The Economics of Urban Sprawl – Joel Cayford – 5^th December 2004

Published in NZ Herald – December 2004

The current Auckland debate about sprawl vs intensification needs to be informed by an understanding of the economics of what is happening, and through consideration of the relationship between land use and transport.

For example, critics of sprawl in the USA report that increased automobile dependence undermines or nullifies efforts to improve air and water quality and to conserve energy, and that public investment in schools, public safety and mass transit systems becomes unfeasible. A Bank of America study points out that sprawl leads to higher costs for businesses and leaves more workers caught in long and exhausting commutes.

But things are changing. In the recent US election round, traffic-weary voters committed more than $40 billion to transit expansion.

Around the edge of Auckland the initial appeal of life in a gated community has become a prison sentence for many who bought homes in Greenfield developments. Families seeking security, and attracted by the prospect of a brand new home, have been disappointed by the lack of street life, no corner shop, no nearby library or school, and the need to drive everywhere. Yet these subdivisions were all granted consent by city councils favouring Greenfield development to accommodate an expanding population, despite being signatories to The Regional Growth Strategy and its ideal of compact city development along mass transit corridors.

The Growth Strategy accepts that growth will occur, and provides for the staged development of Greenfield areas around Auckland over a fifty year period. However its main objective is to promote redevelopment and regeneration of existing urban areas in order to support mass transit investment, and to protect Auckland’s quality built environment from infill.

Despite the idealism of the Growth Strategy, Greenfield sprawl development dominates across Auckland because it is easy, low risk, and because it is highly profitable. When rural land is taken inside the Metropolitan Urban Limit and rezoned, property investors make huge capital gains. Further gains accrue on subdivision, development, and sale of individual properties. It is clearly in developers’ interests to stimulate housing demand, and to accelerate Greenfield development.

Sprawl does represent a superficially attractive form of economic development. Undoubtedly it delivers a construction and real estate boom, and appears to offer a quick path to economic growth. Even those who anticipate its eventual costs may defend sprawl on its perceived economic benefits. A common local government assumption about sprawl is that new residential development will lead to increased rate revenue, which will ultimately lower everyone’s rates. However history shows the economic growth triggered by sprawl does not last beyond a few frenzied years, leaving regions with huge transportation, piped-infrastructure, and community service liabilities.

In Auckland, apart from some local works that have to be carried out by the developer, community development costs have traditionally been born by existing ratepayers across the whole Auckland region. New legislation now allows Councils to levy developers for some of these costs and a couple of Auckland’s councils have adopted a developer levy regime, but the amounts collected still fall well short of the true costs of Greenfield development.

Regeneration projects within city boundaries also incur development costs, but since sprawl is located away from established centres, new businesses and homes cannot utilise existing services and infrastructure. So new services must be built, often over long distances, at significantly greater cost per new home. In addition, remote sewage plants, schools, libraries and other improvements are often required to service new low-density communities. And if excellent public transport services are not provided, the new occupants will be forced to use cars for transport.

Not only do existing ratepayers subsidise Greenfield development costs, thereby allowing new homes to be sold at discount prices – they are forced to share already congested roads with sprawl’s new home-owners who must drive even further to get to work.

The 2001 census recorded 822,867 cars, trucks, vans and motorcycles registered in Auckland, including 626,740 cars. 334,272 individuals drove to work on census day. Assuming the region's average of 1.2 people per car, this equates to about 280,000 cars
on the road, leaving over 340,000 cars at home. On census day, 4,000 people biked to work, 15,000 walked, and 26,000 went by passenger transport. In 2001 239,000 kids were enrolled at primary and secondary schools. 70,000 walked or biked there. 42,000 drove with a parent or guardian on their way to work. 110,000 went on a dedicated car trip. Just 17,000 arrived by bus. These statistics are an indictment on Auckland’s passenger transport.

This year the Government committed more than a billion dollars to improve transit systems across Auckland. But this investment comes with strings attached. The Auckland Regional Council, and all the region’s City and District Councils must change their city plans to deliver the Growth Strategy objectives. Previously the Growth Strategy had no statutory force. Now it does. Government legislation requires land uses across Auckland to develop in ways that will better integrate with public transport investment.

Stimulating more development investment in regeneration projects will not be easy. Public investment will be needed to transform failing local centres into vibrant town centres. Councils have a major role in improving the public realm in their towns, because of its importance in retaining residents and attracting private investment. New transport policies are part of that. For example traffic calming creates streets that are attractive walking environments because they feel safe. And council’s will need to level the playing field by eliminating economic incentives for out-of-centre development. Only then will the vision of attractive compact city development, interconnected by quality transit, become a reality. ENDS