Nibbling away at nature & amenity resources

I don't have strong views on the proposed use of the particular park in Kensington for Sir Ron Eddington's proposed tunnel to connect the eastern freeway with the western suburbs in Melbourne*. Public protests are being organised on this use of the park. However I am concerned at the propensity of governments at all levels to nibble away at public parks and nature reserves in meeting infrastructure and other developments within intensively settled urban areas.

These parks and reserves have significant social value both in terms of their use values (e.g. walking the dog, bicycling, enjoying the open air) and because of the implied amenity externalities that get crystallised into increased local property values. The extent of the use value generated can be measured by the consumer surplus triangle the presence of such areas generate - the triangle is large because the access costs of large numbers of people in urban areas to these resources is so low. (I always set out this idea to my environmental economics students as an application of Harold Hotelling's 'travel cost' method of valuing natural resources).

But every time a new road or development is proposed the prospect of resuming large numbers of private homes and business firms to provide land needed looks far too expensive compared to nibbling a bit of the local park or reserve and, of course, the externalities these resources give rise to get forgotten about. And the argument normally put is that the park is quite large and we are only taking a 'small' proportion of it. Repeated applications of this reasoning lead to death by one thousand cuts, to an impoverished amenity resource and a urban environment.

It is not always the public sector alone that is at fault here. Private developers stage protracted campaigns to get land in reserves rezoned to develop private housing and industry - private nibbling along most of the Yarra Parklands in Melbourne is close to an outrage despite the excellent efforts of Melbourne Water and other groups in restoring this land. Developers pester local governments for decades.

And at the time of each public or private sector 'nibble' the argument is sensible in terms of myopic development costs or of giving private agents the chance to 'enjoy nature'. It is just that the long-term outcome is not at all sensible.

In my view we ideally want far fewer private gardens and much more public land that can be assigned to provide amenity resources and nature conservation. There are economies of scale in providing both types of output. One advantage of private holdings however is that they are less susceptible to development pressures and nibbling. While they are much less efficient they are more resiliant in the face of relentless development pressures and the views of philistine public administrations.

* Of course I am strongly opposed to unending expansions of road and tunnel infrastructure when socially costly urban travel is unpriced. Supply decisions should be made in an environment where costly travel is priced.

Urban congestion

My paper, Targeting urban congestion: Equity and second-best issues, has just been published in the Australian Economic Review. Unfortunately the complete paper is firewalled outside the universities. I originally drafted this here on my blog for the Making the Boom Pay Conference in 2006. Comments welcome.

Climate-proofing the cities

While I have posted at length on adaptation policies for dealing with climate change impacts on agriculture and biodiversity resources (also here) I have said nothing about the cities where most Australians live. Indeed COAG have recently moved to establish a Climate Change Adaptation Framework which includes in its brief analysis of these issues. Climate change impacts on cities and urban areas are the subject of this informative Age article by Peter Fisher.

Cities and urban areas are subject to (i) potentially huge damage from both long-term impacts of climate change (increased temperatures, water shortages, rising sea levels) that might ‘creep up’ on inhabitants and (ii) from increasing climatic variability that can produce impacts such as severe heat waves, storms, floods, bushfires and high winds that hit with unexpected, sudden fury.

Melbourne was battered by severe winds only a few weeks ago and two people died. The prospect is that these types of catastrophic events may become nmore frequent and more intense.

Governments need to introduce policies that will facilitate adaptation to such problems and to promote adaptive responses by the private sector.

A primary concern is that citizens do not choose unsafe locations to reside. Houses built in low-lying areas that are subject to flood or houses in waterfront locations or locations where exposure to high winds and bushfires is a problem that can be partly addressed by government zoning regulation and partly by private insurance markets. Where services such as fire protection are now borne by the community some attempt should be made to shift extra costs towards those living in vulnerable areas to foster private incentives to more sensibly make residential choices.

Builders should face market and regulatory incentives to protect the residents of homes from climatic extremes such as heat stress (which killed thousands of elderly people in the Paris heat wave of August 2003) and to foster use if materials to protect against things such as large hail damage. In addition incentives for facilitating retrofit programs are needed to guard against heat stress, retain run-off from heavy rain and direct high winds away from high population areas.

Victoria needs to plan for potentially catastrophic events such as the destruction of the Thomson water catchment by bushfire, damage to desalination facilities by sea level changes or even the prospect of being hit by a cyclone. This isn’t science fiction – it is simply recognising that the environment is a variable that will increasingly come to pressure our lives.

I've just started thinking about these issues so these comments are provisional. Comments welcome.

Urban population trends

Bernard Salt’s Population Growth Report 2007 for KPMG (I could not yet find an online version) makes interesting reading. Melbourne has joined the ranks of Australia’s fastest growing capital cities with nearly double the growth rate of Sydney and close to the growth rates of boom cities like Perth and Brisbane. But the Queensland coastline still holds the centres with maximum population growth – Cairns in particular is growing at twice the rate of Brisbane.

With current growth rates Melbourne would be the largest city in Australia in 20 years – returning Melbourne to its 19th century status as Australia’s largest and most popular city. Of course these projections presuppose no change in relative housing costs which would be quite unrealistic.

Around Australia the main competition for rapidly growing coastal areas and for 'sea changers' comes from city centres. The trend is strong everywhere but particularly in Melbourne and Brisbane. Young couples are living in apartments close to city centres to minimise their commuting costs.

The standout area is Sydney where some municipalities (Campbelltown, Fairfield) actually lost people as young adults leave older parents to live elsewhere. Indeed Sydney’s centre continues to grow while its periphery is shedding people.

The experience Salt identifies correlates with quite a bit of experience. Melbourne property prices grew strongly last year while Sydney prices did not. Still Sydney property prices remain very high. I was struck by this headline in the Sydney Morning Herald yesterday while visiting - over the past year 570 government grants for first home buyers were given to people buying $1 million plus valued properties – a 44% increase over the previous year. It is a stunning figure.

My subjective feeling (no real evidence) is that Sydney housing on average is of higher quality than Melbourne's - houses in Sydney have often been renovated several times and the physical beauty of Sydney as an urban setting is not arguable. Melbournians gloat about their beautiful gardens but Sydney, with its milder climate, has some of the best urban gardens I have seen anywhere.

My main objection to Sydney as a place to live, apart from housing costs, is the cost of making journeys by road. A visit to the local shopping centre can be a congested nightmare in many suburbs. My impression of the train and bus services in the city are however generally very positive. The exception that has impacted on me is on the far north side areas where public transport is almost non-existent late in the evening. On the other hand if I owned a house at Palm Beach I probably wouldn't ever want to leave and would presumably have enough money that I could afford not to do so!