8 Urban Planners and Urban Economists Have an Important Role to Play If They Manage to Work Together
Mayors and Urban Planners Should Be Enablers and Facilitators, Not the Creators or Shapers of Cities
The productivity of cities comes from the proximity of households and firms. However, this close physical proximity, which is so essential to the creativity of cities, requires special rules, shared investments, and common services. Local governments are created specifically to set and enforce the rules that make proximity viable. In addition, local governments manage shared capital goods (e.g., infrastructure and public open space) and provide social services. Shared capital investment and services need to be paid for through local taxes, tolls, and user fees.
The role of mayors and their municipal staff, including urban planners and economists, is therefore rather like the role of a well-coordinated team of competent managers and janitors. The mayor, with his team of municipal managers, is not the city’s ruler, nor is he the city’s designer. A city is entirely created by its citizens’ initiatives. These citizens are required to act within a set of “good neighbor” rules, and to be supported in their endeavors by a network of physical and social infrastructure managed by a mayor and a city council.
In a large city, the municipal budget is often much larger than the individual budgets of most of the city’s firms and households. The political power provided by the large municipal budget to mayors, municipal councils, and their planning staff seems out of proportion with the modest role of managers and of competent janitors that the function would require. Hence the temptation to use this power in an abusive manner, as shown in the preceding chapters.
Some municipal governments conclude that the power provided by their large budget entitles them to “design” the city, and that their role should not be limited to competently providing the infrastructure and services required to support the activities of their citizens. We have seen an expression of municipal hubris in the preceding chapter. New York City zoning rules are no longer limited to establishing good-neighbor norms and to mitigating obvious negative externalities but are now aimed at designing the city through regulations. A municipality is fulfilling its proper role when it simply coordinates municipal public investments with the investments of private developers, as it has done, for instance, in the development of the Hudson Yard project in New York.
While they do not have to design the city, urban planners and economists have a very important role to play in managing their city’s land assets, like streets and open space, and its infrastructure capital assets. In particular, planners have a major role to play in improving mobility and ensuring housing affordability. In this chapter, I describe the important role that urban planners should play in maintaining and hopefully increasing the welfare of the cities they work for. In doing so, I first have to describe the deviation from this role that has been prevalent during the past 50 years.
Do We Really Want Our Mayors and Planners to Have a Vision?
For about a quarter of century, many municipalities have been describing their development plans as a “vision.” Calling a simple municipal action and investment program “a vision” is symptomatic of the grandiose misunderstanding that municipalities have concerning their role. Merriam-Webster’s Dictionary defines vision as “the act or power of imagination.” This is not what you would expect from your janitor! A vision is normally the outcome of a personal religious, artistic, or scientific insight, and should not be used to qualify a plan to extend a sewer network, to adjust a property tax, or to collect tolls on bridges. The use of the word “vision” to define a municipal works program has spread worldwide. A Google search of words “mayor vision” produces 50.2 million entries! A search in French and Spanish gives similar results. It seems that all over the world, mayors feel obliged to manage their cities through “vision.”
Here are some of the results from the Internet search:
• “Hilton Head hires consultant to help jumpstart mayor’s ‘vision’ process.”
• “My Vision For Seattle—Mayor. seattle.gov.”
• “Quezon City mayor’s vision for an inclusive city.”
• “Vision for London—Sadiq Khan Labour candidate for Mayor of London.”
Does it matter if mayors use the word “vision” to describe their municipal program? I think it does. George Orwell wrote “but if thought corrupts language, language can also corrupt thought.”1
A mayor convinced of the necessity of having a vision to manage a city would feel less inclined to respond in a supportive way to the changes brought by the activities and innovations of the city’s population. A visionary mayor may feel compelled to impose her unique insights on the life of her Philistine citizens. The hubris of mayoral visions would be a clear example of what Orwell was thinking about when he wrote about the possibility of language corrupting thought. A mayor with a vision needs to be followed. She should not be questioned by people who lack vision. Visionary leadership implies a top-down approach. We have seen in the preceding chapters that a city is mostly created from the bottom up. However, a top-down approach is required to design infrastructure and services, but only as they are needed to support citizens’ activities. The support role involved in this top-down design is not trivial and requires good data and outstanding technical and financial skills, but a personal vision is not a requirement. It might rather be a hindrance.
Where Did the Vision Come from in Silicon Valley?
Silicon Valley has been the world’s most innovative urban concentration during the past half century. The creation of Silicon Valley is a perfect example of the advantages of a grassroots citizens’ vision, as opposed to a top-down mayoral vision. Silicon Valley was not created by a visionary mayor but by a large group of brilliant tinkerers, at times collaborating, but certainly not coordinating, their actions by implementing a common plan. The tinkerers had visions. Hewlett Packard and Apple were started in garages, in violation of local zoning laws! The deans and provosts of Stanford University had vision, as they encouraged their students and researchers to start their own enterprises, and provided start-up incubator workspaces on land belonging to the university. But no visionary mayors or urban planners were involved in the creation of Silicon Valley.
Silicon Valley extends over about 18 municipalities. Maybe the limited size of the municipalities tempered the urban planners’ ambition to control what the brilliant tinkerers were doing. The fragmentation of municipal power prevented planners from creating a special zone where anybody dealing with electronics would have to operate. One shudders at the thought that the municipal planners in Silicon Valley could have circumscribed the coders to a special coder zone, like the zone reserved for artists created in New York, as described in chapter 7! The planners of the various Silicon Valley municipalities deserve credit, though, for not having killed through land use regulations the activities of the emerging electronics industry. This industry, with its mix of coding, venture finance, and light manufacturing did not readily fit any traditional zoning district description.
I have worked in a few cities where “visionary planners” pretended to include the design of new “Silicon Valley” satellite towns in their Master Plans. These visions never took off. By contrast, where some of Silicon Valley conditions are met—a great university next to open land with flexible land use—similar creative activities may emerge. This has been the case in Beijing, for instance, in the area located between Peking University and Tsinghua University, and in some areas of the Pearl River Delta in southern China.
However, the role played by nonvisionary but competent planners was indispensable to the success of Silicon Valley. Indeed, its success depended on the municipal management teams being able to adjust to changing demand for urban services and infrastructure that were required by the sudden transformation of an area, originally largely residential, to a new type of land use. The competence of the municipal staff and their mayors was therefore indispensable for the successful growth of Silicon Valley. However, this role was not driven by a top-down “vision” but involved great professional competence in many sectors: land use and traffic management, transport, infrastructure building and maintenance, education, refuse disposal, security, taxation, and tariffs, among others. They did not need vision, but extreme competence.
In this chapter, I describe the important tasks that a municipal urban planning team has to fulfill, together with the type of working relationship between the municipal planning department and the other technical departments that form the staff of a municipality.
One of the major urban planners’ tasks is to constantly monitor the city’s welfare through quantitative indicators. The planners, detecting through data an impending deterioration in the quality of city life, warn the mayor, who decides what resources and priority to dedicate to the issue. Planners then propose strategies to address the mayor’s priority objectives. The role of planners is therefore mostly technical and data driven. Although in the rest of this chapter, I will use the words “urban planners” to designate the professional staff in the municipal urban planning department, the term also covers urban economists working closely with the more traditional urban planners whose professional background includes architecture, physical planning, engineering, and urban geography. Urban economists able to understand the functioning of real estate and labor markets have to be integrated into the team of more traditional urban planners.
Urban planners’ more important tasks can be divided into three major groups:
1. Monitoring important indicators and turning on blinking red lights when real estate prices, average commuting time, and other indicators point to an incoming crisis;
2. Developing and monitoring strategic projects to implement mayors’ municipal objectives; and
3. Designing new land use regulations and extension plans, and auditing existing regulations.
The Role of Planners in Monitoring Indicators and Turning On Blinking Red Lights
Publicly traded companies are subject to elaborate and codified reporting requirements concerning their financial flows, their assets and liabilities. Municipalities maintain financial records about their operating budget but usually do not systematically maintain a database that monitors changes in the private and public assets on which their tax income and expenditures depend. The changes in a city’s built environment largely determine its future income and expenditures. Of course, beyond being useful in projecting future municipal financial situations, the changes in the built environment and its value, determined by rents and real estate prices, are essential to be able to manage what I suggest is the main function of urban planners: maintaining mobility and housing affordability. In many cities, these essential databases concerning the built environment are either not maintained or are poorly maintained. And when they do exist, they are rarely analyzed and used to guide policy. I will repeat Angus Deaton’s quotation that cited in chapter 6: “Without data, anyone who does anything is free to claim success.”
In the past 20 years, many municipalities have developed spatial databases in GIS format that are open for public use. However, I doubt whether these databases are routinely analyzed for decision making. When downloading the data, it often happens that they are incomplete, that links are broken, and that many fields are just left empty. For instance, the city of Atlanta maintains a database called “Strategic Community Investment Report Data” (SCI, 2013). Recently, when one of my students tried to use the database, it appears that 18 percent of the original SCI parcel dataset had null values for the areas of buildings, and 22 percent of parcels had a lot size recorded as zero. The poor maintenance of the records suggests that the dataset has not been routinely used to identify urban issues and to develop urban policy. I had the same experience many times when trying to use the database of other cities in OECD countries.
The poor maintenance of municipal databases confirms my assertion that very few urban economists are involved in the daily policy making in cities. Urban economists are all data hungry, and if they were actively participating in policy making, they would make sure the city IT department properly maintains their databases. Traditional urban planners being more used to a qualitative approach to urban management—expressed by fuzzy words like “livable,” “resilient,” and “sustainable”—are likely to seldom use the municipal database.
The Master Plan Fallacy
Preparing a master plan—typically every 10 years—is a ritual that constitutes the “creative” part of the job of urban planners. In many cities, the urban planning department—with the help of consultants—prepares a master plan that includes two main parts: a large database and a set of maps, typically showing existing and future land use and urban extension. This would be a useful exercise if the database and maps were used as a permanent management tool and were periodically updated, say, every quarter. But this is seldom the case. After the master plan has been completed and approved by the local government, the team of consultants is disbanded, and the database is archived and is not updated. It is assumed that the data were only necessary for the preparation of the master plan, but once the master plan is completed, all that is needed is to implement it.
The decennial preparation of master plans is based on the false assumption that a city is like a very large building that needs to be periodically renovated and expanded. The master plan constitutes the renovation and expansion blueprint. Over the decade between master plans, it is assumed that the planners’ role is to simply implement the features found in the blueprint. In reality, most master plans are only very partially implemented or not at all. This blunt negative assertion is based on my own experience during my 55 years as a practicing urban planner.2
Despite this poor record, every decade, master planning exercises are repeatedly initiated at great expense. Why? Municipalities feel that a master plan will help project an optimistic view of the future and is a great public relations exercise. It also shows that “they are doing something” to address municipal issues like traffic congestion and unaffordable housing. The master plan document usually includes many volumes of charts and data, providing gravitas to the final maps and drawings showing what the city will look like a decade later.
Most of the time, the master plan is a very costly public relations operation for the municipality. However, I have met a large number of people who sincerely thought that it was an indispensable document to ensure a brighter future. These people, invariably disappointed by the final decadal outcome, attribute its failure to a lack of political will on the part of the municipality to faithfully implement the plan. The failure of master plans is not due to the human imperfections of those in charge of implementing them but to a conceptual conceit: A city is not a large building requiring a detailed blueprint before being built. I will suggest below urban management tools that would be useful substitutes for master plans.
Maintaining a Database Generating Important Indicators
A large city must be managed on a day-to-day basis. It cannot be run on autopilot for 10 years, as the concept of a master plan seems to imply. A municipality’s financial department maintains its accounts daily, updating constantly its income and expenditures, making projections and updating these projections regularly, and communicating to the mayor major changes to be expected in the budget forecast. In contrast to the municipal budget, which is carefully updated by a team of accountants and bookkeepers, in many cities, the quantity and value of the assets on which the revenue of the municipality are based—its land under different uses, its buildings that provide rents and property tax, the income of households and firms that pay utility fees for municipal services—are not monitored on a regular basis, outside of the periodic master plan exercise.
Too often, the staff of the planning department fails to monitor the prices, rents, and land use changes that may anticipate a future crisis. Data essential to the welfare of citizens—such as the monthly number of building permits issued and the size, prices, and rents of the residential units built every month—are seldom published and analyzed on a regular basis, although the data are routinely collected and are available in a disaggregated form in ledgers dispersed in various municipal departments. In the same way, the data concerning the addition and demolition of commercial and industrial space, which is routinely entered in ledgers when registering buildings and occupation permits, is seldom entered in an accessible geographical database. Hence, crucial information about future housing affordability, traffic, and commuting patterns is lost.
Monitoring the changes of neighborhood real estate prices is extremely important for the management of the city. These prices show when and where the equilibrium between supply and demand might be shifting. Planners, de facto, control the supply of land and floor space through regulations and infrastructure investments; they can therefore act in advance to adjust the supply elasticity that would decrease real estate price volatility. This price volatility too often creates extreme hardships for low-income households and small enterprises.
A city planning department should therefore create, maintain, and monitor an extensive urban database. Simple models should link raw data to indicators. For instance, changes in a neighborhood population and floor space can be linked to population densities and rents, producing indicators whose changes in value would need interpretation but could lead to municipal action. In the same way as publicly owned firms are obliged to publish quarterly financial indicators to inform the public of the state of their finances, municipalities should publish quarterly a set of indicators that will inform the public about the welfare of its inhabitants. The local municipal democratic process would be greatly enhanced by such actions.
Turning On Blinking Light Indicators
At times, the value of some urban indicators may change rapidly. Often, the change is benign and just indicates the normal adjustment of a city land use to a changing economic environment. At other times, the changes may indicate a deterioration of living conditions for the entire city or for some socioeconomic group. For instance, a rapid increase in density and decrease in floor space consumption in a specific neighborhood may indicate a decrease in the housing standards of the socioeconomic group living in this neighborhood. Urban planners should then warn the mayor about “indicators blinking red.” They should provide an explanation for the change in density and propose alternative strategies to deal with it if in their opinion it may result in a loss of welfare in the future.
Just a few years before the housing finance collapse of 2007, I heard the words “blinking indicators” for the first time during a talk on mortgage risk and housing policy given by the late John M. Quigley, an American economist. Quigley, together with some of his colleagues, had assembled and regularly monitored a number of housing and financial indicators for the United States. At the conference, he used the expression “those indicators are all blinking red.” His tone of urgency was striking. The mortgage crisis of 2008 followed his warning a year later.
I thought that the concept of blinking indicators could be applied to many city metrics, for instance, rent-to-income ratio, floor consumption per capita, and median commuting time. By maintaining a regularly updated urban database, well-trained urban planners and economists could detect changes as they are occurring and act before the problem becomes too acute. For instance, rapid increases in housing prices could signal an emerging constraint in the supply of floor space or developable land, or both. If a plan of action to remove a potential supply bottleneck is implemented quickly, it could prevent a further large increase in housing prices and a future affordability crisis that would have serious consequences for the welfare of the population and city productivity. The presence of blinking indicators by themselves does not suggest an automatic diagnosis, and they need to be interpreted in the local context. For instance, a rapid increase in housing prices could be caused by poorly formulated regulations, by land tenure issues, or by a lack of investment in primary infrastructure and transport. Or in a more benign way, by a large increase in households’ income and in housing quality. Only after planners and urban economists have been able to establish a correct diagnosis will it be possible to design a strategy that will bring back the indicators to a value that would predict a return to smooth sailing.
The role of planners in monitoring databases could then be divided into three series of tasks shown schematically in figure 8.1. The series are:
Monitoring an urban database.
• creating and monitoring a municipal database,
• identifying blinking indicators, and
• proposing strategies with relevant line agencies.
Those series are in turn divided into three main topics:
• spatial structural changes,
• mobility, and
• affordability.
The items in the database suggested in the left column in figure 8.1 are only indicative. Different cities will have different ways of measuring a city’s spatial structure. There are useful papers proposing various sets of indicators. I recommend in particular those developed specifically for housing by Stephen Malpezzi and Stephen Mayo,3 two urban economists, and those developed by Shlomo Angel,4 an urban planner with a worldwide experience of cities.
Every year, the technology used to create and monitor urban databases is offering more information collected at a much lower cost. Each city should establish its database depending on the level of technology that is locally available and as a function of the city’s priorities and morphology. In some cities, for instance, the locations where running water is available is limiting the expansion of the city. Obviously, in this case the area covered by the water supply network will be part of the spatial database. In other cities, areas vulnerable to flooding are a major hindrance to their development. Clearly, in these cities planners should include in the database a very detailed topographical study and modeling of potential flooding under various climatic assumptions.
The urban planning database should not duplicate the databases maintained by the line agencies in charge of transport, infrastructure, or social services. Line agencies are better at maintaining a detailed database for their sectors and have idiosyncrasies that should be respected. However, land use and demographic data, including projections, should be maintained exclusively by the urban planning department. I have seen too often line agencies making their own projections for land use and demography, simply in order to justify a technological choice made by them. I have seen sewer and storm drainage departments planning to use oxidation ponds for sewage treatment in areas where the trend in land prices suggested future high population densities. The sewer engineers were assuming a projected low density compatible with the use of oxidation ponds to justify their technology choice. This is again an area where an in-house urban economist would be better able to contribute to decision making—in this case the trade-offs between a land-intensive but low-cost hardware technology like oxidation ponds versus a traditional sewer system, much more capital intensive but with low-land requirements.
The Role of Planners in Developing and Monitoring Strategies to Implement a Mayor’s Municipal Objectives
Municipal Policy Objectives, Alternative Strategies, and Impact Indicators
Mayors and city councils set up city policy objectives. These objectives are political, and rightly so. There is no scientific way to set up urban development objectives. However, while the priority objectives are political, the issues they aim to address can be resolved only through a technical approach expressed through a strategy. It is the role of planners to prepare alternative strategies to meet the mayor’s objectives. Much too often, the strategies proposed are unfortunately limited to identifying government inputs and do not explore the potential impact, which will indicate whether the strategy is succeeding or failing in meeting its original objectives.
For instance, let us suppose that a mayor’s objective is to improve public transport. The typical response will consist of announcing the financial inputs required to address the issue: how many million dollars from the municipal budget will be allocated to transport; some output indicators might be added, for instance, how many new buses or light rail lines will be added. However, what is important for the citizens is the impact of the municipal investment on their daily commute—how timely and less crowed buses will be and how much shorter the average commuting time might become.
If a quantified measure of the impact on commuting time has not been made explicit, there will be no way to measure whether the investment associated with the strategy has been successful in meeting the mayor’s original objective. If success is measured solely by the amount of money spent and the number of buses procured, despite no measurable positive impact on urban transport, faulty strategies could be repeated at great expense without any results. It is impossible for citizens to evaluate a municipality’s performance if the proper indicators of success—impact indicators—are not declared in advance.
The role of measurable indicators is not limited to monitoring progress and eventual success but is also part of the preparation of a properly formulated strategy. Indeed, the objective of a public transport strategy is not to buy new buses but to reduce travel times and to increase the commuting comfort of citizens. Unless this objective is clearly expressed and quantified as an impact indicator, there is no way to know whether the strategy succeeded or failed. Once the municipal council has declared an objective, finding the proper impact indicators is the first step in developing the strategy.
Strategies should include several types of indicators to
• identify the strategy,
• monitor whether the strategy has been successful, and
• eventually modify some element of the strategy to improve its performance.
The formulation of indicators while the strategy is being developed help focus on the desired result and not on the initial steps, like budget inputs, the purchase of equipment, or the construction of civil work. Many urban strategies have failed because the proper indicators were not initially imbedded in the strategy.
The design and implementation of a strategy requires identifying four types of indicators: impact, outcome, output, and input. I will illustrate the relationship between policy objectives, strategy, and indicators with an example summarized graphically in figure 8.2.5 Obviously, during the strategy design phase, the indicators’ sequence will have to be iterated several times. A desired impact when first formulated might prove to require inputs that are beyond the financial means or staffing capability of a municipality. The indicators will then have to be iterated until the inputs are found feasible while the expected impact is still worth pursuing.
Objective tree: impact, outcome, output, and input. Source: Adapted from Roberto Mosse and Leigh Ellen Sontheimer, “Performance Monitoring Indicators Handbook,” Technical Paper No 334, World Bank, Washington, DC, September 1996.
During the strategy preparation phase, the indicators will be prepared in the following sequence: impact, outcome, outputs, inputs. During the various phases of strategy implementation, the indicators will be measured in the reverse order, reflecting the sequence of project implementation: inputs, outputs, outcome, impact. I have shown in figure 8.2 the indicators in the order that should be used during strategy preparation.
Using figure 8.2 and starting from a municipal objective, I will follow the sequence required to identify a strategy and the indicators that will allow quantification of the results expected during the different phases of a strategy.
Let us assume that a mayor and her city council have decided that alleviating poverty in a specific neighborhood X is a major policy objective as part of a citywide development program.
Several alternative or concurrent strategies could be developed to alleviate poverty. One strategy could aim at increasing household incomes by improving employment opportunities, thus decreasing unemployment or underemployment. Other concurrent strategies could consist of transferring resources to the target population, or increasing the supply of social services, like health and education.
Let us select the first type of strategy aimed at increasing household incomes by improving employment opportunities in neighborhood X. Employment opportunities could increase in neighborhood X if workers had faster and cheaper access to the metropolitan labor market. Improving access to the labor markets usually decreases unemployment and increases salaries, as discussed in chapter 2. The values of the indicators, as discussed below, will be first projected during the design phase and then monitored during the implementation phase. The difference between the target numbers at the strategy design phase and those monitored during and after strategy implementation will indicate the degree of success of the strategy and help identify the elements that were crucial for the success or failure of the strategy.
Impact Indicators
The values of the impact indicators quantify the original municipal objective of the selected strategy. The objective is to decrease poverty in neighborhood X. The strategy selected to achieve the objective is to increase employment opportunities by providing faster and cheaper access to high-employment areas. The impact indicators during strategy design will fix a target decrease in both poverty and unemployment. For instance, if unemployment in neighborhood X is currently 25 percent, the strategy target will aim at decreasing this number to, say, 10 percent over 5 years, or adding a total number of newly employed workers6 equal to N1. If the number of commuters out of neighborhood X is currently N2, the strategy implies that, every day, a target number of workers equal to N3 = N1 + N2 should be able to use a faster and cheaper means of transport than is currently available. I assume here that new employment will be located outside the neighborhood. Creating new jobs within the neighborhood would be part of a different strategy.
During the strategy implementation phase, the impact indicator will monitor the rate of unemployment in neighborhood X every 6 months and compare it to unemployment in a neighborhood with similar socioeconomic conditions but without a transport project. The variations of the impact indicator over time will show whether providing better access to high-employment areas might decrease unemployment. It will indicate whether the strategy is likely to be effective. If the impact indicator shows that it is not, the strategy should be modified, or an entirely new alternative strategy should be tried.
Outcome Indicators
At this stage of strategy preparation, planners should find the more effective way to transport N3s number of people at peak hour from location X to location Y and Z, where many jobs are located. Depending on the size of N3 and the distance D between origin X and destinations Y and Z, alternative transport modes will be considered, from collective taxis to buses or urban rail. Individual means of transport like electric mopeds or motorcycles might also be considered. Let us assume that at this phase of preparation, it is found that an express bus line is the most effective commuting mode to transport N3 passengers from X to locations Y and Z.
During the design phase of the strategy, the outcome indicators will set the target number of passengers using the buses, and then the schedule, frequency, and speed of the express buses from origin X to their destinations.
During the implementation phase, the outcome indicators will monitor and compare the occupancy rate of the buses, schedules, and speed to the target established during the design phase. During implementation, the outcome indicators might be used to modify the strategy if they are inferior to the target outcome indicators. For instance, if the new express bus line has a low occupancy rate and is underused, some alternative routes and different time schedules should be tried.
The outcome indicator is important to monitor, but the fact that a bus line is well used does not necessarily mean that the objective of the investment has been met. People may take the bus for other reasons than commuting to work. Or possibly, the passengers of the new bus line have shifted from a less convenient route that they were previously using to commute to work. A positive outcome indicator might only indicate that trips to and from the neighborhood are becoming more convenient, not necessarily that the poverty alleviation objective has been met. The outcome indicator is not a substitute for the impact indicator.
Output Indicators
During the strategy design phase, the output indicator will show the number of express buses that will be required to carry N3 passengers to their destinations. The output indicators will then include the number of buses required to ensure the service, and the number and location of bus stations. The output indicators will also include the number of staff hours of surveyors, traffic engineers, and statisticians that will be required to monitor the implementation of the strategy and eventually to modify it.
During implementation, output indicators are used to measure potential cost overrun—fewer buses than originally planned for the money invested, for instance. The output indicator does not tell us whether anybody is using the buses, how frequent they are and even less if the new buses result in an increase in employment. The output indicators are important intermediary indicators but are not indicative of a successful strategy, even if they meet their targets.
Input Indicators
During the strategy design phase, the input indicators will include the total investment cost of the project: including design and supervision, the capital cost of the buses and of the construction of the bus stations, the operation and maintenance cost of the bus line and eventual subsidies, and the projected cash flow of the project, including fares and eventual operation subsidies. Some inputs, including operation and maintenance subsidies, might be recurring over time.
It is usual that during the design phase, the total inputs required to implement a strategy exceed the municipal budget or staff capacity. The planners will then have to iterate the four types of indicators until a consistency between expected impact and budget capacity is reached. Going through iterations during the design phase usually stimulates creativity and innovation.
During implementation, the input indicators will show whether budgetary and staff commitments have been met. Obviously, slowness in cost disbursement will have a negative effect on project performance and might cause a strategy failure. Ensuring that disbursements of project costs occur on schedule is a prerequisite for strategy success, but it does not guarantee it.
Indicators Have to Be Used to Weed Out Failing Strategies
It is normal that some strategies will fail. What is abnormal is to continue implementing a failing strategy. Designing and monitoring indicators is the only way to weed out failing strategies. The four types of indicators—impact, outcome, output, and input—are indispensable for designing and monitoring strategies, as well as for eliminating failing strategies.
Without calculating impact indicators, it is impossible to know whether the project investment contributed to the policy objective or not. In the example above, new buses may well be running on time, but they may have no impact at all on unemployment. The intermediary indicators—inputs, outputs, and outcome—provide us with important information about the design of the project, despite not telling us whether the strategy objective has been met. The intermediary indicators show how the performance of the project could be improved. For instance, if the buses are too slow and result in very long trips, corrective action could be taken, for instance, by improving the design of road intersections and the traffic management along the route.
Economic Rate of Return
By combining the results of the input and impact indicators, it is possible to calculate the internal economic rate of return of the project. The economic rate of return will calculate the present value of a discounted cash flow of the expenditures and the benefits (the additional flow of income coming to the neighborhood because of newly employed workers). For instance, in the example depicted in figure 8.2, in addition to the economic rate of return, it will be possible to calculate what the capital and yearly recurring cost of the strategy is per new employed worker. It may then be found that either the selected strategy provides a high economic return on the municipal investment, or possibly that the return is very low and alternative strategies should be explored that would increase the welfare of the citizens at a lower cost.
If we look at the way an industrial producer creates new products, we see a long list of trials and errors and eventually improvement in quality at a lower cost. Urban policies and strategies, by contrast, often do not follow this logic; they are often repeated even when it is well known that they failed. For instance, policies like rent control, greenbelts, new light rail transports, among others, are constantly repeated in spite of a near consensus on their failure to achieve their objectives. A quantitative evaluation of the failure of these policies is usually well documented through special reports or academic papers; it is seldom produced internally by cities, however, and the information does not seem to reach urban decision makers. Only a systematic analysis of data through indicators allows urban policies to be improved over time and failing policies to be abandoned. But as Angus Deaton wrote: “without data, anyone who does anything is free to claim success.”7
Most Institutions, Cities, and Development Banks Monitor Mostly Input and Output
Unfortunately, most urban strategies tend to focus on input and output, seldom on outcome and almost never on impact. The output is often misunderstood to be the objective. Developing the four types of indicators when developing the strategy obliges us to think about the real long-term policy objective and avoid being solely focused on our immediate tasks, which are only intermediary phases to accomplish the real objective.
Robert McNamara, while he was the president of the World Bank, from 1968 to 1981, tried to impose this methodology during the appraisal of projects financed by the Bank. McNamara, who strongly reoriented the Bank toward fighting poverty, required the staff to quantify the number of direct project beneficiaries distributed by income percentile of the country or the city where a World Bank–financed project was located. That was the best way to evaluate the impact of projects financed by the World Bank whose objective was to decrease poverty.
In 1971, as a practicing urban planner working for the Government of Yemen under the United Nations Development Programme, I learned for the first time to use this quantitative approach for project evaluation, as I participated as “the local urban planner” in the appraisal of two urban World Bank projects. I was greatly impressed by this rigorous quantitative approach, which was completely new to me. It was in part because of this first very favorable professional impression that I decided to join the World Bank several years later when, with my family, we finally settled in Washington, DC.
In the post-McNamara period, unfortunately, there was a strong tendency in the World Bank to focus mainly on input and output indicators, as these indicators were directly under the control of Bank staff and affected directly the institution as it worked as a bank. A project was deemed successful if the funds were disbursed on time—input—and if there was no project cost overruns—output. This was apparent in World Bank statistics that presented the amount of loans disbursed per sector and per country. For instance, in transport projects the outputs were the number of buses that were purchased and the length of the bus lines built. The numbers measuring outcome and impact could not easily be aggregated into country statistics, because their nature varied so much between projects. Therefore, there was much less pressure to monitor carefully these numbers after projects were completed. While some projects included the full set of indicators during the project appraisal phase, it was rare that outcome and impact indicators were carefully quantified and monitored during the supervision phase of the project. By contrast, inputs and output indicators made or broke the reputation of professional staff.
The World Bank was aware of this problem. It had instituted an independent review of project performance by an Operations Evaluation Department (OED) and more recently by the Independent Evaluation Group. These departments, reporting directly to the president, tried to evaluate more systematically project outcomes and impacts for a selected numbers of completed projects. Inevitably, the results were published long after projects were completed. By the time the evaluation results were available, the team that originally prepared the projects had been dispersed to different countries and sometimes to different sectors. Usually, the OED reports constituted a very professional and detailed analysis of what went right or wrong during project conception and implementation. However, lessons were seldom learned, as new teams started new types of projects in different contexts in different cities, and the evaluation phase was seldom taken into account when designing new projects.
Can a City Avoid the Problem Encountered by the World Bank in Monitoring Strategies and Project Impact?
The problems inherent in monitoring and evaluating World Bank projects as I experienced them are unavoidable in centralized organization like the World Bank, which is physically remote from the location of the project. I think it is unavoidable that international organizations and central governments are likely to focus on the input and output performances of their strategies, as these are the only numbers that they can easily monitor and aggregate.
Development banks, such as the World Bank and its regional counterparts, like Asian Development Bank and Banco Interamericano de Desarrollo, are, first and foremost, banks. The speed of loan disbursement and the correct enforcement of procurement rules are likely to preoccupy bank staff, whose performance is largely judged by management mainly on these criteria, which directly affect banking viability. While the merits of different strategies and their impact on development are the objects of passionate intellectual debates, at the end of the day, the staff performance is judged through its ability to disburse a loan rapidly while following strict procurement rules. Disbursement and procurement are typically monitored through input and output indicators. Indicators linked to outcome and impact, while extensively discussed during project preparation, tend to be rapidly forgotten during project implementation.
Why then would I advocate a methodology to develop urban development strategies that I have seen fail repeatedly? I think that committed mayors and their planning staff are much more likely to follow through and be interested by impact if given the tools to do so. City-states, like Singapore and Hong Kong, manage independently their own finances and policy without interferences from a remote central government, and they are notoriously good at monitoring policies and taking rapid correcting steps as soon as they perceive that strategies are not performing as expected.
By contrast, a central organization cannot feel directly accountable for the details of projects implemented at the local level. Input and output are what they effectively control and therefore are likely to monitor carefully. For instance, a central government’s ministry of Housing and Urban Development may commit itself to creating a target number of affordable housing units in a large number of cities. It has no way to aggregate at the national-level statistics on whether the units created are well located, or whether they result in increased welfare for the target population. The only things the ministry can usefully monitor and aggregate at the national level are the total capital outlays and the number of units created—input and output indicators. The staff of the ministry, if ever alerted that the dwelling units are not fulfilling the original objectives, will be unable to aggregate the different outcome and impact indicators if these are produced by the cities that benefit from the program. The ministry staff will face the same problem as the World Bank staff faced. By the time the indicator results arrive from the various cities, the ministry’s staff that prepared the strategy might well have moved to other activities in other sectors. No lesson will ever be learned. By contrast, in a city administration, continuity is more likely. The issues arising during implementation of the strategies are more likely to be known in real time, and there will be a strong incentive to address the issues as they arise, if the mayor and the local staff have any control over the implementation of housing strategy even if it is financed at the national level. Maybe this is why city-states like Singapore and Hong Kong are more effective in managing their development than are equivalent cities that are part of large states.
For instance, let us look at the case of South Africa discussed in chapter 6. The policy objective was to provide as quickly as possible affordable housing to a very large segment of the urban population defined by its low income. The strategy adopted focused immediately on inputs and outputs: how many houses could be built each year, what should be their standards, and how large were the subsidies needed. The alternative strategies considered were only focused on the way to finance the program. The impact on the income of beneficiaries was never considered, although the main objective of the program was in reality to alleviate poverty. The output—the number of housing units built each year—was carefully monitored and because of their large number, the program was initially deemed successful. It was only after about 10 years of implementation that the serious shortcomings of the South African housing strategy were finally detected. The damage done in building large numbers of dwelling units in areas inaccessible to the metropolitan job markets is nearly irreversible.
Designing New Land Use Regulations and Auditing Existing Regulations
The necessity of living and working in close proximity requires rules that will minimize friction. Because the economic and technological environment is changing constantly, the rules have to be constantly adapted to the new environment. For instance, the introduction of self-driving cars in cities in the near future will require new regulations, just as new regulations were required when cars replaced horse carts as a main mode of urban transport.
Past regulations also have to be periodically reviewed for their relevance. As described in chapter 7, the shadows cast by very tall buildings were a major issue for the first part of the twentieth century, until indoor lighting and air conditioning became efficient and cheap. Being able to concentrate large areas of floor space where demand is very high increases the city welfare much more than restricting densities because of the need to ensure that every building receives direct sunlight and natural ventilation. The slender and very tall skyscrapers, residential and commercial, being built in New York’s Wall Street area would have been extremely objectionable for their neighbors at the beginning of the twentieth century.
Urban planners should therefore constantly revise old land use regulations (or create new ones) to adapt them to the new economic and cultural realities of the time. Unfortunately, urban planning departments tend to prefer designing new regulations over reviewing existing ones for their relevance. As a result, a city’s land use depends on layers of regulations that often contradict one another and whose objectives have been lost with time. Digging into urban regulations is often like digging into an archeological site; one often encounters elaborate artifacts whose original purpose baffles the mind.
This criticism of baffling regulations is not a new idea. In a book chapter published in 1979, Morris Hill and Rachelle Alterman wrote:8
Typically [planning standards] are handed down as “rule of thumb” from one situation to another, adapted by cumulated experience. Such norms are characteristically expressed as a simple inflexible per a given population, sometimes also including locational specifications. From the norms as usually expressed it is impossible to know the substantive justification—whether functional, economic, behavioral, social, psychological or environmental. Therefore, there is no easy way of modifying them to meet particular situations in a reasoned manner.
Planners Should Regularly Audit Land Use Regulations to Eliminate Those That Are Obsolete
The regulatory deadwood accumulated over the years constrains development and affects land prices and the supply of floor space, as these regulations limit what can be built. While nobody usually remembers the objectives of such regulations, planners and citizens assume that they were established as a result of lost wisdom and that it might be hazardous to remove them from the books.
I was confronted with such a situation some years ago in Malaysia,9 when I was asked to find out why housing was so expensive in a country that is well endowed with developable land. I found that in residential areas, the regulations required extremely short blocks of 60 meters, resulting in an extremely high percentage of road areas that would not be normally required for horizontal housing (for example, a Manhattan block length averages about 240 meters). Additional land use regulations resulted in less than 44 percent of the land being developed for residential use in a housing project in Malaysia, compared to 60–65 percent in similar projects in other countries of the region.
Nobody in the Kuala Lumpur planning office knew why blocks had to be so short, but they assumed that there must be a good reason—drainage during the monsoon perhaps? I finally found a senior municipal engineer who told me that the practice was to locate fire hydrants at the end of a block and that the fire hose used by firemen was usually 30 meters long, hence the 60 meter length of a residential block. There was a great reluctance in changing the standard, in spite of firemen using different equipment and the possibility of locating fire hydrants differently.
The cost of these regulations to the housing sector and to the environment was extremely large while bringing no real benefits to citizens. Indeed, these regulations—by requiring more land for residential development artificially—extended the area of cities into the countryside while increasing the impermeable area of the development. In a monsoon country like Malaysia, this contributed to increased water run-off during the rainy season, requiring larger drains and, at times, causing erosion. The eventual revision of this set of land use regulations resulted in substantial savings in land development and environmental cost for the entire country.
The urban regulations of every city contain a number of what I would call “deadwood regulations.” Regulations whose objectives have been forgotten and whose benefits can no longer be identified. It is therefore necessary to periodically audit all land use regulations to remove the ones that are obsolete and contribute to the high cost of urbanization.
Designing New Regulations
New technology and changes in the way cities develop may require planners to design new regulations. These should be designed with great care and tested before being imposed citywide. Land use regulations are very much like new medical drugs—they are supposed to provide benefits but they may also have serious negative side effects that may become apparent many years after they have been applied. All regulations should be submitted to a cost-benefit analysis. In addition, land use regulations that have a direct impact on housing and residential development should be tested for affordability for various income groups.
Regulations should be designed and tested with great caution, in the same way as what is required before a new drug is put on the market. Before imposing new regulations, urban planning departments should ask teams of independent urban economists to evaluate their impact on the spatial development of the city and on the cost of urban development.
The Role of the City Planning Department in a Municipality
Staff and Line Agencies
A municipality is a team composed of a political body, the mayor and the city council, and a technical core composed of “staff” and “line” agencies (figure 8.3). The staff agencies provide policy options to the mayor and policy objectives and support to the line agencies. The line agencies implement and maintain specialized services and infrastructure. The city planning department maintains a set of indicators to ensure that strategies meet the policy objectives of the mayor and the city council. The City Planning Department should be located among staff agencies. Unfortunately, this is seldom the case; most of the time City Planning is just one of the line agencies.
Urban planners and line agencies.
Why should the City Planning Department be among the staff agencies? Practically all line agencies are consuming land or have an impact on land prices. All line agencies’ actions, from education to the fire department, are related to the number of people in a neighborhood and their incomes, usually linked to other socioeconomic indicators, such as household sizes, education, language spoken at home. The changes in the number and socioeconomic characteristics of a population are driven by the real estate market and the competitive demand for floor space coming from households and firms. Data on the use of land and on population changes should not be maintained in separate databases by each line agency but should be coordinated and centralized in the planning department, which should feed the data to the line agencies at regular interval.
The Planning Department Staff Should Include Economists
Instead of being exclusively focused on land use and regulatory issues, the planning department should be also involved in economic analysis on a day-to-day basis. Therefore, I suggest calling the city planning department “City Planning and Economics” (figure 8.3).
In many cities around the world, the city planning departments where I worked were staffed mostly by urban planners, architects, engineers, and lawyers. While economists, working as consultants, were occasionally asked to produce a report on a specific subject, I have never met an in-house economist providing inputs on a day-to-day basis on proposed land use regulations, monitoring changing of land prices, or warning other staff of the Planning Department of their policies’ potential consequences. As we have seen in previous chapters, land use changes and population and job density changes are mostly driven by markets. Urban economists are uniquely trained to monitor and interpret market movements. The presence of an in-house economist would also help trigger ad hoc specialized economic analysis conducted by universities. This would have the double benefit of both tapping a wider and deep economic expertise as well as prodding academic economists into getting involved in “operational economics” at the city level.
The City Planning and Economics staff agency has three main functions:
• developing and maintaining an urban database that monitors among other things, land use, demographics, household incomes, and land prices and rents;
• identifying potential issues derived from observing variations in indicators; and
• working with line agencies to propose policy and strategic solutions to respond to identified issues and to respond to special requests from the mayor and the city council.
The alignment of the City Planning and Economics department as a staff agency is vital, because of its need to relate with all line agencies. Line agencies must develop their own detailed technical databases, but they should refer to the land use and demographic database from the planning department to develop policy. The consistency between the technical projects developed by the line agencies and the city development policy and the strategy developed in the City Planning Department is essential. It seems obvious, but it is not always the case.
Some years ago, I was working for the city planning department of the Jakarta metropolitan area (covering the area called Jabotabek). In liaison with the housing department and a major mortgage bank, we were developing land development standards that should be affordable to households between the fortieth and sixtieth percentiles of Jakarta’s household income distribution. Our conclusion was that to be affordable, taking into account current market prices for land and construction, population densities in the housing projects financed by the mortgage bank would have to have between 300 and 400 people per hectare. Land use subdivision regulations were amended to allow these densities. However, the City Planning department did not amend density projections for the entire city to reflect these changes, as it was considered too far from the traditional planning approach based on design norms and perceived needs.
During the same period, some of my Indonesian colleagues were conducting a feasibility study for a regional sewer and wastewater disposal system for Jabotabek area. Their conclusion was that if the population density in the suburban area of Jakarta could be maintained below a maximum of 50 people per hectare, it would be possible to build a system of septic tanks, seepage pits, and oxidation ponds that would be much cheaper than building a reticulated sewer systems with traditional sewer treatment plants. They assumed that through adequately enforced land use regulations, the government would be able to keep the density below this maximum and as a consequence, they were proposing an investment budget for sewer and wastewater disposal based on this low-cost technology.
A third project, consisting of the planning and construction of a light rail urban transport system, was being developed by the urban transport department with the assistance of a bilateral donor. The light rail being developed consisted of one line crossing Jabotabek from east to west. The feasibility study assumed that the government would be able to regulate population densities in such a way that an east-west spine of high population density of about 300 people per hectare would be concentrated along the catchment area of the light rail line, while regulations would maintain low density in areas not served by the light rail. The financial projections were entirely based on this optimistic density scenario that would have ensured a high occupancy rate for the light rail.
The three projects were based on completely different and incompatible assumptions about the future spatial distribution of the population of Jabotabek. The feasibility of each project depended on different mutually exclusive spatial distributions of the population. The urban planning department maintained a map of projected densities and a map of zoning regulations, but there was no administrative links between the department of environment protection in charge of sewers and the department of transport. I found out about the three different density projections by accident, because I knew some of the engineers working on the two other projects.
This anecdote is not an isolated case. Looking at the municipal organization design of most cities, these types of inconsistencies happen all the time. I am not suggesting that to avoid these problems the Urban Planning and Economics Department supervise every sectoral project, but that any assumption about densities and in general on the spatial distribution of population be cleared with the Urban Planning and Economics Department to avoid these internal contradictions. In transport projects, the many occurrences of overestimation of projected passengers boarding are typical of self-serving projections of future urban densities along transport routes. It is possible to commit errors when projecting the spatial distribution of future populations, but it is inexcusable to maintain alternative projections within each line agency in the same municipality, especially when a centrally managed projection based on markets would invalidate the feasibility of a project.
Past and Future Growth Trends for Cities
Urban Growth Should Not Be Taken for Granted
The examples used in the preceding chapters concern urban issues that arose during the past 50 years. Should we expect different types of urban development challenges in the next 50 years?
I have always assumed that successful cities were magnets that attracted people eager to join their large labor markets. Most of my work as an urban planner has been focused on finding ways to manage urban growth by improving mobility and housing affordability as cities were expanding. The supply of new citizens born in, or immigrating to, cities seemed inexhaustible. Usually developing countries’ cities were growing faster than those in rich countries, but the process of expansion was basically the same, and all were expanding.
At the beginning of the twenty-first century, I realized that the world population had crossed a demographic watershed and that the cities of the world were going to be divided between those who were growing and those who were shrinking. The cause of the shrinking ranges from internal causes like poor management—as has been the case for the decline of Detroit—to external causes like demographic reversal and rates of urbanization.
In 2010, during a work visit to Moscow, I learned that the government was planning to close 60 cities, whose populations were decreasing and aging to such an extent that maintaining their public services was no longer viable. Closing cities is an extreme case, but decreasing population has also affected many other cities. Among the 13 Russian cities with a population larger than a million people, only four were still growing; the others, including St. Petersburg as the second-largest city in the country, had declining populations. I was asked if I could give some advice on what to do in cities with decreasing populations. I declined and claimed incompetence; in 50 years of my international urban planning practice, I had never been confronted with the issues arising from decreasing urban populations.
More recently, during a visit to Toyama, a city of 1.2 million on the western coast of Japan, local urban planners described to me the problems faced by a city with an aging population, increasingly abandoned by its younger generation migrating to Tokyo to find work.
Japan and Russia are representative of countries with high income, low fertility, a high rate of urbanization, and a low rate of international immigration. Decreasing fertility in high-income countries that are already highly urbanized creates low urban growth, as the natural growth rate and the migration rate decrease simultaneously when the country’s rural areas are not sending additional migrants to the cities.
Figure 8.4 shows the relationship between urban growth rates and rates of urbanization and income by region and type of income. We see clearly the correlation between high income, high rate of urbanization, and urban growth rate. Women in high-income countries tend to have a low fertility rate, reducing the natural growth rate caused by the difference between the number of births and deaths. The high urbanization rate in these high-income countries implies that there is not much excess labor left in rural areas to migrate toward cities and compensate for the low natural growth rate with immigrants from the countryside.
Rates of urbanization and urban growth rates by region, 2010–2015. Source: World Bank, “3.12 World Development Indicators: Urbanization,” Washington, DC, 2017.
These cities of the rich world are eventually doomed to have a stagnating and eventually decreasing population, unless they deliberately open themselves to international migration and can draw migrants from countries with high fertility rates and low rates of urbanization.
Traditionally, large economically dynamic city-states like Singapore and the cities of the Emirates, who could not draw migrants from a populous rural hinterland, have relied on controlled immigration to increase the labor force that keeps their economy growing, thus increasing the income of their national population. In Singapore, the foreign nonresident population represents 29 percent of the total population. In Singapore as in the Emirates, most of the nonresident population is not intended to eventually become citizens. They remain on short-term contracts. This allows the cities to target the skills they need for the development of their economies. The nonresident emigrants are carefully selected among two groups: highly skilled professionals and low-skilled labor force for services. These city-states understand that the development of their economies, and therefore of the welfare of their native citizens, depends on an expanding labor force and that immigration is indispensable to their economies.
By contrast, countries of Western Europe and North America have a different approach to immigration. In these countries, immigrants are assumed to eventually become citizens, but contrary to Singapore or the Emirates, the national governments of Europe and North America do not explicitly link immigration with urban economic self-interest.
While the United States and Canada have traditionally been dependent on immigration for developing their economies over the past two centuries, the economic self-interest argument for immigration is seldom explicitly made. The popular argument for welcoming immigrants from foreign countries rests more on a sense of generosity and hospitality than on self-interest. The verses engraved in bronze on the Statue of Liberty in New York express perfectly the generous feeling apparently allowing immigration to the American continent:
Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
While no successful immigration can occur without a minimum of generosity and benevolence, the economic benefits of immigrations are very large and should in themselves be the prime motivation of immigration policy. The economic case for immigration is often confused with the human rights case for refugees, which is of course a quite different argument.
While immigration is indispensable to fuel the economic growth of cities located in countries with low birth rates and with an already high urbanization rate, the pace of immigration should be controlled. To become fully economically effective, new immigrants must have time to adapt to the social norms and language of the host country, and this adaption takes resources that must be allocated in a national budget or at least by motivated NGOs. Without these resources and a minimum of assistance, the lowest-income immigrants might become an underclass separated from the host population by language and unfamiliarity with the social norms of the host country. In this case, the economic stagnation of the less-educated migrants reinforces the nativist anti-immigrant hostility, contributing to closing borders and to the decay of cities with aging populations.
The political upheaval of 2016, whose main outcomes were Brexit in Europe and the presidential election results in the United States, was caused in great part by two antagonistic perceptions of immigration. The populations of large cities were aware of the economic benefits of foreign immigration, while the populations of smaller cities and rural areas saw immigrants as job stealers rather than as contributors to the national economy. In New York in 2015 the foreign-born population represented 38 percent of the total city population. In London in 2011, 37 percent of the population was born outside the United Kingdom. No wonder that both cities voted against the anti-immigration parties in the 2016 vote!
Immigration is therefore a necessity for the economic survival of large cities in affluent countries with declining birth rates. However, because immigration policy is decided by national government and not by the cities themselves, it is quite possible that cities in affluent countries will see their economies decline, as the aging of their population will not be compensated by an influx of younger and more vigorous immigrants. Some large US cities, which include many foreign-born workers, are well aware of the problem and have declared themselves to be “sanctuary cities.” Sanctuary cities like New York, San Francisco, and others have declared that their municipal police will not enforce emigration laws and will not cooperate with Federal departments to enforce them either. This demonstrates the differing interest between economically dynamic large cities and more stagnant smaller cities and rural areas.
Cities like London, Paris, Berlin, and possibly New York will soon be faced with the same problems encountered by Toyama. Looking at figure 8.4, it appears that it might take one or two decades before the cities of Latin America will face the same problems as European cities.
This book is about operational urban planning. It might be worthwhile therefore to explore what is likely to happen to the cohort of cities in affluent countries that will be starved of immigrants by their national government. We can use the example of Japan as a precursor of urban planning in cities with aging and shrinking populations.
Effect of Aging Populations on the Growth of Cities in Japan
The population of Japan peaked at 128 million in 2010. It is projected to decrease to 107 million, or 17 percent by 2040. Between 2010 and 2040, the active population10 is projected to decrease from 64 percent to 53 percent and the dependency ratio (dependent population/active population) will increase from 57 percent in 2010 to 85 percent in 2040.11 The decrease in population and the increase in the dependency ratio is more severe in smaller cities than in larger ones. In the three major metropolitan areas (Tokyo, Kyoto-Osaka, and Nagoya), the dependency ratio is less than the national ratio and is projected to increase more slowly from 49 percent in 2010 to 76 percent in 2040.
By comparison, in 2014, the dependency ratio of New York was 45 percent and that of the Singapore resident population (excluding foreigners) was 37 percent. Including foreigners, Singapore’s dependency ratio would be even lower. The Japanese government, however, currently has no plan to encourage foreign immigration to compensate for the aging population. There were 2.1 million foreigners residing in Japan in 2014, much less than the 3.2 million foreign-born residents found the same year in New York alone. The way Japanese cities cope with declining populations will constitute an example for urban planners in cities of Europe and other places with an increasingly aging population not compensated for by an increase in foreign immigration. As we will see, the urban development problems encountered by cities with declining populations are very different from the ones described in the preceding chapters of this book.
Six of the eight Japanese cities of more than 5 million people had a positive population growth rate between 2005 and 2010 (figure 8.5). Tokyo, the largest city with 13 million people (Tokyo Prefecture), saw the largest population increase at 4.7 percent. By contrast, among the 39 cities between half a million and 5 million, the growth was negative for all but three of them. An aging population, apparently, does not prevent the larger cities from growing, although modestly, but it contributes to an accelerating decrease in population for smaller cities.
Population growth rates of Japanese cities above 500,000 people, between 2005 and 2010. Source: Wendell Cox, “Japan’s 2010 Census: Moving to Tokyo,” New Geography, Grand Forks, ND, 2011, http://
The mayor of Toyama, a city of 1.2 million with a loss of population of 1.7 percent between 2005 and 2010, considers that the population decrease is the major challenge faced by his municipality. Local planners explain that Toyama’s young adults tend to emigrate toward larger cities like Tokyo or Osaka, where they are likely to find more new jobs than in a city like Toyama. This emigration of young people from smaller cities further decreases the size of their local labor market, making them even less attractive for new investment and creating a disinvestment spiral. The fiscal base of these cities and their budgets are also severely affected by the increasing pensions and social services they have to provide to the old while their tax base is shrinking.
What kind of urban projects become a priority in a city with a shrinking population? In Toyama in 2016, the major planning projects consisted of trying to regroup aged people from the suburbs to a more central location where they could be taken care of at a lesser cost. Some suburban areas are even demolished and citizens are given a subsidy to move toward more centralized locations. Public transports are redesigned to provide more mobility to the handicapped. Schools are reconverted to care centers for the aged. One of the major objectives of the municipality is to maintain the mobility of the elderly who can no longer drive, either by providing them with motorized wheelchairs and special wheelchair lanes on sidewalks or by organizing easy-to-board public transport in neighborhoods where the elderly have been regrouped.
At the same time, with tax subsidies, the municipality is trying to retain or create jobs outside the geriatric health sector, the only sector that is thriving. The municipality is also trying to make the city more culturally attractive to retain the young. These descriptions from Toyama are of course anecdotal evidence of what urban planning consists of in a city with a shrinking population. Most urban planners, including myself, are completely unprepared to manage cities who will be in a similar situation as Toyama and many other smaller Japanese towns. It is possible that technology, for which the Japanese have a demonstrated expertise, could partially solve the problem of an aging population. There is also a possibility that in the future the Japanese birth rate will stabilize at a level that allows the country to maintain a constant urban population and a corresponding stable urban economy.
Growing and Shrinking Cities Will Not Be Randomly Geographically Distributed
Most cities of the world will not face the trials of Toyama. There are still many countries with very young populations who are ready to move from rural areas to urban areas, or to emigrate anywhere in the world toward the dynamic cities that would welcome them. From the beginning of the twenty-first century we will see a strong divergence between very dynamic megacities like the Pearl River Delta cities, for instance, and shrinking cities in Europe and some parts of the North American continent. Let us now look at the potential for dynamic cities.
In 2014 the United Nations published a report titled “World Urbanization Prospects 2014.” I reproduce one of the major graphs from the report in figure 8.6. The graph displays the growth rates between 2000 and 2014 for world cities sorted by continents and by size class. We see immediately a large dispersion of annual growth rates from 10 percent to −1.5 percent. The largest dispersion is on the Asian continent, where megacities of more than 10 million have been growing from about 0.5 percent to 5 percent.
Urban growth rates by region and city size, between 2000 and 2014. Sources: Data are from United Nations, Department of Economic and Social Affairs, Population Division (2014). World Urbanization Prospects: The 2014 Revision, Highlights (ST/ESA/SER.A/352).
The cities with negative growth rates are found mostly among medium-sized cities of one to five million people and smaller cities between half a million to one million. The negative growth of many cities below five million people is consistent with the Japanese experience.
The distribution of cities in figure 8.6 shows the preponderance of urban development in Africa and Asia, areas with the highest growth rates for megacities as well as for smaller cities. The shift in the economic center of gravity of the world, from North America and Western Europe toward Asia, which occurred at the beginning of the twenty-first century, is put in evidence on the graph; while some megacities in Asia are growing at more than 3 percent a year, megacities in Europe, Latin America, and North America are growing at less than 2 percent a year.
In Asia, the large investment in infrastructure that took place during the past 20 years has stimulated the growth of more cities by making trade easier and transport less costly. In 2013, the government of China announced an initiative called “The Silk Road Economic Belt and the Twenty-First Century Maritime Silk Road,” usually abbreviated as “One Belt, One Road.” This initiative will link the cities of central Asia with newly expanded port facilities in cities of South and Southeast Asia. This will create an enormous transcontinental trading zone of a scale never seen before. The planned infrastructure will provide access to the sea for central Asia countries, with their vast natural resources. The increased exchanges following the newly created maritime routes will further stimulate the growth of cities in the region and the migration of population toward large cities.
Some large cities of Asia, in particular in China and India, may already be affected by low birth rates linked to newly found affluence. However, these cities are in countries that still have a large reserve of surplus labor in rural areas. Their continuous growth for the medium term is therefore ensured. The possibility of extensive communication and cultural exchange between Asian countries with different and deep cultural traditions will certainly greatly stimulate the creativity and innovation of cities of the region.
African cities still have the largest unrealized potential. Their growth will benefit from a much younger population than the other continents possess. Their major challenge will be to develop in a timely fashion the infrastructure that is required for humans to live in close proximity in very large cities.
What Will Cities Look Like in the Middle of the Twenty-First Century?
As I have suggested, we will see two types of cities by the middle of the twenty-first century:
• First, cities that are growing fast and attracting immigrants from their own country and internationally.
• Second, cities that are losing populations and have increasingly high dependency ratios.
Both types of cities will pose serious urban planning challenges. The fast-growing cities will reach sizes that are unprecedented and for which current transport technologies are inadequate. The shrinking cities will require regrouping the population within a smaller perimeter as their fiscal resources will dwindle with their population.
Let us look first at the larger fast-growing cities of Asia. The recent Chinese policy of looking at the development of cities in clusters, instead of as one central city surrounded by its large suburbs, is a significant departure from past urban practices. City clusters already exist of course, like the Randstad in the Netherlands, which links Amsterdam, Rotterdam, The Hague, and Utrecht. The urban development around San Francisco Bay could also be considered a city cluster. What is different with the Chinese concept of cluster is their scale. The Randstad connects only 7 million people, while San Francisco Bay (including Silicon Valley) has only 6.2 million people. By contrast, the urban cluster of the Pearl River Delta already had 65 million people in 2010, larger than the entire population of the United Kingdom but concentrated on less than 10,000 square kilometers! The recent urban cluster including Beijing–Tianjin–Hebei links together more than 105 million people.
Will these gigantic urban agglomerations really constitute unified labor markets, with the capacity for innovation and productivity commensurate with their labor market sizes? For the moment, the urban transport technology that would allow these large labor markets to integrate does not exist. The existing urban clusters of Asia work well as supply chains, but their labor markets are still fragmented into several smaller overlapping ones. These overlapping but fragmented labor markets certainly provide a comparative productivity advantage over smaller ones like San Francisco Bay or the Randstad, but they do not allow the productivity that could be obtained by linking 100 million people in commuting trips of less than 1 hour.
The main challenge of urbanization in the future therefore rests on the development of urban transport technology. Very fast trains combined with individual means of transport that would provide fast door-to-door trips (or door-to-station and station-to-door trips) would allow the integration of these labor markets. The emerging self-driving technology and small vehicle sharing will probably be a major factor in unifying fragmented labor markets. The allocation of land and the standards used for housing will also constitute a major challenge, as a large movement of labor will be expected.
Cities that lose population will also pose serious challenges until they eventually stabilize. Can a city adapt to a stable population and a stable dependency ratio? We do not have models, as the last century was characterized by a general massive migrations from the rural areas to urban areas.
Whatever model of cities prevail, large urban clusters grouping 100 million people or cities of half a million losing population, urban planning in the middle of the twenty-first century will be very different from what we have known so far.