There are certain events that shape the world forever. The American Revolution, the invention of the world wide web, the fall of the Berlin Wall, and what looks to be the most recent addition to the list – the coronavirus pandemic. With regards to urban spaces, the change was immediate, with thousands of city workers being ordered to work from home. In light of this, it is worth assessing why we live in cities in the first place, and what the future challenges will be.
At their base, the primary function of a city is to act as a labour market. From the ancient cities of Damascus and Athens to recent cities and new towns like Dubai and Milton Keynes, it is clear that a city can only continue to exist if it is able to meet this essential role. Cities are places where employees know they will be able to find employers, and employers know they will be able to find employees – something which compounds as a result of the secondary roles (health professionals, teachers, shop workers, and so on) needed to support those primary roles.
The coming together of millions of firms and people in a given area also results in agglomeration economies, where those in an urban space benefit from productivity boosts as a result of being in close proximity to a pool of talent and to other firms. In San Francisco, for instance, the proximity of many tech start-ups leads to ideas spreading more easily, and firms also have faster access to suppliers, designers and all the other roles needed for innovation in this space to occur.
Other examples of the benefits of agglomeration include the four fashion capitals, the car industry in Detroit and the financial sector centred in the City of London and Canary Wharf. These productivity gains are not trivial. Productivity per head is 77 per cent higher in London than in other parts of the nation.
We have established that cities are labour markets and that there are many benefits associated with them. That’s why, weighing the costs and benefits, the UN estimates that 55 per cent of people live in cities. This is despite the fact that across the world, many cities are plagued by poor air quality, congestion and high living costs.
However, a city can only fulfil its purpose as a labour market to the extent that people are able to travel around the city to access the jobs available, which is known as mobility. This is where urban planners come in. Their most important function should be to increase mobility (whilst curbing the excesses that come as a result of it, like pollution) to allow the city to meet its purpose as a labour market. Planners should then focus on providing green spaces, parks and other amenities considered public goods.
Planning regulation should also be designed in a way that enables development to occur where demand outstrips current supply. When designing this regulation, policymakers should keep in mind that there are trade-offs to everything. It is fine to want to preserve quirky aspects of a city that distinguish it and make it a special place to live. However, planners should be careful with allowing only certain uses to buildings or zoning districts, as they have no idea what future uses a building could have.
It is also clear that in London, and many other cities, there remain problems to be solved. House prices have risen sharply over the past thirty years (518 per cent in 24 years, much faster than inflation) people are now having to travel further (meaning less mobility, as people have access to fewer jobs within a given time period) and are having to accept smaller rooms, often with multiple roommates. Homelessness is another side-effect of supply-side constraints on housing.
The solution, therefore, is to lift some of the constraints on development, whilst using the existing housing stock more efficiently. Thankfully, this seems to be high on the government’s list of priorities. Housing secretary Robert Jenrick has already announced a number of measures that will have a substantial positive impact on people’s lives.
Changes to permitted development (PD) enabling office space, now in lower demand due to coronavirus, to be quickly converted into residential space, are a fantastic way of using existing floor-space more efficiently. The same can be said of the reduction in transaction costs brought by cuts to stamp duty, which incentivises the elderly to downgrade to smaller spaces when their children move out. This move should be made permanent.
By reducing minimum space requirements, or abolishing them altogether, people would have the option of living in so-called “micro-apartments” – another way of using the housing stock more efficiently. Whilst it is not for everyone, many people would prefer a small apartment in the centre of the city, all to themselves, than an equally small room in an apartment shared with 4 other people.
Finally, by cutting over-burdensome regulations and bureaucracy and allowing land to be used more flexibly, smaller housebuilding firms would be able to compete more efficiently with the large housebuilders, which are currently constructing monotone, identikit housing. The result of increased competition would be more beautiful and better-quality housing, which would also reduce NIMBYism.
The recommendations of the “building better, building beautiful” commission would also be very beneficial. The recent move enabling individual homeowners to build upwards will also have some very positive impacts, as would reclassifying a small proportion of green belt land – say, ten per cent – which was proposed in this report from the Institute of Economic Affairs.
Trends over the last twenty years have been overwhelmingly positive, with councils now allowing taller developments, new PD rules meaning spaces can be quickly converted to their most efficient use and improvements to transportation meaning people can access a larger proportion of a city’s labour market. But we can go further. By implementing some of these policies, real people will benefit by having access to better quality housing, reducing commuting times and increasing overall satisfaction.