Right now, Auckland Council’s zoning allows people to build about a million shops selling tasty pies.

Tomorrow, someone could buy or lease a commercially-zoned site near you and turn it into a shop selling pies. The shoe store could turn into a pie shop. So could the butcher’s. The barber shop too.

It would be possible to buy up every storefront in your local village centre and have nothing but pie shops. Zoning would usually allow it.

Can you imagine it? Auckland with a million pie shops – and hardly anything else.

Of course it is ridiculous. Having something on the order of 8,000 hectares of commercially zoned land does not mean that you’d get a million 80-square-metre pie shops. And note of course that these are very back-of-the-envelope figures.

Broad zoning allowing a site to be a pie shop, or a barber, or a dairy, or something else entirely, means entrepreneurs have options. Someone who always wanted to run a pie shop can spot places that really seem to need one and try their luck. If they guessed right, they’ll succeed. If they didn’t, the shop will fail and another will take its place.

The number of pie shops finds its own level, adjusting as demand changes. There is no ‘right’ number that can be determined on its own. The right number is found as entrepreneurs take punts and consumers make choices. A million potential pie shops can be the right answer, even if the city can only support a few thousand. And a pie shop that knows that a competitor cannot set up across the street risks growing stale.

Musical chairs and its artificially induced scarcity might be fun as a kid’s game, but it shouldn’t be a model for other activities. If there are only just enough chairs to go round, with some of dubious quality, there will not be much choice. If you want people to be able to sit comfortably in the place of their choosing, letting them bring in more chairs is a good idea. And especially if another player might decide to join.

When central government asked Auckland to zone to allow up to two million additional dwellings, it wasn’t a demand that Auckland build that many homes. Or even an expectation that anyone would ever try to build nearly that many.

The point is not to get two million homes.

When lots of places can turn into houses, townhouses, and apartments when housing needs change, then new housing can just turn up when and where it is needed. Developers watch where people most want to live, look at the cost of developing in different places, and try their luck.

Ample options provide choice and competition. If Auckland only zones to allow about as many new houses as its planners think might be needed, there will be less choice than if they allow many more.

It makes for a difficult political conundrum.

Cities have been reluctant to allow enough new housing to keep up with demand, in part because financing the required infrastructure has been difficult, and in part because of neighbour opposition.

Broader reform to infrastructure funding and financing is coming – along with changes to developer contributions. Incentive payments to councils encouraging them to welcome housing growth was a coalition promise that has yet to be fulfilled.

But in the meantime, and also as a way of resetting planning culture, central government has mandated that cities allow more housing, using numerical targets.

And that brings the conundrum.

If central government told Auckland that it must zone to allow up to a million new pie shops, everyone would be up in arms – despite zoning already allowing about that many. The difference between the number allowed and the number expected is hard to fit into a headline.

If central government sets housing targets reflecting only the number that are likely to be built, the number would draw far less opposition. But housing would remain expensive. If developers can only choose among a small number of sites, each site will sell at a premium. Land, and housing, would remain far too expensive.

But set a number large enough to allow ample choice, far in excess of any amount ever likely to be built, and the fact of a large number will build its own opposition.

It’s a flaw baked into planning processes that start from population projections and add in a margin for competition on top. Any number large enough to be effective, because it enables development on far more sites than might ever be realised, is large enough to draw ire.

For now, just remember that Auckland allows about a million pie shops. Look around. Do you see a million pie shops?

Things being allowed does not cause them to exist. But allowing competition changes, and improves, what can exist.

To read the article on The Post website, click here.