WellingtonFebruary 16, 2024

How Wellington’s housing panel reached its anti-housing conclusions

Wellington editor

A fringe economist, a narrow frame of evidence, and planners who made up their own minds on the law of supply and demand. The story of how Wellington’s independent hearing panel turned against new housing.

The independent hearings panel for Wellington’s new District Plan has stripped back new housing capacity, expanded character areas, decided the Johnsonville train isn’t a train, and made perplexing rulings about whether it’s possible to walk up a hill.

The panel’s recommendations have been criticised by the infrastructure commission, several prominent economists, MPs across the political spectrum and affected citizens as being restrictive and often just plain weird. But the big unanswered question was: how did they reach such controversial conclusions?

This week, for the first time, independent hearings panel chair Trevor Robinson fronted up to Wellington city councillors. After four hours of questioning over two days, its finally becoming clear how the panel reached its unusual findings.

Almost every weird decision, every strange conclusion, every move to reduce housing capacity, all comes back to one person: Australia-based economist Dr Tim Helm.

Helm was hired by the Newtown Residents’ Association, the Onslow Residents Community Association, and the Wellington’s Character Charitable Trust. He argued “zoning for additional capacity does not change housing supply or affordability”. He’s one of the only economists in the world who has taken that stance. Helm’s evidence included self-written blog posts claiming Auckland’s upzoning didn’t lead to more housing – a position which has been debunked, according to Motu economist Stuart Donovan.

Councillor Rebecca Matthews asked if it was appropriate for Helm to cite his own blog posts as evidence. Robinson revealed he hadn’t actually read Helm’s research. “I wasn’t aware that Dr Helm cited a blog post. I can’t recall him doing that. I certainly can’t recall reading it, I’m pretty sure I didn’t.”

Robinson said Helm’s oral testimony convinced him the jury was still out on whether upzoning caused housing growth. “Whatever may or may not have happened in Auckland, we didn’t have any evidence before us on how, or why, or the extent to which it was relevant to Wellington … We saw it as a red herring.”

Helm said the proposed District Plan already provided more housing capacity than was needed, and any extra would be “like pushing on string”.

The economist for Kāinga Ora, Mike Cullen, argued a more mainstream view: enabling even more housing above and beyond what the plan already provided would likely result in more competition, more diverse developments, and lower prices.

Cullen wanted the council to take a “more liberal than restrictive view” of new housing. “In planning for growth and development, density is regarded as a good thing if applied in these areas, with the further point that all else being equal, more density is better (economically) than less density.”

Cullen said the District Plan was “too low and at risk of not meeting demand”. Wellington already has a housing shortfall of 10,222, to add to the 36,000 new houses it is projected to need over the next 30 years, meaning 93% of all possible sites would need to be fully developed just to keep pace with population growth.

Robinson told the council he found Helm’s evidence more compelling than Cullen’s. “We accepted Dr Helm’s economic evidence, that because so much development had been enabled in the plan already, adding more would make no meaningful difference.” Helm’s argument that enabling further supply wouldn’t improve affordability “appeared credible to us,” Robinson said. “I put the contrary propositions to Mr Cullen and his answers appeared less credible to us.”

Matthews asked whether it mattered that Helm was arguing a fringe economic position, which is “out of step with the entire profession’s view.”

“We did not study the tomes that have been written by economists trying to analyse this,” Robinson replied. “We did not have evidence of ‘what is the prevailing economic view’, we had competing economic evidence, and we had to make a judgement on which we thought was better founded. In terms of Dr Helm being out of step: in my mind, it’s not a numbers game, it’s who has the best analysis.”

Robinson is not an economist. None of the eight panel members are economists. Despite that, the panel felt it was responsible for deciding whether the laws of supply and demand apply to housing, and used it to make sweeping decisions about the future of housing in Wellington.

The panel latched onto Dr Helm’s argument that extra capacity wouldn’t improve supply or affordability. It was the key justification for the decision to expand character areas – because excess capacity meant it wasn’t necessary to densify the inner suburbs.

The same argument was used to reject this entire list of upzoning requests from Kāinga Ora and other private developers:

Increase the medium density height limit from 11m to 18m.
Increase the high density height limit from 22m to 29m-43m, depending on location.
Add high density areas to Aro Valley.
Make most of Newtown a high density area.
Make Berhampore a high density area.
Make most of Mount Cook a high density area.
Make Oriental Bay a high density area, up to 36m.
Make Mount Victoria a high density area.
Increase the height limit in Island Bay from 14m to 18m.
Increase the height limit in Tawa from 21m to 29m.
Add high density zoning south of Victoria University, Kelburn.
Increase the height limit in the Johnsonville town centre from 21m to 36m.
Upgrade Takapu Valley to a medium density zone.
Upgrade five other new residential developments from low to medium density zones.

If the panel had sided with Cullen’s view, it could have treated these requests as a cherry on top of the housing sundae, extra wiggle room to make sure Wellington was doing absolutely all it could to address the housing crisis. Instead, it sided with Helm’s view, and decided there was no point doing any of it.

All this bears the question: if the panel’s decision about the economics of housing was so important, why did only two economists give evidence?

One person who submitted on the plan told The Spinoff it never occurred to them to find an economist to support their pro-density argument. They assumed the idea that more housing capacity leads to more housing and better affordability was a basic, widely accepted fact, rather than something they had to prove.

Other highlights from the War for Wellington:

Panel chair admits he mischaracterised Generation Zero

Youth-led climate change movement Generation Zero and its representative, Marko Garlick, had a tough time with the panel. The group’s attempts to push for denser housing in the city centre and near public transport were repeatedly rejected and dismissed.

The panel even snuck in this snide, climate-change-themed dig: “Dr Helm described the surplus capacity enabled by the proposed District Plan as “an inconvenient truth” for those, like Mr Garlick, who told us that planning controls play a dominant role in housing affordability. We consider that quite an apt description in the circumstances.”

One part of the panel’s reports said Garlick had “provided no details or analysis” to show upzoning would increase housing supply or affordability. This was not true. In both his written statements and oral evidence, Garlick provided several studies to back up his statements.

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Councillor Ben McNulty asked Robinson if this was a mischaracterisation. “It might be,” Robinson admitted. “I would need to listen again to the tape. If I have misdescribed Mr Garlick’s evidence, I would apologise to him. I, and my colleagues, wrote our reports based on the notes we took and the written evidence we had … I relied on the notes I took of what Mr Garlick said. If those notes were in error, then what I contributed to the report was probably an error.”

The Spinoff identified a second instance where the panel misrepresented Generation Zero’s evidence.

The panel’s report on character areas says “Generation Zero told us that rents in inner-city suburbs would remain high” even if the areas were upzoned. But no one from Generation Zero ever said that. In fact, Garlick told the panel the exact opposite – that upzoning the inner suburbs would “provide greater opportunities for residential development … thereby reducing inner-city housing prices” (my emphasis).

Walking is still an impossible mystery

One of the strangest events of the whole District Plan process was the panel’s decision to reduce the city centre walking catchments, where six storey apartments are allowed by default. The panel refused to consider census data showing the areas where Wellingtonians walk to work, because the census had only asked how people get to work and didn’t ask how they got home.

Several councillors were bemused and asked why it was so hard to believe someone who walked to work would walk home. Robinson doubled down on the panel’s decision. “There was an evidential hole,” he said. “The question was how you get to work, so how people get home is a big question upon which we have no meaningful evidence, which left us in something of a quandary.”

Robinson revealed the panel also dismissed the council’s own statistical modelling of walking catchments. “All the empirical data was based off fit trampers who had Fitbits, because they were the only ones who could provide the data, and it was skewing the end results,” he said.

That claim prompted Sean Audain, the council’s strategic planning manager, to interrupt Robinson. As a council officer, he couldn’t directly say Robinson was wrong, but he diplomatically urged councillors to read the report he was referring to, and hinted at how councillors could overturn the panel’s findings.

“Walkability has a range of definitions in international town planning, and the weight you decide to place on different forms of evidence would be the basis of an amendment, should you wish to make one,” Audain said.

It turns out the report was based on Strava, not Fitbit, and it was based on regular commuters, not trampers. It acknowledged the data was biased towards faster walkers, but balanced that out with 48 pages of mathematical modelling and dozens of other walking studies to account for the speed of average walkers.

What will happen next?

The independent hearings panel is still gradually releasing its recommendations, though the most important decisions about housing are out already. The remaining reports focus on niche issues like earthworks, noise, and subdivisions.

The recommendations of the independent hearings panel are not final. Wellington city councillors still have the chance to make changes to the District Plan in a meeting on March 14, as long as they can get a majority vote for their amendments. Any changes the council makes will need to be signed off by the minister for the environment.

How to follow along

If you want to stay on top of everything that happens throughout this process, subscribe to The Spinoff’s War for Wellington newsletter. Every week, we’ll send a roundup of the most important stories about the District Plan process and the future of housing in Wellington. It will include highlights from our own coverage, perspectives from experts and activists, and the best reporting from other media around Wellington.

Keep going!

OPINIONPoliticsFebruary 15, 2024

Opinion: Wellington’s housing panel is out of step with the economic evidence

Stuart Donovan

Guest writer

The independent hearings panel for Wellington’s District Plan claims upzoning won’t enable more housing or improve affordability. Economist Stu Donovan takes a critical look at the evidence.

Little Wellington is facing big decisions about whether to embrace more apartments and townhouses. The hot question is: will upzoning lead to more houses and improve affordability? According to the independent hearings panel making recommendations on Wellington’s proposed District Plan, the answer is no. In its first report, the panel decided “enabling intensification does not, of itself, improve or even address affordability”.

These views are – to put it politely – wildly out of step with the economic evidence. To understand why, we only need to look at Auckland, where the Unitary Plan enabled widespread upzoning from circa 2013 onwards.

The number of building consents issued per 1,000 people annually fell after downzoning in 2005 and remained low until the Auckland Unitary Plan began to be adopted from 2013 onwards – after which consents surged to all-time highs.

In the eight years since Auckland upzoned, 112,000 new consents – one for every five existing homes – have been issued. Around 90% of these consents turn into new houses, so it’s fair to say housing supply in Auckland is booming.

That doesn’t necessarily prove that those new houses were built because of upzoning. To figure that out, we need to account for the hypothetical scenario (or, “counterfactual”) where Auckland hadn’t upzoned. Thankfully, researchers have been working hard on these gnarly questions. This study compares consents in upzoned residential areas to non-upzoned residential areas within Auckland and finds upzoning caused an extra 22,000 consents over five years. Another study compares consents in Auckland to other similar cities in New Zealand and finds that upzoning caused an additional 43,500 consents. These are big, chonky causal effects.

What about prices? Well, a third study finds that rents for two- and three-bedroom dwellings in Auckland declined by around 20-30% in real terms after upzoning. Together, these three studies find upzoning in Auckland caused the supply of housing to increase and the price of housing to fall.

Submissions from several people and groups, like Generation Zero, pointed to the Auckland experience as evidence of the benefits of upzoning, but the panel was not convinced, writing that the submitters “provided no details or analysis that might have demonstrated either that there was a causal relationship between these changes or that the same result would likely follow in Wellington.”

The most serious problem here is that the panel was directed to detailed economic evidence that analysed the effects of upzoning in Auckland. This evidence found that upzoning had increased supply and reduced prices in Auckland, and that the same could be expected to occur in Wellington.

The panel is meant to be full of planning experts. That’s why they’re appointed to the role. Yet, they seemed unfamiliar with evidence on the AUP, which is surprising because the AUP is probably the biggest thing to happen to planning in New Zealand in recent decades. I’m very serious when I say that Auckland is home to the most rigorously studied upzoning the world has ever seen, and it’s right in the panel’s backyard.

As far as I can find there exists no counter-evidence to the submitters’ claims. There are zero published economic studies (at least that I have found) that concluded upzoning has no causal effects on housing supply in Auckland. In fact, the best evidence the panel can muster is a submission that references a blog post.

Indeed, most of the panel’s positions and recommendations relied heavily on evidence submitted by Dr Tim Helm, who acted as an expert witness for the Newtown Residents Association. In his evidence, Dr Helm cited a blog post that he had co-authored (“published”), which critiqued one of the three studies on Auckland’s upzoning that we discussed above. To start, I’d suggest that a blog post is a fairly weak piece of evidence to rely too heavily on. Even more problematic, however, is Dr Helm’s failure to mention that the criticisms in his blog post and testimony have, themselves, been strongly critiqued – and in my view, comprehensively debunked – in a blog post written by another economist. I suggest the failure to provide a balanced view of this evidence raises serious questions about Dr Helm’s conduct as an expert witness and, by extension, the panel’s reliance on his testimony to inform its own positions.

That said, Dr Helm’s evidence does provide some useful theoretical insights into housing dynamics. The problem is, he uses this theory to draw an extreme conclusion: “zoning rules just shape where housing goes and what it looks like – not how much is built”. This is the opposite conclusion to the Auckland research, which shows clear causal links between upzoning and building.

Now, Dr Helm might try to argue that differences in the rate of supply between cities over time are due to differences in demand, such as population growth. For this to be a strong argument, however, Dr Helm would need to provide empirical evidence to support his theoretical claims, but he does not – or, at least not to a level that I find convincing. When I do try and test the implications of his theory, for example, by comparing the rate of supply with the change in the population, like I start to do here, then I find the housing supply gap between Auckland and Wellington widens. So, Helm’s relatively extreme theory isn’t supported by evidence or data. And keep in mind it’s Dr Helm’s job to make that case, not mine.

What about the second part of the IHP’s argument, which questions whether these effects are “likely to follow in Wellington”? This hot take is deeply problematic for four cold, hard reasons.

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First, the effects of upzoning on housing supply (higher) and prices (lower) follow directly from basic economic theories. While there certainly are some exceptions, submitters should not be expected to provide evidence that basic economic theory was likely to apply in Wellington. If the panel considers that this theory does not apply, then the onus and responsibility is on them to make the case. As it is the panel that is making the extraordinary claims, it is the panel that needs to supply the extraordinary evidence. In my view, the panel doesn’t make this case because it can’t: The vast majority of evidence doesn’t support the panel’s positions, even when one takes Dr Helm’s submission at face value.

Second, and building on this theme, the effects of upzoning have been documented in many studies and places globally. From Mumbai to California to Atlanta, Austin, Chicago, Denver, Los Angeles, New York City, Philadelphia, Portland, San Francisco, Seattle, and Washington DC, studies consistently find that upzoning boosts housing supply and reduces prices. Another recent study from renowned researchers went further and used global data to show taller buildings lead to lower rents, less sprawl, higher wages, and lower commuting costs. Given the voluminous evidence, I’d again suggest that the onus is on the panel to justify its position that upzoning wouldn’t have similar effects in Wellington to elsewhere.

Third, the panel’s implicit assumption that upzoning wouldn’t have similar effects in Wellington isn’t supported by data. Housing supply in Wellington has lagged behind Auckland for most of the last three decades, with the gap narrowing and widening following downzoning and upzoning, respectively – precisely as you would predict based on the economic evidence.

Similarly, since 2016, rents in Wellington have increased faster than Auckland. Importantly, the detailed economic evidence submitted to the panel specifically modelled the effects of upzoning on Wellington and found it was of a similar magnitude to other cities in New Zealand. Just to the north, meanwhile, the small but mighty Hutt City has seen consents surge to record highs after upzoning. The panel’s unusual views on upzoning and its implicit, unsubstantiated assumption of Wellington exceptionalism sits horribly out-of-step with this evidence and the data.

The fact is that simple analyses of publicly-available data show that the rate of housing supply falls after downzoning and grows after upzoning. Boring old conventional economics carries the day again, pulling the rug out from under the panel’s recommendations.

So why do we care? Well, the panel’s position on the effects of upzoning and its relevance to Wellington have underpinned their many recommendations to reduce housing capacity. The panel concluded, again pointing to evidence from Dr Helm, that the proposed plan has “sufficient capacity” to meet “expected demand” – therefore, there was no problem with reducing housing capacity. This assumption that downzoning is costless does not stand up to economic scrutiny.

The panel does not consider, for example, whether the capacity that they recommend retaining is a substitute for the many locations where they recommend downzoning, such as the inner city character areas. Different locations can vary enormously in terms of their accessibility and amenities – even over relatively short distances. For this reason, policies that reduce supply in some locations but increase it in others can still have large and tangible economic costs.

Where to next? I suspect that both Wellington City Council and central government are taking legal advice on whether these apparent errors of economic fact constitute errors of law. Spicy!

Stepping back, however, this episode highlights deeper, more structural problems with the role of economic evidence in planning processes in New Zealand. The law that governs the District Plan process, the NPS-UD, has the objective to “improve housing affordability by supporting competitive land and development markets,” which in my view the panel does not take sufficiently seriously.

The law also says that any move to restrict housing below that required by the NPS-UD and MDRS must “assess the costs and broader impacts of imposing those limits”. Wellington’s panel dismissed the latter requirement and recommended strict limits on development below those required by law without assessing their costs or quantifying their impacts. In New Zealand, our planning processes somehow manage to be both totally costless and yet extremely costly, all at the same time.

The good news for Wellington is the panel’s recommendations have been criticised by politicians of all stripes. Many people seem to clearly think that New Zealand would benefit from enabling more housing. And with some political leadership from central and local government, I get the sense that this is still possible to achieve. For its part, Wellington City Council now has the chance to reject the panel’s recommendations for downzoning, while ministers could also end up weighing in. In general, I remain optimistic that New Zealand will continue to adopt evidence-based housing policies that help more people get into better and more affordable homes.

Stuart Donovan is a senior fellow for Motu Economic and Public Policy Research in Wellington. Stuart currently resides in Brisbane with his family and three worm farms. Stuart does not own property in Wellington, but he would consider doing so if prices were to fall.