The Post

The infrastruc­ture-housing blame game

- Dileepa Fonseka dileepa.fonseka@stuff.co.nz

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.

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 ?? ?? A new national policy statement brings forward some proposed density changes
A new national policy statement brings forward some proposed density changes

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