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Private Equity Exacerbates the Climate Crisis

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The following is a Press Release from the Private Equity Stakeholder Project. If you are unfamiliar with Private Equity and how it works I suggest you read Cory Doctorow on the subject.

Pension Forum Investigates the Role Private Equity Plays in Exacerbating the Climate Crisis

The University of Washington’s Harry Bridges Center for Labor Studies hosted a forum Wednesday that explored the relationship between pension funds and other institutional investors, the climate crisis, and the impacts on communities and the environment. Trustees and representatives of dozens of investors with more than $10 trillion in assets combined participated in the forum.  

Moderated by Michael McCann, the University of Washington Gordon Hirabayashi Professor for the Advancement of Citizenship, panelists spoke of the growing urgency to interrogate the role private equity plays in exacerbating the climate crisis, often using pension fund capital. 

Treasurer of the British Columbia Government and Service Employees’ Union Paul Finch said at the forum, “What doesn’t get measured doesn’t get managed. And we need to better understand what the risk is and we need better measurements of investment risk. We need less blind trust of investment agents. We need to appoint more critical thinkers to these pension boards who are equipped and educated with the tools to be able to understand the risks that exist.” 

Panelist Sleydo’ (Molly Wickham) – Gidimt’en Checkpoint Spokesperson on Wet’suwet’en Territory, British Columbia, said, “Our resistance creates huge instability and risk to investors. We know that [KKR’s] Coastal Gas Link project has been delayed for at least one year and many seasons due to direct action and the requirement of added infrastructure throughout the pipeline route. 

“We will never stand down and will continue to resist this project and others like it that do not gain consent from our people. It is a bad investment that will never see the returns that pensioners deserve.”

Participants discussed how labor unions, pension fund trustees, and Indigenous rights and grassroots organizations are working to encourage climate-safe investment practices and explore avenues for further collaboration. 

Finch said, “What we found is that if people don’t have the tools to properly measure what’s happening in the markets, then they’re not able to make informed decisions in the best interest of their members or their beneficiaries. Across the board, the risks associated with these [fossil fuel] investments are not being properly analyzed or understood. Since divesting [from fossil fuels] our union has approximately earned, net of fees, 12.5 percent on the market, on average, every year.”

Even as the US has rejoined the Paris Agreement, and the Biden Administration is advocating for greater investment in clean energy infrastructure, and as publicly traded companies begin to commit to net-zero emissions, private equity firms – such as the Blackstone Group, KKR & Co., and the Carlyle Group – continue to acquire fossil fuel assets, contributing to the climate disaster we are experiencing. 

Earlier this week, the International Energy Agency (IEA) released a groundbreaking report that stated that in order to achieve a net zero energy system by 2050, from today, there should be “no investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.”

Private Equity Stakeholder Project Climate Director Alyssa Giachino told forum attendees, “There is a universe of economic actors outside of the public markets – like private equity — that are finding buying opportunities in assets shed by publicly traded companies. Absent pressure and real accountability, private funds managers will continue to invest institutional investors’ capital in oil and gas despite the risks. The public needs real information to hold private equity accountable to the impacts they have already had on the environment and marginalized communities.”

Mitch Vogel, Trustee of the Illinois State Universities Retirement System and Eileen Moran, member of the Environmental Justice Working Group of the Professional Staff Congress – CUNY also participated on the panel.

You can watch the recording of the forum here.

Written by Stephen Rees

May 21, 2021 at 8:52 am

Alberta might have one last oil boom.

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The marker which shows where the well was

Western Canada’s First Oil Well: Waterton Lakes, Alberta

 

The headline comes from The Globe and Mail.

The cause:

Analysts predict global oil demand could peak as soon as 2022. Even some big oil companies see peak demand by the 2030s.

But between then and now, in the mid-2020s, oil companies such as France’s Total forecast higher prices on a combination of steady demand and tighter supply.

This scenario, if it plays out, won’t mean $100 for a barrel of crude. But it would mean a profitable oil industry – and potentially quite profitable. Given that Alberta is among the biggest producers of oil in the world, this outlook could be very good news for the provincial treasury.

This annoyed me so much I found that I was writing a reply in my Plague Diary. Which will not be seen by anyone – at least not for a very long time. Perhaps they will have fun comparing the prediction with reality.

I cannot imagine that the provincial treasury will see all that much. Mostly because politicians do not have a long term focus. And this seems to apply in spades to Conservatives and Albertans. The early paragraphs of the editorial lists what happened in previous oil booms. My prediction is that while the mistakes may have some differences, the political instinct will be to devote any windfall to spending that will bring enough popularity to improve the chance of winning the next election. That is all the party in power thinks of. Yes, there are lots of good causes, and plenty of lobbyists. The ones that promise significant donations to party funds and other help to win elections will get the most favorable hearing. And the oil and gas lobby is still the biggest and most generous. While the statistics show Mining, quarrying, and oil and gas extraction, at 16.12% of GDP, CAPP continues to claim “30% of all economic activity in the province” which is obviously not the case.  But most Albertans and nearly all of the politicians probably don’t see it that way.

What has been happening is that the oil and gas sector has been largely bought up by foreign investors. Large multinationals, most of whose profits get squirrelled away in places where there are no taxes. There is a huge overhang of environmental damage, most of which will remain for the public purse to repair long after the end of the age of oil and gas. I doubt that much will be spent on this in the short term unless there is some major catastrophe to concentrate minds. Some inspiring folk are converting abandoned well sites to  solar capture. But the amount of space that occupies compared to the huge swathes of wrecked boreal forest is tiny. And the first thing that a conservative thinks of when there is a “surplus” is tax cuts. Actually it is the only thing no matter what the state of the balance of revenues to spending – unless it is spending cuts to hurt those least capable of withstanding them.

Of course we all know what works and what doesn’t. Conservatives are not persuaded by evidence, they like stories, and they love the old stories. They keep on doing what they have always done even though the outcome is always the same too.

If oil prices rise so too will oil and gas production. Right now there is a glut and the places to store the surplus are at capacity. Note too that the higher prices are predicted by an oil company. Not exactly an unbiased source.

But we also know that Canada has not a hope of meeting its commitments to reduce ghg emissions – mostly because the Canadian government spends far more on propping up a dying industry instead of promoting the green alternative. “As part of its COVID-19 response, Canada’s government is spending $1.7 billion to clean up “orphan” and inactive oil and gas wells in Saskatchewan, Alberta and British Columbia.  Industry should be footing the bill…” (source: Suzuki ibid

Many other governments are doing far more than Canada to promote sensible investments in renewables – and they are seeing good rates of return on those investments as well as moving in the right direction. I do not see a Jason Kenney government following that path – but maybe that will not survive long enough to see the predicted boom times.

More likely the predicted boom is unjustified optimism. Or downright lies – which is what I think that CAPP claim is.

Written by Stephen Rees

September 3, 2020 at 2:08 pm

Why “Green Growth” Is an Illusion

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Power Lines

Photo by Pixabay on Pexels.com

Again, found in my in box but intriguing enough for me to go and find out something about the people who sent it to me

Changing the Conversation

Economists and finance professionals still promote free market fundamentalism, shrinking from drawing even obvious conclusions about the dangers of unfettered markets. Fiscal austerity and deficit reduction continue to be watchwords of both policymakers and theorists, even as global inequality increases exponentially and unemployment equals or exceeds levels of the Great Depression in many countries. Politics chokes reforms that could bring growth and relief to millions, while the many challenges of sustainable development and environmentally friendly innovation are brushed aside.

Neoclassical economics fails to address these challenges, but the resistance to change is substantial — both inside the discipline and in the world at large.

So that in itself recommended the article to me, but there are other things right now that need my attention. So I am going to simply cut and paste the text (with the links) from the email – and expect to get some reaction in the comments below.

I will say this. During my career there was initially a sort of consensus (known as “Butskellism“) about the need for public sector investment and social programs. That was overturned by the arrival of Thatcher – and a lot of people I found myself working for, who were genuinely convinced of the integrity of the intellectual underpinnings of neoclassical economic theory. I was at best skeptical, but over time became convinced that it was simply the same old reactionary attitudes of the privileged. Yes communism collapsed, but that does not mean that Marx was entirely wrong, and anyway Leninism – and later Stalinism and Maoism – were some distance away from Marxism. Not only that but I was sure Keynes was right since I had grown up during the period when people from my background were at last seeing some benefit from his policies. At least, once we had paid off the huge US dollar loan, which the rest of Europe had escaped due to the Marshall plan. What I also saw was the sheer greed of the people who always yacked on about the Dutch “problem” (of gas revenue being spent on social welfare programs) while they gleefully stuffed their own pockets with the profits from oil and gas drilling in the North Sea and the increasingly dodgy Private Finance Initiative.

In the wake of this fall’s IPCC report on the growing dangers of climate change—including to the economy—a new paper and supplementary analysis from the Institute for New Economic Thinking (INET) find that the conventional wisdom of the dynamics between climate change and the economy actually understates these dangers. It finds that, contrary to popular belief, we cannot have it both ways: We cannot have carbon emissions reduction while also maintaining current levels of economic growth. There is instead an inexorable tradeoff between economic growth and preventing climate catastrophe. The paper is from leading economists on climate change, Enno Schröder and Servaas Storm.

Among its highlights, based on original research and a new set of data regressions:

  • “Green growth” is an illusion: Contrary to optimistic claims by Barack Obama and a host of others, you can’t grow your way to a better climate; consumption growth necessarily drives increasing CO2 emissions. The research finds that outsourcing production to other countries may hide this relationship between economic growth and emissions, but it’s not possible to de-link the consumption that accompanies rising living standards with rising emissions.
  • To stabilize the climate, future economic growth must be well below the historical income growth rate of 1.93% (1971-2015)—even with unprecedented reductions in carbon and energy intensity. The hard truth is that, based on even optimistic assumptions concerning future reductions in energy and carbon intensities, future global growth will be compromised by such climate constraint.
  • The present fossil fuel-based socioeconomic system, which was built over two-and-a-half centuries, now must be comprehensively overhauled in just 30 years, and not in a few countries, but globally.
  • To avoid a climate catastrophe, a radically different strategy—a concerted policy shift to deep de-carbonization—is needed. That means a dramatic shift from current practices: a fundamental disruption of hydrocarbon energy, production, and transportation infrastructures, a massive upsetting of vested interests in fossil-fuel energy and industry, and large-scale public investment.

The supplementary analysis I mentioned is the full debate INET is hosting on the topic. It includes analysis by Gregor Semieniuk, Lance Taylor, and Armon Rezai that reinforces many of Schröder and Storm’s findings, as well as a comment from Michael Grubb, professor of energy and climate change at University College London, who offers a more optimistic view of growth during decarbonization, and subsequent response by the aforementioned scholars.

Like I said I hope that others will take a hard look at this, particularly since I am immediately concerned about issues like climate justice – fair and equitable climate action. Plus, of course, reversing the recent rapid growth of inequality.

Written by Stephen Rees

December 6, 2018 at 3:19 pm

Book Review

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This review has been removed.

The representative of the PR firm pushing the publicity campaign for its publication  has a different view of the meaning of “Fair Use” which, if followed, would have made this review incoherent. I am not willing to do that.

 

 

 

 

 

 

 

 

 

 

 

 

 

Written by Stephen Rees

September 27, 2018 at 1:23 pm

BC Budget 2018

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You can read the whole thing on the BC Gov website or Justin McElroy on the CBC ‘s summary. Basically a commitment to increase necessary spending in the right areas which is being funded by increases in taxes on the corporations and the wealthy. So I am generally in favour.

But what is missing is a much needed correction of former BC Liberal policies which saw a giveaway of our natural resources. Once upon a time oil and gas revenues from leases and royalties made a significant contribution to our provincial budget. That is no longer the case, and ought to have been corrected by the new NDP (+ Green) government.

Two reasons leap out. Horgan retains Christy’s silly obsession with LNG, as well as Site C (which will increase GHG emissions) and, quite possibly, given the federal Liberals commitment the potential TMX pipeline expansion too. Our emissions are not going down even though it is quite clear from the state of the Arctic ice alone that this is a problem we are not tackling. Melting permafrost, with consequent releases of methane and mercury, are immediate threats, not something in the future.

But secondly the whole budget rests on a somewhat hopeful outcome of the ICBC debacle. I think the idea that somehow economic growth and a reasonable approach from personal injury lawyers is going to be enough is overly optimistic. We are going to need the revenues from oil and gas royalties and leases sooner rather than later.

But also, the whole fight with Alberta over the pipeline starts to look a bit different  when you consider how much diluting bitumen for pumping down the pipe depends on BC natural gas and its condensate. (For that thought I acknowledge the twitter feed of Eric Doherty.) The entire project is based on a falsehood, that there will be a market in Asia for dilbit at a higher price than the US refiners are currently willing to pay. It becomes less attractive to the US market (where nearly all of the exports go now) if the BC fuels it depends on have to pay some fairer share of the costs on our local environment and the fact that the resource is not renewable. There is a real reason to fear the loss of jobs at the Burnaby refinery if TMX is all about exports. We need to make sure that we are getting money for value. That isn’t case at the giveaway prices set by Clark.

AFTERTHOUGHT

Yeah, well there was something else that wasn’t in the budget. It would have been really welcome if the NDP had reversed some of Christy Clark cuts to the Public Service Pension. Of course, when these were announced they came with the message “these changes protect your pension” but what they actually meant was that the government was going to stop picking up the tab for some essential health services – so the pension paid out now has to pay for the things that are no longer covered. First up was MSP, of course, but at least that will be going if not immediately. Then there was extended health care, where coverage is now distinctly chintzy. A couple of fillings today cost me $200. And I will need either a denture (over $2,000 – some coverage) or an implant (near $7,000  – no coverage at all) soon. More of that would have been covered under the old plan.

And of course many Canadians have no dental coverage at all.


“As announced in September, starting on April 1 the carbon tax will rise by $5 per tonne of carbon dioxide equivalent emissions. It will be the first of four annual increases and will bring the price on carbon to $50 per tonne of emissions in 2021.”

source: The Tyee

Written by Stephen Rees

February 21, 2018 at 3:58 pm

Should the rich be taxed more? A new paper shows unequivocally yes

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This Guardian post from Sunday covers the ground that can’t be in a ten minute radio interview. The toll removal commitment made by the NDP was not accompanied by any discussion of how the required funds would be found. The money raised by bridge tolls will now come from the provincial budget – stayed tuned for that announcement.

The problem revealed by the toll removal is that we still have not dealt effectively with how to pay for Translink. And the probability that the Mayors’ preferred alternative – road user pricing – is now hostage to the “Toll Free BC” slogan.

But there are people who have done very well indeed from the 16 years of BC Liberals. Not the general population, of course, just the privileged. The people who already had plenty have got much more. The inequity of the policies pursued by right wing governments, and vacuity of the “policy” framework based on falsehoods such as “trickle down theory” and ” the rich are job creators”, has been widely exposed but oddly not generally accepted. The fact that people still vote for these parties against their own interests has also been widely noted.

Is it actually likely that Mr Horgan will open the can of worms that is Translink funding? Will he really bring in more progressive taxation on the super rich? Or will he decided that the over heated property market in Vancouver allows him to rake in more from property tax which is always the favourite target for provincial politicians, as that is the one source of revenue that they don’t get the blame for?

While the article I am citing above does not mention Canada or BC the general principles do apply – which I why I am linking to it. Because I think you need to read that rather than whatever bright idea someone like me could come up with. Well researched, properly cited and evidence based policy recommendations – backed by hard data – is worth far more than just opinion.

If you would like to listen to me pontificating on Roundhouse Radio 98.3FM on this subject that is now online. Just make sure if you want to point other people to that link through social media you use  @Roundhouse983 and @mornings on twitter and Instagram and ‘Roundhouse Radio’ on Facebook.

Written by Stephen Rees

August 29, 2017 at 10:09 am

BC Natural Gas Revenues

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Screen Shot 2017-08-22 at 10.52.29 AM

The graph comes from a tweet by Eric Neilson.

When you listen to Carole James present her interim budget in the fall this picture is what you need to bear in mind.

Written by Stephen Rees

August 22, 2017 at 10:59 am

Book Review: “Understanding Planned Obsolescence”

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There is something very post modern about this review. I was offered a copy of this new book (out 3 January 2017) to review, but what I got was an ebook hobbled by Digital Rights Management. It expires in a month and I am not allowed to cut and paste any quotations from it. Now I may not know much about copyright but I do understand the concept of “fair use”: which includes quotation!

I am going to cut and paste what I can from  the blurb on netgalley and the publisher’s press release. (see below the line)

The reason that I wanted to read the book was my irritation at getting this tweet

screen-shot-2016-12-19-at-3-00-45-pm

The iPad mini in question is less than two years old. I have determined by reference to the book that I am not alone in this experience, and indeed it appears to be a long established policy of Apple. Indeed within the product cycle, the life of the hardware is prescribed – and there will inevitably come a day, long before the device in question is beyond repair, when its operating system will not get updated any more. There is a case in the book of the iPod whose battery life was designed to be 18 months, and the battery could not be replaced by the user. There is also a documented legal case of an iPod mini designed and sold as an adjunct to exercise which failed when it came into contact with human sweat. Apple’s advertising showed the device attached to human bodies under exertion!

There is nothing new about planned obsolescence.  I read Vance Packard’s The Wastemakers at East Ham Grammar School when I studied A Level Economics (1964-66). Everybody knows about GM’s policy of annual model changes based simply on design as opposed to technical innovation. And the cartel of lightbulb makers who made their products fail earlier so that they could sell more of them. My Dad told me about British carmaker Armstrong Siddeley that went bust because their cars were built to last – and no-one ever bought another one having no need since the first one they got was so well made and reliable. I fully expect my 2007 Toyota Yaris to see me out – unless there is a sea change at the strata council and I could install a charger for an electric car. Or Modo relents and puts a shared car in our neighbourhood.

If you are a student then you will be comfortable reading this book. It is remarkably short – I read it cover to cover in two hours or so – and is well annotated and referenced. It does acknowledge Brexit – which will probably remove British consumers from all the EU protection offered to consumers, which is remarkably advanced compared to North America. But was obviously written pre Trump. With leaders like Trudeau and Clark we cannot expect anything other than continuing adherence to the best interests of their funders. And just as the fossil fuel industries will ignore the carbon bubble for as long as possible, we can confidently expect the 0.01% and the corporations they control to continue to ignore both the pile up of garbage and pollution and the growing shortage of critical raw materials (like rare earths) as long as their profits increase and remain largely untaxed. So acquiring this book if you are an activist and wishing to bring about some change is likely to disappointing.

But if you are really in need of an education in the theory of planned obsolescence this might be worth forty quid to you (CAN$66.45 at the time of writing). But as far as prescriptions go, there’s not much. The certainty that the “current hegemonic paradigm will not allow humans to remain on this planet much longer” – and therefore the need to “walk in search of new patterns, new models, new meanings to then build new paths, new paradigms”.

And that is about it.

 


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Written by Stephen Rees

December 19, 2016 at 3:38 pm

Canada (and BC) can grow GDP and cut GHG at the same time

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I came across this story by clicking on link bait “Something else Donald Trump is wrong about” on Vox. But I decided not to simply retweet that, firstly because we have all seen far too much about that fake tan monster and secondly this is important in both a Canadian and a BC context. (And I thought the people I wanted to reach might be less interested in that attention grabbing headline – “here’s some good news about the planet” seemed better to me!)

The Sarah Palin of BC politics currently occupying the premier’s chair is convinced that LNG is both an economic saviour and a way to reduce GHG emissions. It is, of course, neither.

Our newly elected  Liberal government in Ottawa – elected on promises to reduce GHG and committing in Paris to hold global warming below 1.5℃ – is now wavering. Not only because they allowed the Woodfibre LNG plant to go ahead, despite the very obvious shortcomings of the current (i.e. previous Conservative, Harper driven) EA process. But also because of the re-election of Brad Wall, which was obviously what Catherine McKenna must have been worried about when she started talking about national unity as being more important than the survival of life on earth.

So what Vox did was reprint a table from the World Resources Institute which shows that 21 countries have managed to reduce their GHG since 2000 while at the same time as increasing their GDP.

Decoupling_sparkline_graphic_v2

By the way, the stated reduction in US emissions is has been shown to be wrong, mostly because of the way they have counted methane.

You will notice, of course, that Canada is not among them. BC, of course, had been following a somewhat different track thanks to its adoption of the carbon tax. But that progress has been slowing, as the carbon tax has been stalled, and so much attention is now devoted to exporting fracked gas. Not only is the market for LNG now swamped, so that finding a customer for BC LNG will not be easy despite our generous tax and royalty regimes, but the way that methane leakage from fracking and LNG processing is measured has been updated with better data to show that it has little advantage over coal in reducing GHG.

There is no one answer to how this decoupling has been achieved – but there are some useful pointers in the article you just have to scroll down below that big table. But also there is, in BC, at present, a really good analysis of just how BC can improve its performance. And if you suppose that it might just be possible that none of the proposed LNG plants actually get built, and we elect a government in BC that is actually serious about reducing both CO2 and CH4 emissions – as opposed to just taking credit for past success – then progress does actually seem possible. Although if we try to do both, it’s very unlikely.

At the time of writing, there is still time to make yourself heard as part of the consultation on the BC Climate Leadership Plan. But even so, the table above ought to enough to silence the people who keep talking about growing the economy and saving the environment as though they were at odds with each other.

UPDATE From The Tyee interview with Nancy Oreskes, Harvard climate professor and co-author of Merchants of Doubt

Oreskes said Canada cannot seriously address climate change while also building more giant pipelines to deliver Alberta’s oil sands bitumen or British Columbia’s fracked natural gas to proposed export terminals on both coasts.

“If Trudeau can say we’re going to do all these things,” she said, “that says to me that they have not truly assimilated what is at stake here.”

Trudeau raised eyebrows when he told a Vancouver sustainable business summit last month that “the choice between pipelines and wind turbines is a false one. We need both to reach our [climate] goal.”

B.C. Premier Christy Clark similarly promotes liquefied natural gas as a climate solution: a “bridge fuel” to help China get off dirty coal power.

Oreskes called their positions dangerously “wishful thinking.”

Written by Stephen Rees

April 5, 2016 at 4:58 pm

“NIMBYs in the twenty-first century”

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The title comes from an article in The Economist (paywalled) which discusses the work of a graduate student who has challenged the very successful book by Thomas Piketty “Capital in the 21st Century”.

I have had to return the copy that I was reading to the library: the wait list is long and the number of copies limited. If you want a good summary then Cory Doctorow has done a very good job of that.

Matthew Rognlie

On March 20th Matthew Rognlie (pictured), a 26-year-old graduate student at the Massachusetts Institute of Technology, presented a new paper at the Brookings Papers on Economic Activity. Although the paper began its life as a 459-word online blog post comment, several reputable economists regard it as the most serious and substantive critique that Mr Piketty’s work has yet faced.

Without actually quoting the whole of the article, the point I want to tackle is this. “housing wealth is the biggest source of rising wealth”

Economist graph

“Policy-makers should deal with the planning regulations and NIMBYism that inhibit housebuilding and which allow homeowners to capture super-normal returns on their investments.”

Now this seems to me to be a very familiar assertion that I have read from the same gang of dealers in secondhand ideas who like to attack government spending on transit. They have asserted more than once that the ALR is responsible for unaffordable housing in Vancouver. For instance here’s the Fraser Institute – citing Wendell Cox (pdf)

The land scarcity created by the ALR has rendered Vancouver housing the most “severely unaffordable” of any major city in the 265 metropolitan markets across Canada, the United States, Australia, New Zealand, the United Kingdom, and Ireland, as analyzed by Wendell Cox and Hugh Pavletich (2009) in their fifth annual International Housing Affordability Survey

And the same thing in almost any city that imposes an urban growth boundary to limit sprawl.

Dr. Shlomo Ange of the Stern School of Business (NYU) Urban Expansion Project puts the issue simply in his introduction:where expansion is effectively contained by draconian laws, it typically results in land supply bottlenecks that render housing unaffordable to the great majority of residents.

The Economist of course does not have to reference these reports since, as we learned recently, the marketplace of ideas has adopted this notion unquestioningly. Or has it?

The argument stems from the idea that markets are better at determining everything than policy makers. Except that markets can only determine the level of use of those things that are priced. And most of the things that are of real value – breathable air and clean water for instance – are not priced. Land capable of producing food is priced far below what it would be as land designated as suitable for development. Smart Growth seeks to protect this land from development by ensuring that land within the growth boundary is better utilized.

Smart growth planning allows us to create new housing choices that are more affordable. We need to:

  • make better use of existing land and buildings (for example, by filling in vacant lots and allowing homes to be built over stores)

  • allow a mix of home types in every neighbourhood, like secondary suites, granny flats, and single- and multi-family dwellings

  • provide a mix of homes with commercial in the same neighbourhood

  • carefully add new homes in existing neighbourhoods, such as units in the basement or above the garage (to increase rental supply and provide extra income to help with the mortgage)

  • provide easy access to jobs and transportation choices, so households can save on transportation costs

In fact the very idea of “affordable housing” might be misleading because it fails to encompass travel costs. Indeed the old saw about buying a house was “drive until you qualify”. The amount you can borrow to buy a house is controlled (in our case by the rules of CHMC) but no-one controls the amount of time and money you spend commuting. This idea is encapsulated neatly in the last of those bullet points. It is also the case, of course, that in markets like Vancouver, many people cannot afford to buy and renting is increasing in popularity even if the supply of rental housing may not be responding as we might like.

It also ignores all the evidence that the conventional model is unsustainable. All the infrastructure that is needed to support sprawl makes it financially unaffordable – as Charles Marohn admirably demonstrates at Strong Towns. The US congress has been arguing for years how to patch up the crumbling interstate system, given their refusal to even contemplate raising the gas tax which funded its construction but not its maintenance. And the bits which are usable fill with traffic congestion which building more roads has never relieved. This makes for very unhappy commutes (see Charles Montgomery “The Happy City”) but again human happiness is another one of those externalities which markets ignore. Prices were supposed to be based on “utility” but every study shows that simply piling up more cash fails to make anyone happy.

Indeed the greatest failing is that the inequality puts more resources in the hands of those who pay politicians to adopt policies that are disastrous to human existence but are good for their short term profit.

What bothers me about the Economist piece  is the nonchalance which goes along with omniscience. It goes without qualification what policy makers must do. Because all we are talking about is inequality and where wealth comes from. So none of those dull externalities need get considered at all.

And all of this it seems to me has been covered by others more able and capable than I, but that work does not seem to get cited when I go looking for it. I am actually not too dissatisfied by this piece, but at one stage I was seriously considering crowdsourcing it. I am sure that my regular crew of commentators will be piling in but if you know of other articles which deal with this particular debate (“the impact of growth control on housing affordability” gets 54,700 hits) in particular with reference to either this region or the Pacific North West, by all means let me know.

Afterword

Just how unaffordable is Metro Vancouver – and how will that change? VanCity has this forecast

Of course, there is a policy that could deal effectively with affordability, just as there is a policy that would end Homelessness. It simply requires the provision of subsidised housing. Of course those who oppose taxes on the wealthy will howl with rage. But all that we have to do to free up some resources is stop subsidizing fossil fuels – and rethink our agricultural subsidies too, while we are at it. It is ridiculous that corn and sugar production is subsidized when we are dying from diabetes, obesity and heart disease. All of which are also strongly associated with sprawl. Utah – hardly a radical liberal sort of state – eliminated homelessness by simply housing the homeless, which turned out to be cheaper than making them stay on the streets.

Written by Stephen Rees

March 25, 2015 at 4:08 pm