Planning, Inequality and Housing Affordability: Lessons from New Zealand as Seattle Considers Global Competitiveness

Crosscut today considers the competitiveness study done by the Boston Consulting Group for the Seattle Metropolitan Chamber of Commerce. (We wrote about it here.)  Reporter David Kroman writes, 

The pillars [BCG] chose are logical enough: human capital, including education, diversity, livability and natural environment; the costs of doing business; the presence “innovation ecosystem” or how well startups can get going; movement of goods and global connectivity; and infrastructure.

…To measure all this, BGC selected a pool of nine cities deemed similar to Seattle, including some obvious picks like Vancouver and San Francisco, as well as some less obvious choices like Singapore and Amsterdam, chosen because of concerns about competitiveness in a global economy. Relative to these places, Seattle ranked 5th in 2013, while San Francisco ranked first and Hamburg, Germany ranked last. However, in 2015 Seattle dropped a space to 6th. Singapore passed San Francisco to take first.

In studies like these, few things are static.

The drop, said the Chamber’s CEO Maud Daudon, is less a result of Seattle moving backward than it is the other cities moving forward. That said, while Seattle has seen job growth in the high- and low-income brackets, middle-class jobs fell by about 7 percent.

Kroman reports that the Chamber will be releasing some ideas on how to improve Seattle’s performance. 

When asked what should happen tomorrow – or even yesterday – to assure a strong city, she emphasized cooperation. “We need to get aligned,” [Daudon] said, referring to business, non-profits and the public sector. “We need to get everyone on the same page.”

Like Daudon, we support collaborative planning and have drafted our general set of priorities and recommendations. So we were intrigued by a report on a recent speech by Bill English, Deputy Prime Minister of New Zealand. Provocatively, English implicates planning in some of that nation’s economic woes.

One of the frequently cited justifications for urban planning is to mitigate negative externalities — detrimental impacts that people or organizations impose on others in society. While acknowledging this, New Zealand Deputy Prime Minister Bill English charged that urban planning itself has become the externality, by virtue of its impact on house prices, equality and the economy in New Zealand.

The solution, it appears, is better planning.

The Deputy Prime Minister says that planning has, in effect, abandoned its public purpose:

“For those among you who are economists, I would go so far as to say that while the justification for planning is to deal with externalities, what has actually happened is that planning in New Zealand has become the externality.

It has become a welfare-reducing activity.

And as with other externalities, such as pollution, the Government has a role to intervene, working with councils to manage the externality.

Sounds like an argument for more inclusiveness and collaboration. And, as Wendell Cox, the economic and demographic analyst who wrote the NewGeography post, concludes, the issues are not unique to New Zealand.

It is not only in New Zealand that urban planning has become a negative externality. From London to Vancouver, San Francisco, Sydney and elsewhere (God forbid, even Liverpool) the land rationing strategies of urban planning policies have been associated with the losses in housing affordability, with an up to tripling of house prices relative to household incomes. These policies have lead to significant economic losses, including expanded inequality and labor market distortions. Important domestic goals shared by nations around the world, such as improving the standard of living and reducing poverty cannot be addressed efficiently or effectively in such an environment.

There are lessons there for cities wanting to succeed in the global economy: Better planning aimed at increasing opportunity and shared prosperity.