Tuesday, December 11, 2012

Men are born free but are everywhere in zones. Nearly everywhere.

Most of the English-speaking world’s planners have embraced the strangulation of cities by planning—and virtually all the English-speaking world’s politicians have let them.

Men are born free but are everywhere in zones—zones drawn up by planners to fit us into their dreams. Everywhere, that is, but Houston.

The good citizens of Houston have resisted zoning, voting it down every time it has been offered to them.  Consequently, while housing in much of the western world has become seriously unaffordable, the city of Houston remains unzoned, and its housing among the most affordable anywhere.

How affordable? Simon White has done a wee comparison for you, comparing houses in middle-level Houston with houses in the more affordable parts of Auckland and Christchurch. As he says, this was “a very sobering exercise - particularly in Auckland where there are very few new standalone 3 bedroom/2 bath rm houses available for less than $500,000”:

Comparison: New Zealand to Houston new house prices

Houston has a population of more than 6million, and was the fastest growing large city in the USA in the last decade.
Its ‘supply responsive’ land use and infrastructure policies have ensured that housing remains affordable (around half the cost of Christchurch and Auckland relative to income).  Because of this, Houston households have a much lower total cost of living than other cities, and household debt levels are significantly lower (less than half that of NZ, relative to income). All as a result of lower house prices.
Want some examples? Here goes:

A new family home in Cave Creek Drive, Humble, Houston: US$182,950. That’s just $223,000 in New Zealand dollars.
It is 30km from centre of Houston; 3bedroom; 208m2 floor area ; 511m2 section. Home with 2 car attached garage, 3 bedrooms, 2 baths, dining room, family room. Upgrades include: porch elevation, stone accent exterior, 42'' maple kitchen and bath cabinets, 3/4'' granite kitchen countertops, 8'' stainless steel undermount sink, tile backsplash on diagonal, double vanity in master bath, alarm trim with strobe light. Tile flooring at: entry, master bath, kitchen, breakfast. Wall tile at all baths.
The NZ dollar price of this house in Houston is $223,000 – similar houses in the Christchurch area cost $420,000 or more. In Auckland these houses are generally in excess of $500,000.

Comparison: 3 bed room, 2 bathroom houses that at 20 to 30km from city centre (in NZ dollars, taken from realty.co.nz):

 

Houston

( Typical example)

Christchurch

Templeton

Christchurch

Rangiora

Christchurch

Lincoln

Christchurch

Rolleston

Auckland

Takanini

(terraced home)

Auckland

Weymouth

South Auck.

Auckland

Massey

West Auck.

Price (NZD)

$223,000

$419,000

$489,000

$495,000

$469,000

$412,000

$429,000

$479,000

Construction year

new

1998

new

new

new

new

new

new

Section size (m2)

511

 

656

520

750

185

716

529

House size (m2)

208(Note 1)

180

200

175

185

156

180

166

Distance from city centre (km) approx

30km

<30km

30km

25km

30km

30km

30km

20km

Total price(NZD) per m2 of floor area (note1)

$1072

$2,328

$2,445

$2,829

$2,535

$2,641

$2,383

$2,886

Notes:
1. The Houston price per m2 is overstated and house size understated relative to NZ examples - because in the USA the garage is excluded from the floor measurement. Add around 40 square metres to the Houston houses to match them up.
2. There is very little available new housing (standalone 3 bedroom/2 bath room) for less than $500,000 within 40km of Auckland city centre.

Here are some other examples of newly constructed homes recently listed on the Houston market :

clip_image004

A new two story family home in Skyview point Houston:
$129,995 (NZ$158,000)
15km from centre of Houston
3bedroom; 2 bathroom; 189m2 floor area

clip_image006

A New basic single family home in Peyton Stone Houston:
$115,960 (NZ$141,400)
20km from centre of Houston
3bedroom; 2 bathroom; 139m2 floor area and 470m2 section
Specs: floors of lino and carpet, and laminate bench.

clip_image008

A new Condo in a seaside village - Houston:
$154,900 (NZ$189,000)
30km from centre of Houston
3bedroom; 2 bathroom; 145m2 floor area

clip_image009

A quality new family home – Ponte Serra Drive, near the seaside, Houston:
$209,000 (NZD $255,000)
35km from centre of Houston; 3bedroom; 191m2 floor area ; 607m2 section.
Home with 2 car attached garage, 3 bedrooms, 2 baths, granite kitchen countertops.
Tile, wood and carpet flooring .

Houston, we have a problem.

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7 Comments:

Anonymous Anonymous said...

Cave Creek drive, Houston, is over 15km from the centre of town in the middle of scrubby nowhere. How is that going to work when gas is$20 a gallon?

12/11/2012 12:29:00 pm  
Blogger Peter Cresswell said...

@Yes, I can see why you've posted Anonymously. I would be embarrassed too.

So let's see. Assuming the questions begged in your own question, you could either walk to Lake Houston and go jump in.
Or, with the approximately $267,000 you've saved by buying a home in Humble, Texas instead of Rangiora, Christchurch, you could buy approximately 13,350 gallons of gas at your putative $20 per gallon, then, at the 50 miles per gallon of your favourite hybrid, you could drive about 667,500 miles--which is approximately 34,000 return trips to the centre of Houston (enough to keep you going for 6,700 working weeks) or a travel itinerary encompassing a trip around the world 83 times (which at the rate Phileas Fogg went, would take you just over 18 years).
So even with your made-up number, I think we're fine.

12/11/2012 01:23:00 pm  
Blogger Mark said...

I'm against zoning, but I can't see how comparing house prices between NZ and Houston proves the detrimental affect of zoning. There's numerous other factors aside from zoning that contribute to the difference in cost in building a house, some of them no doubt market related and due to economies of scale and efficiency in bigger economies. If you wanted to prove the detrimental affect of zoning, shouldn't Simon White be comparing house prices in Houston to similar sized cities in the US with zoning?

12/11/2012 05:15:00 pm  
Blogger Blair said...

Last time I checked, gas in Texas cost a smidge over $3 a gallon.

And 15km from the centre of Houston is not very far. Houston is freaking huge. Massive. It's easily one of the largest urban areas in the world in terms of land area. It will literally take you an hour to drive from one side to the other in good traffic.

Mark - yes there are other factors, but do they triple the price? I put it to you that they do not, and the key is to look at the land values.

12/11/2012 08:50:00 pm  
Anonymous Fentex said...

The 30k distance means nothing given Houston is a city of 6 Million, and it says nothing about how far anyone buying it will be from where they may wish to work.

Without zoning I should think houses will be near centres of employment.

This post makes a convincing case that homes are cheaper in Houston,
but it doesn't prove zoning is the sole or even major cause of that.

Surely some price comparisons with other U.S cities as much like Houston as possible but with zoning would be sensible?

As it is these examples don't control at all for the other differences between Auckland N.Z and Houston U.S.A.

Supposing controlling for those differences still suggests zoning is expensive, supporters of zoning would then likely argue there is some benefit provided by zoning that offsets the extra cost.

Which would require comparisons between Auckland/Christchurch and the same zoned and unzoned U.S cities.

Without such rigour not much is proven by these comparisons.

12/11/2012 09:02:00 pm  
Blogger Mark said...

@ Blair: Ok then, let's look at land values, specifically the $419,000 example for Templeton. I'm currently developing for sale sections in the same council district(Selwyn), so I'm qualified to comment.

Firstly, if I was subdividing land in the same location and building a house of similar size and quality I'd be expecting the split between land and building sell value to be around:

Land: $160,000
House: $259,000

The land value of $160k would be split roughly as follows:

Bare land purchase (per lot):$40k
Development Costs: $50k
Development Contributions: $20k
Selling Costs & Interest: $20k
Developer Profit: $30K

So what would change if zoning was removed?

Bare land purchase: let's say I could develop land currently zoned rural, and it dropped to $5k per lot ($35k saving).

Development Costs: Lower consenting costs, but construction costs for roads/stormwater/sewer/etc wouldn't change. Say a small $5k saving.

Development Contributions: No change, or perhaps a rise (DC's have risen dramatically in recent years, and are no doubt exhorbitant in many cases, but that's a separate issue). All other things being equal, Council infrastructure costs would probably be higher because development would be more dispersed, so cost of servicing would be higher. I'd say $10k rise.

Selling costs and Interest: no change (even without zoning you would still need to get stormwater and sewer discharge consents, so timeframes would be similar and no real interest savings).

Profit: It would perhaps be more competitive, so assume profit drops to $20k ($10k saving)

So I'd estimate we'd be looking at about a $40k saving total in Templeton, if we had no zoning.

Inflated land values due to zoning is not as big an issue in Chch as it is in Auckland.

There is undboubtedly much more the gov't could do to reduce the cost of housing here, some of which include:

1. Making the resource consent process easier (still need other consents if zoning is removed)

2. Lowering exhorbitant DC's (they keep the DC's high so they don't have to raise rates as much as they ordinarily would)

3. Relaxations of building code requirements.

4. Remove GST on land developers and house builders. (this alone would save $55k on the above example.

5. Removal of some of the 'gold plated' subdivision standards - particularly around stormwater treatment.

Unfortunately this is where the folks at Demographica lose the plot a bit. Promising unrealistic housing utopias if zoning was removed is not helping the cause - if anything it's harming it.

Rather than making gross comparisions between Templeton and Houston and concluding the difference *must* be due to zoning, they'd be more convincing and more likely to effect change if they drilled into detailed costings here in NZ and attributed it to the specific causes I've listed above.

12/12/2012 09:08:00 am  
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12/26/2012 09:04:00 pm  

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