know that the definitive audio account of how the Kiwis did it was captured in a three-part series by an organization called the New Zealand Initiative, a free market think tank based in Wellington, compared to this show, their episodes are longer, deeper, recorded with much higher quality equipment, and have a different focus, reconstructing a history that ends right around the time of victory. As you know, if you've listened to the show so far, we're most interested in what happens after victory, which the NZI show gets into somewhat too. I strongly recommend it. However, if you do not at this moment wish to drop everything to listen to that other podcast, I can offer you a related opportunity. Today's conversation is with the two hosts of that miniseries, Eric Crampton and Benno Blaschke. Both these guys are pretty interesting characters. For one thing, both of them are immigrants. Eric from Canada, Benno from Austria. This puts them among the 29 percent of New Zealanders born outside the country, and maybe it also goes along with a particular enthusiasm for their country. When I met Crampton at their Wellington office, he immediately led me on what I would describe as a heedlessly brisk walk around the city's beautiful harbor, talking all the while at a similar pace, about New Zealand childcare norms, earthquake resilience measures, and sewer amortization schedules. Another thing about Crampton and Blaschke is that they may not agree with New Zealand's national party on everything, but they do most of their work within the political right, the way I do my work within the political left. They're part of what New Zealanders refer to as the liberal faction of the National Party. New Zealand is unusual in that this faction even exists. Unlike most of the developed world, its big metropolis of Auckland is actually a political swing area because many urban residents continue to vote for the center-right National Party and the more radical, rural, and older factions of the National Party have not expelled what Americans might realize as Chamber of Commerce types from their right-wing party. I bring this up because we get into this subject, New Zealand coalition politics, for quite a bit of our conversation today. Another note: Crampton and Blaschke generously offered to record our conversation in their dedicated podcast studio. So, please enjoy today's superior audio quality. All right, I'm here in Wellington, and would each of you take a moment to introduce yourselves and tell us where we are?

Eric Crampton 14:43
Sure, I'm Eric Crampton. I'm chief economist with the New Zealand Initiative here in Wellington.

Benno Blaschke 14:48
I'm Benno Blaschke. I'm a research fellow here at the Initiative, also in Wellington. I think both Eric and I have been working on urban issues for quite a long time. I would say myself, eight years. In government, primarily now you're outside of government, and Eric longer, I presume.

Eric Crampton 15:05
Well, you've had more of a specialist focus on it. Yes, I am an applied micro guy in economics, and that means that we are broad across lots of different areas. And since I do policy, I kind of have to be across everything. But housing is a big part of everything. I like Sam Bowman's housing theory of everything. If we fix housing, then a whole lot of other policy problems just drop away.

Michael Andersen 15:27
Right, and I gathered just from the quick walk around Central Wellington that we just took, that you're just a general purpose nerd and very much into lots of bits and bobs.

Eric Crampton 15:37
I think general purpose nerd would apply to both of us. Ask him about his board game collection.

Michael Andersen 15:43
All right. Great. We can do that later. I would love that too. The New Zealand Initiative is a center right think tank research organization, is that fair?

Eric Crampton 15:51
We're a membership organization, which is also a think tank. We're probably New Zealand's most prominent think tank. So business members provide an annual subscription fee that pays all the bills. We're independent of them. The membership base spans the breadth of the economy, so they don't really none of them have any particular sway on us. Because if we lose one of them, it's kind of sad, but it's not the end of the world, and we keep a pretty good cushion. So we've not really had any member pressure to go one way or another on issues. I think it'd be fair to describe us as market liberals or classically liberal in general orientation, but fairly pragmatic.

Benno Blaschke 16:28
I think I'd like to add, and that's come through in housing policy more generally, because I've worked with a lot of urban economists, and urban urban issues and urban policy is a place where left and right kind of come together, and there's a even though we think through it from a more economic perspective, it has a you could say a social justice element to it, and that's what brings both sides together. It's just a matter of I guess that both eyes might be thinking a little bit differently about the how, but not yeah the why or whether.

Michael Andersen 16:58
That's exactly what I find in the states, and our organization is a left of center organization, I would say, though we don't say that up front. But key to our strategy is working with people on the right of center on this issue in particular.

Eric Crampton 17:11
Yeah, I guess the interest more of the of the other side is general productivity and the revenue of the entire country and our wealth. Right. But I mean, you know, both are realities, and both needs both are affected by housing.

Michael Andersen 17:24
Do you think that people on the right of center in New Zealand are motivated by this abstract concept of productivity, which comes up again and again and again? I've been impressed by the extent to which that is used, but also seems like potentially that is actually a unifying left-right obsession, perhaps more than it is one side or the other. I'm not sure.

Eric Crampton 17:44
I think there's some of that, but there's also the very direct financial consequences that central government here faces when local councils have broken housing markets. Right. So, Honorable Chris Bishop, our current housing minister, he will frequently cite the number of billions of dollars per year that central government provides in accommodation supplements to help families that are facing.

Michael Andersen 18:06
So like this this is a public expense driving up your taxes is a right facing message.

Eric Crampton 18:11
And it's just wasted money. If if supply is the issue then subsidies push up prices so that's a bit of a problem but you can't not provide at least some support. The prior national government, under Prime Minister John Key, 2008 through 2014, had taken what I consider to be a fairly laudable initiative, and instead of having the state providing the housing, the state would provide accommodation supplements that would help people afford rental housing. Now they would still maintain a stock of state housing for people who are difficult to accommodate in private rentals, but that was the general shift. Making that work requires planning liberalizations that you can actually build the housing that is then promised, and without that, the bill for the accommodation supplements gets very large.

Michael Andersen 18:59
Right, right, that makes sense.

Benno Blaschke 19:00
Yes, and then when later the government started thinking about like Kiwi Build, for example, and then going back to building a lot of houses, they discovered that actually can't do it.

Michael Andersen 19:09
Right. Is that a useful thing for like for the government to find itself a developer? One of the interesting phenomena we've seen in in Portland is that sort of the progressive groups all became nonprofit housing developers for a few years, and then they realized, oh man, it's terrible to build housing.

Eric Crampton 19:24
So that was kind of what we saw as a potential silver lining, but it was also a big problem. Right. So I'll step back a little bit to how we got to that spot, and then some of the consequences. Labor had made a promise. I think it was in the 2011 election that they were going to do this Kiwi Build program. So often, when the government does something and puts up like a government-owned enterprise, they put Kiwi at the front of it. So when the coalition government in the 2000s wanted to have a state-owned bank, they called it Kiwi Bank. Right. So in response to some of the housing shortages we were seeing in really developing in Auckland, labor came. Up with this Kiwi Build initiative, and they just picked a number out of thin air for the number of houses that the government was going to build. Then they doubled down on that in the coming election and promised that it'd be an even bigger program. I'm not sure that they were really expecting to win, but then they had a change in leader. Jacinda Ardern succeeded to Andrew Little, and of course she won, and they were stuck with this promise that they'd made to build what is it, 100,000.

Benno Blaschke 20:29
Yeah, particularly the housing minister stuck with it, which is the problem.

Eric Crampton 20:32
Which was a problem. So Minister Twyford is a very good urbanist. He understands all this stuff.

Michael Andersen 20:39
I heard the story from his perspective too.

Eric Crampton 20:42
But he kind of got saddled with the Kiwi Build promise to build houses. Now the government there had made the specific mistake of putting up a number and a date, and those together caused problems. They were never going to be able to build that many houses. The systems were not up to it. The infrastructure funding and financing wasn't there for it. The planning system wasn't there for it, so officials who had been previously a bit skeptical of some of the supply side stories started bashing into those branches with their own heads and saying, "Oh, well, maybe there's something to this. So that was potentially helpful. It might have been helpful for parts of the Labor Party who had not been as enlightened as Twyford, and still wanted to be in this kind of developers versus renters kind of rhetoric, they also saw that well, even we can't get this built. Maybe there's a problem here.

Michael Andersen 21:30
Yeah. So I want to get into the the post 2020 period of New Zealand land use politics. Specifically, my own selfish interest in this is that we've completed a similar sequence of reforms in Oregon and Washington recently. We've legalized townhomes in the biggest cities. We removed parking mandates for most of the major metros, and recently we've created a sort of a planning obligation that's going to require to legalize three to four-story apartment buildings. Much more barriers.

Benno Blaschke 21:55
When did you complete that?

Michael Andersen 21:56
That most recent was a few months ago. Still early. So I'm trying to figure out what's going to happen next. So what are the counter currents that are going to arise in our politics once these things actually start being built? How do politicians react to those? How do builders react to those?

Eric Crampton 22:14
Okay, so I don't know any of the Portland politics, but I can talk about what happened here and you can extrapolate from here to whatever you think might happen in Portland.

Michael Andersen 22:22
Exactly.

Eric Crampton 22:23
So we similarly had bipartisan consensus to get rid of the mandatory parking minimums, and so that was set by central government where they forbid councils from setting parking minimums. We cheered. We had like party had to spanning the ideological bounds. It was Julie Genter from the Green Party who had pursued those reforms. She was a Donald Shoup student, right? Oh, she was personally. I'm pretty sure she was. Okay, and Shoup zoomed in for a little party at her place afterwards. It was great. We had that consensus. We had the consensus on the medium density requirements, which are similar to the townhouse ones that you're talking about, and strong consensus around the national policy statement on urban development, which requires councils to have upzoned uses around what's considered to be mass transit, or at least reasonable transit.

Benno Blaschke 23:17
Yes, localized upzoning.

Eric Crampton 23:18
Localized upzoning near transit lines. The pushback has been from suburbs that have viewed viewed this as an imposition, like kind of NIMBY Central in Auckland.

Benno Blaschke 23:29
I think there's multiple dimensions. So there's the political economy element of people that live in the city and suburbs. Then there's the public service and the planning system, and then this is more to a different arenas in which this is playing out. Because I can speak maybe more to the public officials and the planning system and all that.

Eric Crampton 23:49
Yeah, just on on the public response. So in the last election, the national party was taking a lot of heat at doorstops among their base about well, somebody might put up an apartment tower near me. Somebody might put up a three-story building that's overlooking my garden, and I'm not going to have privacy anymore. They were taking a lot of heat on that, and unfortunately, the ACT Party, which is the nominally kind of libertarian-ish party, they seem to have adopted a view of property rights that means that you've got a lot of property rights over what your neighbors do, but not very many property rights over your own land. It's an odd kind of view.

Michael Andersen 24:29
Reinforced by the fact that their leader represents one of these exclusive suburbs.

Eric Crampton 24:32
Yeah. So I guess the most defensible case that you can make for it is, well, folks had these expectations when they bought a house here, and those expectations matter, and you shouldn't just stomp on them.

Michael Andersen 24:42
And I do think that's a reasonable argument.

Eric Crampton 24:44
Yeah, but it meant that the ACT party was making some inroads into National's traditional base in those areas, which meant that National wound up retreating from the consensus on MDRS, the medium density residential standards, but in a particular way. They said all right, if MDRS doesn't work for your council area, you can withdraw from it, but but you have to zone for at least that much housing in some other way. If you can find a different way to deliver at least as much housing, yeah yeah, fill your boots.

Michael Andersen 25:16
At least as much zoned capacity, is that correct?

Eric Crampton 25:18
Right, yeah. So that was the opt out that they offered at the time, and that's proven a little bit contentious because then you're immediately into...

Benno Blaschke 25:28
Now we got a figure. Now they turned from general upzone capacity to this is how much you have to enable, and then we got back to a number.

Eric Crampton 25:36
So the problem that you get with that is when you put in enough zone capacity to have competition among landowners for new developments that requires zone capacity that's much larger than anybody else expects to develop. Unfortunately, most people aren't the urban nerds that are sitting around the table. They see, oh my God, the government wants to have 2 million more people living in Auckland. There's only 1.8 million people here. Do they want to import a pile of people? Are they replacing it? It fed into all of these stupid narratives because they had to pick a number because they withdrew from MDRS. Right. Now, one other pillar of the current government's housing reforms, pillar three, will be changing councils' incentives. So here, unlike in the U.S. councils fully fund themselves through user charges and a form of property tax. They don't have revenue streams based on income. They don't have local sales tax or local business tax. That means that they're often left with the cost of enabling growth and not great ways of accommodating those. Where central government gets a lot of the upside benefits if cities grow, but not as much of the downside cost, and that gets a bad political economy. I don't know great ways around it. Avoiding having numbers is one. If you just have this generalized up zoning where you're not putting a number target on it, that's great.

Michael Andersen 26:57
So you frame it around this is what you're able to do on your property now, as opposed to this is the vast change that's going to immediately occur in your budget.

Eric Crampton 27:05
Yes, budget, but there were problems that did come up, and I think some of those are local council. Where in Auckland, a lot of streets did take up the the townhouse upzoning option, and there have been lots of reports of problems of on-street parking because if you provide on-street parking for free without much policing, then residents don't really want. They don't see the need to have an on-site parking space despite having a car or two because they figure they can get it for free and it's hard to compete with free. But then you wind up with those streets being incredibly parked up and often illegal parking on the berms, and it's unpleasant. It's hard to drive through, and prior residents lost an amenity that they found valuable. Adequate parking management is critical if you get rid of parking minimums because, like, parking minimums suck. They force land use that might that's not optimal. But if you're making developers make choices where residents think they've got a free option. They are not going to provide parking to people who actually want would be hap py to pay for it.

Benno Blaschke 28:10
You should maybe couple it with treating road spa ce as real estate. So they can price it in a factor that.

Michael Andersen 28:15
But you could never do that politically until the scarcity arrives, it seems to me.

Eric Crampton 28:19
There is a way to do it. Or at least I think we could do it this way. So Wellington has some neighborhoods where it's resident parking passes. To park on this street, you must have the pass that's issued by council saying that you live on the street. Now imagine if prior to anybody building townhouses, council said, "All right, along this strip, we've just seen a whole pile of consent applications. People want to build more housing here."

Michael Andersen 28:41
Triggered by the consent.

Eric Crampton 28:43
Yeah. So, well, you'd probably want to do it a little bit before the consent because people are then then have some of their design locked in. But say that a street has room for 20 cars on it, right? And say that there are currently 10 houses along this street. There's street frontage for like two two cars in front of each house. All right. Reserve two spaces, maybe three, as metered parking where you pay for 15-minute increments. Split out the rest as resident parking passes to people who currently live on that street, and just give it to them for free. Like I don't like that option, but it recognizes the de facto property right that they have. I'd be happy to do it just through auction, but that's not going to pass politics. So give them each however many parking passes matches their frontage. Right, split it out, and if they're not using them, say, hey, there's some new townshouses coming in. The people who live there might want to buy a parking pass from you. In other places, parking passes sell for about this much, maybe you should consider talking to the developers that are going in about whether you'd be happy to sell one of your parking passes to go with their new spot. All of a sudden, the existing residents have a valuable property right that they can sell to the people coming in. That is worthless if there aren't more people coming in.

Michael Andersen 29:57
Right. Is there any evidence of this working anywhere? I've loved this idea for years, but I've...

Eric Crampton 30:04
I've not heard of anybody doing it. I think we should have been doing it. Like I, I'd been advocating it, but parking management is an Auckland Council issue. Yeah, I think central government at this point probably needs to put national direction through NZTA, the transport agency requiring that local councils do this in places that are under parking stress, because otherwise, it's the central government restriction against parking minimums that'll take the heat. Because nobody's going to view it as a parking management problem, which is entirely council's discretion and council's fault. They will say, "Oh, we didn't have this. Yeah, we didn't have this problem when people were required to have parking. Let's require people to have parking again.

Michael Andersen 30:45
Right, right, exactly. Yep, that is that was a great fear. And I I fear that it will not happen via a direct reversal of the parking mandate, but it'll manifest in some other way to stop housing from existing.

Eric Crampton 30:57
There are all kinds of bad places where that balloon squeeze can pop up.

Michael Andersen 31:02
Exactly. So I think that there's been some limited awareness in the states of this row back in New Zealand under the current government. Some of the people I've talked with have expressed we shouldn't over overemphasize that because it's really not that much of a rollback that New Zealand is so much further along in land use liberalization than it was six years ago. Yeah, yeah. So I would love your take on sort of where we are right now in this conversation in New Zealand and where you're. And then I'd like to talk about what's next.

Benno Blaschke 31:34
The way I see it is that this is a, I would hope, a temporary blip in local politics that our prime minister is now just to manage, while they are still holding course in terms of their overall reforms.

Eric Crampton 31:47
Ten steps forward, two steps back. And the work that they're currently doing will enable the next 10 steps, or maybe the next five steps. We had this great consensus, and we moved a long distance. There were still big issues that needed to be sorted out, particularly around infrastructure funding and financing.

Benno Blaschke 32:04
They're still outstanding, those problems. We're still sorting those out.

Eric Crampton 32:07
Yeha. So I'll go through those a little bit. Yeah. So as I understand things in American municipal debt, about 60% of it is project-based financing, and maybe 40% is general obligation. So general obligation debt is a minority of the debt that municipalities issue. Here, basically, 100% is general obligation debt.

Benno Blaschke 32:28
The way I would describe is, you don't have finance freedom because you always have to ask for permission from a group of people that actually don't want to give it. Right.

Michael Andersen 32:34
So you need to ask the voters: Do you do you want your city to change rapidly at your expense?

Benno Blaschke 32:39
Exactly. Right. And the answer is, but do we know? Yeah, we just don't have a mature enough finance system yet where you can raise debt in a way that then doesn't have recourse onto the council or a public body.

Michael Andersen 32:48
So this is one of the things that's going to be... one of those next five steps.

Eric Crampton 32:52
They're working on it. They're making progress. I think how far they'll get, we'll see.

Benno Blaschke 32:56
But it's fair to say that we haven't solved the infrastructure funding finance completely. We've definitely, we understand the issue, and we we see what needs to be done. But it's going to be a time required to get it done.

Eric Crampton 33:07
But just stepping back from that, so there has been the retreat from bipartisan consensus on MDRS, for example.

Michael Andersen 33:14
This is townhomes.

Eric Crampton 33:15
Yeah, allowing townhomes the medium density residential standard, but work on an on better infrastructure funding and financing models is progressing. I expect that that work would continue even if there were a change in government. Everybody wants this to work.

Benno Blaschke 33:29
I mean we are really getting to this point. I think in New Zealand where the planning system is becoming less of a constraint. We can see it from councilors, planners. They they literally come to you and say, well, now that we are liberating planning and removing that constraint. How do we plan for finance and deliver infrastructure under uncertainty? Yeah. How does this new world look like?

Michael Andersen 33:47
Yeah. This is what I hate. I was hoping you would not say this because it means I have to learn all kinds of a new policy that you guys are clearly immersed in now.

Eric Crampton 33:53
Well, it's fun because when Alain Bertaud was visiting last week and his colleague Salim Furth, everyone here is asking, how do we solve the infrastructure problem, where councils can't know how quickly people are going to be moving in to take up a pipe that's put in.

Benno Blaschke 34:10
And they will literally say that we have used planning to control our infrastructure spend so we can make it predictable. Now that we've pulled that away, what do we do?

Eric Crampton 34:20
And so for Alain, he was saying, "Well, you're hitting the problems that you only hit if you've solved all of the other problems."

Michael Andersen 34:25
It's good news. Good job, everybody. Now you've got new problems.

Benno Blaschke 34:29
New problems, yeah.

Michael Andersen 34:31
So you mentioned the new Planning Act. One of the sexy things that might be in that is like a Japan-style 12 zones for the country. Is that right?

Benno Blaschke 34:39
I don't think it's going to be 12. It's going to be I think it's under 30 or something.

Michael Andersen 34:42
Okay. Well, even with various conditions and overlays or whatever. But a more standardized...

Eric Crampton 34:47
Yes. And I think there's good bipartisan consensus on that too.

Michael Andersen 34:50
Do you? How excited are you about that? Do you think it's going to work?

Benno Blaschke 34:53
I'm very excited. Well, there are numerous reasons. One is the transaction costs and the ability for developers to work across the entire country.

Michael Andersen 35:01
Right. So the the same builder can work in Christchurch or in Wellington.

Benno Blaschke 35:04
Yeah, yeah, yeah. The other one is about monitoring and responsiveness. So because one thing that's going to be happening, so our minister has guaranteed me, is that they're going to be putting in competitive land markets as a goal of the planning system. And as part of that, they're going to have to monitor land prices and land price differentials between zones and urban and rural.

Michael Andersen 35:23
So it creates a legal obligation on the government to continue monitoring this. Is that what you're saying?

Benno Blaschke 35:27
it creates an obligation of the planning system to monitor this. Yes. But it also should be creating an obligation to respond if those goes out of whack. And the key thing is though that standardized zoning will help with the monitoring because it makes all of that much much simpler and clearer, and also assessing what the land prices really are once you get down to that level, but also what the differentials are, and what those differentials mean, and if they mean, for example, that scarcity due to scarcity of land, then it is clear what to do about it

Michael Andersen 35:57
Right, right. And is the information gathered through price? Like, is that is that the key signal being read here?

Benno Blaschke 36:03
The key signal is land price. Yes, absolutely. Yeah, but I mean, there's a lot of other pieces of information.

Michael Andersen 36:07
That is such a leap for American planners. They have a lot of trouble using price.

Benno Blaschke 36:11
We've got urban economists building the model. They're going to do. They're going to be working a few more months to be able to assess. You know, like if you do the residual approach, like where you have this is the construction cost, this is the land cost, etc. etc. and so they will get down to what is the land at at site level, and they're going to be monitoring, updating that every quarterly in the year.

Michael Andersen 36:31
Fascinating. Yeah. Okay.

Eric Crampton 36:32
Yeah, the price stuff is really exciting. Just stepping a little bit back on what Benno was saying on construction, there aren't any restrictions here on construction companies operating across different council areas. We don't have weird local occupational licensing rules. We've got a building act which is national level. There isn't differentiation on that one. It's more that the different combinations of setbacks and recession planes and all of that stuff in weirdness in local zones mean that there are 1,000s.

Benno Blaschke 37:00
It's the transaction costs and and getting paying permission,

Eric Crampton 37:03
But also that you can't just roll out a standardized build across the country because there's too many places where it would violate one building code or another. There's been plenty of evidence in the United States that that reduces construction sector productivity, making it legal and easy to build the same house in the same zoning across the whole country, and just roll that out, and the same for apartment buildings means you get more learning by doing, you get more efficiencies in your supply chain, all kinds of advantages that can come from that. But Benno was right to be focusing on prices.

Michael Andersen 37:34
One last thing on the the sort of the public message here. One of my theses that comes out of listening to Eleanor, Eleanor West, is that it's easier to make a first order argument than a second order argument. She was talking about in her case sort of a climate and anti sprawl argument for infill being an easier case to make than a price argument, and that was that resonated very strongly with me. That's exactly what we've seen in Oregon. It's very difficult to say, well, we need this fancy house so that somebody else can get into that, so they don't bid up this other house, and that's how we're going to make housing more affordable for you, ordinary person who can't afford the fancy house. That's just such a complicated thing to communicate, right? Whereas, say, house goes here, not over there, or to say this house is affordable, or this house is accessible, or you can do this when you couldn't do it before, right? That's a property argument, but it's a first order argument.

Eric Crampton 38:20
Yeah, in the 2000s we were more in the up versus out debates, where kind of the left wanted to allow more density and sharply restrict suburbs. The rights wanted more suburban expansion and not to have more densification. We've got a reasonable up and out coalition, and if you can maintain that, where like that's kind of a form of disarmament. So instead of each thwarting the other's plans and nobody being able to build anything.

Michael Andersen 38:48
Yeah, I don't mean to endorse wholeheartedly the not-out argument, but I do mean to say, I wonder if...

Benno Blaschke 38:56
It is technically harder to make a simple case. I mean, I think about this as affordable housing versus housing affordability, which is something we distinguish here, right? Like, affordable housing is housing supplied at a certain price, subsidized, right? Housing affordability is price levels of housing in the aggregate in the market. So those are two different things, right? What we're trying to do is the second, not the first, right?

Michael Andersen 39:19
And that's just very difficult for the public to understand.

Benno Blaschke 39:21
Yeah, so providing narratives of the second type is harder, or not as like intuitive, as simple as the first.

Eric Crampton 39:29
We've made a lot of progress.

Benno Blaschke 39:30
But that's what I'm saying, is it has taken a long time, and that's changing. Like people now in the council, are talking back to us and to Bertaud, for example, using arguments of the second type. So that has shifted, but it has taken eight years.

Michael Andersen 39:42
Right, yeah. Similarly, I feel like we've made some progress on that in the states. I'm just looking for ways to create a robust argument that will be robust enough to survive the backlash that I expect to be coming in the way that you've seen it.

Benno Blaschke 39:55
I think robustness isn't the problem. I think the arguments on the on the second type are actually more robust. The problem is that they are just having more steps. So they're not as simple.

Michael Andersen 40:04
Politically robust, I guess I would say.

Eric Crampton 40:07
Up and out really work well together. It's that if you don't allow land at the edges of town to compete with land downtown, the land under an apartment building is going to be so much more expensive than it needs to be, and that makes apartments less affordable.

Michael Andersen 40:21
Right. Competitive urban land market.

Eric Crampton 40:23
That's right. Even if nobody decides to build in the suburbs, then you want to make sure that you've got the transport charge correctly, that you put in congestion charging in places where it matters, that you're not providing free infrastructure. You want to charge it to the beneficiaries of it over time, and it's more expensive to service suburbs than downtown. Make sure that the beneficiaries pay the cost over time and let them make their choices. Even if few people make that choice, it reduces the monopoly power that can be. It's not quite monopoly power because there's still lots of landowners downtown. But if they don't have to compete with the potential for new subdivisions or new townhouses further out, land prices get inflated, and it makes everything harder.

Michael Andersen 41:07
Okay, great. I'm not completely convinced, but that's all right.

Benno Blaschke 41:09
From at a political level, I hear you.

Michael Andersen 41:12
Yeah, and I'm more of a political actor than you are, perhaps. Well, thank you so much. Keep on bearing all the costs so that we can learn from your lessons and do things right for ourselves.

Eric Crampton 41:23
Thank you.

Michael Andersen 41:31
I hope you enjoyed the nerdiness of that conversation as much as I did. It got me thinking a lot about the next generation of reforms that should follow zoning victories in the United States, like the ways more standardized zoning could interact with a private right of action, like we already have in much of the United States, to create an all-purpose backstop against future bans on housing. One thing I dig about working across the usual right-left political map is that campaigns become less about affiliation and more about ideas. And as New Zealand has sailed off into the horizons of pro-housing policy, ideas have become a more important compass. YIMBY Country is an independent podcast miniseries produced for fun by me, Michael Andersen. Thanks to Eric Crampton, Benno Blaschke, Salim Furth, Jonathan Moss, and my wife Mo, my ongoing partner in fun and trouble. If you enjoy the show, share it, rate it, and tell your friends.