Cost of Residential Servicing Report Before Committee – UPDATED

Not quite what people were looking for

 

Another item tucked away into the Auckland Development Committee agenda this Thursday is the long-awaited Cost of Residential Servicing Study. I believe it is the Cost of Growth Study rebranded after it was meant to be presented late last year.

In any case we know that the Mayor and through the Auckland Plan has been purporting that the Compact City model is less costly on us at least in terms of infrastructure development compared to sprawl (as Auckland has done). The idea comes from building on top of existing infrastructure and the agglomeration effects from intensification making upgrades to infrastructure (physical and social) cheaper. Greenfield developments require new infrastructure to be built that would connect to existing infrastructure which in turn needs upgrading itself.

A classic example would be the Southern Interceptor in South Auckland. It is ageing and at capacity. To handle the increased pressure from Greenfield developments in Papakura, Karaka, Drury and Paerata the Southern Interceptor will need upgrading – well replacing to allow the sewerage to get to the main wastewater treatment plant in Mangere. So in effect Greenfield developments can get lugged double cost right?

Wrong. 

The study showed that neither the compact city model NOR sprawl were any better than the other in terms of cost for infrastructure. That is some Greenfield developments had cheaper infrastructure costs while some Brownfield developments were more expensive with infrastructure costs.

 

The Report starts on page 253

 

What I did find when Brownfield development infrastructure costs were higher than their relative Greenfield counterparts it was owing to the existing infrastructure having no latent capacity left. Thus very expensive upgrades are needed to give the extra capacity needed. Examples would be the interceptors across urban Auckland being replaced or upgraded at the moment. However, because this give new capacity for the next 50 years and what should be 50 years of growth the relative cost per dwelling in Brownfield should come down over time.

With Greenfield (and this ties in with the overall picture and legacy) you can keep costs down in a decentralised approach at first before hooking up to a centralised system in due course. This is how Municipal Utility Districts work and a summary of that can be seen here: MUDS TO ASSIST GREENFIELD DEVELOPMENT?

 

Transport costs are somewhat complex and showed varying costs for both Brownfield and Greenfield. The complexity is a bit more than what I would stick in this post – thus if I would cover it separately.

Social costs are dependent if it is a park or civic like a school or hospital. This is owing to catchments and who provides for them (Council with parks, Government with hospitals, schools etc).

 

Conclusion?

As the Study dispelled both Council’s Compact City idea AND Sprawlist’s like a Dick Quax (and yes you too Phil from Lower Hutt) idea on growth it seems we need to go back to the drawing board and look at Auckland planning AGAIN. This time maybe a bit more objectively and outside the box in thinking. Because something tells me with the Super City so young but Auckland divided in fragments for so long thus with different infrastructure provisions in that time, different thinking which requires centralised and decentralised provisions is going to be needed.

 

UPDATE: Extra Reference Material

Bob Dey also wrote on the report with these opening remarks:

Case studies make for difficult infrastructure cost comparisons

Auckland has a new “cost of growth” study with a new name – the Cost of residential servicing study – and it won’t satisfy the critics who want to be able to say compact is definitely more expensive than sprawl, or vice versa.

The study findings will go to Auckland Council’s Auckland development committee on Thursday.

The study has figures, but they’re from case studies, so the authors have pointed out that they can’t be taken as gospel for pricing in a particular category, although there are averages for different parts of the region.

Those geographic averages show developments in the north are the most expensive to service, costing around $40,374/dwelling. The south’s average was $38,736, the central area $30,967 and those in the west cost $29,496.

Cost differences between sites reflect a number of different factors. For the greenfield areas the costs are typically driven by the need to expand network infrastructure, water, wastewater & transport.

In brownfield areas, the network infrastructure is generally already in place and, where there is spare capacity in the network, the marginal cost of providing infrastructure to an additional household in these locations is found to be comparatively low.

However, the average cost of expanding the network to cater for growth in these locations may well be higher than in greenfield sites. Consequently, it is important that there is a good level of understanding about the level of excess capacity in the existing networks when planning the location of future developments.

………..

Source and full post: http://www.propbd.co.nz/case-studies-make-difficult-infrastructure-cost-comparisons/

 

One thought on “Cost of Residential Servicing Report Before Committee – UPDATED

  1. Ben, I don’t think it is fair to say that the Report dispelled my arguments about the different urban forms. All I had always said is that the arguments that intensification was cheaper, were wrong. In many cases, what the public has been led to believe is miles from the truth, even if it is only because of exaggeration of a half-truth. Members of the public, if pressed for details of what they believe, would tell you that they think there are many thousands of dollars per dwelling infrastructure costs to be saved by having intensification instead of greenfields, and hence rates will be lower that way. I have always said this is not true; and furthermore even if it was true, it would be more just and fair to simply charge a lump sum tax on all first home buyers when they buy their first home to be applied to paying for the infrastructure for growth.

    Under the status quo, the first home buyers are paying several times as much as this tax would be, and it is not going to government, it is a wealth transfer to vendors of zoned land and existing property, and it is not being captured for something useful like infrastructure spending. But if you proposed such a tax on first home buyers, there would be an outcry at the injustice of it all. The passiveness with which a far more unfair and insupportable wealth transfer is accepted, is a sign of lack of information and understanding. This is really the number one point we should focus on.

    But there is so little in intensification versus greenfields, in terms of infrastructure costs, we should just leave it to development experts to identify where development can be done most competitively. If there is somewhere that intensification makes economic sense, it will get done as well as greenfields growth getting done. Houston is probably the best example of this in the first world today, and the resulting developments are super affordable. I estimate that a true free market like this not only provides fringe suburban McMansions at half the price, it provides CBD floor space at 1/10 the price. This is ironic given that the planners responsible for all the price inflation, say they wish to “increase housing choices”.

    I say more about the false assumption about the ultimate selling prices of new properties that have been provided by intensification, versus those on greenfields, HERE:

    http://www.propbd.co.nz/economic-report-council-exhortation-relax-land-use-rules/#comment-80414

Comments are closed.