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Post by Marines Pocaterra

The increasing consciousness that next decades will require efforts to locate the global population growth in more efficient cities brings us to wonder about the responsibility of those in power to influence the urban path.

The Problem

It seems that inequality is a great enemy for development and Latin-America holds the highest inequality index in the world.

Eduardo Lopez Moreno, Investigation Director of UN–Habitat, has developed a study on Latin-America financed by CAF, a Latin-American Development Bank in which he concludes that although there is no statistical relation between economic growth and inequality, it is a demonstrated fact that inequality increases criminality and violence.(1)

The UN-HABITAT report launched September 2013, expresses the need of shifting the world’s attention to a more solid notion of development, one that looks beyond economic growth dominating biased policy of last decades, to include 5 dimensions of prosperity: quality of life, adequate infrastructure, productivity, equality and sustainability.

UN-HABITAT also presented the City Prosperity Index (CPI). The CPI is unique for two reasons: it focuses on individual cities rather than countries, and it measures prosperity across its five dimensions (productivity, infrastructure, quality of life, equity, and environmental sustainability) rather than focusing solely on the business environment of the local economy.

It represents a qualitative change on the notion of development and prosperity, demonstrating on systematic bases that prosperity is directly proportional to equality. CPI not only creates a method for sectorial assessing of cities, but could also help local authorities to identify opportunities and intervention areas.

The report states that cities, supported on different government levels, can become flexible creative platforms to confront economic/financial crisis in more pragmatic efficient ways, occupying a stronger stand before present challenges.

If nothing is done to fight (and control) inequality, the consequences will be social outbursts, violence, weakened institutions and diminished trust on the governing structure. All those factors lead to chaotic urban development.

Tackling the problem

As urban growth is very high in Latin-America, investment is never enough, thus the need to find a structural pattern of financing the poor to shorten the distance between rich and poor. The capture of surplus values generated by public urban investments is a tool to achieve a continuous source of financing for those social purposes.

Initial investment unit multiplies by recovering part of the incremental urban value to dedicate to weaker income sectors. The land owners benefit from central investments (roads, improved services, increased densities) but must return part of that increment to be invested elsewhere.

Scheme

Governments should be busy developing and implementing tools to cope with urban deficits, financing city development (rather than just growth) is at the base of urban sustainability. Generating rotating (Self Sustainable) funds to harness the potential of urban change to positive use, could be the Urban Robin Hood method needed. Taking part of the benefits city bestows on the high income segments to give to those who cannot afford the urban ride. Call it solidarity or fair deal; these methods could even-up the urban equation for the greater good of urban population.

Quoting David Vetter on a Land Lines Journal Interview:

“Roads, pavement, public health and education demand huge investments which exceed the available financial resources. Recovery of the revalorization of land once developed can generate a positive feedback creating a virtuous cycle to obtain additional investment resources. For example the investments will increase the tax base over the property and resulting incomes could finance additional infrastructure”

“What role does the surplus value recovery have in housing?”

“What creates real estate wealth? Who will benefit? There are usually winners and losers, which reinforces inequality. The land and property owners receive increased values but those interested in living on those conditioned areas will pay higher rent. ”

“Would A Housing Policy focused on generating real estate wealth with fair distribution be different to low income programs?”
“Very different. Most programs reduce its costs by using low price land which has no access to employment or basic services, determinant keys to housing value.
City managers must learn to use these value recovery mechanisms, to finance equal urban quality for rich and poor, fostering tolerance and mixed neighborhoods. We have many successful stories in Brazil and Colombia. Sometimes the conditions of recovery are previously set by multilateral organization.

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