Performance Urban Planning.org

Welcome to Performance Urban Planning

As a long term commercial development practitioner and former industry leader in New Zealand, I was approached by colleagues back in late 2004, expressing concern that the public was not being provided with sound structural information on the state of the urban housing markets within Australia and New Zealand.

We were all aware that most of the housing market information generated and relayed by the media, was too often self serving. Its only purpose was to sell more overpriced housing with grossly excessive mortgages and hopefully lift the advertising spend at the same time.

The wider public interest was never considered.

Some way had to be found to generate sound structural information about urban housing markets.

This is why I initiated the Annual Demographia International Housing Affordability Survey's with the support of my colleague and survey co - author Wendell Cox of Demographia, an international demographer and urban transport specialist, based in St Louis, Illinois, U S A. The first international survey was released in early 2005 – the 6th annual edition late January 2010.

The Annual Demographia Survey’s cover the major urban housing markets of what is loosely referred to as “the Anglo world”, being the United States, Canada, United Kingdom, Republic of Ireland, Australia and my home country, New Zealand.

These annual surveys are based on what is termed the Median Multiple, which is simply the median house price divided by the gross annual median household income of particular markets. The “median” is the mid-point of a range of numbers, and is preferred, as “averages” tend to move more dramatically over time, depending on the intensity of activity within market price segments. It is a measure employed by the United Nations and World Bank Urban Indicators Program’s and Joint Center for Housing Research (JCHR) Harvard University, as just three examples.

It is clear from the Annual Demographia Surveys and the vast amount of other credible international research, that housing prices should not exceed three times gross annual household incomes. Further to this, households should not have to burden themselves, with in excess of the equivalent of two and half times their gross annual household income with mortgage debt.

This is something people within Australia and New Zealand (and other countries too for that matter) were not aware of, until the Annual Demographia International Housing Affordability Survey’s were generated.

To be clear – as I explained within a November 2009 article The curse of politically engineered research, an affordable urban housing market can be defined as follows –

“For metropolitan areas to rate as “affordable” and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household incomes. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household of that urban market. The fringe is the only supply or inflation vent for an urban market. The critically important Development Ratios for this new fringe starter housing, should be 17 – 23% serviced lot / section cost – the balance the actual housing construction. Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3 through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 – to ensure maximum stability and optimal medium and long term performance of the residential construction sector.”
Following the release of the 2007 3rd Edition Annual Demographia Survey, the New Zealand Planning Institute publicly stated –

“The New Zealand Planning Institute strongly supports Demographia’s call for planners, local councils and developers to collaborate more proactively and effectively in the provision of an adequate supply of affordable new residential housing” adding “Importantly, this and other such partnerships around New Zealand will help ensure that affordable housing takes its rightful place at the heart of community planning decision making, alongside other key elements such as environmental sustainability.”

During early 2008, I wrote a rather lengthy paper Getting performance urban planning in place , where I “walk through” this fascinating issue, explaining the political and commercial pressures that create these housing problems, and set out why it is vitally important to “change the language” when we discuss housing markets. And most importantly – (as the New Zealand Planning Institute states) with respect to local planning –

“……that affordable housing takes it’s rightful place at the heart of community planning decision making”.

Indeed – the United Nations within its 2007 World Population Report was very forthright when it stated –

“Once policymakers and civil society understand and accept the demographic and social composition of urban growth, some basic approaches and initiatives suggest themselves. These could have a huge impact on the fate of poor people and the viability of the cities themselves. Throughout the report, the message is clear. Urban and national governments, together with civil society and supported by international organizations, can take steps that make a huge difference for the social, economic and environmental living conditions of a majority of the world’s population.”

“ Three policy initiatives stand out in this connection. First, preparing for an urban future requires at a minimum, respecting the rights of the poor to the city. As Chapter 3 shows, many policymakers continue to try to prevent urban growth by discouraging rural – urban migration…….These attempts to prevent migration are futile, counterproductive and wrong – a violation of people’s rights.

Denying people affordable shelter or inflicting on them excessive rents and mortgages, is a very serious issue, and indeed, unnecessary.

The three key areas that require focus at the local level (with of course the support of others as the United Nations and the New Zealand Planning Institute make clear) are as follows –

(A) Getting sound performance measures in place.
(B) Ensuring ongoing and adequate affordable land supply on the urban fringes.
(C) Appropriately financing infrastructure.

As I explain in more detail within “Getting performance urban planning in place” (refer Chapter “ Seven simple performance measures for local government”) restoring housing affordability is not a complex issue. It is essential however to instill within local government culture and planning with respect to housing, a small number of clearly understood performance measures being –

(1) Housing Affordability (the Median Multiple) – with the following supplementary measures -
(2) Raw fringe urban and adjoining rural and extended true rural land price differences.
(3) Total housing stock – usually occupied housing stock per 1000 population.
(4) Annual housing construction rates per 1000 population.
(5) Age of housing stock in decadal bands.
(6) Residential rental vacancy rates.
(7) Population growth and trends

With this focus and these simple measures in place, it is then possible for local communities and groups within them, to work together to restore housing affordability over a reasonable and realistic time frame.

There is always a temptation, for professionals in particular, with inadequate market and political experience and understanding, to “confuse and lose” focus. Being actually educated in an issue, is in large measure knowing clearly what’s (a) important (b) interesting and (c) irrelevant.

I have dealt with this constantly these past five years, as illustrated within my February 2009 New Zealand Herald article There are no perfect measures - so let's stop quibbling and a little later with this Interest Co NZ article Focus on the structural issues, where I took an Australian economist to task.

There is a world of difference between being “educated’ and “schooled” in an issue. If those responsible for policy development and management fail to properly instruct professionals with a specialist academic knowledge – the result is failure.

New Zealand learnt this lesson the hard way, when its previous National (Conservative / Republican) Government during the early 1990’s, was charged with the responsibility of repealing the failed prescriptive British style Town and Country Planning Act and enacting the enabling and environmental effects based Resource Management Act 1991. The previous Labour Government got the process underway.

Indeed – if the previous National Government had implemented the Resource Management Act as it was intended – New Zealand would not have experienced this current housing bubble.

Over these past few years, I have at times been highly critical of the economics profession, as illustrated within the article Housing Bubbles & Market Sense from January 2009 – where in my view the profession is “seriously impaired” due to the influence of the late Professor Paul Samuelson in particular, with his emphasis on superficial modeling.

The sad reality is that if the current and previous generation of economists had been properly trained in structural urban economics, the consequences of strangling fringe land supply and artificially inflating raw urban land prices, coupled with inappropriate infrastructure financing, should have been “blindingly obvious” to them.

Most were sadly completely oblivious to the housing bubbles – as illustrated within this recent article - The Unofficial List of Pundits/Experts Who Were Wrong on the Housing Bubble . Because of these training deficiencies, the economics profession was ill equipped to talk “housing market sense” within the appropriate forums, and importantly, incapable of influencing other allied professions, such as urban planners and property appraisers / valuers.

The urban planning profession has also experienced inadequate training, as I explained within an article The Housing Bubble: The Planner's Role and Lessons Learned on the United States Planetizen website August 2008. Too often unfortunately, due to inadequate professional disciplines, it has lurched from one fad to the next, as the costs of the previous one, in social, environmental and economic terms, become so obvious.
The “costs” are always, of course, borne by the poor and the disadvantaged.

Professionals need to understand that they have an important responsibility to the public and the political process. A “duty of care” if you like, as the medical profession has with its Hippocratic Oath - to “do no harm”.
Housing is no less important than health. Indeed it is an important aspect of it.

Following the 2007 Australian Federal election, the Sydney Morning Herald commissioned Fitch Ratings to research why the Howard Liberal Government lost the election and the Rudd Labor Government won.

Stuart Washington reported within Fear of losing homes drove Labor win –

“In his post election speech to the National Press Club, Labors (then) national secretary, Tim Gattrell noted the swing to Labor was not confined to one single group, but that the party had made significant inroads among home loan borrowers.”

“ ‘People with mortgage repayments of between $1400 and $1600 a month, just above the average repayment, stood out as one group that moved solidly to Labor’ he said. ”

“ The ABC’s (Australian Broadcasting Corporation) election analyst, Anthony Green, noted the seats identified by Fitch did not appear to select the seats with the lowest incomes, but rather those facing the highest cost of living expenses.”

Put bluntly - the political costs of mortgage stress.

This website is really an “archive” of my writings over these past years, with articles of note and down the left column, links I trust you find of interest.

In general terms, I am extremely heartened with the way that the public conversation of these important issues has evolved in Australia and New Zealand, as I explained within a recent article on Australia’s highly regarded website On Line Opinion - Housing bubbles: why are Americans ignoring reality? (also Scoop News NZ, Interest Co NZ and New Geography United States) .

The Frontier Institute in Canada is at the forefront of encouraging public discussion in that country. It appears the public conversation is belatedly getting underway in the United States, following Federal Reserve Board Chairman Ben Bernanke’s speech Monetary Policy and the Housing Bubble January 3, 2010, to the American Economic Association at Atlanta, Georgia. It is to be hoped that this will happen in the United Kingdom and the Republic of Ireland soon as well.

Do bear in mind however, that I currently hold nothing other than the important position of “citizen” – and that this work these past five years has been on a voluntary basis. I do wish you every success in restoring housing affordability in your own community – and look forward to learning of your ideas and successes. Please feel free to communicate with me at hugh.pavletich at xtra.co.nz to discuss these issues, should you wish to do so.

Best regards,
Hugh Pavletich FDIA
Performance Urban Planning
Christchurch
New Zealand
January 20, 2010

ARTICLES & SUBMISSIONS BY HUGH PAVLETICH & ARTICLES OF NOTE

2009
091218 - Interest Co NZ - Housing Bubbles & Parkinsons Law
091204 - Interest Co NZ - The curse of politically engineered research
091203 - Scoop NZ - The curse of politically engineered research
091125 - New Geography - Housing Bubbles: Why are Americans ignoring reality
091124 - On Line Opinion - Housing Bubbles: Why are Americans ignoring reality
091113 - Scoop - Why are Americans ignoring reality
091112 - Interest Co NZ - Housing Bubbles: Why are Americans ignoring reality
090708 Bill English - Government considers local body ‘bond bank’
090706 Interest Co NZ - Local Government failure led to housing bubble behaviour
090706B - Scoop: Housing Bubbles - Economists ‘Cart Before The Horse’ Problem
090526 - Interest Co NZ - Housing Bubbles are a local issue
090526B - Scoop: Housing Bubbles Are A Local Issue
090524 - Atlantic Online - United States Bubble Cities with map
090524B - NZ Sunday Times - Cheaper borrowing for local authorities
090514 Govt looks at 'city limits' as house prices stay high - Environment - NZ Herald News
090508 - Hon Dr Nick Smith Speech to the NZ Planning Conference
090503 Interest co nz: NZ vs Australian housing policy; the need to focus on structural issues
090503B Scoop: Housing : Focus on Structural Issues
090417 Interest co nz: What if NZ and others were issuing building consents at the US rate?
090417B Scoop: United States House Building Below Replacement
090407 Interest co nz: Housing Bubbles & Deceit
090407B Scoop: Housing Bubbles & Deceit
090320 Interest co nz: New Zealand's pragmatic political approach welcome
090320B Scoop: New Zealand's pragmatic political approach welcome
090306 - Wall Street Journal "You cant spend your way out of a crisis" -
Hon John Key, New Zealand Prime Minister
090225 Scoop: Housing Bubbles: Learning From Houston
090225B Interest co nz- Housing Bubbles: Learning from Houston
090209 Scoop: The Dangers Of Superficial Knowledge
090206 NZ Herald: There are no perfect measures - so lets stop quibbling
090204 Beehive - Affordable Housing Enabling Territorial Authority Act to be reviewed
090202 Scoop: NZ Herald ‘Home Truths’ Article Confused
090202B Interest Co NZ : NZ Herald Home Truths article confused
090130 Scoop: NZ Government Housing Commitment Applauded
090126 2009 5th Edition Demographia Survey International Release
090126B 2009 5th Edition Demographia International Housing Affordability Survey
090126C New Zealand Housing Minister Heatley response to Demographia Survey
090109B Interest Co NZ - Housing Bubbles and Market Sense
090109 Scoop: Housing Bubbles and Market Sense

HUGH PAVLETICH

CONTACT +64 3 343 9944 Christchurch, New Zealand

ARTICLES & SUBMISSIONS BY HUGH PAVLETICH & ARTICLES OF NOTE

CONTACT
+64 3 343 9944
Christchurch, New Zealand