Getting Cities Right

Our world is urbanizing. Rapidly. The United Nations Population fund reported that by 2008, more people were living in cities than in the countryside — and it is estimated that five billion people will be living in urban centers by 2030.

The effects of rapid urbanization on human communities, on the natural world and on the life-sustaining capacity of the Earth will either be very bad, or very good. It could go either way, but the stakes get higher by the year; muddling through won’t be an option.

In a place like the United States, people generally have a high-enough standard of living and can avail themselves of enough cheap, convenient energy to be insulated from the harsh realities of urban life in other countries. The US has urban dysfunction, to be sure. But, aside from the odd hundred-year flood (three of which have hit Texas in the past five years), Americans do OK. The United States is accustomed to levels of abundant land, energy, food and information that much of the world can scarcely imagine. There is poverty, yes — but poor Americans can still, by and large, kick back with a six-pack and watch the NFL.

Lagos, Nigeria

Globally, the more characteristic urbanization experience is that of cities like Lagos, Cairo, Karachi or Shanghai (ten of the world’s twenty fastest-growing cities are in China). Growth in such cities is chaotic. Often people pour in from the countryside, where local opportunities have been sucked away by large land sales to transnational corporations. These people settle in slums without dependable sanitation or power, often without public infrastructure of any kind, and without any form of secure tenure — they can be evicted by bulldozer any time a developer wants the land under their shanties. The population of Lagos, Nigeria, for example, is variously estimated; the government estimates it at about 21 million, but the number is not precise. It is increasing by about 4 ½ percent per year.

Obviously this developing-world urbanization model is not sustainable. Neither, for that matter, is what takes place in most of the developed world. There are a few exceptions, such as Hong Kong and Singapore, which use sensible public-revenue and planning systems to create largely sane, functional urban landscapes. In the USA, Sprawl is king, as cities spread out into megalopoli, with bigger roads, more traffic jams, development leapfrogging over blighted areas, across crumbling bridges — a terribly short-sighted way of doing things. Even in New York — a vibrant city if there ever was one — a third of its citizens are severely burdened by housing costs, while 23% of its privately-owned land, some 46 square miles, is vacant or nearly so (with buildings worth less than 20% of the land’s value).

Earth’s pervasive urbanization is going to lead either to utopia or dystopia. Why is there no middle ground, on which to muddle through? Because billions of people are pouring into urban centers — and we have not yet learned how to do cities right.

It’s widely understood that cities can be — and in fact generally tend to be — the greenest form of human habitation. More urban dwellers live in larger, more energy-efficient buildings, use more public transportation (and walk more) — and because they put more human activity in a smaller area, cities tend to decrease encroachment on natural habitats. This general tendency is retarded by many pervasive urban trends, such as sprawl, land-speculation and dependence on private autos. In the heart of Mumbai, a thriving recycling industry has gone on for decades in the famous Dharavi slum, with no hint of safety or environmental regulations.

So, despite the fact that cities, in general, are the greenest way to house human beings, there’s no denying that they could get a whole lot greener.

Are cities moving toward utopia, or dystopia? Let’s examine two new, iconic buildings, as a way of focusing attention on key issues.

Seattle’s Bullitt Center started taking in tenants in 2013. A marvel of sustainability engineering, it is the greenest building on the planet, one of only three buildings (and the only commercial building) to be fully certified as a Living Building by the Living Future Institute. Utilizing geothermal heating, rooftop solar panels and super-frugal energy-monitoring equipment, the Bullitt Center creates 30% more energy than it uses. It gets all its water from rainwater, and processes its own sewage. It has no parking facilities, except for bicycles, and it boasts an “irresistible stairway” that offers panoramic views of downtown Seattle and the Puget Sound. Its main structural material is sustainably harvested local douglas fir. And it offers all this at per-square-foot rents comparable with other Seattle office space.

This would seem to bode well for the prospect of cities getting their utopian act together! But, while some other fascinating green buildings have been created here and there, the vast majority of new construction is conventional. In many places, building codes are unimaginative (the Bullitt Center had a struggle to get some of its power and water systems accepted). But the biggest difficulty is simply the cost/risk equation. Most innovative buildings of this sort are done by colleges and nonprofits; though they obviously save lots in energy costs over their lives, their startup costs are quite high. And buildings everywhere are hampered by the load placed on them by property taxes, which usually add a couple of percentage points to the annual financing cost of a new building. That additional load is often enough to quell the risky urge to innovate. Taxes on buildings penalize new construction across the board, and this forces many cities to put up with antiquated housing stock, old buildings that hang on year after year until someone finally razes them to build something new, something big, something unaffordable for the people who actually live there.

Wouldn’t it be nice if we could get rid of taxes on buildings? Well, we can! To learn how, keep reading.

The other iconic building we’ll consider is that huge pile that one can see from every corner of New York City: 432 Park Avenue. This most famous example of New York’s luxury condo boom is known, notably, not by what it is but by where it is. It misses being the tallest building in New York by a few feet of the new World Trade Center’s antenna mast, but its penthouse views are way up there (each window is ten feet square). In the past, buildings this huge took pride in sharing a small bit of their majesty with the public, but not this one: it has no observation deck or public space of any kind. And, it is by no means a green building: its fancy tubs & toilets get their water from the city’s system, and drain into the regular sewers. It sucks fabulous amounts of power from the electric grid; like all of New York’s new residential “supertalls,” it is over-the-top in every way. It has 104 apartments on 96 floors, which have sold at an average price of $24 million apiece. Yet most of these condos are investments for foreign billionaires; Fortune estimates that only a quarter of them will ever be occupied at one time. Rafel Viñoly, 432 Park’s architect, said in an interview, “There are only two markets, ultraluxury and subsidized housing.”

No, we don’t seem to be able to get cities right. The ways in which housing gets built in New York City (or London, or San Francisco) are exactly the opposite of sensible sustainability. Our cities waste resources, squander infrastructure and fail to provide housing at prices most people can afford.

We can get a big clue to why this keeps happening by looking at the Henry George Theorem. This generally-acknowledged truth, extolled by such weighty economists as Joseph Stiglitz and William Vickrey, states that in any reasonably well-run city, investments in public services and infrastructure will increase land values by at least the amount spent. This implies that cities can be financed by taxes on land values alone — that no taxes are needed on buildings, wages or sales!

Yet most cities do impose taxes on buildings, wages and sales, burdening workers and entrepreneurs, making every entrepreneurial decision riskier than it needs to be. Meanwhile, taxes on land values are often very low indeed. The value of land is created by the surrounding community and its public investments — yet it is collected by private landholders! This creates perverse incentives. Why renovate an old building, when your hard work is just going to increase your tax load? Better to rent out a unit or two, enough to cover your meager property tax, wait until the time is right, and sell the land for many, many times your investment!

Meanwhile, at the edges of cities, developers persuade local governments to provide roads and other services to areas of farm or forest land, vastly increasing land prices there. Center-city sites languish, held by speculators — while sprawling new developments at the edges benefit another set of speculators! The economic incentives created by existing tax systems make it impossible to get cities right!

And yet, despite these sources of dysfunction and waste, people are flocking to urban centers in ever-greater numbers. We’d better start getting cities right! Our planet’s capacity to support human life may well depend on it.