12 thoughts on “Guest Post: Turning passengers into shoppers – adopting a Japan-style public transport service model for Auckland”

1. The issue with auckland is Auckland Transport does not own surrounding land near the stations, even if they do, they are not authorised to develop the surrounding land.

   The Panuku and council may like to develop the land, but AT has no incentive to do any TOD nor try hard to improve its service.

   With a poor 20min off peak service, the patronage is going to be poor. It is not feasible for developer to develop the surrounding land.

   Thats why you can see the wasteland around the new Otahuhu train station.

   For it to work, AT has to own some land and can develop it and get rent.

   Ideally there should also be some internal competition between Heavy rail and Light rail, and between stations, lines, and suburbs.

   1. Exactly! Exactly! Exactly! Integrated ownership of the transit system and the sites served by it, and multiple such integrated enterprises competing with each other, is why Japan’s transit works so well. Of course Transit oriented development is going to occur, and be done competitively and attractively, under these conditions!

      It is so rare to encounter someone else who understands this!

      Anglo property rights combined with independent ownership of “transit oriented” sites; and “public” investment and subsidies to mass transit, is a classic case of rentier capitalism, zero-sum transfers of value, and economic injustice. The late great urban economist Colin Clark absolutely nailed it in a 1982 book when he said “…In net effect, the subsidies on rail and subway suburban transport are subsidies to the owners of certain types of land — for which there is no social justification…”

      Anthony Downs wrote the following in 2007:

      “…The cost of land poses a key dilemma for urban planners everywhere who want to concentrate jobs together so they can be best served by public transit. Such concentration raises the costs of land near centers; in fact, it would confer a monopoly advantage on landowners who owned such land and could exploit firms trying to locate there. Now firms want to locate elsewhere to cut their land costs.
      Planned concentration of jobs in a few centers is not consistent with private ownership and control of land. Some type of collective control over that land would be necessary to prevent monopolistic exploitation of land values. In theory, this could be done with high land taxes in such areas and special zoning rules. But adopting those devices is politically difficult in a free enterprise economy….
      “…A similar but less intensive dilemma concerns land near transit stops, where it would be most efficient to concentrate high-density housing and jobs. That also creates ownership monopolies over such land unless it is specially controlled or taxed. Yet focusing development near transit stops is a key to using more transit…”

      The Japanese institutional arrangements around transit beautifully invert these perverse mechanisms; and in fact they operate as a near-perfect substitute for the role of “sprawl” in Anglo urban economies. Competitive sprawl is what has disciplined land rent and averted monopolistic, extractive, predatory land-owner behaviour for decades; this beneficial effect is lost (and reversed) as soon as land-rationing planning policies are introduced. The evidence is incontrovertible, from Britain in the 1950’s, California in the 1970’s; Oregon in the 1980’s, our own cities from the 1990’s. It is simply too incredible to claim factors others than the land-rationing policies as being the coincidental cause of an explosion in land rent in each case.

      Ironically, the perverse consequences WITHIN urban land markets distorted by these policies, greatly undermine the claimed benefits of the land-rationing and prescriptive planning policies. The LSE’s Paul Cheshire (now emeritus) who is an expert in Britain’s distorted urban land markets, nails it when he says that urban property is turned into a speculative commodity like gold, swamping all the usual assumptions by economists about “the market allocating resources to best USE”. There is not a single case, for example, where greater compactness of a city / higher density has resulted in lower average commute times. Comparing like for like population levels, British and US cities have very similar average commute times; the fact that the British cities are around 5 times as dense on average, shows no benefit in the data. One of the reasons for this, is what Downs said above: potential residents and employers are “priced out” of the efficient locations; Japan’s cities have very prominent “articulated density” with residents and employers “priced in” by the competitive transit-property systems. British cities just have relentless crowding everywhere, weighted towards the “least unaffordable” (i.e. most inefficient) locations, and such low rates of redevelopment that the housing stock turnover cycle length is now estimated to be 1000 – 1600 years! In contrast, Japan’s housing-stock turnover cycle is below 40 years!

      The famous Newman and Kenworthy hypothesis about lower energy consumption with density, can be explained by the higher discretionary income in cities with low density. Contrary to the assumption of government urban planners, housing affordability is associated with low density and freedom to sprawl; every median-multiple-3 city is low density. Median-multiple 3 housing versus median-multiple 6 housing (or 8, or 10, or whatever) OBVIOUSLY leaves a LOT more discretionary income in the hands of households to spend on energy for all purposes.

      The price of urban land inside a growth boundary or similar constraint (which removes cheap rural land from “supply”) is “elastic to allowed density”. This is why a city with 5 times the density can have a median housing-unit price 3 times as high even though that housing unit is 1/5 the size of the median unity in a median-multiple-3 city. We see this dramatic explosion in land prices in Auckland, just as has occurred before in Britain, California and Oregon (and has become a latter-day global plague with the fad for saving the planet from urban sprawl). The evidence is much more stark when land values are considered rather than “housing unit prices”. In a single economic cycle, the land values can explode ahistorically by a factor of 20 to 30. The factor is now in the hundreds in Britain, compared to a “free to sprawl” counterfactual.

      I say “good luck” to anyone wanting to do nice attractive “T.O.D.” under these conditions of “land as gold” and mercenary self-interested behaviour by existing site owners under the systemic new powers handed to them by urban planners. .

      1. There is a lot of good thinking from Philip Hayward and I agreed with most of it.

         Something I wish to point out, although low rise sprawl is more affordable to the household, the council who maintain the services (water, power, roads) may not be able to afford it in long term.

         After decades, the road will be old and tired, the water pipe will be expensive to replace. The limited service also stops further intensification. The whole suburb will soon goes into vicious ghettoization phase. The rent drops, poor people moves in, crime goes up, valuation goes down, council rate goes down, local service goes down, etc.

         Another issue with low density suburbia is auto-dependent, which creates unwalkable environment and lack of urban vibrancy that is found in Japan.

         I believe the reason why higher density living is more expensive partly because people values the vibrancy and convenience and wish to pay more for it.

         The best model I believe is to have a hybrid of high density near transit, and lower density house further. In this way the resident has a choice and can pay for whatever he can afford. This will indirectly drives down prices as there will be more competition.

      2. Thanks, Kelvin. Again, I think you are seeing this issue exactly right. “…The best model I believe is to have a hybrid of high density near transit, and lower density house further…”

         That is what “articulated density” is. I believe it is important to avoid “breakdown congestion” in the road network. Even if congestion pricing is used, the actual capacity of the network relative to the users of it is very significant for urban economic efficiency. Effective non-automobile mode shares are only helped by articulated density. Cramming in more houses absolutely everywhere is always a net diseconomy because at the majority of locations, transit is not relevant. We should plan high density (and redevelopment to higher densities should always be very elastic) where there is frequent transit, but everywhere else might as well consist of single family homes with decent size sections. For the great majority of locations where people will use automobiles (or even two-wheeled vehicles) the important thing is for fast road travel to maximise economic demand-enabling, Not highways, by the way: just substantial arterial capacity and good grade separation at major intersections instead of traffic lights.

         I am familiar with density advocates objections to “urban area” density calculations that show New York urban area to have low density, even though it has super-dense Manhattan. These objections (which are correct) is that the “base” for calculations should be “people”, not “land area”. But they are not interested in replicating New York with its articulated density – high density in the right places and low density everywhere else – they want houses crammed in on every inch of surface space, they want congestion and they want driving to be made as inefficient as possible. Another thing they hate confronting, is that the world’s powerhouse urban economies actually have a high proportion of surface area dedicated to street space; they have just built “up” very strongly in the private space in between the streets. Our density advocates struggle to accept that Auckland has the lowest street space as a percentage of surface area, in the entire first world; it is down there with former USSR cities and third world dystopias; but if you suggest that Auckland needs more street space rather than less, and more building “up” instead of carpeting the surface with structures, they have a tantrum.

         One of the consequences of bloody-minded ideologically-driven “carpet development” is that all future re-development, and infrastructure renewal and maintenance, is greatly increased in inconvenience and cost. Our planners have been appallingly incompetent at protecting corridors and providing access to underground infrastructure as infill development has been happening. There was a significant “cost of infrastructure” report a couple of years ago that found that the assumption that infrastructure for increased urban intensities is “cheaper than infrastructure on greenfields” is not necessarily true. Virtually no underground infrastructure in Auckland has significant excess capacity to simply be tapped into; it needs digging up again and re-doing with larger pipes; and this is diabolically disruptive and costly. Going straight from low density to high-rise is probably efficient, but if you have already gone from low density to infilled medium density and you already lack street space and you have already covered your surface area with low-rise houses, you have left yourself with no good options.

         Some smart growth advocates I know of in the USA are coming around to the idea that the correct place for smart growth is on greenfields, with everything done properly “from scratch” this time. I even advocate for a properly-done new alternative CBD on greenfields, with transit-served sites owned by the transit enterprise itself, and no height limits, no NIMBYism, no Heritage protection, Underground infrastructure should have surplus capacity from the outset, and easy access to it for maintenance should be maximised. (I suggest putting it underneath cycle and pedestrian paths). Building “up” in the right places should be the means of achieving density, not minimising surface public space and street space.

         Collapsed-value low-density suburbs in US rust belt cities represent a massive redevelopment opportunity, and there are examples of “rising from the ashes”. If there is a cultural problem making crime intractable, that is not a consequence of low density. The inner cities had these problems too (and some still do).

         Last point: you say “… higher density living is more expensive partly because people values the vibrancy and convenience and wish to pay more for it…”

         Yes, and yet no city has expensive high density housing and cheap low density housing. Either everything is expensive, or nothing is, in relative terms. An extreme “opposite case” I already pointed out is in UK cities, where low density housing is so extremely under-supplied that it commands a massive price premium. No housing in the UK is cheap, not even their apartments. But the most expensive housing of all is the low density housing. Just some guesstimates to illustrate: in a US median-multiple-3 city, a small apartment in the CBD might be $80,000; an inner-suburb townhouse might be $150,000; a suburban McMansion might be $250,000; and a palatial home on 4 acres might be $1,000,000. In a comparable UK city, the inner city apartment is likely to be $600,000; the inner-suburb townhouse $800,000; the suburban McMansion $1,200,000; and the palatial home on 4 acres $30,000.000 (and only people like Elton John and Richard Brandson can afford them).

         Nothing actually affects prices more than “supply” and its responsiveness. This effect is far more powerful than the much-vaunted “amenity” effect. It is absurd to suggest that, say, Liverpool’s land values are dozens of times higher than Nashville’s and housing of all kinds is much more expensive (especially the lower density housing) “because of superior amenity”. You might as well argue that people in a country being gouged by an oligarchy in basic foodstuffs are actually paying for “higher-amenity bread” than people in a free market. I recommend my essay “The Power and Necessity of Consumer Surplus”.

      3. Kelvin if you would like to write a guest post or essay on this flick me an email at view[dot]of[dot]auckland[at]gmail.com

         Cheers
         Ben
         Admin

      4. When looking from Auckland, note how narrow that street in the picture above is. That is, what, 8 metres in total? How many streets over here (outside the CBD) are that narrow?

         Even tiny local streets over here have 8 metres of roadway, plus berms and footpaths. The entire street corridor may be 20 m wide. So I find it quite surprising that Auckland has a low street space as a percentage of surface area. (on the other hand, the street grid is indeed very coarse)

         Also, I have a question about that observation of 40 years turnover. Is there any expectation at all that if a building is replaced, it must be replaced by exactly the same type of building? I guess not. Images from Asian cities (and to lesser degree European cities) always look a bit ‘messy’, which I think is just a consequence of being in a ‘living’ city. Over here, everything has to be ‘orderly’, i.e. entire neighbourhoods of very similar houses, and no possibility of change. Which I imagine greatly cripples the supply of housing in central areas.

      5. This is a really interesting read on housing in Japan:

         http://www.archdaily.com/450212/why-japan-is-crazy-about-housing

         No, there is glorious anarchy of housing styles! Brendon Harre always makes good points about the much more liberal “property rights” of Japanese.

         It is possible that it is Japan’s cultural worship of hygiene that makes them so fond of new houses versus anything that has already been lived in by anyone else. There are some astonishing statistics in that linked article; eg 87% of Japan’s home sales are new homes (compared with only 11–34% in Western countries).

         It is a mistake to overlook cultural factors when attempting to replicate one country’s policy “success” on some metrics, in another country. Actually, it is possible that Japan’s rate of turnover of houses is so rapid that it is wasteful of capital, rather than beneficial rapid redevelopment response to market signals.

         Another cultural factor is that the Japanese do not go in for any “additional private green space” dividend if this option is becoming more and more of a bargain due to demographic shrinkage. They just abandon the exurbs and the fringes and huddle closer in together in the city. Imagine what Kiwis would do if the value of urban land fell so far that 1/4 acre sections were <$200,000! Maybe the demographic collapse in Japan, and the desire for comforting crowds, go along together. But crowded urban conditions are not synonymous with social interaction. Crowds can be made up of loners.

2. The big magical success ingredient in the Japanese transit institutional arrangements is not that the private transit enterprises “diversify into real estate” to prop up the public-transport side of their business. It is that the multiple competitors have ALWAYS seen ridership and “master planned community” with tenants and trip attractors, as part of the same competitive game. In fact Japanese cities grew this way right from Victorian times, with the railway enterprises doing the “sprawling” property development along newly-created subway and rail routes, and retaining ownership of the property.

   Continual redevelopment has been the norm so as to compete for tenants who are also ridership, and compete for trip attractor tenants or even get involved in retailing and other trip-attractor businesses. But the most beautiful feature of this system is that there has always been a competitive tension in RENTS. Every other “transit oriented planning” system in the world, delivers zero-sum capital gains to the independent owners of sites that benefit from transit “investments” and subsidies, whether they bother to develop to potential or not. The “spiky” urban rent curve always results in “pricing out” potential residents and trip-attractor tenants. The Japanese system is the only one that turns this wicked problem on its head.

   Tokyo in particular has the most amazing “articulated density” – tall buildings in the RIGHT places, around the transit hubs and stops. In some locations, multiple transit enterprises subways cross over each other and this is where the most building “up” and redevelopment has occurred. In the rest of the world with independent property owners reaping all the gains, the land rent is “spiky” but the actual height profile of the built area is not, with density perversely going “everywhere”, including where it is INEFFICIENT. Developers must profit on the actual construction, but the more “efficient” the site location, the higher the cost of carrying and financing the site, which squeezes the end margin for the capital outlay. Hence developers are just as likely to obtain less expensive sites at the “wrong” locations, because there is no incentive to them in the form of the gains that actually fall to incumbent site owners. The Japanese system reverses this.

   Hong Kong’s transit system is a monopoly, and its real estate holdings and landlording policy is to charge “rents” that follow the market. There is no competitive incentive to charge lower rents to gain tenants and hence ridership versus similar enterprises operating in the market. Libertarians who like to use HK as an example of low taxes, miss the point that a significant source of government revenue is property rents that are gougingly high, and that the transit system actually turns a profit because its ridership is largely captive. Transit advocates like to imagine that HK with its ultra-high density, is “efficient” and yet HK’s average one-way commute time is something like 55 minutes. Obviously the real estate and rental markets are so distorted that co-location efficiencies are non-existent (in contrast to ultra-sprawling US cities with average commute times less than half HK’s). Not only is HK’s transit ridership captive, they are captives to ultra-long commute distances (at a high ticket cost) as well.

   The world of urban policy is infested witrh cargo-cultist dreaming about replicating Japanese transit and TOD success, without anyone demonstrating that they have the slightest clue WHY it works so uniquely well. The independent owners of sites who reap the benefit of transit “investments” and subsidies will continue to do so, and the perverse incentives for actual redevelopment and intensification will persist. I have communicated these things to Phil Twyford long since, and even proposed that the solution in Auckland is for new developments on greenfields served by new rail routes, with the sites compulsorily acquired and ownership of them permanently vested in the transit system itself. The aim should be to create a new competitive CBD (including a better connection to the airport than the current CBD) and deliberately discipline the rent expectations of the current CBD and start making the site owners there work to create value for once, instead of being constantly on the receiving end of zero-sum gains.

   The optimal outcome would be to collapse the existing CBD’s value so thoroughly that the transit enterprise could scoop up site holdings there cheap and develop them properly – and from then on, the closed circle between value creation and value capture would be a virtuous one.

   Existing Japanese enterprises could even be invited in as partners in projects of this kind.

   One last note of realism: Auckland, even with 2.5 million people (one day) would still be a small city by Japanese standards, and Japan’s small cities are not afflicted with Walter-Mitty dreaming about copying Tokyo for everything. Mundane, un-sexy bus services are the realistic PT norm outside of the megalpolises, and low-rise suburbia is prevalent. Wellington is even worse than Auckland for “piddly little-man Walter Mitty syndrome” dreaming about mini-HK status. The people in an Asian city of half a million would laugh in derision at the thought. Nevertheless, I propose, in good faith, the least stupid possible path of emulation of the successful Japanese system.

   1. To copy Japan there needs to be competition amongst landowners and new housing providers to build within existing suburbia. My suggestion is something like this;
      View at Medium.com

      1. I absolutely agree that that is another factor that helps keep housing affordable in Japan. I am only focusing on the transit institutional arrangements because that is so hard to understand. I would include the freedom of local redevelopment in the category of good policies that nevertheless won’t work “on their own”. They “work” in Japan, in combination with the transit institutional arrangements AND the demographic collapse.

         I know that even while Japan has been collapsing demogaphically, density has been increasing in parts of Tokyo, but this density increase is a powerful demonstrator of the “pulling power” of suppliers of floor space in intense competition with each other for transit ridership. The danger always is that policy will be made (eg in NZ) on the basis of some element of the Japanese system, but which won’t work the same beneficial way in the absence of the other elements.

         Japan’s culture is also highly unusual in that they do not seem to be attracted by anything, even low cost, to private green (backyard) space of their own. As their demographic shrinkage has taken effect, they have “withdrawn” from exurban and fringe suburban locations leaving these like ghost towns. It may be that the aging population and the cultural background (loss of belief in the future) leads them to seek the solace of urban hustle and bustle. Western planners fervently like to imagine that their populations are going to behave in the same way, so as to justify their proscription of suburbia, but the Japanese remain unique. Humanity on the whole reveals a preference for private green space; the less there is of this, the more its price reveals a “shortage”. For example, in Britain, large sections are so rare that they command a price so high that only the 1% can afford them at all. The price “as a large section” is even higher than its price “as redevelopment potential”. The absolute opposite cultural preferences are what show up in Japan.

         This price distortion in British cities is my primary argument against the “YIMBY” movement that imagines that the existing density and the existing “revealed” shortage of private green space is no obstacle to “more density” as a “solution” to affordability. I think Auckland has gone past the point already where shortage of private green space is a factor in supply/demand disequilibria – let alone British cities that are twice as dense as Auckland (and London is 4 times as dense). The Herald reported a couple of years ago that the number of houses on the isthmus with sections of 1/4 acre or larger, was “7”. Seven. Every owner of these properties endures endless harrassment from developers wishing to acquire them. One still sees comments from “experts” about Auckland’s “attachment to the pavlova paradise dream”, which needs to be sacrificed for the good of the planet and “housing affordability”, but such comments are counter-reality nonsense. Auckland has been 3 decades already doing “intensification” completely the wrong way – covering the surface area higgledy-piggledy with low-rise infill housing everywhere regardless of locational efficiency; the complete opposite of “articulated density”. If it ain’t articulated density, it is a certainty that it is “net inefficient”. Auckland is already imploding under this inefficiency.

      2. Brendon if you would like to write a guest post or essay on this flick me an email at view[dot]of[dot]auckland[at]gmail.com

         Cheers
         Ben
         Admin

   2. Philip, I agree with a lot of what you’re saying about transit oriented development in Japan and I am pleased that you have done a lot of thinking on the subject.

      My post is actually not about replicating something from straight out of Tokyo and into Auckland. Having lived in the Tokyo/Yokohama area for many years, such copying into a Auckland environment would be a huge mistake.

      TOD and land use in Fukuoka is actially what Auckland needs to look at. There is much about how things are done in Fukuoka that is of relevance to Auckland’s transit network development…plus the fact that Fukuoka and Auckland are sister cities of long standing.

      My post is pointing out that a Japan model of development when applied thoughfully , will be of much benefit to Auckland. The Asian demographic of our city is such that we do need to look to that part of the world more now for ideas and opportunities to improve in what we’ve started.

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