Housing and the Nimby problem

Dr Eric Crampton
10 October, 2023

Pro-housing policy generally tries to find ways of outflanking NIMBYs – the Not In My BackYard objectors to new development.

It’s an approach well-supported in academic research and reflected in New Zealand policy.

In that standard view, new housing – whether downtown apartments, inner-city townhouses, or new greenfield subdivisions – imposes localised costs while benefitting a much broader community, including future residents. And it leads to a standard solution. Subsidiarity says that decisions should be set with the level of government that internalises the relevant costs and benefits. If the benefits of enabling more housing are enjoyed across an entire urban area rather than within a neighbourhood, pulling planning up to a wider area makes sense.

It can even work, up to a point.

The shift to an amalgamated Auckland was never about enabling more housing. Amalgamation was supposed to achieve back-office efficiencies – which never seem to have eventuated. But the shift to the Auckland Unitary Plan enabled much more housing than had been allowed under prior plans. Auckland University’s Ryan Greenaway-McGrevy shows that the unitary plan made for lower rents than otherwise expected.

Labour’s urban growth agenda has been based on similar principles. Central government legislation requires councils to enable more density near mass transit and to allow more development on residential lots more generally.

And Labour’s reform to the resource management system pulls city planning up to the regional level, making it harder for local objections to block growth.

But it might be missing an important part of the problem.

Early last year, David Foster and Joseph Warren published work in the Journal of Theoretical Politics that looked at the problem from another direction. In “The NIMBY Problem”, Foster and Warren ask whether better local decision-making processes could be part of the answer.

They argue that the underlying problem is a little bit different. When people who bear localised costs from development are not part of the bargain, they prefer processes that make it hard for anyone to develop anything anywhere.  

There are real localised costs from development, but bargains between developers and neighbours should be able to solve those problems. When housing is in very short supply, adding more houses adds a lot of value. Suppose local residents worry that the local park isn’t big enough or that the local water pipes aren’t up to the challenge. In that case, developers should be able to find a way to fund local improvements from the proceeds of development.

Now, there are real obstacles to doing that in New Zealand, to which we will return later.

But there’s another problem.

Local planning processes also make it easy for those with the least reasonable objections to throw sand into every set of gears. The result is drawn out project consenting processes that make every new development far more costly. Activists with enough legal nous can even tie up a hospital development for years during a pandemic.

When development is far too costly, developers can’t afford to strike the local bargains that would get developments over the line.

In that case, pulling planning up to a regional level can have a perverse outcome. If there is no need to strike bargains with local communities to offset real or perceived local costs, developers won’t do it. But that leads to broader hostility to all development and greater support for the costly processes that local communities see as the only way of avoiding the minor local costs that a project might impose.

Or, as Foster and Warren put it, current processes give local communities ways to veto projects but no real way to approve them.

Even worse, New Zealand makes it very hard for developers to strike the kinds of deals that Foster and Warren suggest.

If a set of new townhouses and apartments could, over time, cover the cost of infrastructure upgrades that made the whole local community better off, New Zealand has no way of enabling it. The developer would have to bear the costs upfront and load them onto the selling cost of the properties, rather than spreading them over the lifetime of the new infrastructure through a special ratings area. Better ways of funding and financing infrastructure are still needed.

Labour’s urban growth agenda has been laudable and made real progress. The election will likely bring a change in government; any incoming government should not abandon measures like the medium density standards that enable more housing.

But if Foster and Warren are correct, that progress will not last, or at least not on its own.

Pulling planning up to the regional level or setting national-level mandates on council planning does not share the benefits of urban growth with communities that have straining infrastructure and facilities. It outflanks the NIMBYs, for a while. But it also encourages broader opposition to the new housing development needed to restore housing affordability.

When a city enables development, central government enjoys increases in income tax revenue, company tax revenue, and GST. Local councils are left with a bill for infrastructure that they cannot easily fund. And even less capacity to make the local improvements that would build local support for new development.

Better ways of funding and financing the infrastructure needed for urban growth, and sharing the benefits of that growth with local councils so that they can share it with local communities, seems important if we are ever to solve the NIMBY problem.

To read the article on the 
Newsroom website, click here.

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