New Zealand’s planning processes have been breaking Wright’s Law for too long. Yesterday’s resource management reform announcement goes some way to fixing things.

Wright’s Law isn’t in any statute book and it isn’t in the Gazette of regulations.

It was an empirical regularity noticed by an American engineer, Theodore Wright, in the 1930s. Every time airplane production doubled, the amount of labour needed to make each airplane reduced by 10 to 15 percent. People learned how to build planes by building them. The more they built, the more they learned. Processes improved. Costs came down.

You probably know of it as the learning curve. You probably didn’t know that that curve is an actual curve, traced out in Wright’s article in the Journal of the Aeronautical Sciences in 1936.

It can lead to a virtuous cycle. Ford’s Model T came down in cost because Ford’s teams learned to be better at building them as they built more of them. Lower cost meant more people could afford the cars. Demand increased with each drop in price, and each increase in demand helped encourage more production and more learning by doing.

New Zealand, and the anglosphere in general, has been breaking Wright’s Law for a very long time – at least in the construction sector. Nobody winds up in jail of course. Breaking Wright’s Law means breaking the conditions needed for the Law to provide real benefits.

When every house, townhouse, and apartment tower is a bespoke thing that cannot be replicated elsewhere, it’s harder to reap the gains from Wright’s Law.

When councils do not allow much building, building companies don’t scale up.

Learning by doing, in housing and in the infrastructure needed to support it, requires being able to do the doing.

When each project needs months to years of permission processes before the doing can start, and councils don’t allow much building at the end of those processes, and a set of townhouses fit for one city might not be allowed in another, nobody will move very far along the learning curve.

Many American states and cities have the same problem. Rough and ready figures from a team of American economists suggested that America’s construction sector could be sixty percent more productive if residential construction had been able to scale up. Economies of scale, and learning by doing, can have substantial effects.

Yesterday, the government announced further decisions about resource management reform.

Some of what was announced had been long-signalled. But one piece had not been.

The government will standardise council zoning.

Minister Bishop said that New Zealand’s councils have over a thousand different kinds of zones. He contrasted this with Japan’s thirteen, which serve a country larger in area and in population.

Japan’s councils have discretion to use the centrally defined zones as suit local circumstances.

But if a house is consistent with the rules for a Category 1 residential zone in one part of the country, zoning won’t be a constraint on building that house in the same zone in any other town or city. If a commercial tower meets the zoning rules in one city’s Commercial Zone, it will meet the zoning rules in another’s.

The differences in zoning rules are arcane but can really matter. Different places will set different rules around building heights and recession planes from boundaries. The result is that a design that is compliant in one city is not compliant in another. All of it increases costs.

Standardised zoning is one part of resource management reform that should be able to earn cross-party consensus. Had Labour won election, they would likely have announced a National Planning Framework to complement their Spatial Planning Act; standardised zoning would likely have been a part of that framework.

Other announced reforms will also encourage learning by doing.

Currently, councils and consenting regulates a rather broad set of effects. The new approach will focus more narrowly on externalities as economists define things. Effects borne by the party undertaking the activity will not be controlled by the planning system.

And so, currently, proposed buildings can enter into layers of design review in which planners assert that residents will be happier if an apartment is reconfigured, or if the building’s frontage is broken up in various ways, or if the back yard has a slightly different shape. Developers will tell you horror stories. You only have to ask.

Homes, townhouses and apartments become more expensive not just because they’re harder to build, but also because they’re harder to replicate.

Imagine what Wright’s learning curves would have looked like if the production lines of the 1930s had a council planning officer intervening for each and every airplane. One officer would insist that the plane he was examining should have slightly more backswept wings. Another would demand a different shape to the windows. Still another would want the rivets to be square rather than round, in keeping with that planner’s desired style.

And an Independent Hearings Panel of trained and certified Commissioners would insist that none of those interventions had any effect on cost. Square rivets are no more expensive than round, you see.

It's no way to build an airplane, and it’s no way to build a city.

Paring all of that back to focus on actual externalities would be liberating. Zoning would determine what is allowed, subject to the Building Act, and developers could get on with delivering the housing that people want to live in.

There are a lot of moving parts to the government’s reform agenda, with much of the detail yet to be written.

But a consistent thread through the proposals is enabling Wright’s Law to work its magic. Housing needs to be more affordable. The proposed reforms are a good start.

To read the full article on the Newsroom website, click here.