November, 2007

Are Urban Growth Boundaries Really Necessary?

A background paper prepared for “Recovering from Smart Growth”

The 2007 Preserving the American Dream Conference

San Jose, November 10-12

By Owen McShane

Director, Centre for Resource Management Studies.

1.Introduction

1.1.Background – Recovering from Smart Growth.

The theme of this Conference is “Recovering from Smart Growth. And many Governments around the world, at national, state, regional and local level, are now considering how to deal with this problem of moving from a highly inflated and regulated property market to one in which more “normal”, and competitive, market conditions prevail.

To many commentators, the first and most necessary change is to remove Urban Growth Boundaries, (UGBs) or Metropolitan Urban Limits (MULs), or whatever they happen to be called according to local custom.

However, the central planners’ first response to such a proposal is to defend the UGB’s because they are “necessary” – proceeding to make several claims – but never with supporting evidence – in support of their case.

This paper examines whether Urban Growth Boundaries really are necessary. Unless we can counter the conviction that they are it will be difficult for any property market to recover from the effects of Smart Growth.

1.2.The Economists’ View.

Urban economists around the world[1] are virtually of one mind in their conviction that the first and most important step in improving housing affordability in cities around the world is the removal of unnecessary restraints on the supply of land, and, in particular, the removal of Urban Growth Boundaries (UGBs)[2] One could list endless footnotes but most would agree that when economists from as diverse positions as Paul Krugman, Edward Glaeser, Thomas Sowell, Joseph Gyourko all conclude that restraints on the supply of land is driving up prices in urban areas then some measure of consensus prevails. Mind you, given that they are simply endorsing the rule that when supply is constrained from responding to increasing demand prices will rise, it would be surprising if they found otherwise.

Only the central planners[3] seem reluctant to conclude that the law of supply and demand remains valid in their territories.

Dr Don Brash, former Governor of the Reserve Bank of New Zealand, and presently Chairman of the Board of the NZ Centre for Resource Management Studies, clearly stated this position in a media release to accompany the Centre’s submission to the Commerce Select Committee Inquiry into Housing Affordability in New Zealand, as follows:

“Quite frankly, Metropolitan Urban Limits and similar restrictions should simply be outlawed, no ifs or buts. And Parliament should establish an RMA Regulatory Review Committee to ensure that all rules, regulations and levies imposed by local governments are consistent with the RMA[4]. I have no doubt that these two measures would do more to improve the affordability of housing in New Zealand than anything else policy-makers could do,” Dr Brash concluded.

However, those officials and politicians who support “Smart Growth”, and other policies that constrain the supply of land, continue to defend their controls. In particular, they insist the UGBs are “necessary” to properly manage the growth of the modern large city.

Their arguments imply that if UGBs were uplifted the costs would far exceed the benefits, although such statements and claims are seldom, if ever, supported by any analysis.

UGBs are imposed on New Zealand cities within the regulatory framework of the RMA. Section 32 of the RMA originally required that a rule had to be “necessary” to achieve the purpose of the Act. However, by 1993, Court decisions had established that “necessary” meant “expedient” or “desirable”, rather than “essential”, which seems out of line with ordinary English usage.

For whatever reason, the 2003 Amendment to the RMA repealed this paragraph and the Act now requires that the Section 32 analysis must include an evaluation which examines:

(a) the extent to which each objective is the most appropriate way to achieve the purpose of the Act; and

(b)Whether, having regard to their efficiency and effectiveness, the policies, rules, or other methods are the most appropriate for achieving the objectives.

Therefore a proper Section 32 analysis requires that Councils first establish the most appropriate objectives to address the identified issues of sustainable management, and then establish that a proposed policy or rule is the most appropriate means of achieving those objectives.

The process requires that the evaluation have regard to the efficiency and effectiveness of these policies and rules. New Zealand Environment Court case law has established that “efficiency” refers to the broader concept of economic efficiency, which includes productive efficiency, allocative efficiency and dynamic efficiency. However, in practice most Section 32 analyses totally ignore these elements of efficiency. In fact most of the analysis ignores monetary costs and benefits altogether.

Urban economists have a clear understanding of these terms, and the notion of a Growth Boundary immediately rings alarm bells about the ability of such a constrained land market to properly operate so as to promote these three elements of efficiency.

2.The Arguments are Circular.

2.1The Joint Panel Hearings on the Auckland Regional Council “Policy Change 6”.

An examination of planning documents round the world soon reveals that the planners regard UGBs to be the most “appropriate policy tool” because the planners believe they are, if only because they are “integral” to their “Growth Management Concept”, or whatever term they happen to prefer.

Fortunately, we have a good example of these circular arguments, that underpin most UGBs, in the report recently published by the Auckland Regional Council –Key Issues Recommendation Report of the Joint Hearings Panel, Section 4 – to All Reports.

This document records the Hearings Panel decisions relating to the “Key Issues” raised during the Hearings, one of which is “Growth and Development”.[5]

The full report makes it clear that the UGB is deemed necessary only because it is an “integral” part of a belief system that is not supported by any analysis or observation. Indeed, where statements are made in support of the UGB they are usually demonstrably wrong in theory, and have already been proven wrong in practice.

For example, the Report opens with:

4.1 GROWTH AND DEVELOPMENT

4.1.1 The Growth Concept, Land Use and Transport and the MUL (UGB)

Issue

The MUL is integral to the Growth Concept and to the integration of land use and transport.

Evidence was presented for and against the effectiveness of the MUL as a key policy tool to manage growth in the Auckland Region.

Recommended Policy Direction

  • Retain the MUL in the RPS (Regional Policy Statement) as a key policy tool supporting the Growth Concept in the Auckland Region.

Reasons

The MUL and high density centres and corridors are fundamental components of the Growth Concept contained within the RGS (Regional Growth Strategy). Without these components it is unlikely that integration of land use and transport could be realistically achieved within the Auckland region.

In other words, the Auckland Region needs the MUL, because the Growth Concept needs the MUL, and the Growth Concept is needed by the Regional Growth Strategy, which in turn is needed to achieve the integration of land use and transport.

We know that bureaucrats are masters of “passing the buck” but this document has raised it to an art form. And these arguments are used in support of UGBs round the world.

This circular argument is followed by a series of unfounded assertions such as ”More compact urban forms have significant advantages when compared to lower density.” This is a totally untestable statement, if only because it does not provide the base-line against which either “more compact” or “lower density” has been measured, or will be measured in future.

Essentially, this Report confirms that the MUL is only “appropriate” or “necessary” because it is deemed to be an essential part of the “Growth Concept” which, as the report makes clear, is not up for discussion.

The reasons given for the MUL not affecting housing affordability are simply fatuous. For example the Panel accepts the argument that:

  • While the MUL has an effect through restraint on supply, it is the supply of dwellings rather than the supply of land that is the key price determinant of housing.

This implies that the supply of dwellings is independent of the supply of land. In fact the two normally come as a package. One seldom buys a house resting on “thin air.”

The Panel also appears to believe that “intensification provides more dwellings at lower per unit land cost” and hence improves affordability. The Panel overlooks the fact that the value of a piece of land is largely determined by the number of dwellings that can be placed on the land. Once land is zoned to a higher density the price goes up. Also, construction of high-density housing is inherently more expensive than low density low-rise housing, especially in New Zealand where both wind loads and earthquake loads are so high. The same applies to much of California.

2.2The “Necessity” is Self-Referencing.

Generally, the economic arguments in favour of UGBs are so weak, or so wrong, that the Hearings Panel was clearly persuaded that the UGB is needed, because it is needed because the Growth Strategy needs it.

One might reasonably suspect that without the UGB people might be set free to live where they like – which means the central planners would lose control

3.Are UGBs Really Necessary?

Smart Growth planners and their supporters continue to argue that UGBs are necessary. But are they really “necessary” in the ordinary sense of the word – i.e. in the sense that a a beating heart is necessary to keep a person alive?

The short answer is obviously no, because the vast majority of cities in the world have not imposed UGBs, have never imposed UGBs, and have no proposals to impose UGBs.

If UGBs are genuinely necessary then they would be commonplace and found world-wide, whereas they are the exception rather than the rule. Nicki Sitko writing in 2005 on “Urban Growth Boundaries: Economic Development Tool or Unwanted Interference”[6] notes that:

The most notable implementation of a UGB is Portland, Oregon, which created an urban growth boundary in 1979 after the state passed the 1973 Land Conservation and Development Act requiring all cities in the state to plan for them. Other notable cities that have adopted UGbs include, Seattle, Washington; Boulder, Colorado; Lancaster County , Pennsylvania; and Minneapolis/St. Paul, Minnesota. Internationally, London, Copenhagen and Vancouver also use UGBs (Byrd 1999, Maryland 1992).

Demographia provides a similar list which also includes cities such as Melbourne and Sydney in Australia, Auckland and Christchurch in New Zealand, but the number of cities not on the list is obviously much greater than those in the UGB “club”. The Demographia surveys include literally hundreds of cities without UGBs or the other trappings of Smart Growth.

There are no reports to suggest that all those cities that are “UGB deficient” are collapsing or in general disarray. In fact the opposite is true. The cities with the least affordable housing, the most congestion, and the slowest growth rates are those which have adopted UGBs and the policies which go with them.[7]

4.Other Arguments.

4.1The Aesthetic and Economic arguments.

In other venues the advocates of UGBs insist they are necessary because of the following aesthetic and economic[8] arguments:

  • UGBs are needed to maintain a clear boundary between urban and rural development.
  • UGBs provide certainty for developers who presumably otherwise would not know where to carry out their developments.
  • UGBs prevents speculation in land because developers know they can develop only within the UGB area.
4.2The Romantic Allure of the “Walled City”.[9]

When UGBs are firmly linked to Smart Growth packages, they are frequently deemed “necessary” because they mark a clear boundary line between urban and rural areas. The US planners’ term, “Urban Growth Boundaries”, describes their “visual” objective, which is to provide a clear visual “boundary” between the urban and rural areas. Smart Growth is usually linked to policies intended to promote something called “sustainable urban form”. If something is to have a “form” it presumably must have a clear boundary. Presumably if the form is uncontrolled, then the boundaries will be misshapen, intermittent, ad hoc, or “chaotic” – or otherwise “out of control”.

The Californian information package, “Urban Growth Boundaries” by the Greenbelt Alliance[10], explains:

What’s an Urban Growth Boundary?

An urban growth boundary is an officially adopted and mapped line that separates an urban area from its surrounding greenbelt of open lands, including farms, watersheds and parks.

Why bother with an urban growth boundary? Isn’t it just another city limit line?

A UGB is more than just a line separating cities from countryside. As one urban analyst has noted, a long-term boundary is “a pro-active growth management tool that seeks to contain, control, direct or phase growth in order to promote more compact, contiguous urban development.”

Back in 1991 the New Zealand Parliament was persuaded, and some Courts still accept, that the RMA was intended to remove the power of the planners to “direct and control the use of land”. UGBs simply hand that power back. Giving bureaucrats the power to contain, control, direct or phase growth is rather like giving them ownership of the “means of production distribution and exchange” – and that experiment failed to deliver the goods.

The Greenbelt Alliance[11] package includes a cartoon illustration of the urban growth boundary which shows a medium-density town built sharply up to the nicely curved “boundary” (presumably part of a near circle) while the “pure”[12] and “unmodified” open lands lie outside this curved line.

Separating the Urban from the Rural Zone – a truly “artificial” boundary.

Actually, these lands are arable “strips” of orchards and the like and are neither “natural” nor “unmodified” but somehow the planners have managed to equate rural activities with a state of nature, presumably reflecting the long standing prejudice against human activities in the so called “open space”.[13] It remains unclear whether the Smart Growth urge for intensification and vibrant urban communities is really driven by a love of city life or more by the hatred of urban activity in “despoiling” the countryside. I shall leave the argument to others.

Such a clear geometric pattern of a tightly encircled urban form, with pure open space beyond, is totally unnatural, and without historical precedent, unless we count the early fortified towns and villages enclosed within high walls to keep out the marauding tribes of bandits and barbarians.

As civilisations developed, and people felt more secure, these walled cities soon spread out beyond their walls into the surrounding countryside. The edge of the typical city became more like a “fractal”, following the spontaneous order of deterministic chaos, rather than a rigid geometric boundary line striving for the classical forms of circle, pentagon or square.[14]

These natural fractal patterns are found everywhere in the world – we see them routinely in Television programs about home-seekers in France, Spain, and Italy – where people have been free to locate their diverse activities as they see fit. Those landscapes are not scattered with random “ad hoc” development – they reflect the natural patterns of spontaneous order, which in turn reflect the underlying landforms, economies, and living habits of the people. While a few people (normally the most wealthy) choose to live in splendid isolation, most form into clusters, which can be hamlets, villages, towns, and cities. The Manhattan skyline is the most famous fractal cluster of all.

The people who find these natural but complex patterns unacceptable are those central planners who feel compelled to impose their aesthetic preference for simple classic geometric forms on populations who fall under their control.

Governments and Councils have long influenced the direction and thrust of urban expansion by their decisions on the location of roads and service lines. These have normally responded to a mix of topographical realities, and the markets’ preferences for location. This allows a sensible “chaotic”, or fractal edge, where natural features, and rural and urban activities, interweave and interact in the time-honored way. The result is a diverse, interesting, and cost-effective pattern of land-use that embodies peoples’ choices and preferences. (See Christopher Alexander's work on “The Pattern Language”, “The Timeless Way of Building” “A City is not a Tree” and more recently the many books on the mathematics of deterministic chaos such as Gribben's “Deep Simplicity” etc.)