Bernard Hickey reports:
Economist and former Reserve Bank Chairman Arthur Grimes, who has researched the effects of the Metropolitan Urban Limit on land prices, said he also supported its removal and a change to infrastructure financing, as well as the relaxation of density limits. Along with other researchers from Motu, Grimes found in 2008 that land prices inside the Auckland boundary were 10 times higher than outside the boundary. See my 2009 article on that here and subsequent Productivity Commission research showing similar results here.
“I’m partial to removing whatever they want to call it this week — the Metropolitan Urban Limit or the Rural Urban Boundary,” Grimes told Interest.
“There are two urban growth boundaries in Auckland. One is a horizontal one and one is a vertical one, and it’s important to get rid of both of them,” he said.
Grimes said he opposed the recent practice of progressive extensions of the RUB, which simply gave land owners serial monopolies on land that pushed up land values.
“The way it’s been discussed in the draft Unitary Plan really shows a misunderstanding of basic economic principles and is almost designed to give people their own specialised monopoly for a while that forces up the price of land.”
Grimes points out very well the problem of just moving the boundary.
Grimes also supported moves to finance the infrastructure needed for development with targeted rates, pointing to other similar tools used overseas such as as (Tax Increment Finance) TIFs.
“These sorts of things are quite mainstream internationally and would seem to me to make a lot of sense to investigate. I can’t see major fishhooks in them and they’re definitely worth looking at,” he said.
Grimes also said Councils also had low debt ratios in New Zealand and linking rates payments to infrastructure bonds was an accepted and sensible practice.
I’ve previously blogged in support of Twyford’s infrastructure bonds proposal, so that the costs of infrastructure to new properties is funded through targeted rates over time, rather than up front.
Property Council CEO Connal Townsend said he agreed with Labour’s call to abolish the Rural Urban Boundary.
“The Rural Urban Boundary is a barrier to entry into Auckland’s land market which will continue to distort market behaviour. An artificial boundary that chokes land supply is counter intuitive,” Townsend said.
He said he also agreed a rethink of infrastructure financing was needed.
“We know that paying development contributions through targeted rates over a number of years is workable. And, we already have the Local Government Funding Agency which more and more councils are starting to make use of,” Townsend said.
The property people support it.
Business NZ also welcomed Labour’s proposal.
CEO Kirk Hope said providing more land for building was needed.
“With agreement on this issue between both main political parties, it is to be hoped that local government planning decisions will take heed of the need to focus on land and housing supply,” he said.
As does business.