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Don’t stand so close to me

Principal Advisor, Productivity Commission
21 May 2020

One of the big goals of some urban policymakers in recent years has been achieving greater population density, especially in inner-city suburbs. In New Zealand this goal has often been described in local government documents as the ‘compact urban form’. Advocates of greater urban density argue that it will provide a range of benefits, including reduced carbon intensity, greater health, stronger social connections and productivity gains.

Some of these claims are stronger than others. For example, many economists agree that higher population density can lead to productivity growth through the faster flow of ideas and technologies, larger and more specialised markets and greater competition. This collection of economic effects is known as ‘agglomeration’. Research into agglomeration effects on productivity in New Zealand suggests that they are real and positive, but modest (in part since, by international standards, even Auckland has relatively low density and is relatively small). And the Commission found in its inquiry into the low-emissions economy that greater urban density (combined with more public transport and accessibility) could make material, but small, reductions in vehicular travel and emissions.

But might density have a dark side? Density implies close proximity to others and more difficulties implementing social distancing. For example, very dense cities depend on public transport systems to move people around efficiently. MIT economist and physician Jeffrey Harris recently mapped the spread of the coronavirus through the subway system in New York. And agglomeration enthusiast Richard Florida has noted that density is one factor – albeit not the only one, nor a decisive factor1 – in the transmission of COVID-19.

And what if people’s preferences for density and proximity to others change as a result of COVID-19? Many public policies and investments rest on assumptions that people will either be comfortable with density and proximity, or actively seek it.

  • Most of the benefits for the Auckland City Rail Link cited in its business case were from reduced travel time for passengers ($1.3 billion) and agglomeration benefits (around $800 million).2 What if people are wary of getting on trains full of people or entering busy areas like train stations? What if businesses decide that the current experience of having staff working remotely has been positive and the demand for inner-city office space tails off?
  • Similarly, many local councils District Plans (and associated infrastructure plans) aim to have more medium-density housing built – eg, terraced houses. What if people’s existing preferences for detached housing and private space become stronger as a result of COVID-19?

Of course, it is too early to tell exactly what impact COVID-19 will have on New Zealanders’ preferences. The real estate lift-out in my local newspaper says that people are already looking for homes with dedicated home offices and spacious gardens! But it could be that people don’t change and their housing preferences will be subject to the same constraints as before COVID-19. People still need to get to work and New Zealand’s housing supply is so dire that families may choose higher-density units even when they’d rather have something else.

New Zealand is about to embark on a large infrastructure investment programme, and these capital projects will make assumptions about people’s desires to be and work close to others. Perhaps it would be wise to test these assumptions and allow for uncertainty by choosing projects that will be valuable whether or not people’s preferences shift.


Notes:
1. After all, east Asian jurisdictions such as Hong Kong and Taiwan also have cities with high levels of population density and appear to have successfully controlled the spread of COVID-19. And others have challenged Harris’ methodology.
2. These are net present values over a 40 year time horizon, using a discount rate of 6%

Image: Peter Scott - Above Hawke’s Bay

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  • Gravatar for Les

    Les 5 Jun 2020, 08:20 (2 months ago)

    Cars are much safer and public transport with greater distancing ie half full bus is uneconomic. This makes EV's much more important and cycling too. Policies should promote the latter. If buses and trains are to carry fewer people they can be lighter in construction.ie light rail not heavy rail

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  • Gravatar for Ralph Chapman (VUW)

    Ralph Chapman (VUW) 4 Jun 2020, 12:57 (2 months ago)

    Thank Nik
    You make good points. But you leave the impression that urban density is a problem.
    The writing I've seen suggests the problem is crowding (the number of people in an indoor space), not density. And most infection risks arise with specific activities such as social gatherings, long-distance travel and stores.
    Risks associated with travel could best be reduced by increasing active travel and adopting masks on public transport during lockdown periods.
    Shifting investment back to dispersed suburban housing would be a mistake because of its carbon emissions implications (although this would be partly mitigated by electric vehicle take-up).
    Check out a useful report by Todd Litman here:
    https://vtpi.org/PRCP.
    Cheers, Ralph

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  • Gravatar for Richard

    Richard 25 May 2020, 17:27 (3 months ago)

    With the borders being closed due to Covid19 and likely to remain so until a proven vaccine is available, the very high numbers of migrants and overseas students coming into NZ have stopped.This will significantly reduce the demand for housing. "What housing crisis". We are going to see many cancelled apartment and high density projects promoted by Auckland Council in its Unitary Plan.

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  • Gravatar for accidental hypocrite

    accidental hypocrite 21 May 2020, 14:06 (3 months ago)

    Really great to see this post, questioning assumptions that underpin so much public money spend. As I wander about I wonder about the NZ's "dire housing supply". I observe huge numbers of dwellings or potential dwellings (2nd homes, city apartments, boats etc etc) empty, un-lived in. Are we really short of dwellings or are there a lot of dwellings owned by the wrong people? Just wondering?

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