The infrastructure-housing blame game
Councils and planners soon showed us why it was a good idea they weren’t consulted on Labour and National’s housing announcement.
Wellington Mayor Andy Foster said he found the whole thing ‘‘frustrating’’, Christchurch Mayor Lianne Dalziel was concerned about ‘‘mechanisms for ensuring adequate tree cover’’, Hamilton Mayor Paula Southgate was worried this could ‘‘change the face of Hamilton as we know it’’, and Auckland’s planning council chairman Chris Darby was ‘‘infuriated they have embarked on this’’.
This wasn’t just a pity party held amongst elected councillors and mayors. Over on LinkedIn middle-aged planners were crying into their scrunched up district plans.
Eke Panuku Development Auckland senior strategic development manager Scott MacArthur called the whole thing a ‘‘race to the bottom’’, complaining central government politicians were ‘‘degrading every square inch of our cities’’.
In the replies Auckland Transport principal planner Chris Freke wrote ‘‘goodbye Auckland villas and bungalows’’, then complained this was all ‘‘coarse central control’’.
For a long time now housing has followed a particular cycle when it comes to councils.
First, developers, a council candidate, or a small subset of voters, cite population projections and ask their councils to fund more infrastructure instead of building a particular convention centre, arena, or V8 street racing infrastructure.
Then, councillors and council staff claim population stats are overcooked, warn of empty houses, unused infrastructure, density done badly, and potentially even a city in Detroit-style decline if infrastructure is prioritised over things that could bring more tourism and events into a city.
A few years later the event or convention centre goes bust, house prices go up, and Government blames councils for not building enough infrastructure and houses.
By this time councillors and council staff have conveniently forgotten all those earlier debates and blame all of this unpredictable population growth on migrants, a ‘‘broken’’ local government system, and a lack of money. When a new set of voters complain, again, councillors now warn there is a danger of overbuilding, since the earlier population growth was exceptional and will likely never be repeated.
In 2016, Hamilton mayoral candidate Rob Pascoe, now a councillor, rubbished population forecasts of 40,000 people over 10 years from a rival candidate, dismissing them as ‘‘pure fantasy’’. He argued a figure of 2200 per year, or 22,000, was more realistic.
Stats NZ numbers would later show Hamilton’s population increased by 4400 people the year he made that prediction. To be fair to him, he was far from the only council candidate to take such a line.
‘‘For Hamilton City to advance fund infrastructure on these predictions will only lead to the financial suffering the city has experienced in the past,’’ Pascoe wrote.
Infometrics economist Brad Olsen says councils often choose lower-rung population estimates because it’s better for their books if they do.
‘‘They could have expected it [population growth], they should have expected it, but they didn’t.’’
Accepting higher population projections means putting more money aside for infrastructure, which means higher projected rates or debt, a political no-no in the world of local government. ‘‘In terms of how the planning plays out, and I think that’s the key struggle,’’ Olsen says.
Now that the Government is allowing people to build more properties on their section, as of right, and to build higher, councils and their advocates are wheeling out the infrastructure excuse again.
Councils are not wrong about infrastructure being an issue, but councils are also part of the reason the infrastructure isn’t there.
Intensification will cost councils, but they will have to pay for this extra infrastructure even if they don’t increase housing density.
The infrastructure deficit we hear so much about is very real, but it has largely come about because there has been a historic underinvestment in the maintenance of assets.
Councils are not wrong about infrastructure being an issue, but councils are also part of the reason the infrastructure isn’t there.
The estimates of how much we have underinvested in infrastructure largely come down to the difference between how much these assets have depreciated by, and how much money councils have actually set aside for their upkeep.
The Infrastructure Commission notes density can actually help councils handle infrastructure costs by spreading these over a larger number of ratepayers.
‘‘Infrastructure costs per household tend to fall as population density increases, because the fixed costs of infrastructure provision can be shared by more people,’’ it notes in a consultation document released in May. ‘‘Water network operating costs fall significantly with population density.’’
Councils have always been short of money, but more recently there has been a reluctance to plan for new infrastructure too.
When the Government put out calls for shovel-ready projects last year there were plenty of projects worthy of funding, but few had reached a stage where they were ready to go.
Which is surprising. If councils really wanted to build these projects they would surely have had plans on the books, ready for a time when central government might decide to throw some money their way.
Yet if councils start planning for new infrastructure it ends up in their 10-year plans. When it does, it blows out the headline figures in their budget. It means councillors have to find some way of funding it through a rates rise or a debt level increase, even if they expect Government might come to the party later.
‘‘Without the funding it has made it harder and harder over time for councils to plan at the scale that they’ve needed to,’’ Olsen says.
Perhaps this is why when Infometrics examined the accounts of a number of councils they found some had put aside money for replacement infrastructure, but little had been put aside to expand capacity. Which makes no sense. If you’re replacing these assets anyway you are surely better off replacing them with something that has a lot more capacity.
Olsen says there is just no appetite to use the funding levers available to councils, no desire to raise rates even though costs are increasing, and councils are not keen on debt financing either.
Without these options there aren’t very many ways for them to fund infrastructure, which is why they steer clear of trying to plan for it too. Which ultimately works to their disadvantage because the bills just get steeper.
It is worth remembering ratings agency S&P signalled councils could see their credit ratings downgraded if they purposefully underinvested in infrastructure, which means local government may end up knee capping itself in more ways than one if it keeps underinvesting.
Housing and intensification might carry more costs for councils, but a lot of these costs are there because councils were already behind on their infrastructure spending.
Councils may be in an unenviable position now, but many made a conscious decision to close their eyes and ears, and pretend population growth wasn’t real.