Value of good planning adds up

So you may be in the strange situation of growing a city into future debt if you don’t do it right . . .

While the mooted 16.5% rates increase is related to the city’s operating costs, one of the interesting aspects missing from the city finances debate is the impact of development patterns and good planning.

The most expensive way for any city to develop is to release new land for housing in greenfield areas; it means you have to pay for new roads, pipes and reservoirs, not to mention the parks, schools and swimming pools, etc, that these citizens need for their quality of life. Then include the wider costs of sprawl, from the economic impact on the CBD of shoppers living far away, to the low viability of public transport, to health concerns from low walkability.

The idea is that developers pay a portion for the costs (called development contributions) and rates gradually help recoup the rest of the expenses but, depending on the density, you may never recover the original costs before infrastructure needs maintenance, never mind the impact of the wider costs.

All growth has some costs. While infill is cheaper as it plugs into existing systems, it may still require having to increase the capacity of existing infrastructure.

There is a little research on the true costs of new development, but not much. Auckland Council recently estimated the costs of a new dwelling to be $146,000, but this is a very rough figure and there are no clear figures as it depends on the density (homes divided by infrastructure costs). However, it’s safe to say that this is a factor in the rise in city debt in most NZ cities that are experiencing growth.

Therefore, the density of new development is important. In general, the lower the density, the more ratepayers have to subsidise growth.

So you may be in the strange situation of growing a city into debt if you don’t do it right, and then you see cutbacks on the things that make a city liveable as they are unaffordable, or not realistic, or the need to raise revenue via rates.

Much of this so far has been about cities in general – linking the way we use land to the way we finance development. Once you turn to a specific place it gets more complex.

For Hamilton it’s not as simple as stopping growth, or only doing infill. In reality, you need to provide affordable housing and take advantage of investment opportunities. To do this you’ve got a few ways to balance development, help growth pay for itself, and not pass on a burden to current or future ratepayers.

Infill is something Hamilton is making great progress at with new development running at around 50%.

We can do better on density though. Much of Hamilton’s recent growth has been in places like Rototuna, which is around 16 households per hectare. This is a high cost model as the roads and pipes service fewer households. Density is not something to be unduly worried about, however. It’s not about forcing everyone to live on top of each other, it’s about the balance of housing stock and using land efficiently. Even if every new house for the next decade is double-storey on a smaller plot, but still with a good amount of outside space, it would create only a slight shift in the overall stock. So the character of Hamilton wouldn’t change – if you want to buy a low density home you can, there are lots of them.

Masterplanning growth in a strategic manner, rather than just releasing sections, is another option. Then you can plan for higher density and amenity from the start, using great design. So the new growth cell in Peacockes, while expensive, could have a higher density to offset the costs.

Other solutions range from reducing road width (reduce cost and increase development space), to shifting boundaries and minimum densities of greenfield or intensification areas, to increasing development contributions. It means being creative and flexible.

More generally, given the wider trends in local government debt in high growth areas, central government should also be stepping up. The interest-free loan that was recently given to places like Hamilton is an admission that the current system isn’t working. But is it fair to pass the costs of national growth to local governments while collecting the GST in a risk-free manner?

Almost all these solutions involve good planning, which is far removed from the simplistic talk of needing to release land for sections quickly, or getting rid of ‘‘red-tape’’ that we frequently see among some in Hamilton politics.

We hear councillors discuss how ‘‘we can’t afford playgrounds’’ as we need to grow, but this debate very rarely hits on strategic development patterns – how can we grow in a way that doesn’t hugely affect the quality of life of the people who live here? I think councillors should turn to this question.

Given the way that development impacts on finances, if you are a councillor concerned with savings, you should be advocating the wider value of good planning and recognising the true costs, not just of development, but of not doing so.

And the money to be saved on playgrounds, libraries, or pools, simply pales in comparison.