Last week the NZ Initiative, a free market-oriented think tank, put out a report that was generally critical of the “compact city” approach to urban planning.
One thing I liked about the report was its criticism of the very arbitrary rules that urban planners often impose on cities. This includes such things as minimum parking requirements, building height constraints, excessive “character” protections, yard and set-back restrictions, et cetera. As the report correctly noted, all of these things serve to constrain housing supply and increase prices.
The report used these arguments to launch a somewhat emotional attack on “compact city” planning that aims to limit sprawl and encourage densification. It would’ve been nice to see a bit more thought put into how a free-market based system could work instead. In particular, how can rigid planning restrictions be removed while still providing a mechanism for disagreements to be resolved, eg I like my view but you want to build in front of me.
The way I see it, a city is a platform for enabling interactions among people — if we were all hermits we could live far apart but most of us don’t seem to choose that lifestyle. So the objective of a city should be to maximise the overall quality-adjusted volume of such interactions. This is the solution to a complex constrained optimisation problem.
The fundamental constraints in this optimisation come not from city planners but from scarce resources: land obviously, but also other things like nice views, a clean environment, safety, health, etc. It’s not clear that adding additional planning constraints on top of these “natural” constraints will make anything better. On the other hand planning constraints are often well-intentioned, trying to resolve conflicts over the use and ownership of resources. An interesting question is whether there are market institutions that could do better?
The NZ Initiative report also devotes a considerable amount of ink to arguing that compact cities don’t reduce traffic congestion. This irks me because while nobody likes to waste time in traffic, congestion is really not a good measure of how well a city is solving its constrained optimisation problem.
Of course congestion itself is caused by a market failure and a lack of a price, but if congestion pricing is “too hard” to implement then it’s risky to give congestion too much weight in your evaluation of a city’s performance. For one thing congestion only affects those who drive; in many large successful cities a lot of travel is not done by driving. Furthermore it’s dubious whether building more roads “solves” congestion in the long run, since more building roads reduces the effective price of driving and induces more of it. However you can permanently solve congestion for a person by taking them off the road and either reducing their need to travel so much (eg live closer to work) or giving them an alternative transport mode.
A follow up opinion piece by one of the NZ Initiative report authors falls into this trap. The argument is that good train transport systems don’t seem to reduce road congestion, as measured by vehicle travel times or speeds on the roads. The problem is, every person on a train is not experiencing road congestion, but the road congestion measure ignores this. This nicely illustrates why it’s risky to emphasise such a narrow measure of city performance.