Hard News by Russell Brown

100

Housing: the Feudal Model

The problems of continuing to build cities outwards rather than up are fairly well documented: such a policy eats up productive or otherwise valuable land, and the cost to existing ratepayers in delivering basic infrastructure further and further out becomes prohibitive. People start having to travel longer and longer distances to work.

Well, the NZ Initiative has a plan. As is often the case in "market" strategies whose ends don't quite meet, the plan rests on the magic of large government subsidies. The authors of the think-tank's latest report contend that councils habitually drag the chain on consents for greenfields development, but could be bucked out of their ways by means of a "Housing Encouragement Grant", which they would rely on in providing services. Given that the grant replaces the traditional levy on developers, who need services in order to sell the houses they build, it seems debatable who is actually getting the grant.

But the really interesting proposal is the bold new regime for private rent-seekers:

The think tank proposes legislation allowing the formation of Community Development Districts modelled on Texas's Municipal Utility Districts. Under the regime, any land not specifically earmarked for environmental or even tribal uses could be set up as an area for development where the Resource Management Act would apply only lightly and where private sector interests borrow to construct infrastructure normally provided by councils.

Those private interests would then have the statutory ability to levy taxes on home owners within those areas to recover their costs and make a profit.

In theory, this proliferation of private, barely regulated micro-authorities would be nimble and democratic, but according to an analysis by the Fordham Law Review the benefits tend to flow away from residents:

In the case of MUDs, real estate developers have become their most vocal advocates and have received most of their benefits. While the regulatory capture story is not new, the surprising extent to which developers control MUDs calls into question the many benefits given to special districts. Many developers integrate MUD financing into their earliest feasibility studies of a development project. Developers support MUDs because MUDs provide a vehicle for them to recoup initial infrastructure expenditures: Typically, MUDs issue bonds in the amount of the expenditure and immediately repay the developer; then, MUDs tax incoming landowners to repay the bond. Without the bonding and taxing powers, MUDs would not be able to provide a wide range of amenities, and developers would not be able to benefit from the construction of infrastructure at low or no cost to them. MUDs thus make exurban developments less risky-and more attractive-by distributing public funds to subsidize private developers' efforts 

Even in Texas, not everyone thinks this is working:

The pro-growth culture is so strong that planners foresee a day when development reaches out 100 miles from Dallas. Yet given the long-term costs behind such a layout, some community leaders believe that unchecked growth is unsustainable.

Commute times are rising. Air quality has declined. Water supplies are strained. And as subdivisions continue to sprout up on the Texas prairie, older communities closer to downtown Dallas have struggled to turn around aging neighborhoods and declining school enrollments and replace outmoded infrastructure.

Some in North Texas have already begun to approach growth more thoughtfully. Of course, no community has all the answers. And curbing this region’s relentless outward push could prove particularly hard, since Texas — its laws, culture and residents — all point the same way: outward.

“Dallas-Fort Worth is rapidly maturing. Its costs are growing,” said Bill Sproull, president and chief executive officer of the Richardson Economic Development Partnership. “These are the natural consequences of suburban growth. I don’t think it’s sustainable if all we have is just unbridled sprawl.”

Note that this model doesn't generally allow for public transport services; it aims to facilitate the building of roads and laying of pipes. And for all that we need solutions on housing, I am really not convinced this is the one. Still, so long as it's not the Unitary Plan encouraging dirty apartment-dwellers in city suburbs, it's all good, right?

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