Thursday, August 16, 2012

Christchurch’s Anti-Recovery Plan: Theft based on threadbare analysis

_hugh-pavletich-smlGuest post by Hugh Pavletich of Cantabrians Unite

‘THE GOVERNMENT’S BUY-UP FOR the central Christchurch blueprint has been described as a "land grab" and the Canterbury Earthquake Recovery Authority (CERA) as a "den of thieves.”’
The Press reports:

Angry landowners say the Government will profit by selling their sites to someone else, in some cases leaving the original owners severely out of pocket... 
    Lisle Hood, co-owner of properties around Poplar St earmarked for the new innovation precinct, accused the Government of bullying tactics.
    "It's a land grab. They are nationalising private property and stomping all over our property rights," he said. "They are buying up all this land and they will flog it off to the big corporates and make a huge killing on it."
    Owners investing in heritage restoration had improved the city "only to be treated like crap, and that's obscene.”  "The Government should be looking after people, not ripping them off, and they've got a den of thieves [CERA] doing it on their behalf," Hood said.
    Roland Logan, part-owner of the Ng building in the path of the proposed stadium, said owners would be "subject to a serious injustice" if their land was resold at a profit.
    "Their property will be taken, their business destroyed, they'll receive what is as yet undetermined compensation, then [the Government] will on-sell it when the city has recovered."
    He said Cera was "basically flouting the rule of law" by impinging on property rights.
    "What they're doing is just mindboggling; it's appalling," Logan said…
    Property lawyer Hamish Grant, of Anthony Harper, said the blueprint had opened a "legal can of worms" and unhappy property owners could try to fight the buy-up. "
Grant said the Government could take land only for earthquake recovery, not "willy-nilly" or to benefit the city or the economy, and could be challenged by judicial review. "
" 'The courts have traditionally come down on governments because they are taking advantage of people's property rights," he said. "But it could be hard to argue. Until someone who is unhappy takes them to task, we just won't know."

In Sections 60 through 70, the Canterbury Earthquake Recovery Act 2011 sets out for confiscated property how little compensation can be paid. It needs to be studied closely and legal advice sought.

As Cantabrians Unite has made clear over recent weeks, from a commercial perspective, the Central Blueprint for Recovery is in reality an "Anti-Recovery Plan" based on theft of business owners’ property rights—to be partially paid for by that theft.

If it is allowed to proceed, it will do irreparable damage to Christchurch.

imageWITH WORK ALREADY BEGUN buying confiscated land at bargain prices, the Authorities have still to produce any detailed cost estimates, feasibility studies or robust social and economic reports. The reason for this is obvious: because they know as well as we know that this CGI-larded Blueprint would not withstand any kind of robust analysis.  It is nothing more than a politically inept attempt to ram through a hare-brained planners wish list based on nothing more than a bunch of pretty pictures.

The politicians involved unfortunately are nothing more than "parrots" for bureaucrats with neither expertise nor track record in urban development, who are clearly clueless and careless about the consequences. 

Several very good articles are already beginning to pull apart the threadbare underpinnings of this Anti-Recovery Plan.

A recent perceptive article by political scientist "Puddleglum" provided an inkling of how this whole sorry Blueprint saga is playing out, a fiasco in which the Central Development Agency (and it would appear CERA people) appear to have simply gone on an ego trip with no understanding or inkling whatsoever of urban development realities—delivering profits into the hand of a chosen few by taking the property rights of many.

Sam Richardson, economics lecturer at Massey University, has done substantial international research on the problems of these types of public projects. His short blog article with hyperlinks to further material is most helpful.

The "core problem" here has been weak and ill-informed governance at both the central and local levels right from Day One , 4 September 2010—nearly two years ago.  The writer has covered these issues, many of which began before the earthquakes destroyed the city, most of the threads of which are incorporated within a recent article: CHRISTCHURCH: THE WAY FORWARD.

Last Thursday as well, Jo Kane of Canterbury Television graciously asked me to explain some of these issues on their One on One programme.

As I tell Jo, from the outset the authorities’ priorities should always have been (1) people (2) housing and (3) business. 

In the wider context, the Central Area and its recovery is only a small component of the issues - with people and their housing being far more important. The Central Area property owners and associated businesses are more than capable of sorting out their own issues had they only been left free to do so.

imageIndeed, one of the few great "highlights" of these earthquake events has been watching the heroics performed by Christchurch’s central business people, so many of whom managed to get their businesses back up, running and relocated in the suburbs within a remarkable 7 to 14 days after the 22 February events.

A truly remarkable achievement !

Leave them alone and these same people are more than capable of making recovery happen back in the central area from which they’ve been barred—if only the authorities would allow them.

The authorities should remove their focus from grand plans formed over other people’s property rights, and focus instead restoring their own loss-making public facilities, at the lowest possible cost, in both central and suburban areas—a job, all too sadly foreign to bureaucrats now becoming used to Blueprint-driven power trips.  And in the suburban areas as well, where most people now actually do live and work.

AT A HUMAN LEVEL, one of the things that has distressed me greatly these past two years of disaster has been the sheer bureaucratic ignorance and arrogance.  It is not overstating it to say that far too many people, with their homes and their businesses, have simply been 'bureaucratically brutalised.

What the earthquake couldn’t do to them, the bureaucrats have.

This must stop. Now.

Recovery will not get under way until people and their communities are allowed to take back control.

One way to start is for ratepayers to talk to their local councillors, their employees, to instruct them and the staff they control to pull their heads in. Here are the contact details: http://www.ccc.govt.nz/thecouncil/councillors/index.aspx

Hugh Pavletich is a Christchurch entrepreneur, the owner of website Performance Urban Planning and the co-author of the Annual Demographia International Housing Affordability Survey, 2011 .

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8 Comments:

Anonymous nick said...

Join the club...the government nationalises 30% of my productive effort every year

8/16/2012 03:52:00 pm  
Blogger Mark said...

Even if land were free, $50k sections would not be acheivable. Hugh does his credibility no favours by always saying this. He's simply out of touch with current development costs. Just like Ansell, you might sympathise with some of his general sentiments, but I can't get behind someone who quotes spurious 'facts' like this.

8/16/2012 09:30:00 pm  
Anonymous Anonymous said...

Mark, you have not been following Hugh's detailed arguments. Land almost IS "free" when it is available at the true RURAL value of well under $10,000 per acre. Almost all the cost escalation that is behind unaffordable housing everywhere that it is a problem, is because regulatory rationing allows the lucky owners of "urban" zoned land to hold out for closer to $1,000,000 per acre, which is pretty cool capital gains thanks to some bureaucratic action, not to any deserving productive activity on the part of the land owner.

Don't you think it is ironic that the government is happy to compulsorily acquire CBD land in ChCh, but not fringe land so as to make housing affordable?

Another important difference in all the affordable cities in the USA (identified in the annual Demographia Reports) is the way they finance infrastructure. It actually makes a major difference to house prices across a whole city, if the cost of infrastructure is lumped into the price of new houses. Imagine if the cost of roads was suddenly lumped into the price of all new cars; say a $20,000 "impact fee" per car. The price of all used cars would suddenly jump up too, no?

This is exactly what happens with housing. It doesn't matter WHERE a first home buyer buys, or how OLD the house is, the price reflects the inflated price of "new houses".
So it really helps housing affordability and social equity, to fund infrastructure via "finance" and ONGOING charges, not lump-sum-up-front.

But the actual dollars involved in this is nowhere near as great as the dollars involved in the "rationing" effect on the price of rural land suddenly rezoned "urban". The costs of development, if built upfront into house prices, is 5 figures (approx. $40,000): the "rationing" effect is 6 figures. Seeing the inflation per acre is something like $1,000,000, even a one-tenth-of-an-acre pocket handkerchief section is inflated in price by $100,000, and this is only part of the story. At least half of the land the developer has to pay $1,000,000 per acre for, will not have houses on it at all; so the price inflation has to be built in to the land on which the houses are built. It is easy to see in reality, that one-tenth-of-an-acre pocket handkerchief sections in most NZ cities, are inflated in price by some $200,000.

In the "affordable" cities where the raw land is closer to $10,000 per acre, the sections that typically ARE $50,000 are usually 1/4 to 1/2 an acre. So Kiwis are being robbed blind by a stinking, corrupt racket that benefits the land bankers on the fringe. How anyone can defend this and lie straight in bed, is beyond me. And it is almost certain that there is massive actual corruption involved, given human nature. BTW, because all urban land inflates in price if fringe land is inflated in price, anyone with fat investments in land at the most valuable locations (eg the CBD) stand to gain even MORE from anti-sprawl zoning than the fringe land bankers do. This is why major international CBD property investors have been lavishly funding "environmental preservation" lobbyists for decades.
-PhilBest

8/17/2012 03:57:00 pm  
Anonymous Anonymous said...

Thank you Phil Best.

There are three major factors Mark is not considering -

(1) fringe land values should be close to their True Rural Values.

(2) All infrastructure 9other than roading and footpaths) should be financed out on the bond market - using the Texas MUDs model for guidance.

(3) Mark has failed to factor in the massive degradation of our residential pricing performance, due to decades of grossly intrusive planning. When the ALL UP costs per square metre for starter stock on the fringes of the affordable US markets are in the order of $US600 per square metre - and ours are at or above $NZ2,500 per square metre - it is clear evidence there are serious structural problems with our residential construction industry in NZ.

Mark may like to communicate with the NZ Institute of Quantity Surveyors to ask them for a detailed breakout of the construction costs for both NZ and Texas.

These people have had 8 Annual Demographia Surveys to "ponder" this!

A clear definition of an affordable housing market is provided on the front page of my archival website www.PerformanceUrbanPlanning.org .

It has been a formulaib business since the rime of the Levitts following WW11, when they made housing available for $US100 per square metre ALL UP.

Our numbers here are currently a shambles.

Hugh Pavletich

8/18/2012 12:14:00 am  
Blogger Mark said...

Phil and Hugh - you're missing my point. There is no disagreement that gov't contributes to high land prices in a variety of ways. But your argument that the removal of land zoning and ring fencing alone would see $50k sections is what's unrealistic.

If you'd brought residential sections to the market in the last 10 years (as I have) you'd know that. Development costs alone, before purchasing the land and before development contributions are in the order of $40k per section. You've then got to add an allowance for the finance cost, the risk, marketing - and of course profit. Now it's true that Council regulations in terms of minimum standards for stormwater treatment and so on contribute to that development cost - and every year they add something new which just adds to the cost. But blaming it on ring fencing alone is too simplistic.

If land could be purchased at $25k per ha has Phil quoted, and restrictions on land development of rural fringe areas were removed overnight, I'd say $100k sections would be acheivable in NZ. Any further gains would require a lesser standard of urban development from Councils (eg: no kerbs and channels, less stormwater treatement, etc), and a much easier consenting process for your discharge consents.

Like I thought I made clear, I agree with Hugh's general sentiments, but as it stands your argument is unbelievable when you continue to quote the out-dated figure of $50k per section. You need to update your figures, and also modify your argument to make clear it's not just ring fencing - but Council standards, RMA, etc which all contribute to high sections prices.

8/18/2012 08:37:00 am  
Blogger Mark said...

Hugh - If you do want some current figures on land development costs in Canterbury, please contact PC for my email address. I can also provide some commentary on the various Council regulations, etc which add to those costs.

cheers, Mark

8/18/2012 08:47:00 am  
Anonymous Anonymous said...

thanks for sharing.

8/29/2012 05:32:00 pm  
Blogger Just Friends said...

Structural engineers, surveyors, civil engineers, landscape designers, urban planners,quantity surveyors, project managers have all benefited from the abrogation of the architect’s professional responsibilities."

8/15/2013 11:28:00 pm  

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