Project Auckland: Opportunity costs lie in flood and cyclone response

MOTORWAY FLOODING: South Western motorway under the Southern motorway overbridge is completely flooded on 27 January 2023. Photo / Dean Purcell

The recent weather events that battered Auckland have left the city with significant damage to public and private assets, including infrastructure, land, houses and businesses which will take a lot of work to put right.

Auckland Council chief economist Gary Blick says the city is worse off and while there will be a bump in activity to put the damage right, it will not necessarily mean Auckland is further ahead, with funding and capacity constraints leading to other projects - and their benefits - being deferred.

“Economists think about the opportunity cost,” he says. “What are we forgoing by having to turn our limited resources - labour, capital, equipment - into putting things back.”

As chief economist, Blick is focused on the medium to long-term implications of decisions that are made by the council. His approach to economics is broad, considering trade-offs in resource use as well as the wellbeing of the community.

Recent events have revealed the need for the city to consider its policies for managing future natural disasters and climate change and have focused policy debate on Auckland’s resilience.

Blick says it is important to be quite considered and have a good evidence base around causality and impacts.

“If we are going to take a policy action, we have got to consider all of the impacts on our resources and the associated trade-offs,” he says. “As an example, adapting to the changing climate and natural hazard risk in a way that doesn’t undermine our other objectives such as accommodating growth, enabling more housing, and reducing transport emissions. And we want to respond in a way that is consistent with financial sustainability and the prudent use of public funds.”

Gary Blick. Photo / Supplied

Given the evidence of how natural disasters can impact on mental health, Blick has been reflecting on the potential impact of weather damage on the wellbeing of Aucklanders. “Particularly for younger people, and the disruption it can have on their home life and their engagement with education, training and employment pathways. We are trying to get a good evidence base around that in terms of characteristics of affected households and their potential vulnerabilities.”

Blick is particularly interested in Auckland’s ability to accommodate growth, and its long-term competitiveness and attractiveness to current and prospective residents. With this in mind, he is closely watching Plan Change 78 - the council’s response to the Government’s National Policy Statement on Urban Development - which is now before an independent hearings panel. The initiative was created from a cross-party law in late 2021 when National and Labour collaborated to bring about significant modifications to the existing plans for major urban areas, leading to big changes to the Auckland Unitary Plan.

Some of these include requiring the council to enable buildings of six storeys or more within walking distance of the city centre, large metropolitan centres and around rapid transit stops. It also enables three-storey housing to be built on most residential sites in urban Auckland.

In the aftermath of the January floods, some councillors have expressed concerns about the impact of new housing density laws, fearing multi-storey residential buildings could further strain the already-overburdened infrastructure.

Blick acknowledges the weather events have highlighted challenges that will need to be addressed in policy settings on land use and infrastructure investments. He notes these are discussions many international cities are grappling with, particularly in coastal or flood-prone areas.

Such decisions can have significant and far-reaching consequences for Auckland’s growth patterns. It is Blick’s responsibility as the city’s chief economist to consider and advise on the full range of consequences.

Land use policy and transport infrastructure investment are big, powerful levers for a city’s attractiveness, Blick observes. They influence where households can locate, the accessibility of different locations, and the decision-making of people in New Zealand and overseas who are considering relocating.

“More flexible land use gives households more choice, and the option to locate in locations that are in relatively high demand due to their proximity to jobs, transport links and other urban amenities.”

Enabling more people to locate closer to the things they value is positive for wellbeing and productivity and improves Auckland’s competitiveness in comparison to other cities and regions.

The Auckland Unitary Plan shows the power of changes in land use policy. Upon its implementation in 2016, it increased Auckland’s capacity to accommodate growth and allowed land in some locations to be used more intensively.

Research conducted by the University of Auckland has analysed the impact of the Unitary Plan by modelling the counterfactual if it hadn’t been introduced. The study found that over the first five years, the Unitary Plan led to the construction of an additional 26,900 dwellings, 50 per cent more than otherwise.

“This really shows how powerful land use policy can be, and so potential changes need to be carefully considered,” Blick says. “People may notice changes in some neighbourhoods and some people may not feel entirely comfortable about it.

“But we also need to consider where we’d be without those extra homes and where those households would otherwise locate. Enabling the market to deliver more homes in response to the demand has been a positive step for improving housing affordability over the medium term.”

Looking ahead, this will help Auckland retain its competitive advantages. “Auckland still offers a diverse range of employment opportunities, specialised roles, higher income prospects, urban amenities and consumption possibilities not available in other regions,” Blick says.