Challenges stack up for super minister

Published in The National Business Review (Auckland), 17 November 2017

In the new cabinet, Phil Twyford stands out as the minister with the most challenging mandate. Combining housing and transport in one person has created a superminister in charge of all aspects of urban development.

If Mr Twyford succeeds, he will not only bolster Labour’s chances of re-election. He will also shape the face of the country for decades to come.

At the risk of oversimplification, New Zealand’s urban growth model at best has been a model to accommodate growth, not facilitate it. At its worst, it’s a model to restrict or hinder development. Just think of the Resource Management Act and the rural-urban boundary.

Mr Twyford’s task is to change not just the letter of the law but the spirit behind the acts and policies governing urban affairs. He must lead New Zealand toward an embrace of urban growth.

Unfortunately, the terms ‘urban growth’ and ‘urban development’ sound academic. They mask what it is about and what is at stake. A little global perspective may help to illustrate the issue.

For decades, the global trend has been away from rural living to city dwelling. According to the UN, in 1990 only 43% of the world’s population lived in cities. By 2014, this share had increased to 54% and is forecast to reach 66% by the middle of the century.

There are many reasons behind this development. But there was no great plan to move to the cities. It just happened because people voted with their feet. They sensed that cities are “our species’ greatest invention,” as Harvard economist Ed Glaeser put it.

Cities provide opportunities that smaller settlements cannot. Bringing people together enables cooperation. It allows for specialisation. It helps to breed new ideas.

Well-functioning cities make us more productive and give us better options to live our lives.

But there is a caveat to this statement. It is ‘well-functioning’ – and our cities, least of all Auckland, do not always meet that requirement.

The opportunities for engaging with other people disappear when you struggle to reach them. There is little advantage to living in a city that makes it nearly impossible to commute to the jobs best suited to you. Transport gridlock is not just a nuisance. It undermines one of the critical features of cities.

The same goes for housing. Most people move to cities for better jobs and incomes. But what is the point of securing a high-income job when a large chunk of what you earn goes toward servicing a gargantuan mortgage or paying a ridiculous rent?

There comes a tipping point for a city when it can no longer fulfil its core promises because of inadequate housing and transport choices. Occasional media reports about Aucklanders leaving for a better life elsewhere are anecdotal evidence – as are reports about Auckland schools struggling to recruit teachers.

Mr Twyford has his work cut out for him. He faces a double challenge. On the one hand, he must allow Auckland to grow further. By international standards, Auckland is still a relatively small city. If we want it to reach its potential and achieve agglomeration effects, we would not want to curb its growth. And that is despite its past growth not having been managed well.

At the same time, Mr Twyford needs to help Auckland deal with its congestion and housing affordability issues. Fortunately for him, urban economics provides a robust toolbox for tackling these challenges. And fortunately for New Zealand, he has indicated he will use these tools.

Both in opposition and now in government, Mr Twyford has repeatedly explained why the obstacles to housing delivery must go. These are the height and density controls under the planning laws, the rural-urban boundary that creates an artificial scarcity of land, and the inadequate ways of financing residential infrastructure.

Mr Twyford has now also expressed his interest in road-user charging, and his regional fuel tax is a step in this direction. Again, road pricing is good economics. As with any other scarce resource, roads must be priced to allow the most efficient use. If you do not price scarce resources, the only alternative is rationing. With roads, this means queuing in traffic jams.

These are the technical, economic challenges the new superminister for urban development must tackle. And Mr Twyford, after years of learning and engagement, is well-prepared to do so.

Beyond these technicalities, however, he needs to convey an emotional message to Aucklanders. He will have to explain why further growth will be good for them and the city.

In jurisdictions such as Switzerland, where there’s a direct link between a city’s economic development and the council’s budget, this would be an easier task. If people can see how economic growth directly translates into better local services, they are more open to making it happen.

In New Zealand, we do not allow cities to capture the benefits of their development. If Mr Twyford’s work in housing and transport leaves him any capacity, he should work toward changing this unfortunate situation.

For now, we can only wish Mr Twyford success. There is no more challenging task than making New Zealand’s cities thrive in the global era of urbanisation. Quite appropriately, we now have a superminister to deal with it.