PPP

Public Private Partnership:

  • Protection: The first role of government is to ensure the people and planet are protected
  • Permission: The second role of government is to give permission with the minimum necessary cost of paperwork
  • Performance: The role of the private partner is to perform; to deliver the town, settlement or development at the
    • lowest price
    • best product
    • best relationship with customer

An effective public private partnership restores the balance of roles held by the public sector (government) and the private sector (business).

When government takes on the role of taxing to spend on public housing, the results stigmatise the client base. Living on the dole, living in a state house, being a caseload for social workers, strips dignity from the beneficiary. It produces many negative side effects, including crime, domestic violence, substance abuse, teen pregnancy, suicide... the list is long and it is unnecessary.

Where government is effective is to provide public protection both of people and the planet. It establishes the boundary conditions to ensure the private sector creates, as opposed to converts, wealth. Making a profit on a product that as a side effect hurts people or pollutes the planet is wealth conversion. Making a profit that does not is wealth creation.

Once it is assured that the proposal does not have adverse effects or side effects, the proper role of government is to give permission. Let business get on with doing the job.

The obligation of business then is to perform; to do what they say they will do, within the protections and permissions proscribed by government. This includes ensuring housing is affordable by all, that people are able to earn a living wage and communities are safe at a minimum, with the aspiration to be socially and culturally enriched for all.

Executive Summary

Can a PPP build a prototype Market Town somewhere in NZ using the proposed Urban Development Authority (UDA) legislation?

This would be a public-private partnership in which the role of government is protection and permission, and the role of the private partner is performance, to deliver on the promise, to implement the purpose.

Where? Unlike conventional development which relies of the existing regional economy, and therefore is built on infill, or the next band of empty or underdeveloped land beyond the existing suburban sprawl, a MarketTown is a self-supporting local economy which needs no adjacent infrastructure other than good road access for delivery trucks. This means that rural land can be selected that may still be in large-section ownership (the average NZ farm is 160 hectares), probably in low-grade agricultural production such as dairy.

The business case is compelling: Dairy farms tend to have a ratio of one cow per acre producing 400 kg of milk solids a year. A 100 hectare urban core will replace 220 cows with 10,000 people. 220 cows generate $280 thousand per year in gross income. A 10,000 population MarketTown can be expected to generate $350 million in gross income (presumes 4,000 households @ NZ average median household income). High quality farm land, with fertile soils that grow vegetables (such as the volcanic soils of Auckland's Botany Downs that were covered by suburban sprawl) should not be used.

There are some locations that are better than others. The first site should be one that is most likely to sell in the shortest period of time. Access either by road or commuter air link to Auckland Airport is important. An area with a current housing shortage will make it easier to sell in short order. Relatively flat land is helpful. In site selection note that all amenities will be self-contained. Schools, recreation, shopping and other destination-activities will be within the town boundary. As such, it does not need to be located near existing services such as schools, shopping malls or services.

How?: It is proposed that territorial authorities bid to host a MarketTown built as a UDA so local residents do not feel the project is being laid upon them. With its surrounding Greenbelt to prevent cross-boundary conflicts and a design that eliminates the need to drive, it avoids adverse effects that annoy neighbours. It is not a gated community, thus it will become a socially and culturally enriched destination for people in the host region. It is expected to pay more in rates than it asks of the host territorial authority. Most importantly, it becomes an economic engine for the region - a diverse engine not dependent on primary industries. 

What?: A Market Town is a self-supporting local economy that provides almost all day-to-day destinations within walking distance. No cars within the urban core, no need for outbound commuters. If permitted by law and health officials, it intends to be water and energy independent. It is to be a showcase of sustainability. In specifics, about 200 hectares is optimal for every 10,000 population town. Half is urban core, half is surrounding greenbelt.

Larger towns (35,000 population) and satellite cities (60,000 population) should use biological principles of expansion in which optimal cell size is established (neighbourhood about 500 people, local control over local affairs, about 10,000 people), and the urban units placed side by side, so that local control over local matters is maintained. As can be seen in Auckland's supercity, when one centralises decision-making over local matters, a disconnected bureaucracy arises and becomes entrenched, spawning all sorts of unanticipated negative side effects.

Urban Core The centre of the urban core is a cosmopolitan town centre surrounded by multiple side-by-side villages, each with an average of 500 people on 4 hectares. By creating these separate neighbourhoods with their own qualities, local people take care of their own. When living in groups or territories of 250-750, everyone knows each other, everyone is known by the others. It is human nature for such groups to sort out their own concerns and issues rather than call in outside, paid officials to do so for them. This social magic number has been proven in tribes, military, schools, communities and business. The smallest unit is the village (500) which makes up the town (10,000) that is made of a cosmopolitan town centre surrounded by about 20 villages. A large town would be made of multiples of 10,000 unit towns, and a satellite city would be made of several large towns. With each jump in growth, some units are duplicated whereas others involved shared infrastructure (such as a single solar array or zero-waste processing plant).

Greenbelt: Surrounding the urban core is a buffer zone with no residents. It includes parks, gardens, native reserves, festival, sports and equestrian fields, utilities, the motorpool, freight depot and a walk-to, clean-tech industrial park. The Greenbelt provides open space and access to Nature for the MarketTown citizens, and it prevents cross boundary conflicts with the surrounding rural lifestyle and country folk who were there first. All they will see is trees and greenery.

PPP: It is proposed that this be built as a PPP with an international company experienced in infrastructure projects larger than any done in New Zealand. The private partner will provide the funding, the tooling, the expertise and manage all aspects of the project, including construction using on-site temporary factories to build the whole town in 12 to 18 months.

Environmental Standard: The project would aim to be a sustainability showcase. This means far more than carbon neutral or properly insulated. Green homes do not make a community; they do not make an economy and they do not make an enriched culture. The baseline of a Market Town is carbon neutral, zero waste, with substantially less motor vehicle use, generating its own energy, harvesting rainwater and use advanced water saving systems, reuse water and dispose of its wastewater as a surplus resource.

Beyond that baseline it also implements  the RMA purpose of enabling people and communities to provide for their economic, social and cultural wellbeing health and safety, not just protecting and preserving the environment. It would enable the people as settlers, engaging them in the process of forming their settlement. It would encourage the formation of communities by designing a town made of side-by-side villages, where the character of each village would be defined by its founding settlers.

It invests in an infrastructure framework that fosters social and cultural enrichment in the same way a framework set on a sandy sea bottom fosters rich marine life - the inert framework does not tell the colonising flora and fauna what to do or how to grow, it merely provides the structure that makes growth possible.

Affordable: The 10:1 multiplier of median home price to median household annual income is destructive to NZ's well being. In order to make both homes and owner-occupied businesses affordable the following will happen:

  1. No capital gain on raw land: If, for example, a 200 hectare farm is purchased for $40 million, and it is rezoned into 4,000 sections, the raw land cost would be $10,000, not what the market will bear (say $100,000)
  2. UDA Plan: The plan for the project will exceed RMA standards, but it will not add to home prices by spending excessive amounts on consultants and lawyers
  3. CodeMark: 99% of buildings will be based on CodeMark approval to lower the cost of consent.
  4. 25% Parallel market: In addition to lower the price of all homes, targeted groups that cannot compete (such as teachers) would have subsidised housing

The Power of People is Innovation and Wealth Creation

The win of the America's Cup is a great story of innovation even if at the end, it's sole purpose was to make the Kiwi boat faster than the competition to win a silver cup.

It is the story of how talent is harnessed, how a team is formed where the group is more than the sum of its parts.

What can we learn from this experience?

  • With the shift from an industrial economy to a technology economy the distance that once handicapped New Zealand is no longer relevant
  • If we provide the resources to talented people who organise themselves into a focused team, we can create wealth
  • We can do it with a lot less dependence on the petroleum industry. We won the cup by harnessing the wind more efficiently

It really is a new era, but the implications of this new era have not been understood by the real estate development industry that is still designing and building for the 20th century.

It is time to build new forms of habitat, towns that are built not on cars and petroleum, but on technology and fibre-optic global connection.

The Power of Government is Permission and Protection

"The vast majority of 20th century millionaires in America were made by rezoning land." 

Rezoning land does not create wealth, it gives it away to the lucky land banker or developer who owned it when land use changed from rural to medium or high density. In NZ it has caused land prices to skyrocket. It is beginning to damage the future of the younger generations. It is a serious problem that can be cured by a simple UDA requirement. In exchange for permission to rezone, no capital gain shall be taken on the raw land cost.

Permission: The American experiment of separating homes from business, and then creating zones exclusively for single-family homes created a new industry - real estate development. Developers would contribute to political campaigns to get their men elected to county governments. Once in office, their men would rezone farmland the developer owned, rezoning it to either residential or business. Subdivided, the value of the land would be ten times or even a hundred times more than they paid for it. The officials did nothing more than give permission, but in doing they confused public good with pecuniary interest.

Protection: The subdivisions separated homes from business. They separated people into single-family dwellings, where to accomplish the mundane chores of daily life, everyone must drive. This was good for the automobile, petroleum and chemical industries, but eventually it became clear that it was not wealth creation, but wealth conversion. It created lives of comfort for a rising middle class by mortgaging the environment of future generations. It is far more than climate change. To move people around from home to work, school, shops, services and recreation required a vast interlocking global infrastructure that extracts resources from the earth, refines them into products, while asking Nature to absorb the toxic side effects. The officials failed in their duty of protection.

Real protection is understanding why humans desire to live in communities in the first place. How can we design habitat so that it meets peoples needs and enables them to pursue their aspirations? How can we use our technology so that it leaves the planet in better shape than we inherited it?

There are many experts who are focusing on these many questions and who have good answers. It is not for a lack of knowledge or tools. The role of the private partner in the PPP is to find these experts, listen to their answers, and weave their solutions together into a new development pattern that is sustainable, is fulfilling and is practical.


Understanding the Source of the Challenge

Why is it that in the past decade, median real estate prices have jumped to almost 10X median household income, when the traditional rule of thumb was 3X or 4X at most ($50,000 per annum median household income / $200,000 median house price)? Is it a bubble, that will correct itself, or is something else at work, something that requires a different approach to how government provides for and protects its citizens and future generations?

In the past 25 years, the population of the planet has jumped from 5.5 billion to 7.5 billion. But it is not just raw population growth, it is an expansion of the global middle class. The aspirations of this middle class have been defined by America, where the middle class is the high-consumption class.

A recent Brookings Institute report illustrates the challenge:

MiddleClass

ConsumptionChart

In other words, it is not a housing bubble, it is an explosion of the global middle class that in many cases is not seeking capital gain, but capital preservation. Investing in NZ real estate comes with the innate security of a stable nation far from threats of instability. 

Building 20th century suburbs and densifying a car-based urban centre is not the right answer, even if the planet shifts to electric cars.

New Zealand needs a new development pattern, or to me more accurate, needs to revive a very old, timeless, proven settlement pattern.

The frame work is ready to be implemented. The people to do it are in place. All that is required is permission and protection.