A faster track to supermarkets

Minister Willis announced measures opening retail grocery to greater competition. 

She announced a fast-track process in which retail grocery that would pass a 'does this improve competition' test could get consents that override existing district plans, access to a single building approvals authority for sites across the country, easy ability to replicate builds in multiple places, and an easier path through the overseas investment office.

Back in May, Benno at our shop put up our proposal for achieving the same outcome. Ours differed a bit. It tweaked existing fast-track processes so that a plan change would be effected that could override parts of plans with which it were otherwise inconsistent. The path would only be open to new entrants or to minor current players looking to substantial expansion. And sites would be mixed-use by default so entrants could stick apartment towers above their stores. After 5 years, the pathway would open to current incumbents. The intention here was to give new entrants a head start and a good reason to move early. And, if no entry happened, to let the incumbents go more strongly head-to-head in spots where they previously haven't. 

I think the Minister's proposed process is decent. It seems obvious that Costco will use it for speeding up its own expansion. Whether anyone else will use it is anyone's guess. The point of lowering barriers isn't to guarantee some number of entrants. It's to discover whether new entry is warranted. Maybe there just aren't super-profits here worth chasing. It's hard to tell when entry is de facto illegal. Removing the barriers lets you find out.

There's always ways this could still go wrong. But I'm optimistic. 

A few previous bits.

• BusinessDesk / Spinoff , July 2021
• Submission on market study draft report, August 2021
• Cross-submission to ComCom, November 2021
• RNZ nights, December 2021
• Newsroom March 2022
• Herald Oct 2022
• Post November 2022
• Platform, Oct 2023
• Herald April 2025
• Benno's note
• Taxpayer Talk
• Hosking, May 2025
• Post, June 2025
• Post, June 2025
• Newsroom, July 2025

Afternoon roundup

The worthies from the tabs:

• Kate MacNamara tracks down all the Covid funds that wound up diverted into the road use subsidy. $1.3b and counting. 


• A reminder that it can be easiest to innovate by leaving academia. 


• Messy claims that the UK sugar tax reduced obesity. Looks like green jellybeans. 


• People keep telling me cancel culture isn't real. And yet I keep seeing stories like this.


• Great to see that the sponsored refugee regime has been working out. Genuine good news. Let's hope it expands. 


• Treasury's hiring a Director, Economic Systems, meant to have a significant leadership role in macro and growth. Nothing in the job requires an economics degree. I hope that properly qualified economists do apply, and that good applications drive out bad. 


• Men on Tinder are not intimidated by highly educated women. 


• Markups and inflation. How markups move can tell you whether you're dealing with a supply-side or demand-side issue. Price Theory is great. 


• Bill English's 2005 Chapman Lecture. Some issues are timeless. 
• Helen Dale on the Return of the Pagans.


• Tap Yellowstone for basically limitless power. But it would cost on the order of $3.5 trillion to build. Not huge when compared to overall annual energy spend in the US, depending on marginal cost of running the thing and whether it could generate low-cost hydrogen for vehicle fleets. But it is a very big number.


• I would love to know how much Council time and effort went into this mess. A developer wanted to turn a ruin of a former dairy into housing. Council didn't want her to. They eventually relented and let her build, on condition that the houses have wooden window frames. What incredible value Council added here. Kudos. They should all be very proud. Especially the resource consent team leader who argued that the developer should have first tried putting up a fish and chip shop or a laundromat. 

Afternoon roundup

Easing back into the office after a summer break and already the tabs have multiplied.

Today's worthies:

• Alex Penk on the value of free speech
• Zoning Reform in Gotham. One option sounds a lot like NZ's National Policy Statement on Urban Development. 
• Bryce Edwards expects a big politician pay increase after the election. I'd forgotten about the MP pay freeze. I like that a nominal pay freeze for the politicians responsible for the dilution of the Reserve Bank's mandate and erosion of accountability for meeting its inflation target means substantial real pay cuts for them. 
• Bryan Caplan is working on a book on zoning reform. Will look forward to it!
• Regime uncertainty around investment in thermal generation is a problem:

  “Mitigating the winter 2023 operational coordination issue with further information is insufficient by itself, particularly considering the limited timeframe to resolve the issue,” the system operator says. The key issues are the influx of unreliable wind generation, the paucity of fast-start thermal generation, and the weakening market incentives for slow-start thermal generation. And Transpower says the EA’s proposed measures won’t address these underlying problems.

  The article notes some more complex multi-hour generation contracts as a potential solution. 

• Getting more energy generation seems like a good idea and people get unreasonably upset about landfills. And so a waste-to-energy plant gets knocked back for want of an adequate cultural impact assessment. 
• But, on the plus side, there is more generation coming through - including 168MW of geothermal
• Medicaid expansions in the US did not reduce mortality. In line with the results of the now-old RAND experiment. 
• Some details are up on the new smokefree regs. New Zealand's Planning Board has mapped out where cigarette stores will be allowed to be. Oamaru and Queenstown will each be allowed to have two stores. Balclutha can only have one. Auckland will be allowed 13. These are all clearly the scientifically-determined correct number of stores. If you disagree, you have a couple of months to make your submission. 

Resource Management and degrees of freedom

The Natural and Built Environment Act has eighteen different outcomes and sub-outcomes that regional planning must seek to achieve, without hierarchy among them. 

When I see this many outcomes, with no way of weighing across them, and without a requirement to run some kind of CBA across the set, I see infinite degrees of freedom for a regional planning body to just go ahead and do whatever the heck it wanted to while justifying it by pointing to one or several of the outcomes.

I mean just look at this.

5 System outcomes

To assist in achieving the purpose of this Act, the national planning framework and all plans must provide for the following system outcomes:

(a) the protection or, if degraded, restoration, of—

     (i) the ecological integrity, mana, and mauri of—

          (A) air, water, and soils; and

          (B) the coastal environment, wetlands, estuaries, and lakes and rivers and their margins; and

          (C) indigenous biodiversity:

               (ii) outstanding natural features and outstanding natural landscapes:

               (iii) the natural character of the coastal environment (including the coastal marine area),  wetlands, and lakes and rivers and their margins:

(b) in relation to climate change and natural hazards, achieving—

     (i) the reduction of greenhouse gas emissions:

     (ii) the removal of greenhouse gases from the atmosphere:

     (iii) the reduction of risks arising from, and better resilience of the environment to, natural hazards and the effects of climate change:

(c) well functioning urban and rural areas that are responsive to the diverse and changing needs of people and communities in a way that promotes—

     (i) the use and development of land for a variety of activities, including for housing, business use, and primary production; and

     (ii) the ample supply of land for development, to avoid inflated urban land prices; and

     (iii) housing choice and affordability; and

     (iv) an adaptable and resilient urban form with good accessibility for people and communities to social, economic, and cultural opportunities; and

(d) the availability of highly productive land for land-based primary production:

(e) the recognition of, and making provision for, the relationship of iwi and hapū and the exercise of their kawa, tikanga (including kaitiakitanga), and mātauranga in relation to their ancestral lands, water, sites, wāhi tapu, wāhi tūpuna, and other taonga:

(f) the protection of protected customary rights and recognition of any relevant statutory  acknowledgement:

(g) the conservation of cultural heritage:

(h) enhanced public access to and along the coastal marine area, lakes, and rivers:

(i) the ongoing and timely provision of infrastructure services to support the well-being of people and communities.

6 Decision-making principles

(1) To assist in achieving the purpose of this Act, the Minister and every regional planning committee, in making decisions under the Act, must—

     (a) provide for the integrated management of the environment; and

     (b) actively promote the outcomes provided for under this Act; and

     (c) recognise the positive effects of using and developing the environment to achieve the outcomes; and

     (d) manage the effects of using and developing the environment in a way that achieves, and does not undermine, the outcomes; and

     (e) manage the cumulative adverse effects of using and developing the environment.

(2) If, in relation to making a decision under this Act, the information available is uncertain or inadequate, all persons exercising functions, duties, and powers under this Act must favour—

     (a) caution; and

     (b) a level of environmental protection that is proportionate to the risks and effects involved.

(3) All persons exercising powers and performing functions and duties under this Act must recognise and provide for the responsibility and mana of each iwi and hapū to protect and sustain the health and well-being of te taiao in accordance with the kawa, tikanga (including kaitiakitanga), and mātauranga in their area of interest.

I don't think there exists a possible regional spatial plan that can meet all of the objectives without trade-offs between the objectives. And there's enough of them that you could write up whatever spatial plan you preferred (based on aesthetics or whatever else), and then just point to how any alternative worsens one or several of the named outcomes relative to your starting point. 

"Oh, we'd love to allow more density in this region. But as I'm sure you're aware, that area's important for the preservation of cultural heritage. And while we'd like to enable urban expansion at the fringes, we're simply surrounded by land that either has high agricultural value, or is ancestral land, or both. So I'm afraid our hands are tied. We aren't NIMBYs who just hate change and newcomers; we'd love to be able to do what you recommend. But we must give regard to a broad set of outcomes. It is unfortunate."

Unless councils have a lot stronger incentive to want growth, they'll have plenty of degrees of freedom for blocking it. 

My column at Newsroom this week covers it. Ungates tomorrow by dropping /pro from the URL. 

The game of whack-a-mole in which central government legislates against each new way that councils find to obstruct growth seems likely to continue – unless councils are made to welcome urban growth by sharing in its benefits.

Morning roundup

The morning's worthies:

• Treasury are the heroes in this story, where Daalder paints them as villains. Treasury tried to stop the dumbest of the climate spend. GIDI, which either pays companies to invest in tech they were already going to buy, or subsidises them to invest in cost-ineffective ways of mitigating emissions, is such a rort. 


• Justin Giovannetti left New Zealand because of our housing policy disaster. He tells Canadians about the problems.


• Dileepa Fonseca suggests council rates should be apportioned only over land value, rather than land plus capital. I agree - at least for urban councils. For rural ones that don't use user-fees for services provided in towns, there will always be temptation for the townies to screw over the farmers by loading them with costs for services they rarely use. 


• Auckland Council bans people from building infill housing in places where people want to live through special character designations. Allowing infill housing where people want to live is the single most cost-effective thing that councils can do to reduce demand for carbon emissions. Meanwhile, Auckland Transport puts up aspirational plans of how many people they'll force out of cars. If you run a comprehensive price on carbon, you don't need this micromanaging BS. But those who know they are your betters want to dictate how you live. Just letting prices work within an ETS with a binding cap isn't good enough for them. Instead, NZTA is advertising for a Principal Advisor on reducing vehicle kilometres travelled. That just shouldn't be a goal. NZTA should be making sure that road users pay the costs of their road use rather than try to stop it. Maybe the advisor will suggest even worse maintenance on the roads, so the threat of broken axles will discourage driving. 


• Meanwhile, Minister Wood thinks breaking the public transport contracting model is needed to push up wages for bus drivers, among other worthy-sounding outcomes. It's all nonsense. Greater Wellington set a contracting model with trivial penalties for cancelled services and then was shocked! and aghast! that the bus companies ran lean staffing models, eating the fees for cancelled services rather than paying enough for staff to ensure reliable services. Council could have contracted for different outcomes, if it had been willing to pay for them. It'll be interesting to see what they do when they no longer have a scapegoat I suppose. 


• The Auditor General warns about some implications of the proposed 3 Waters Reforms.

Even worse than I'd thought

It just seems incomprehensible that the Commerce Commission spent two whole weeks in hearings on grocery competition, without zoning really coming up.

I'd not seen this when it came out. Yesterday, I was searching for the average footprint of a supermarket. Some OIO rules on sensitive land trigger if you're buying 0.2 hectares and some trigger at 0.4. 

So, Googling around, I found this, which noted the proposed construction of a 2787 square meter New World supermarket. 

Good, I had a number. 

Then I looked at the rest of the document. 

It's a 39-page report by Property Economics. They were commissioned by New World to produce a "Retail Impact Assessment" for a proposed New World on Dominion Road, March 2021.

This application was for one of the Covid fast-track consenting processes. New World presumably could have chosen the normal council consenting route, which means that the normal route is more restrictive than what we can infer from this piece of work.

The Report seeks to prove that a new supermarket would be very good for the neighbourhood. It does show by demonstrating that there is so much excess demand for retail grocery in the area that the supermarket could not have more than minor adverse effects on existing grocery retail. 

It argues that:

• the supermarket should be seen as an extension of a Dominion Road local centre, rather than being in direct competition with existing centres [clearly they expect the planners to see competition as bad]
• that neighbourhood demographics would support an additional 2-3 supermarkets by 2038, and that "demand for supermarket retail significantly outweighs supply... the market is unlikely to come to the point where a new supermarket is no longer viable." [If a new grocer could only earn customers by attracting them away from another, to the detriment of the other, that would presumably be viewed as bad by the planners - or at least the consultants believe that that is how the planners would decide]
• that the new centre would not impose adverse retail impacts on St Lukes, Mt Eden, and Balmoral Centres [presumably a new centre that were a lot better than existing ones and drew customers away would be seen as a bad thing by planners]
• that the new centre would not cause "retail distribution effects". What are those? Remember the old Discount Brands litigation. That stuff is still affecting things. The Courts decided that while the RMA shouldn't consider the harms a competitor imposes on another competitor, it should consider the effect on surrounding amenities. Basically, if your new centre draws people away from an existing one, then consenting should stop you not because of the effects on your competitor, but because your competitor's picnic area in the courtyard might not be as nice any more. Basically, if the effect is "significant", then Council can block you. But isn't one of the points of competition to have significant effects, or at least the potential for them?  
• Just listen to this, with an antitrust set of headphones on. "In Property Economics view, having undertaken the requisite analysis, there is little to no propensity for this New World to cause any additional trade competition effects that would flow over into significant retail distribution effects in the context of the CRA." In other words, if the new shop were too strong a competitor, that would be bad for the consent application's likelihood of success.

So to get the consent, New World had to commission a 39 page economic impact report showing that it would have no material economic impact on nearby competitors. 

If there's anyone that the Commerce Commission should have been raking over the coals for the last couple weeks, it's the ones responsible for a planning and consenting system that views competition as a harm to be mitigated. I'm a fan of criminalising cartel behaviour, when it comes to town planning systems. 

Afternoon roundup

The worthies, on the closing of the browser tabs:

• The Let's Get Wellington Moving plan for bus-priority looks like it hits a big bottleneck on a key route, with no workaround.  
• National seems incoherent on vaccine passports. 
• Remember the old Discount Brands litigation from 20 years ago where new retail was blocked because it would hurt the amenity value of an existing shopping centre? Still happening. Ashburton Council blocks new retailers from taking up spaces in a new complex because it would hurt existing downtown properties. Meanwhile, the Commerce Commission is running an inquisition into supermarket pricing that will be poring over loyalty programs and weighted cost of capital measures, but won't be getting into regulatory constraints into allowing new entry until Session 8 on Thursday. 
• A hundred specialists call for harm-reduction approaches when the WHO has its own inquisition into vaping. 
• An MIQ shake-up is coming. Still no word on how non-residents might be able to enter. 
• Roger Partridge on the uncertain path ahead for Auckland. 
• An update to the Stats Act. An update's been needed, I hope the framework winds up being more enabling for research. But going through it will take some time. 
• RIP Anthony Downs. I'd set the following question on my take-home exam in my 3rd year Public Choice class, back in the day.

  Some work in economics is called seminal: it is the seed from which springs whole new fields of enquiry. Anthony Downs’ 1957 “An economic theory of political action in a democracy” is one such work. Demonstrate that insights in that paper anticipate at least three major developments in later work in public choice: show me the initial Downsian insights and how they’ve been developed later by others. 

• "Economics is still a discipline where you can put forward non-PC results without being destroyed for it."
• How to protect kids, while the government continues to ban them from being vaccinated. 

Afternoon roundup

The browser tabs...

• The Internet Archive will help improve access to a lot of books currently held by the National Library. Naturally, this upsets some people. 
• Mike Joy wins a battle over what "natural levels" of nitrate in aquifers might mean.
• Places where the local schools are funded by higher levels of government wind up trying to privatize the public schools through zoning. Everything's tradeoffs though, eh? If schools are funded by the local communities, poor places get really bad schools. It's instead a good argument against even greater anti-NIMBY vigilance.
• Potential nudges to improve compliance with scanning-in for Covid tracing. I'd add one more: put the QR codes in lots of places. Make it easy. At the entrance is great, but if your phone isn't ready and you'd be holding up a queue, maybe you won't scan and you'll forget to on the way out. Put them everywhere. 
• The EMA makes a very bad argument about unemployment rates. The point of inflation targeting and increasing rates when you're hitting capacity constraints isn't to create some stupid Marxist reserve army of unemployed, which seems to be what they're arguing for. The point instead is that if a monetary push gets you past NAIRU, you just wind up back at higher unemployment rates anyway once contracts adjust AND you have higher inflation to go with it. Anyway, because either EMA put it badly or it was reported badly, a billion tweets followed claiming the Marxists were right all along. 
• Heather du Plessis-Allan cites me here on Treasury's diminished capabilities. Worth noting: all of that was prior to the current Secretary's appointment. She may well have improved things since; I need to get OIAs in to check. 
• Shipping is a mess.
• Remember back at the Budget Economic and Fiscal Update when Treasury put in a footnote saying they couldn't produce a structural deficit figure this time round because they couldn't tell how to place some of the Covid-spend? And it seemed odd because Covid-spend is supposed to be emergency = one-off = not-structural? Well, looks like the free school lunch programme is Covid spend. I simply do not understand how this works. Shouldn't the Auditor General be going after this kind of thing as misappropriation? 
• The government isn't bothering to check on whether people got their Covid tests before travelling. Some of them get caught ex-post, with the option to go into quarantine or return to Oz, after they've been circulating in New Zealand already. If they went back to Oz and turned up positive, what hope would we have on contact tracing them? However low your expectations of government competence are, you just keep being surprised. 

Demotion, or second chance?

My Newsroom column from last week looks at the Twyfortunity in the cabinet shuffle - belatedly posted here as I was off at the NZAE meetings last week. 

Cabinet shuffles provide great journalistic set-pieces.

For the politics-as-sport contingent, it provides all the narrative arc of changes to the Black Caps line-up for the World Cup: winners and losers, who’s in and who’s out, and whether the changes will do more to help the team score political runs or to defend against the Opposition’s bowling attack.

As expected, the Government’s changed the housing line-up. Megan Woods became Minister of Housing; Kris Faafoi took over public housing; Nanaia Mahuta took responsibility for Māori housing; and Phil Twyford took up Urban Development and Economic Development. Sporting commenters framed it as a loss for Twyford. But is it a loss for housing?

In last week’s column, I urged the Government to give Minister Twyford the chance to see through his housing supply agenda. I have argued that no one in Parliament better understands the underlying failures in local council incentives, regulatory settings, zoning, and infrastructure financing. And solving that complicated mess is what is required if New Zealand is to build its way back to affordable housing.

When it comes to housing, it isn’t just the batting line-up that’s out of order, it’s the selection process, the training system, and the club system generating the talent that might be picked. It needs fixing from top to bottom.

An optimistic read of the cabinet changes is that this is not a demotion for Minister Twyford, who maintains his ranking within Cabinet, but rather an unshackling. The Government’s housing supply agenda has not made necessary progress, at least in part because the Minister and the Government have been distracted by impossible-to-achieve Kiwibuild targets. Twyford will be able to focus on the areas where he can make the most difference.

But let’s step back to the mess of problems that yet needs solving and consider the way forward.

...

Minister Twyford’s supply agenda, on the surface, begins with a change to infrastructure finance. Rather than falling onto Council balance sheets, or onto homebuyer mortgages, the cost of new infrastructure will be covered by levies on the housing benefiting from the new infrastructure over the life of that infrastructure. Targeted rates on new developments will pay off the bonds issued to finance new infrastructure.

Separating infrastructure financing decisions from political processes helps set a longer-term platform for urban development. Even if a substantial Crown infrastructure push over the next few years was able to get around the very real capacity constraints in a sector already under strain, it would not set the foundation necessary for long term growth. It would instead help to perpetuate the boom-and-bust cycle that has bedevilled the construction sector for ages.

Infrastructure bonds whose financing depends less on political interest than on the commercial viability of the underlying development can set the stage for greater longer-term urban growth that is responsive to changes in demand. When demand for more housing makes it profitable to build more housing, the developer can issue infrastructure bonds and start building without having to convince the Crown to take on new infrastructure debt. It is a way of sustaining infrastructure investment beyond the current crisis.

But it also requires the buy-in of those who will be paying the levies. And here, I think, Minister Twyford may need to do a bit more work.

This kind of infrastructure finance, in the United States, typically has the assent of those who will be footing the bill. Property owners setting a new development establish infrastructure boards that will own the infrastructure, that will be responsible for paying off the debt through a tax on the properties within the development, and that will be governed by those who buy properties in the new development. Taxation is coupled with representation.

Here, so far, proposals for new infrastructure bonds do not require the assent of the levied. In greenfield sites, where the land’s owner or development partner might set the bond, that kind of assent process will matter less. But it will matter in brownfield sites where an Urban Development Authority might seek an infrastructure bond to allow for upzoning. Homeowners who do not redevelop in response to the zoning change would still be on the hook for contributions toward the new infrastructure.

And while that may be fair enough where the infrastructure increases the value of those properties, it can also be a problem. If an Urban Development Agency seeks a new infrastructure bond without some credible demonstration that the bond issue is supported by most of those who will be paying the levy, political opposition to the process can stymie development.

New Zealand’s business improvement districts may provide a useful model. Business improvement districts allow businesses in a village centre, for example, to levy themselves for the provision of amenities that are to their mutual benefit. But that requires the assent of the affected owners through a ballot. A double-majority requirement is there in place. A majority of business owners is required, as well as the assent of owners whose combined holdings represent a majority of the capital value of the businesses in the proposed district. That double majority requirement prevents a large number of smaller owners from preying upon a small number of wealthier businesses, and also prevents a small number of large owners from imposing too high of costs on smaller owners.

A similar double-majority threshold could provide democratic legitimacy to new infrastructure districts, while leaning on an established body of New Zealand practice.

It is all rather complicated, and hits only onto the infrastructure financing part of the work ahead for Minister Twyford. Unwinding the mess is not a small job.

Focusing on the ballsports [EC: I wrote sportsball; I don't know who changed it to ballsports] parts of politics suggests the cabinet changes were a loss for Twyford. But if it allows him to focus on the parts of the portfolio that play to his strengths, it may instead be a win both for Twyford and for housing. Carving out the parts of the job that can be well handled by others, like social housing, makes a lot of sense. Letting Minister Woods take over Kiwibuild should let Minister Twyford make progress in the parts of the housing agenda that will matter the most over the longer term.

But we will need to see progress now that the barriers and potential excuses are out of the way.

 Ungated version here.

It is not hard to come up with scenarios where brownfield sites for the new bond-and-levy-funded projects get blocked because a small number of owners who'd be subject to the levy are very rightly aggrieved - they'd be paying for something for which they have no use. The levy has no particular democratic legitimacy. There are potential ways around it - like maybe you could accrue those levies against the property until sale or transfer. But things will get messy more easily, and the whole thing potentially binned as having proved too hard, if they get too many cases where the project's been blocked because they've tried imposing the levies on folks who don't agree to them.

Reader mailbag - supermarket zoning edition

From today's reader mailbag:

Hi Eric,

Why not make supermarkets a permitted activity in any Rural zoned area?

Then another chain could be developed with a lower cost base as they wouldn't be paying retail zoned land prices. Large supermarkets could sit on the outskirts of most cities and towns in NZ with minimal effects. Huge dairy factories and timber mills are permitted activities - why not a supermarket?

There are Aussies chains avail - only Woolworths is here. Also Aldi and Lidl - though they only need quite small sites

One tiny change to the RMA and you could knock food prices down by 25% I reckon. Westfarmers would be here in a heartbeat - they own Bunnings.

Graeme Farr

I thought Aldi was starting to look at New Zealand. But in-town zoning does seem a substantial barrier to entry. In Christchurch, Raeward ran a very nice big supermarket just outside of town by the airport.

Are there currently barriers to putting up supermarkets on rural zoned land? I expect there would be transport infrastructure needed, but there's a lot of rural land on highways. 

Graeme notes the price difference between identical products in New Zealand and Australian supermarkets. A lot of that will be differences in warehousing and transport costs between the two countries, so I'd be surprised if prices came down by quite as much as advertised. But that's not a reason not to open things up. 

Afternoon roundup

This afternoon's worthies on closing out the accumulated browser tabs:

• Russell Brown on cannabis reform, including links through to reasonable critiques of the Berenson work that's been floating around.


• Some excellent data work by Mike Reddell looking at the time path of employee compensation in NZ. Labour worries a lot about what they see as a declining labour share of income. Here are the key graphs.
  
  First up, employee compensation as fraction of GDP, adjusted for production taxes and subsidies. It's up on where it was in the 90s, but has been flat for the past decade.  
  
  
  
  Next up, wages as fraction of nominal GDP per hour worked:
  
  
  Reddell's summary:

  There is a fair bit of short-term noise, but the trend is pretty clear. On this data, wages have been rising faster than the overall earnings capacity of the economy. That was so in the 00s, and has been so – albeit to a lesser extent – in recent years too. For anyone inclined to want to debunk the analytical unadjusted series, note that this chart is not wildly inconsistent with the labour share chart I showed earlier: the labour share of total income has increased since the early 00s, with the biggest change occurring in the pre-recession 00s themselves.

  The underlying problem remains low productivity growth.


• Labour markets remain tight.


• These wonderful maniacs coded folklore from 1,000 pre-industrial societies to look for common traits that could be used in testing social science conjectures. Pastoral oral traditions have more motifs of anger and retaliation; foraging societies have more leisure-related motifs; political centralisation correlates with more use of trade and money words and with respect-related motifs. And old folklore predicts current views about things like toleration of socially deviant behaviour. Read! 


• Nudges are far less beneficial when we consider the psychological costs imposed on the nudgees. 


• Peer effects matter. Or, an argument against school zoning rules that concentrate disadvantage.


• Requiring a job search period before benefit uptake can be rather beneficial. It increases earnings and reemployment, without worsening health or crime outcomes.  


• Informal governance matters in disaster planning. I'm reminded of last year's Christchurch Earthquakes Symposium, where Hurunui District Council's Hamish Dobbie explained [my take on part of his talk] how their Council worked to enable civil society organisations rather than supplant them after the Kaikoura earthquakes. 


• And finally, Nate Silver:

  How my brain interprets every Brexit explainer: https://t.co/7smQVKMP76

  — Nate Silver (@NateSilver538) January 15, 2019

SOOBs and disamenities

Housing within Amsterdam's red light district trades at a discount. Here's Erasmo Giambona and Rafael Ribas.

We measure the externalities of prostitution by quantifying the discount that households require to live next to a brothel. In our tests, we exploit a unique feature of Amsterdam's Red Light District (RLD), area inside a perimeter naturally delimited by canals where private homes are located next to prostitution windows. Using a novel two-dimensional difference-in-discontinuity (DiD) estimator, we find that households require a discount as high as 24% on homes inside the RLD. We also find that this discount disappears when prostitution windows are forcibly closed by local authorities. By incorporating the exact coordinates of brothel closings, our empirical design allows us to establish a direct link between these closings and changes in price discontinuities. To estimate the economic impact on households outside the RLD, we look at the closings of all brothels in Utrecht (the fourth largest city in the Netherlands) in 2013. Households are found to have paid up to 12% of the value of their home to be some distance from prostitution. In both cities, the contraction of the paid-sex industry is also associated with a drastic reduction in crime rates. Overall, our findings suggest that the nuisances prostitution creates do more harm than good to residents. 

I wonder whether there's New Zealand data available on the location of brothels. Prostitution law reform and the emergence of suburban owner-occupied brothels, and varied council approaches to zoning and regulation, would provide plenty of room for diff-in-diff study. Red light districts could be rather different than smaller owner-occupied facilities. 

Paying for the infrastructure

A great map made the rounds on Twitter a couple of weeks ago showing all the places in New Zealand where there are no people living within a square kilometer.

Ping everyone claiming NZ is full and we can't have more immigrants... https://t.co/Xy22pa8TEP

— Eric Crampton (@EricCrampton) December 10, 2017

Somebody asked who'd pay for the infrastructure for all the new people. Stephen Selwood in the Herald has one good answer: let the new residents pay for their own infrastructure via municipal utility districts.

I gave a short talk on MUDs a couple of weeks ago and put together this note on them for the attendees. It might be useful background for others too.

Problem:

Infrastructure financing has proved to be a binding constraint on development in growing communities where Councils are approaching their debt limits. In those cases, issuing bonds to finance new infrastructure for development can pass cost-benefit assessment, but would breach debt covenants and trigger higher interest rates.

As consequence, New Zealand’s housing affordability has suffered. Councils zone what seems to be sufficient land for development and growth, but market prices reveal substantial value uplift when land is zoned for development, suggesting that zoned land is actually scarce. Regulatory scarcity of land on which development is allowed also enables land-banking.

Better infrastructure financing mechanisms can be transformational. Credible measures for rolling out more infrastructure for development and for routing around or leapfrogging current landbanks would completely change the dynamics of land markets in constrained areas. If owners of banked land expect that development will leapfrog them and that future housing costs will consequently be lower, they will wish to bring their development plans forward – and quickly to beat the rush. Market prices can then adjust to restore housing affordability where urban housing costs would be limited by the cost of building houses and infrastructure on paddocks outside of town.

Potential solutions

National proposed new infrastructure financing vehicles to allow new infrastructure roll-out without hitting Council books. That will help. Phil Twyford has suggested a suite of other measures that also are credible, including value uplift charging.

Municipal Utility Districts (MUDs) are an excellent complement to the changes currently under discussion.

Current within-subdivision infrastructure is typically funded by the developer, and interconnection costs or trunk infrastructure upgrade costs are handled through developer contributions. Both of these load costs onto the developer very early in the development cycle and then are reflected in higher section prices and higher house prices. In the end, the infrastructure winds up being financed at the new homeowner’s mortgage borrowing costs when the new owner borrows to purchase the serviced section or house.

The MUD alternative sees a developer establish a special ratings area over the new development. The MUD is able to issue bonds to fund infrastructure development, and the bonds are paid off through a special rating on owners in the development. Where the MUDs borrowing costs are lower than the homeowner’s mortgage interest rate, this reduces costs to homeowners over the longer term. It also reduces costs to homeowners by shifting the timing of costs and the underlying riskiness of the related debt. A developer is a more risky proposition than a stream of tax payments from a new development, so bond financing costs backed by taxes on a new development can be lower than the capital costs for a developer.

MUDs are most prominent as part of Houston’s overall story of housing affordability. Typical MUDs range from 200 to 400 acres (81-162 hectares), with the District covering water, sewer and drainage facilities. Some MUDs also cover major roading thoroughfares, and also parks and recreational facilities. They result in masterplanned communities where the community’s residents bear the costs of their infrastructure and take over the management of their infrastructure.

They must purchase access to wastewater treatment services, or provide their own local or regional treatment facilities. They also share in central city water infrastructure costs.

MUDs can also be used for in-city development on brownfield sites where Council cannot handle the resulting infrastructure costs - though they may be most suitable on larger brownfield sites.

The New Zealand Initiative has explored the potential for Municipal Utility Districts to unlock infrastructure in two reports. Different Places, Different Means: Why some countries build more than others described Municipal Utility Districts in Houston and Austin, Texas. Free to Build:Restoring New Zealand’s housing affordability applied the lessons to a New Zealand context.

The Initiative argued that where a group of landowners or developers wished to establish a Community Development District (CDD), they might submit an application to the regional or unitary council outlining the geographic scope of the development, its environmental impact, its water source, and the financing arrangements. A developer board would be established and building would begin. The developer would be reimbursed for initial infrastructure costs on the CDD issuing its infrastructure bond. The debt would be paid off through a tax on homeowners, businesses and commercial enterprises in the new CDD. And as later stages of development proceeded, more bonds would be issued. And control of the CDD would pass to a residents’ board as sections were developed and sold.

Council Long-Term plans would need to specify any areas they viewed as unsuitable for CDD development on grounds of environmental or cultural sensitivity, or notified practical considerations but the total area excluded could not exceed a set proportion of the jurisdiction’s area. Regional water and electricity lines companies would check that compatibility with broader networks were maintained when approving infrastructure plans. And, once approved, the CDD would be exempt from RMA constraints on any decisions regarding their internal operations except for issues like storm water overflow that might impose costs on neighbours.

We suggest further that where debt issued by CDDs would be subordinate to any Council tax claims on properties, this debt should not affect Councils’ balance sheets.

The key benefit to CDDs, or MUDs, is that they enable new development to occur wherever there is demand for it by uncoupling infrastructure provision from Council debt constraints. They can leapfrog existing landbanks or existing planned trunk infrastructure rollout and, in so doing, can make all urban land more affordable. And the new Auckland Unitary Plan allows for new development outside of traditional urban boundaries.

CDDs then provide a nice complement to other measures currently under consideration.

MUDs aren't just a way of unblocking an infrastructure financing constraint. They're a way of making the supply of local government services like infrastructure contestable - and making housing far more affordable in the process.

Valuable upzoning

Allowing greater density can bring down housing costs while increasing the value of existing property. It isn't magic. A piece of land that can be turned into townhouses is more valuable than one that cannot be. Each of the townhouses would be more affordable than the prior house, but the property becomes more valuable even before the townhouses are built.

Auckland Council's economist has run some of the numbers since the unitary plan. 

Our results show that in the most densely upzoned areas of the Auckland isthmus (Glen Innes, Mt. Wellington, Onehunga, Mt. Roskill, and Pt. Chevalier – areas B, C, D, and E on the map), upzoned properties sold on average for a premium of more than $90,000 when compared to neighbouring properties that were not upzoned, controlling for all of the observable attributes of the property as well as the strong overall price changes Auckland experienced over this period.

Across the city as a whole, upzoning added $34,000 on average to the value of a property. 

Council economist Shane Martin makes the case for taxing those windfall gains to help fund the infrastructure needed to enable development, and notes one difficulty: since markets are pricing in the value of upzoning very quickly, Council might want to hasten any announcements of how it would fund the infrastructure so that that could also be priced in. 

The timing of the land value increases also has policy implications. We now have evidence that markets in Auckland react to announcements of policy changes rather than waiting until policies are enacted. That is, when council signals that a policy change is being considered, and the market believes that signal to be credible, prices react. This means that council must consider how it plans to fund new policies (through various mechanisms, including targeted rates), not only before the policies are enacted, but before they are announced. 

It would be difficult for Council to use that kind of infrastructure financing policy if the property turned over between the upzoning announcement and the infrastructure financing announcement. It is easier to announce a policy bundle that provides a net small windfall for current owners than to do it in two parts, the first part of which provides a windfall gain and the second part of which imposes costs on potentially different owners. 

Stonefields

I know you're supposed to hate the game and not the players, but the people living at Stonefield sure make it hard.

Anne Gibson reports that Auckland Council's knocked back developers' plans to add three apartment blocks and 11 terrace houses at Stonefields.

Matt Maingay, who leads neighbourhood action organisation Stonefields Lobby Group, welcomed the council's decision.

..."We support what Todd Property have achieved, but people need to make sure developers don't overstep this balance, that design doesn't completely ignore its surrounding, and that compromise can be beneficial to everyone. The benefit of Auckland growing at such a late stage is that we have the chance to avoid other cities' mistakes.

"If it hadn't been for a unified, concerned, and proud community, Aucklanders would have lost a little bit of themselves," Maingay said.

It struck Aaron Schiff as odd:

@EricCrampton the thing that struck me about this is, Stonefields is a new development but already residents are NIMBYing.

— Aaron Schiff (@aschiff) March 29, 2017

And Conan (surely not his real name) reminded us about this from last year:

@aschiff @EricCrampton is this the same amazing group that got the flying fox removed as kids having fun were making too much noise?

— Conan Gorbey (@arnie03) March 29, 2017

He's right:

A flying fox in a children's adventure playground has been temporarily disabled after noise complaints from residents.

An Auckland Council sign at Playtime Park, next to the Stonefields estate at the base of Mt Wellington, explains that tests carried out showed that noise generated by flying fox users "exceed levels permitted in the residential area".

According to the sign, the council was looking at options - including relocating the flying fox - and the community would be advised on the next steps soon.

Orakei local board member Kit Parkinson confirmed the flying fox had been disabled, but said he would know more about what had happened after a meeting today.

In November, the Herald reported that residents had complained about noise and kids' "squealing" coming from the flying fox at the playground, which opened in September, as well as large sand areas used to create a landing zone beneath the equipment.

I really really hope that the government moves on the Productivity Commission's recommendations around better urban planning.

Update: Does anybody know whether the original consents had apartments/terraced housing in them on this timeframe, or whether this was a new request?

For a bigger Khandallah

My submission from earlier this month on the proposed Khandallah medium-density zoning.

1.     Please accept this email as my personal submission on the proposed Khandallah medium-density zoning proposal.

2.     I am an economist who has read extensively on the economics of land-use planning. I received my doctorate in economics in 2003 and lectured at the University of Canterbury from 2003 through 2014, when I moved to Khandallah to take up a position in Wellington. I submit today in my personal capacity.

3.     I support allowing medium-density housing not only in Khandallah but also more broadly throughout the Wellington region. Zoning rules preventing densification within town and preventing expansion in the suburbs have driven New Zealand’s housing unaffordability problems. While that has primarily been an Auckland phenomenon, Wellington remains fairly unaffordable, with median house prices more than five times median income, according to the latest Demographia survey.

4.     It is rather unlikely that medium density housing in Khandallah, on its own, would substantially alleviate New Zealand’s housing affordability problem. But if existing residents in places like Khandallah continue to be able to block new development, housing affordability will continue to worsen – with the worst costs felt by the poor.

5.     I attended the November town hall meeting in Khandallah. Some residents there in attendance raised legitimate concerns about developments that had adversely affected them as neighbours. But the preponderance of criticisms focused on the character of the neighbourhood, the design characteristics of denser developments, and the consultation process.

6.     It would be rather unlikely that a developer would find Khandallah well-suited to low-end units as land prices are too high. Many in attendance at the meeting seemed to fear that very substandard units would be placed next door to them. And the fliers handed out by the anti-development residents’ group emphasised that developers would be likely to use cheap materials and cheap design. But a developer buying land here to subdivide, and who expects to earn a return on investment, would tie up too much capital in the underlying land for that to really make sense – higher-end smaller units are rather more likely.

7.     The residents’ association also worries that more people will worsen road congestion. While it seems unlikely that development would put any substantial burden on Onslow Road or the Ngaio Gorge Road, one can imagine localised issues with on-street parking were a developer to provide only limited off-street parking.

8.    However, the solution to parking congestion is not to block development, nor is it to require developers to put expensive parking in place for future residents who might not want it. Rather, we could learn from other parts of town that have limited parking to those with residents’ passes.

9.     If a new development would be likely to park up a street that is already heavily used for on-street parking, a better solution would restrict parking on that street to those with residents’ passes. Existing resident households could be issued with resident’s parking passes, and the incoming developer could buy some of those passes from the existing residents for use by future residents of the new development. The prospect of selling surplus parking passes to developers might also encourage a friendlier attitude towards neighbouring developments.

10.  Were traffic to increase substantially on Jubilee Road and Izard Road when children are going to or leaving school, Council may wish to provide a footpath on the southern side of Jubilee Road that children would not need to cross a busy road to find a footpath.

11.  The residents’ association also notes their belief that older people do not wish to live in the townhouse-style developments that could be allowed under the new zoning. I am curious why a developer would build such units if there were no demand for them. The developers have their money on the line; I have more confidence in developers’ ability to gauge market demand than I have in the residents’ association’s ability to forecast who might wish to live in which kinds of places.

12.  The residents’ association points to potential crowding at the local school. Cashmere Avenue School has a lovely and large school ground; an extra building or two on the site should not prove a massive hindrance. Many other schools have less ability to expand.

13.  Council asks where medium-density housing development should happen in our suburb. I believe it should happen wherever the owner of a property is able to undertake it without substantial adverse effect on their neighbours’ views or sunlight.

14.  Council asks what standards should be used to manage site design. It would be difficult to specify that without knowing things specific to the location of any proposed development. A four or five-story development built into a steep hillside could be entirely appropriate in some places as it would not impose shade on others nor would it block others’ views. But, in other locations, even a three-story development would block views or restrict sun. Maximum height should be determined by effects on existing neighbours. And, any maxima established to protect neighbours’ sun or views should be waivable by the affected neighbour to allow for bargaining between existing residents and new developments.

15.  Council asks for our views on the town centre. I note that a few of the shops there seem to be languishing for want of foot traffic. Increased density and more people would make shops more viable and make for a more vibrant village environment. Another few hundred people would hardly be to the community's detriment. It is a bit of a shame that these kinds of consultations only are ever able to draw the ire of existing residents who hate change; the views of residents yet to have the chance to be my neighbours are hard to canvass.

Housing crises and public choice

The worst is yet to come for Christchurch housing. As the rebuild picks up, we're going to have to house thousands* more construction workers, families in temporary housing while their houses are being repaired or replaced, and somehow find room for incoming students as fear-of-Christchurch eases.

Lois Cairns writes in the Press:

The Christchurch City Council and the Canterbury Earthquake Recovery Authority (Cera) have pledged to work together to tackle the city's housing problems.

Both organisations are promising more action to address the shortfall of housing in the city amid growing concerns the housing pinch, which has already pushed rents and house prices sky-high, will worsen between now and 2017.

"I would like to think this is a new start . . . that we can work together. There is so much at stake," council housing committee chairman Cr Glenn Livingstone said yesterday.

His comments came during a workshop on housing organised by the council and attended by representatives of Cera and the Ministry of Business, Innovation and Employment (MBIE).

MBIE senior analyst Dan Martin told councillors the loss of about 12,200 homes in the quakes had dramatically changed both the rental and home ownership market in the city.

It was estimated 7 per cent of the housing stock had been lost.

Shelley Robinson reports in the Herald:

The housing situation in Christchurch is now the worst it has ever been, forcing some families to squat in empty red zone houses.

People being forced out of rental accommodation because of earthquake repairs can now not afford alternative accommodation, welfare agencies say.

Said Christchurch City Missioner Michael Gorman: "I've never ever known it (housing situation) to be like this. It is the worst it has ever been. Usually there is always hope but now it feels as if there is no hope left out there.''

Mr Gorman said squatting in red-zoned houses was not unusual for the homeless - but he was now aware of families who were moving into abandoned houses.

Mr Gorman said a mother with two teenagers was squatting in a Bexley red-zoned house because they could not afford to rent a home.

They been previously been in a rented property but had to leave that for earthquake repairs and couldn't find anywhere else affordable.

Absolutely none of this is surprising. Many people have been very loudly suggesting that Council needed to open things up so that new housing could quickly come on-stream. Very simple fixes, like allowing people to put in a secondary flat inside their houses, could have been achieved at a penstroke a thousand days ago. And yet Council did nothing. Instead, we've had years of arguing about zoning and plans and building codes and stadiums and light rail.

I understand the standard public choice arguments around NIMBY regulations and housing. Long story short, homeowners like higher prices and hate having lower income neighbours and so push for regulations that keep minimum lot sizes large, prevent densification, and restrict development out to the suburbs. Similarly, property-owning developers want strong restrictions on the ability to develop - the regulations then enforce something of a cartel among those developers who can work the system. Sure, it's all couched in a nice veneer, but those are the basic incentives.

Some of the basic literature:

• Groves and Helland show that zoning is mostly a distributive enterprise: a way of allocating rents. 
• Clingermayer similarly provides evidence of zoning's being used both as a way of reducing externalities and as a way of distributing rents. 
• Evans despairs that urban planning takes pretty much no account of standard cost-benefit analysis and instead operates under a public choice model which, while helpful in understanding why things are as they are, does little to help us understand how to fix things. "Thus the economist who chooses his profession in the hope of advancing human welfare, and then chooses to study the economics of town planning, is likely to find his or her professional career frustrating, since their advice will be either ignored or unpopular."
• Webster summarises the basic approaches: Pigovean, Coasean, and Public Choice. 
• Pennington's book looks especially helpful; I need to order a copy. His paper here highlights planning failures and the cycle in which policy failures beget further failures. 

What I don't understand is why the basic economic theory of deregulation didn't kick in. Peltzman taught us that when the costs of regulation change, the equilibrium changes. All of the minor niggling regulations that propped up housing prices and increased building costs in Christchurch before the earthquakes became incredibly binding and restrictive and costly after the earthquakes.

Why didn't Council get out of the way?

I can understand worries about the long term and what the city should look like fifty years out. But very simple things that would have had little to no effect on long term character and that could have quickly brought at least some more supply onto the market immediately after the quake were also blocked.

Why did it take more than a thousand days to get to the point where Council starts taking seriously that we might just need to let people build more houses more easily? Why did it take the threat of central government imposing a plan?

Understanding why Christchurch screwed up so very badly might help in fixing Wellington's regulatory structures before their earthquakes come.

Potential explanations:

• Rent-seeking and political capture by homeowners, each of whom likes the idea of housing affordability in general, but particularly likes their own asset value increasing and dislikes their neighbour's attempt at subdividing.
• Legal risk to Councils where any easing up on building codes could expose them to "leaky-home" style liability. And while this can explain stuff around construction methods and dithering interminably over setting the building codes post-quake, it does nothing to explain council reticence to open up more land or to allow increased densification.
• RMA litigation risk: failing to allow increased density or to permit more development on the fringes causes homelessness; fixing the regulations might lead to somebody suing them for not having gotten all the processes right or not having consulted sufficiently or for failing to have properly considered amenity affects.
• Council fears of taking on infrastructure costs. However, MUDs do solve that problem rather nicely. 
• More psychological explanations: a disfunctional council (elected and/or bureaucrats) post quake just wants to hunker down and do exactly the same thing it's always done in exactly the same way it's always done it. Allow people to put flats into their houses? Bah, we've never allowed that. You just want to turn the area around the University into something like Dunedin, don't you? Well, we won't have that, not in our city. You say we're expecting another fifteen thousand construction workers? Well, [sticks fingers in ears, shouts la-la-la-la-la I can't hear you].

I haven't any great answers here but it's something worth thinking more about. 

* One estimate that was floating around was 15,000 additional workers in the next year.

Coming to the nuisance

John Walley has a point. He worries that commercial encroachment on industrial zones is not being treated as a coming to the nuisance but rather could push out the prior industrial firms.

The mobile Nimbys are motivated to perceive these residual problems as significant, using every opportunity to whip up opinion against any previously acceptable use as unacceptable.

In normal times this creates problems, in a disaster recovery situation it becomes a more serious issue. Industry and manufacturing has been a lifeline for our city through our disaster, the sector kept going and, through the efforts of many, maintained activity.

Our disaster has forced our city to become more diverse, more mixed. Different sensitivities have been pushed together and sadly, we have not seen an expansion in the tolerance of established use.

Minor problems become significant when more sensitive people are present to witness them. We all know that dealing with problems becomes all the more challenging when earthquake damage insurance difficulties and weather extremes are in the mix.

The reverse sensitivities in Woolston are not new; noise and smell have always been potential issues, however these existing uses need to be tolerated as many jobs are threatened, being replaced by a handful of hospitality and retail jobs. Does that make any sense? How would you feel if your job was threatened in this way?

The Woolston gelatine plant has generated a gawdawful stench for at least the decade I've lived here.* Rolling up the windows while driving past is pretty standard drill. And it's been worse since the earthquakes.

A few short months after the earthquakes, Cassels & Sons opened their excellent brewpub close to the Woolston plant. It is a glorious place to spend the afternoon when the sun is out and the wind is coming from the right direction; we were there on Sunday. But when the wind isn't right... well, they have a phone number displayed prominently for patrons to call Environment Canterbury with complaints. Cassels are expanding with a large section of retail shops soon to open beside the brewpub.

The gelatine plant clearly pre-dated the retail development. It's also very likely that the gelatine stench predated most of the current owners of the houses just up the road from the plant; they would have bought their properties at a substantial discount reflecting the disamenity. Anyone who bought a house there after the plant was established came to the nuisance as much as did Cassels.

So, it's almost a classic coming-to-the-nuisance case. And, it's also one where there's a strong residual claimant on most of the abatement benefits: the Cassels family. Their brewpub and assorted retail holdings will do rather better when the foul winds cease to blow. In this kind of case, we expect bargaining to efficiency: if it's cheaper for the gelatine plant to change their operations or to move than it is for Cassels to bear the stench, then they can pay the plant to do it. It might have been too hard for the dispersed homeowners to pay the gelatine plant for abatement, but Cassels could pretty easily coordinate things if they wanted a Coasean solution.

But it's a bit more complicated. The gelatin plant may have been breaching some of its emissions consents:

As one of the three air monitoring stations set up in Christchurch by Environment Canterbury (ECan) is directly across the river from Cassels, ECan is well aware of the problem too. As ECan monitoring officer Chris Elsmore explains, there is the odour from gelatine production and there have also been breaches from sulphuric acid production - that would account for the sulphur smell.

"It's at a difficult stage at the moment," Elsmore says.

"Gelita certainly comprehend the problem and are taking significant steps."

But Gelita is working at a different speed to Cassels and others in Woolston, Elsmore says.

But if Cassels aims to have his Tannery complex open in six months, which is his ambition, will the smell have been minimised by then?

"Most likely," Elsmore says. "We're pushing them all the time."

That said, Woolston has long been an industrial area and is where such businesses have traditionally been. Besides Gelita, there is Independent Fisheries, a tannery and, until recently, rubber curing.

"If it was smelling, it was in that area," Elsmore says. "Alasdair's right in that things needed to improve."

So if Gelita is emitting more noxious fumes than they have the right to emit, and if it is more expensive for them to abate down to Code than for Cassels to bear the stench, they could pay Cassels to stop complaining. Cassels is pushing their customers to notify ECan whenever things are too smelly; some of this will be a push for enforcement of existing code while some of it would be to build pressure for reducing the permissible amount of emission.

John Walley has a point where changed neighbouring uses lead to lobbying for changed rules in cases where it would be really simple for the aggrieved neighbours to buy abatement if abatement could efficiently be provided. But where they're instead lobbying for the enforcement of existing standards, and where you can make a pretty reasonable case that any de facto easement existed only because of strong coordination problems among the residential neighbours, perhaps Gelita should be the ones purchasing abatement from Cassels.

* If you're from Winnipeg, think about the Saint Boniface yards from two decades ago.