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Cities Are Taxing Ride-Hailing Services Like Uber and Lyft. Is This a Good Thing?

Thu, 2018-08-09 18:28

São Paulo is implementing a tax on ride-haling services to mitigate traffic congestion and fulfill the goals in the city’s mobility plan. Photo by Arnaud Matar/Flickr

With ride-hailing services like Uber and Lyft continuing to gain popularity and drawing attention for their impact on congestion and other urban ills, cities from Washington to São Paolo are moving to the seemingly inevitable next step: special taxes.

This is unsurprising. Recent researchshows that ride-hailing services are contributing to dropping public transport rates and increased private vehicle travel on already-clogged streets.

However, new taxes and fees shouldn’t just raise revenue. They can do more than that: they can make cities more livable and transport more sustainable. If ride-hailing is taxed, the mechanism and revenue should be used in carefully targeted ways that improve urban mobility overall.

Taxes on Ride-Hailing Enter the Scene

More than a handful of governments have enacted or are considering fees or taxes, that range from flat-rate fees per ride to taxing as a percent of the ride to systems that target certain types and locations of trips.

These take a variety of forms. For example, Mexico City charges 1.5 percent of ride fare; Washington, D.C., recently raised its tax from 1 to 6 percent of ride fare. Massachusetts levies a 20-cent tax on every trip. Porto Alegre has a monthly fee per licensed vehicle.

A full inventory of city measures to gain revenue from ride-hailing services is provided in a spreadsheet compiled by WRI Ross Center for Sustainable Cities.

Improving Mobility for the City

While new taxes bring in new revenue, these monies aren’t necessarily making it easier to get around. For example, in Rhode Island a 7 percent tax on ride-hailing sends revenue directly to the state’s general fund. In Philadelphia, a 1.4 percent tax sends money mostly to schools and the remaining third to the city’s parking authority. These taxes are also not high enough to change travel behavior in a meaningful way, since transport can sometimes be less sensitive to higher prices.

A tax or charge on ride-hailing—and private traffic as a whole—should improve cities’ transport systems overall, as stated in the Shared Mobility Principles for Livable Cities: “Every vehicle and mode should pay their fair share for road use, congestion, pollution, and use of curb space. The fair share shall take the operating, maintenance and social costs into account.”

While ride-hailing trends are still changing, and will continue to change as technologies evolve, here are considerations for any city to contemplate in levying taxes that not only raise money but improve mobility for residents too:

1. Encourage more sustainable trips for all users.Any discussion should begin with a consideration of allvehicle traffic. People driving their own private cars continue to dominate traffic, and cause congestion, in most cities.

Places like London, Singapore and Stockholm are known for their congestion charges, but no city has yet comprehensively factored in ride-hailing.

Efforts to charge all road users are bubbling up, however. New York City flirted with a proposal to implement a congestion charging zone coupled with ride-hailing fees, but the State of New York balked and implemented only the ride-hailing fees, leaving anyone driving their own personal car into Manhattan’s central business district untouched.

If cities are going ahead with taxes only on ride-hailing, they should encourage sustainable and shared travel over single-occupant rides. This means taxing ride-hailing as a percent of the fare or indexing to distance travelled, rather than a flat fee that would be the same regardless of the ride fare or distance. Most cities are already going this route.

Moreover, shared rides can be taxed at a lower rate than solo rides, or rather, solo rides could be taxed more to incentivize pooled rides. A current proposal in Washington, D.C., aims to reduce the planned tax to 1 percent for pooled rides.

2. Promote equity and access. Taxes should encourage service to transit-poor areas of the city and connectivity to transit generally. Most especially, they shouldn’t hinder new mobility services where they may provide low-cost rides to residents in low-income areas or areas poorly serviced by public transport.

São Paulo, the first city to regulate ride-hailing in Brazil, applies its taxaccording not only to vehicle miles traveled but also equity factors such as whether a driver is a woman and whether the vehicle is accessible to the handicapped. Shared, electric/hybrid, off-peak and weekend trips are all further discounted. A next consideration of cities may be how to incentivize integration with public transit or access to poorly service areas.

3. Invest revenue in multiple modes.Revenue from ride-hailing taxes, like many existing gas taxes or subway fares, should go toward improving mobility systems. It’s also important to support other modes of transport beyond the large public transit systems most commonly assumed to suffer from ride-hailing (like metro rail and buses). Improving road safety or adding bicycle lanes and pedestrian spaces are also ways to support a more holistic approach to urban transport.

Washington, DC’s 6 percent tax on all ride-hail fares will fund the metro area’s public transport agency, yet it is limited to public transport and not aimed at increasing cycling or walking. Fortaleza, Brazil, on the other hand, reduces its 2 percent tax on every trip to 1 percent for companies that make contributions towards urban mobility projects, such as sidewalks, bus lanes, bicycle lanes and bikeshare stations.

Ironically, a more useful guide may be London’s congestion charge, which exempts for-hire vehicles such as ride-hailing services. To reduce traffic in highly-congested areas, the city charges all cars entering central London and uses the £1.7 billion ($2.2 billion) revenue to improve bus services, bicycle commuting and walking, and road safety. And recently, Transport for London is proposing expansion of its congestion charge to for-hire vehicles.

How Does Ride-Hailing Fit the Bigger Picture?

As new mobility services change cities and the way people move, today’s decisions on taxes and other regulations can help shape a more sustainable mobility for all. There is more to consider, in terms of how to tax, how much to charge and where to send revenues—but taking a more holistic approach to understanding the impact of those policies is a good start.

This article was originally published on WRI Insights.

Ben Welle is Global Health & Road Safety Manager at WRI Ross Center for Sustainable Cities.

Guillermo Petzhold is Urban Mobility Specialist at WRI Brasil.

Francisco Minella Pasqual is an Urban Mobility Intern at WRI Brazil.

Cities Are Taxing Ride-Hailing Services Like Uber and Lyft. Is This a Good Thing?

Thu, 2018-08-09 18:28

São Paulo is implementing a tax on ride-haling services to mitigate traffic congestion and fulfill the goals in the city’s mobility plan. Photo by Arnaud Matar/Flickr

With ride-hailing services like Uber and Lyft continuing to gain popularity and drawing attention for their impact on congestion and other urban ills, cities from Washington to São Paolo are moving to the seemingly inevitable next step: special taxes.

This is unsurprising. Recent researchshows that ride-hailing services are contributing to dropping public transport rates and increased private vehicle travel on already-clogged streets.

However, new taxes and fees shouldn’t just raise revenue. They can do more than that: they can make cities more livable and transport more sustainable. If ride-hailing is taxed, the mechanism and revenue should be used in carefully targeted ways that improve urban mobility overall.

Taxes on Ride-Hailing Enter the Scene

More than a handful of governments have enacted or are considering fees or taxes, that range from flat-rate fees per ride to taxing as a percent of the ride to systems that target certain types and locations of trips.

These take a variety of forms. For example, Mexico City charges 1.5 percent of ride fare; Washington, D.C., recently raised its tax from 1 to 6 percent of ride fare. Massachusetts levies a 20-cent tax on every trip. Porto Alegre has a monthly fee per licensed vehicle.

A full inventory of city measures to gain revenue from ride-hailing services is provided in a spreadsheet compiled by WRI Ross Center for Sustainable Cities.

Improving Mobility for the City

While new taxes bring in new revenue, these monies aren’t necessarily making it easier to get around. For example, in Rhode Island a 7 percent tax on ride-hailing sends revenue directly to the state’s general fund. In Philadelphia, a 1.4 percent tax sends money mostly to schools and the remaining third to the city’s parking authority. These taxes are also not high enough to change travel behavior in a meaningful way, since transport can sometimes be less sensitive to higher prices.

A tax or charge on ride-hailing—and private traffic as a whole—should improve cities’ transport systems overall, as stated in the Shared Mobility Principles for Livable Cities: “Every vehicle and mode should pay their fair share for road use, congestion, pollution, and use of curb space. The fair share shall take the operating, maintenance and social costs into account.”

While ride-hailing trends are still changing, and will continue to change as technologies evolve, here are considerations for any city to contemplate in levying taxes that not only raise money but improve mobility for residents too:

1. Encourage more sustainable trips for all users.Any discussion should begin with a consideration of allvehicle traffic. People driving their own private cars continue to dominate traffic, and cause congestion, in most cities.

Places like London, Singapore and Stockholm are known for their congestion charges, but no city has yet comprehensively factored in ride-hailing.

Efforts to charge all road users are bubbling up, however. New York City flirted with a proposal to implement a congestion charging zone coupled with ride-hailing fees, but the State of New York balked and implemented only the ride-hailing fees, leaving anyone driving their own personal car into Manhattan’s central business district untouched.

If cities are going ahead with taxes only on ride-hailing, they should encourage sustainable and shared travel over single-occupant rides. This means taxing ride-hailing as a percent of the fare or indexing to distance travelled, rather than a flat fee that would be the same regardless of the ride fare or distance. Most cities are already going this route.

Moreover, shared rides can be taxed at a lower rate than solo rides, or rather, solo rides could be taxed more to incentivize pooled rides. A current proposal in Washington, D.C., aims to reduce the planned tax to 1 percent for pooled rides.

2. Promote equity and access. Taxes should encourage service to transit-poor areas of the city and connectivity to transit generally. Most especially, they shouldn’t hinder new mobility services where they may provide low-cost rides to residents in low-income areas or areas poorly serviced by public transport.

São Paulo, the first city to regulate ride-hailing in Brazil, applies its taxaccording not only to vehicle miles traveled but also equity factors such as whether a driver is a woman and whether the vehicle is accessible to the handicapped. Shared, electric/hybrid, off-peak and weekend trips are all further discounted. A next consideration of cities may be how to incentivize integration with public transit or access to poorly service areas.

3. Invest revenue in multiple modes.Revenue from ride-hailing taxes, like many existing gas taxes or subway fares, should go toward improving mobility systems. It’s also important to support other modes of transport beyond the large public transit systems most commonly assumed to suffer from ride-hailing (like metro rail and buses). Improving road safety or adding bicycle lanes and pedestrian spaces are also ways to support a more holistic approach to urban transport.

Washington, DC’s 6 percent tax on all ride-hail fares will fund the metro area’s public transport agency, yet it is limited to public transport and not aimed at increasing cycling or walking. Fortaleza, Brazil, on the other hand, reduces its 2 percent tax on every trip to 1 percent for companies that make contributions towards urban mobility projects, such as sidewalks, bus lanes, bicycle lanes and bikeshare stations.

Ironically, a more useful guide may be London’s congestion charge, which exempts for-hire vehicles such as ride-hailing services. To reduce traffic in highly-congested areas, the city charges all cars entering central London and uses the £1.7 billion ($2.2 billion) revenue to improve bus services, bicycle commuting and walking, and road safety. And recently, Transport for London is proposing expansion of its congestion charge to for-hire vehicles.

How Does Ride-Hailing Fit the Bigger Picture?

As new mobility services change cities and the way people move, today’s decisions on taxes and other regulations can help shape a more sustainable mobility for all. There is more to consider, in terms of how to tax, how much to charge and where to send revenues—but taking a more holistic approach to understanding the impact of those policies is a good start.

This article was originally published on WRI Insights.

Ben Welle is Global Health & Road Safety Manager at WRI Ross Center for Sustainable Cities.

Guillermo Petzhold is Urban Mobility Specialist at WRI Brasil.

Francisco Minella Pasqual is an Urban Mobility Intern at WRI Brazil.

Toward Thriving Cities for All: Our 2017 Impact

Fri, 2017-12-22 14:13

Analysis by WRI Brasil helped lead to a new federal law in 2017 regulating the construction of 600,000 homes over the next two years. Photo by Assis Cavalcante/Prefeitura de Sorocaba

2017 was a tumultuous year in some respects. We’ve seen major natural and man-made disasters, disruptive new politics in many countries, and an upswing in carbon emissions. But it was also a year that strengthened the role of cities at the UN climate summit and we saw countless reminders that there are many good people working to build a better tomorrow.

Our work as a global organization working in more than 60 cities gives us a unique opportunity to see this is true. I am constantly amazed at the many projects and initiatives underway to make cities more sustainable, more equitable and more prosperous places. WRI Ross Center is committed to helping cities become the best version of themselves, and we’re committed to the time and teamwork we know is required to reach that goal. This is not an easy process or a linear one.

That said, there were remarkable stories of urban change around the world in 2017. Please find below our top outcomes as a program, none of which would have been possible without close collaboration with governments, partner organizations and engaged citizens. These are significant changes that will positively impact the lives of millions of people, help avoid greenhouse gas emissions equivalent to those of the entire country of Panama, and encourage billions of dollars in new investment. (For more, see our Impact page, recently updated for the last year.)

Major highlights include:

India Adopts Landmark National Transit-Oriented Development Policy

WRI India contributed technical expertise to inform the Indian Ministry of Urban Development’s new National Transit Oriented Development Policy. This policy represents a paradigm shift in the way the government approaches urban development, investing $30 billion in mass transit systems across the country. It highlights the government’s resolve to address sprawl and unplanned growth and the associated negative environmental and human consequences.

Bhopal Introduces India’s First Fully Automated Public Bike-Sharing System

Bhopal launched India’s first fully automated, public bike-sharing system with 500 bicycles and 60 docking stations. Within three months of operation, the system had more than 20,000 riders, and its estimated to have mitigated 5,325 kilograms of CO2 emissions to date. WRI India spearheaded system design, business model development, and tender documentation and hosted workshops to engage technology suppliers, financing institutions and public agencies.

Chinese and Indian Cities Reimagine Waste and Wastewater

Waste-to-energy technologies capture clean energy, reduce greenhouse gas emissions, and have added economic benefits. WRI India and WRI China engaged with government agencies, city leaders and service providers using a circular economy methodology to help cities reimagine waste and wastewater. The teams analyzed methods; shared knowledge of the risks associated with untreated sludge and the benefits of its reuse; and established relations between decision-makers, government agencies and the private sector in multiple cities.

Safe System Approaches Adopted in Colombia, India and México

WRI Ross Center teams played crucial roles in introducing and advancing Safe System approaches to road safety in three countries adopting innovative new policies. Bogotá (Colombia), Mexico City, and the state of Haryana (India) are pioneers for Safe System, or Vision Zero, approaches, which put forth the idea that although human errors on the road are inevitable, deaths and injuries should not. Each year, 1.25 million people die in road traffic crashes, nearly 90 percent in low and middle-income countries, half of those in cities.

Brazil Commits to More Compact, Connected Development for Largest Social Housing Program

WRI Brasil conducted a country-wide investigation evaluating the social, economic and environmental costs of the design principles of Brazil’s largest social housing program, Minha Casa, Minha Vida. Analysis and a pilot project in Rio Grande showed the added benefits of more compact, connected and coordinated planning – at no added cost – and helped lead to a new federal law regulating the construction of 600,000 homes, benefiting more than 1.8 million people over the next two years.

Belo Horizonte Launches First Citywide Corporate Mobility Plan

After partnering with the State Government of Minas Gerais to improve the commute of its 17,000 government employees, WRI Brasil developed a guide to creating corporate mobility plans. The success of this partnership led Belo Horizonte to develop a citywide policy that encourages large companies, schools and universities to take action in fostering sustainable mobility and help the city reduce car dependency.

Mexico City Commits to Scaling-up Energy Retrofit Efforts

WRI Mexico won a national bidding process to prepare terms of reference for Mexico City to carry out energy audits for public buildings and retrofit them. WRI Ross Center provided strategic direction and facilitation through analytical work and a series of meetings with stakeholders. As an active member of the Building Efficiency Accelerator network, Mexico City has also received support from global partners.

Congratulations to all of these cities and all of those involved in making these projects a success. We look forward to many more in 2018!

Ani Dasgupta is the Global Director of WRI Ross Center for Sustainable Cities, WRI’s program that galvanizes action to help cities grow more sustainably and improve quality of life in developing countries around the world.

Toward Thriving Cities for All: Our 2017 Impact

Fri, 2017-12-22 14:13

Analysis by WRI Brasil helped lead to a new federal law in 2017 regulating the construction of 600,000 homes over the next two years. Photo by WRI Brasil

2017 was a tumultuous year in some respects. We’ve seen major natural and man-made disasters, disruptive new politics in many countries, and an upswing in carbon emissions. But it was also a year that strengthened the role of cities at the UN climate summit and we saw countless reminders that there are many good people working to build a better tomorrow.

Our work as a global organization working in more than 60 cities gives us a unique opportunity to see this is true. I am constantly amazed at the many projects and initiatives underway to make cities more sustainable, more equitable and more prosperous places. WRI Ross Center is committed to helping cities become the best version of themselves, and we’re committed to the time and teamwork we know is required to reach that goal. This is not an easy process or a linear one.

That said, there were remarkable stories of urban change around the world in 2017. Please find below our top outcomes as a program, none of which would have been possible without close collaboration with governments, partner organizations and engaged citizens. These are significant changes that will positively impact the lives of millions of people, help avoid greenhouse gas emissions equivalent to those of the entire country of Panama, and encourage billions of dollars in new investment. (For more, see our Impact page, recently updated for the last year.)

Major highlights include:

India Adopts Landmark National Transit-Oriented Development Policy

WRI India contributed technical expertise to inform the Indian Ministry of Urban Development’s new National Transit Oriented Development Policy. This policy represents a paradigm shift in the way the government approaches urban development, investing $30 billion in mass transit systems across the country. It highlights the government’s resolve to address sprawl and unplanned growth and the associated negative environmental and human consequences.

Bhopal Introduces India’s First Fully Automated Public Bike-Sharing System

Bhopal launched India’s first fully automated, public bike-sharing system with 500 bicycles and 60 docking stations. Within three months of operation, the system had more than 20,000 riders, and its estimated to have mitigated 5,325 kilograms of CO2 emissions to date. WRI India spearheaded system design, business model development, and tender documentation and hosted workshops to engage technology suppliers, financing institutions and public agencies.

Chinese and Indian Cities Reimagine Waste and Wastewater

Waste-to-energy technologies capture clean energy, reduce greenhouse gas emissions, and have added economic benefits. WRI India and WRI China engaged with government agencies, city leaders and service providers using a circular economy methodology to help cities reimagine waste and wastewater. The teams analyzed methods; shared knowledge of the risks associated with untreated sludge and the benefits of its reuse; and established relations between decision-makers, government agencies and the private sector in multiple cities.

Safe System Approaches Adopted in Colombia, India and México

WRI Ross Center teams played crucial roles in introducing and advancing Safe System approaches to road safety in three countries adopting innovative new policies. Bogotá (Colombia), Mexico City, and the state of Haryana (India) are pioneers for Safe System, or Vision Zero, approaches, which put forth the idea that although human errors on the road are inevitable, deaths and injuries should not. Each year, 1.25 million people die in road traffic crashes, nearly 90 percent in low and middle-income countries, half of those in cities.

Brazil Commits to More Compact, Connected Development for Largest Social Housing Program

WRI Brasil conducted a country-wide investigation evaluating the social, economic and environmental costs of the design principles of Brazil’s largest social housing program, Minha Casa, Minha Vida. Analysis and a pilot project in Rio Grande showed the added benefits of more compact, connected and coordinated planning – at no added cost – and helped lead to a new federal law regulating the construction of 600,000 homes, benefiting more than 1.8 million people over the next two years.

Belo Horizonte Launches First Citywide Corporate Mobility Plan

After partnering with the State Government of Minas Gerais to improve the commute of its 17,000 government employees, WRI Brasil developed a guide to creating corporate mobility plans. The success of this partnership led Belo Horizonte to develop a citywide policy that encourages large companies, schools and universities to take action in fostering sustainable mobility and help the city reduce car dependency.

Mexico City Commits to Scaling-up Energy Retrofit Efforts

WRI Mexico won a national bidding process to prepare terms of reference for Mexico City to carry out energy audits for public buildings and retrofit them. WRI Ross Center provided strategic direction and facilitation through analytical work and a series of meetings with stakeholders. As an active member of the Building Efficiency Accelerator network, Mexico City has also received support from global partners.

Congratulations to all of these cities and all of those involved in making these projects a success. We look forward to many more in 2018!

Ani Dasgupta is the Global Director of WRI Ross Center for Sustainable Cities, WRI’s program that galvanizes action to help cities grow more sustainably and improve quality of life in developing countries around the world.

New Transited-Oriented Development Policy Has Big Implications for India’s Cities

Wed, 2017-08-23 14:50

A hypothetical development using transit-oriented development principles along a metro rail. Graphic by Neha Mungekar and Nikhil Chaudhary/WRI India

India’s burgeoning cities are famous the world over for their startling vibrancy – and, sometimes, their startling problems. A new national policy, enshrining more transit-friendly development principles, aims to steer urban planning in the world’s largest democracy towards more compact and pedestrian-friendly neighborhoods and streets.

The World Bank projects that India will lead the global urban surge in the decades ahead, adding 404 million urbanites by 2050. However, to date, much of this growth has been unplanned, leading to sprawl and all its attendant effects like longer trips, higher use of private vehicles and more air pollution. The New Climate Economy estimates sprawl could cost India’s economy as much as 6 percent of GDP every year by 2050. Horizontal growth is even cutting into the hinterlands. In 2010, McKinsey estimated that India could save 6.2 million hectares of arable land through more effective land-use planning by 2030.

New policy, adopted by the Ministry of Urban Development in May, seeks to shift current practices to encourage denser, healthier, more productive cities. The National Transit-Oriented Development (TOD) Policy recommends transit and land use strategies for compact, mixed-use development, that gives citizens access both to open space and transport services.

An Inflection Point?

The National TOD Policy is critical to achieving the goal of livable, well-connected communities. Currently, only a small handful of cities and states in India have TOD strategies. The policy will provide a much-needed impetus to encourage more local governments to implement TOD concepts into their urban planning.

Such strategies can spur investment in multimodal connectivity (buses, bicycles, transit, walking, and cars), improvements to pedestrian and cycling infrastructure, and development near transit stations. It might not be too dramatic to say that such an official encouragement may represent an inflection point where compact, coordinated and connected development starts to become the norm across Indian cities.

Indian cities and states that have TOD policies. Table by WRI India

The National TOD Policy highlights the government’s resolve to address issues faced by existing and emerging urban areas. However, the ultimate success of such policies depends on cross-disciplinary integration and partnerships at various tiers of government – not to mention the private sector.

WRI India applauds the new policy and urges policymakers to consider next steps:

  • Government at all levels should review and revise existing policies and regulations to include TOD and promote better understanding of TOD through communications materials.
  • State governments should direct cities to include TOD in their development plans. If they are already prepared, amendments should be issued.
  • States should monitor progress by setting up special departments for TOD implementation. This will ensure that crucial factors, such as financing and governance, are well addressed.
  • City planners should consider the unique needs of individual neighborhoods and evaluate the best use of existing infrastructure.
  • City governments should also identify and create an inventory of informal housing, so TOD is not a stepping stone to gentrification.

The use of transit-oriented development as an urban growth strategy is relatively new in India. Translating policy to action will require a multi-pronged approach. States and cities should take a contextual approach based on local trends, market behavior and city requirements. But if implemented well, the new TOD policy could improve the lives and livelihoods of hundreds of millions.

Prerna Vijaykumar Mehta is the Manager for Urban Development and Accessibility at WRI India Sustainable Cities

Merlyn Mathew is a consultant with WRI India Sustainable Cities

New Transited-Oriented Development Policy Has Big Implications for India’s Cities

Wed, 2017-08-23 14:50

A hypothetical development using transit-oriented development principles along a metro rail. Graphic by Neha Mungekar and Nikhil Chaudhary/WRI India

India’s burgeoning cities are famous the world over for their startling vibrancy – and, sometimes, their startling problems. A new national policy, enshrining more transit-friendly development principles, aims to steer urban planning in the world’s largest democracy towards more compact and pedestrian-friendly neighborhoods and streets.

The World Bank projects that India will lead the global urban surge in the decades ahead, adding 404 million urbanites by 2050. However, to date, much of this growth has been unplanned, leading to sprawl and all its attendant effects like longer trips, higher use of private vehicles and more air pollution. The New Climate Economy estimates sprawl could cost India’s economy as much as 6 percent of GDP every year by 2050. Horizontal growth is even cutting into the hinterlands. In 2010, McKinsey estimated that India could save 6.2 million hectares of arable land through more effective land-use planning by 2030.

New policy, adopted by the Ministry of Urban Development in May, seeks to shift current practices to encourage denser, healthier, more productive cities. The National Transit-Oriented Development (TOD) Policy recommends transit and land use strategies for compact, mixed-use development, that gives citizens access both to open space and transport services.

An Inflection Point?

The National TOD Policy is critical to achieving the goal of livable, well-connected communities. Currently, only a small handful of cities and states in India have TOD strategies. The policy will provide a much-needed impetus to encourage more local governments to implement TOD concepts into their urban planning.

Such strategies can spur investment in multimodal connectivity (buses, bicycles, transit, walking, and cars), improvements to pedestrian and cycling infrastructure, and development near transit stations. It might not be too dramatic to say that such an official encouragement may represent an inflection point where compact, coordinated and connected development starts to become the norm across Indian cities.

Indian cities and states that have TOD policies. Table by WRI India

The National TOD Policy highlights the government’s resolve to address issues faced by existing and emerging urban areas. However, the ultimate success of such policies depends on cross-disciplinary integration and partnerships at various tiers of government – not to mention the private sector.

WRI India applauds the new policy and urges policymakers to consider next steps:

  • Government at all levels should review and revise existing policies and regulations to include TOD and promote better understanding of TOD through communications materials.
  • State governments should direct cities to include TOD in their development plans. If they are already prepared, amendments should be issued.
  • States should monitor progress by setting up special departments for TOD implementation. This will ensure that crucial factors, such as financing and governance, are well addressed.
  • City planners should consider the unique needs of individual neighborhoods and evaluate the best use of existing infrastructure.
  • City governments should also identify and create an inventory of informal housing, so TOD is not a stepping stone to gentrification.

The use of transit-oriented development as an urban growth strategy is relatively new in India. Translating policy to action will require a multi-pronged approach. States and cities should take a contextual approach based on local trends, market behavior and city requirements. But if implemented well, the new TOD policy could improve the lives and livelihoods of hundreds of millions.

Prerna Vijaykumar Mehta is the Manager for Urban Development and Accessibility at WRI India Sustainable Cities

Merlyn Mathew is a consultant with WRI India Sustainable Cities

To Improve Core Services, Cities Should Embrace Disruption

Wed, 2017-07-26 12:30

The iPod and streaming services disrupted the music industry. Can cities harness similar innovations? Photo by Toshiyuki Imai/Flickr

Innovative business models can turn entire industries on their head – just ask retail executives how Amazon has changed their world, mobility companies about Uber, or music magnates about Apple’s legacy. How we shop, move, and enjoy music is fundamentally different today from just a decade ago thanks to disruptive changes in these markets.

The phrase “business model innovation” rose to prominence in the startup culture of Silicon Valley, but public administrations could use the same principles to reshape urban life for more productive, sustainable and inclusive cities.

What Is Business Model Innovation?

An iconic example of an industry transformed by business model innovation in recent years is the music industry. At first, the iPod, accompanied by online file-sharing services, changed everything. Then online retail emerged as a cost-competitive alternative to store-based music sales. Together these changes brought the demise of many physical record shops. Nowadays, streaming services such as Spotify no longer sell records but rather provide access to music on demand. Such services are often offered on a “freemium” basis – free access to songs and playlists, interspersed with advertisements that can be turned off for a subscription fee.

The music industry’s evolution exemplifies several aspects of business model innovation:

  • The first is capitalizing on a new value proposition to the end user. In this case, music lovers benefited from greater choice of easily accessible, on-demand music at a lower cost.
  • Second, is the emergence of new channels for value creation. New supply chains, developed in parallel with new MP3 players and phones, helped move music from physical, store-based locations to online files and applications on users’ devices.
  • Finally, new models for capturing value emerged in the form of new cost structures and revenue models. Moving online cut costs for some, while selling access to streaming rather than ownership of a song makes recurring fee-based charges possible compared to one-off sales revenues.
What Does It Mean for Cities?

It is generally thought that new business models emerge in response to changing market conditions and consumer preferences. While not explicitly studied to date, these trends are also underway in cities worldwide. New and rapidly growing cities, changing living standards and consumer preferences, and new technologies are some of the drivers leading to the emergence of alternative business models for common city services. These include changes to mobility, housing and electricity consumption.

Business model innovations in mobility are some of the most visible. Ride sharing solutions – cars, bikes, and taxis that users pay to access, sometimes non-exclusively, rather than own – have exploded. Bike-sharing is taking off even in unlikely places, such as Bhopal, India, where more than 10,000 new users signed up within the first few weeks of the system’s operation. This trend is underpinned by a new value proposition, about point-to-point, no hassle mobility that is particularly attractive to urban users. While shared mobility options continue to coexist alongside public transit and private vehicles, they are becoming a larger part of the urban mobility mix.

In urban energy, decentralized solutions are another example where new business models are reshaping established value propositions, in this case between utilities and customers. By purchasing or leasing solar panels on their own property, city dwellers can exercise greater control over their energy supply, prioritizing lower carbon emissions. They can also establish a two-way relationship with the utility by selling electricity back to the grid or earning money from leasing roof space to a solar company. Decentralizing energy supply through onsite renewables reverses a long trend of increasingly centralized power generation in power plants far beyond city limits – a paradigm that in fact replaced earlier decentralized solutions, based on greater efficiency and economies of scale.

Finally, recent developments in urban land use and housing point toward competing value propositions that could radically change how urban development is carried out. In some cities in the United States and Asia, “transit-oriented development” is displacing decades of auto-centric policies based on the separation of residential and commercial land uses. This comes in response to people’s increasing preference for city-living over suburban lifestyles because they are able to easily access basic services and cultural amenities by walking or public transit. With a major affordable housing gap, estimated to affect 440 million households by 2025, developing country cities need to develop scalable approaches to city living too.

The Need for Experimentation and Governance

Business model innovation has critical implications for cities seeking greater sustainability. It suggests that the same core service needs – e.g., for mobility, energy, water and sanitation, housing – could be satisfied in a range of new ways, through potentially radically different models than are currently in place, including those that are more environmentally and socially sustainable.

But local governments need to actively shape developments in their city. Innovations, especially in their infancy, can have unexpected pitfalls. Cautionary tales about the negative impacts of short-term rental services such as Airbnb and “rogue” bike-sharing companies show local government’s essential role in providing proactive city leadership that anticipates, steers, and where necessary corrects development in real time.

Critically, this is not an all or nothing proposition. It’s clear from the experience of industries that have been disrupted that alternative and established ways of meeting the needs of end users can coexist even as one may be gradually displacing the other (e.g., in home entertainment, where ad-based television coexists with subscription-based services like Netflix).

Fundamental shifts are driven by processes of experimentation, learning and iteration. In the private sector, firms experiment with new ways of doing business to generate profit. In cities, local governments should take inspiration and exercise leadership in working hand-in-hand with the private sector to actively experiment with new value propositions and new channels for value creation and capture, to deliver social and environmental benefits to all.

Anne Maassen is the Energy, Climate and Finance Associate at WRI Ross Center for Sustainable Cities. She leads WRI’s work on Financing Sustainable Cities, an initiative with the C40 Cities Climate Leadership Group, funded by the Citi Foundation, focused on helping cities develop business models to accelerate the implementation of sustainable urban solutions.

To Improve Core Services, Cities Should Embrace Disruption

Wed, 2017-07-26 12:30

The iPod and streaming services disrupted the music industry. Can cities harness similar innovations? Photo by Toshiyuki Imai/Flickr

Innovative business models can turn entire industries on their head – just ask retail executives how Amazon has changed their world, mobility companies about Uber, or music magnates about Apple’s legacy. How we shop, move, and enjoy music is fundamentally different today from just a decade ago thanks to disruptive changes in these markets.

The phrase “business model innovation” rose to prominence in the startup culture of Silicon Valley, but public administrations could use the same principles to reshape urban life for more productive, sustainable and inclusive cities.

What Is Business Model Innovation?

An iconic example of an industry transformed by business model innovation in recent years is the music industry. At first, the iPod, accompanied by online file-sharing services, changed everything. Then online retail emerged as a cost-competitive alternative to store-based music sales. Together these changes brought the demise of many physical record shops. Nowadays, streaming services such as Spotify no longer sell records but rather provide access to music on demand. Such services are often offered on a “freemium” basis – free access to songs and playlists, interspersed with advertisements that can be turned off for a subscription fee.

The music industry’s evolution exemplifies several aspects of business model innovation:

  • The first is capitalizing on a new value proposition to the end user. In this case, music lovers benefited from greater choice of easily accessible, on-demand music at a lower cost.
  • Second, is the emergence of new channels for value creation. New supply chains, developed in parallel with new MP3 players and phones, helped move music from physical, store-based locations to online files and applications on users’ devices.
  • Finally, new models for capturing value emerged in the form of new cost structures and revenue models. Moving online cut costs for some, while selling access to streaming rather than ownership of a song makes recurring fee-based charges possible compared to one-off sales revenues.
What Does It Mean for Cities?

It is generally thought that new business models emerge in response to changing market conditions and consumer preferences. While not explicitly studied to date, these trends are also underway in cities worldwide. New and rapidly growing cities, changing living standards and consumer preferences, and new technologies are some of the drivers leading to the emergence of alternative business models for common city services. These include changes to mobility, housing and electricity consumption.

Business model innovations in mobility are some of the most visible. Ride sharing solutions – cars, bikes, and taxis that users pay to access, sometimes non-exclusively, rather than own – have exploded. Bike-sharing is taking off even in unlikely places, such as Bhopal, India, where more than 10,000 new users signed up within the first few weeks of the system’s operation. This trend is underpinned by a new value proposition, about point-to-point, no hassle mobility that is particularly attractive to urban users. While shared mobility options continue to coexist alongside public transit and private vehicles, they are becoming a larger part of the urban mobility mix.

In urban energy, decentralized solutions are another example where new business models are reshaping established value propositions, in this case between utilities and customers. By purchasing or leasing solar panels on their own property, city dwellers can exercise greater control over their energy supply, prioritizing lower carbon emissions. They can also establish a two-way relationship with the utility by selling electricity back to the grid or earning money from leasing roof space to a solar company. Decentralizing energy supply through onsite renewables reverses a long trend of increasingly centralized power generation in power plants far beyond city limits – a paradigm that in fact replaced earlier decentralized solutions, based on greater efficiency and economies of scale.

Finally, recent developments in urban land use and housing point toward competing value propositions that could radically change how urban development is carried out. In some cities in the United States and Asia, “transit-oriented development” is displacing decades of auto-centric policies based on the separation of residential and commercial land uses. This comes in response to people’s increasing preference for city-living over suburban lifestyles because they are able to easily access basic services and cultural amenities by walking or public transit. With a major affordable housing gap, estimated to affect 440 million households by 2025, developing country cities need to develop scalable approaches to city living too.

The Need for Experimentation and Governance

Business model innovation has critical implications for cities seeking greater sustainability. It suggests that the same core service needs – e.g., for mobility, energy, water and sanitation, housing – could be satisfied in a range of new ways, through potentially radically different models than are currently in place, including those that are more environmentally and socially sustainable.

But local governments need to actively shape developments in their city. Innovations, especially in their infancy, can have unexpected pitfalls. Cautionary tales about the negative impacts of short-term rental services such as Airbnb and “rogue” bike-sharing companies show local government’s essential role in providing proactive city leadership that anticipates, steers, and where necessary corrects development in real time.

Critically, this is not an all or nothing proposition. It’s clear from the experience of industries that have been disrupted that alternative and established ways of meeting the needs of end users can coexist even as one may be gradually displacing the other (e.g., in home entertainment, where ad-based television coexists with subscription-based services like Netflix).

Fundamental shifts are driven by processes of experimentation, learning and iteration. In the private sector, firms experiment with new ways of doing business to generate profit. In cities, local governments should take inspiration and exercise leadership in working hand-in-hand with the private sector to actively experiment with new value propositions and new channels for value creation and capture to deliver social and environmental benefits to all.

Anne Maassen is the Energy, Climate and Finance Associate at WRI Ross Center for Sustainable Cities. She leads WRI’s work on Financing Sustainable Cities, an initiative with the C40 Cities Climate Leadership Group, funded by the Citi Foundation, focused on helping cities develop business models to accelerate the implementation of sustainable urban solutions.

Real Estate Regulation Act: A Potential Opportunity for Transit-Oriented Development

Thu, 2017-06-08 19:01

Photo by Prerna Mehta/WRI India

The real estate sector is one of the largest contributors to India’s GDP, and it is expected to grow by 30 percent over the next decade. However, it is also considered the “most ambiguous sector to transact under,” with insufficient regulations leading to numerous cases of consumer-developer conflicts and project delays.

After eight years of deliberation to streamline such irregularities, the landmark Real Estate (Regulation and Development) Act (RERA), which was notified by the Ministry of Housing and Urban Poverty Alleviation in 2016, became fully operational on May 1, 2017.

This Central Act has made it mandatory for states and Union Territories (UTs) to establish their own Regulatory Authority (RA) and appellate tribunals which would enforce the provisions under the Act.

By acting as an umbrella regulatory authority and bringing in accountability from states and UTs, RERA seeks to bring transparency in the real estate sector, safeguarding the interests of home buyers and improving financing opportunities for builders and developers.

In February 2017, the Government of India’s Ministry of Urban Development (MoUD) also announced the formulation of the National Transit-Oriented Development (TOD) Policy. This policy looks at integrating land use and transport infrastructure to develop planned, sustainable urban growth centers. For instance, walkable and livable communes with high-density mixed land-use around transit corridors like the metros, monorail and bus rapid transit (BRT) corridors, are currently being constructed on a large scale.

Incidentally, these two forward-thinking policies share common ground – while RERA strives to reform the realty sector, TOD holds the potential to create synergies that eventually lead to sustainable cities with higher densities, increased economic activity and better public spaces. Hence, there lies an opportunity to integrate the two policies, by offering special status to TOD within RERA, paving the way to build compact, connected and equitable cities.

Addressing the TOD Link

In its essence, RERA is indeed a necessary intervention to organize the real estate sector and protect consumer interests. RERA will bring under its domain all projects qualifying as real estate and projects that have real estate as a component.

While complying with the provisions of RERA might lead to a temporary increase in property prices, proactive interventions like the government’s announcement in the Union Budget 2017, to award infrastructure status to affordable housing, will pave way for low-cost finances and increased investment in the sector. If the market has sufficient housing options to choose from, the sector is likely to break even and standardize housing costs for the future. Also, the Act is expected to reduce delays in projects through a single window clearance system.

However, the Act falls short on various counts. To begin with, the overarching guidelines specified in the Act makes no mention of TOD, a prime agenda of the MoUD. With a strong real estate component, one assumes that projects under TOD will have to adhere to RERA, leading to several concerns:

1) While single window clearances are targeted at reducing delays, the Act does not specify the list of approvals that can be sought through this system or its process. Typically, single window clearances do not take into account environmental impact assessments, fire department clearances and so on. Development projects are often held up for years due to lengthy approval processes, and if state-specific procedures are not clarified, it could lead to further delays and confusions.

2) The Act prohibits marketing strategies like pre-launch, that were earlier employed by developers to obtain the initial capital required for a real estate project. Instead, through a fund-channeling mechanism for project development, the Act guards the timely delivery commitment. In such a situation, developers will have to look for alternative sources of funding and financing including their own body. Such prohibitions could be especially detrimental for a new and progressive urban growth strategy like TOD.

3) With a process-oriented approach, RERA can ensure and eventually increase the possibility of obtaining funds for real estate projects. But comprehensive TOD projects, which aim for an infrastructural augmentation of an entire area along with a real estate component catering to a wide variety of users, might suffer for want of funds. This could have a negative impact on the implementation of TOD projects, especially in retrofit situations and at a corridor level.

A Way Forward

If TOD is given a special area status, it will formalize not just the workings of the real estate sector but also its associated infrastructure. By bringing in station area developments within its domain, RERA and TOD can go hand-in-hand, leading to comprehensive development. Regularization of the real estate sector could also benefit TOD projects in terms of procuring finances, streamlining land acquisition processes and timely delivery, thereby making it easier to launch and showcase them. As of today, several states are still in the process of finalizing their RERA rules, giving the concerned state governments an opportunity to incorporate TOD into RERA. This would give a huge impetus to operationalize TOD in Indian cities.

Originally published on WRI India, with inputs from Jaya Dhindaw, Sreekumar Kumaraswamy and Himadri Das

Real Estate Regulation Act: A Potential Opportunity for Transit-Oriented Development

Thu, 2017-06-08 19:01

Photo by Prerna Mehta/WRI India

The real estate sector is one of the largest contributors to India’s GDP, and it is expected to grow by 30 percent over the next decade. However, it is also considered the “most ambiguous sector to transact under,” with insufficient regulations leading to numerous cases of consumer-developer conflicts and project delays.

After eight years of deliberation to streamline such irregularities, the landmark Real Estate (Regulation and Development) Act (RERA), which was notified by the Ministry of Housing and Urban Poverty Alleviation in 2016, became fully operational on May 1, 2017.

This Central Act has made it mandatory for states and Union Territories (UTs) to establish their own Regulatory Authority (RA) and appellate tribunals which would enforce the provisions under the Act.

By acting as an umbrella regulatory authority and bringing in accountability from states and UTs, RERA seeks to bring transparency in the real estate sector, safeguarding the interests of home buyers and improving financing opportunities for builders and developers.

In February 2017, the Government of India’s Ministry of Urban Development (MoUD) also announced the formulation of the National Transit-Oriented Development (TOD) Policy. This policy looks at integrating land use and transport infrastructure to develop planned, sustainable urban growth centers. For instance, walkable and livable communes with high-density mixed land-use around transit corridors like the metros, monorail and bus rapid transit (BRT) corridors, are currently being constructed on a large scale.

Incidentally, these two forward-thinking policies share common ground – while RERA strives to reform the realty sector, TOD holds the potential to create synergies that eventually lead to sustainable cities with higher densities, increased economic activity and better public spaces. Hence, there lies an opportunity to integrate the two policies, by offering special status to TOD within RERA, paving the way to build compact, connected and equitable cities.

Addressing the TOD Link

In its essence, RERA is indeed a necessary intervention to organize the real estate sector and protect consumer interests. RERA will bring under its domain all projects qualifying as real estate and projects that have real estate as a component.

While complying with the provisions of RERA might lead to a temporary increase in property prices, proactive interventions like the government’s announcement in the Union Budget 2017, to award infrastructure status to affordable housing, will pave way for low-cost finances and increased investment in the sector. If the market has sufficient housing options to choose from, the sector is likely to break even and standardize housing costs for the future. Also, the Act is expected to reduce delays in projects through a single window clearance system.

However, the Act falls short on various counts. To begin with, the overarching guidelines specified in the Act makes no mention of TOD, a prime agenda of the MoUD. With a strong real estate component, one assumes that projects under TOD will have to adhere to RERA, leading to several concerns:

1) While single window clearances are targeted at reducing delays, the Act does not specify the list of approvals that can be sought through this system or its process. Typically, single window clearances do not take into account environmental impact assessments, fire department clearances and so on. Development projects are often held up for years due to lengthy approval processes, and if state-specific procedures are not clarified, it could lead to further delays and confusions.

2) The Act prohibits marketing strategies like pre-launch, that were earlier employed by developers to obtain the initial capital required for a real estate project. Instead, through a fund-channeling mechanism for project development, the Act guards the timely delivery commitment. In such a situation, developers will have to look for alternative sources of funding and financing including their own body. Such prohibitions could be especially detrimental for a new and progressive urban growth strategy like TOD.

3) With a process-oriented approach, RERA can ensure and eventually increase the possibility of obtaining funds for real estate projects. But comprehensive TOD projects, which aim for an infrastructural augmentation of an entire area along with a real estate component catering to a wide variety of users, might suffer for want of funds. This could have a negative impact on the implementation of TOD projects, especially in retrofit situations and at a corridor level.

A Way Forward

If TOD is given a special area status, it will formalize not just the workings of the real estate sector but also its associated infrastructure. By bringing in station area developments within its domain, RERA and TOD can go hand-in-hand, leading to comprehensive development. Regularization of the real estate sector could also benefit TOD projects in terms of procuring finances, streamlining land acquisition processes and timely delivery, thereby making it easier to launch and showcase them. As of today, several states are still in the process of finalizing their RERA rules, giving the concerned state governments an opportunity to incorporate TOD into RERA. This would give a huge impetus to operationalize TOD in Indian cities.

Originally published on WRI India, with inputs from Jaya Dhindaw, Sreekumar Kumaraswamy and Himadri Das

Overcoming the Knowledge Gaps for Transit-Oriented Development: What’s Lacking?

Tue, 2017-03-28 18:44

Transit-oriented development can bring economic, cultural and societal benefits to urban residents. Photo by Bradley Schroeder / Flickr

With an increase in their rate of urbanization, many low- to middle-income countries are feeling additional demand for services, amenities and infrastructure. To address this, several cities have followed unorganized development practices (like building bigger and faster), only to meet additional challenges down the road—displacement, uncontrolled migration, greater traffic, higher land prices, insufficient affordable housing and more.

Transit-oriented development (TOD)—a strategy for creating walkable, compact urban areas with a mix of uses around transit systems—can avoid many of these negative effects and bring economic, cultural and societal benefits to the residents of these expanding cities. However, TOD requires an integrated approach to project implementation at all levels of the planning process, and this can be a challenge for cities worldwide. Decision makers must familiarize themselves with the supporting mechanisms to enable TOD if they are to effectively implement this development strategy, but few resources and tools exist at a global level for building capacity and knowledge.

So how do we overcome these barriers, and what’s needed to take them to scale?

A Lack of Common Knowledge Contributes to Common Barriers

Without an extensive knowledge base, TOD remains vulnerable to three reoccurring implementation challenges: coordinated planning, regulatory frameworks and project funding.

First, a lack of coordination between land and transportation planners has historically prevented an integrated planning approach to land, transportation and economic development. This disconnect has led to lost time, increased infrastructure costs, poor health and the loss of public space. For example, in Warsaw, Poland a demand for housing was not paired with the creation of a transportation network. The result was resident dependence on private vehicles and increased congestion on available road networks. To achieve TOD, participating agencies must set clear objectives for growth, ensuring project momentum through political transitions and between development departments while securing citizen support.

Second, an absence of supportive TOD policies in cities has prevented progress by creating isolated areas of development with little foresight for long-term growth. TOD projects require policies that permit high-density and mixed-use developments, often supported by form-based codes that respond quickly to changing economic patterns and space needs. Without local mechanisms in place for land redevelopment, TOD is restricted by national regulations and financial constraints.

Lastly, because TOD is a capital-intensive venture, initial funding for large-scale projects is difficult for many cities to secure. By creatively using and combining financing mechanisms, cities like São Paulo, Brazil are able to tap into value capture instruments that produce the highest returns for their communities. These models can also indicate which projects and technologies are the most advantageous, but local decision makers often aren’t familiar with the options available to them.

The success of Curitiba’s transport-oriented development strategy can be a model for others. Photo by whl.travel / Flickr

Key Lessons from Brazil and Beyond

Although the context of a city is always different, many examples of success in TOD have revealed four common lessons for getting it right: the importance of political economy, planning and regulation, finance and implementation.

A strong planning and regulatory framework can help address political economy concerns by ensuring that TOD projects are developed and maintained throughout implementation. Once a project has been accepted, a strong planning and regulatory framework can help integrate individual initiatives into the larger vision for the city or region. The success of Curitiba is widely credited to the vision and agency of its former mayor, Jaime Lerner, who supported investment in public transit systems and green city initiatives. Curitiba’s zoning codes and design parameters were readjusted to attract new development while maintaining the integrity of the city at the institutional level. The Curitiba example also provides insight on the coordination, handover and delivery of TOD projects, as the city established a network of agencies to protect the interests of those who interact with the city at every level.

The appeal of TOD lies in the distribution of transportation modes and the opportunities that are created for those who use transit in that area. For a project to truly encompass inclusive TOD, there must be provisions that offer affordable housing, grow access to a diverse job base and preserve local culture. Unfortunately, this task can become challenging at the finance and implementation stage. To attract private investors, the public sector must be willing to not only take on initial financing, but also promote incentives for affordable housing preservation and production.

For example, Brazil’s Outorga Onerosa do Direito de Construir (OODC) instrument allows developers to build at increased density in exchange for a fee. These funds are then shared with under-developed areas of the city. In São Paulo, for example, between 20 to 30 percent of these funds are then allocated to affordable housing.  Another financial innovation includes tying specific funds to TOD by making loans to developers to build affordable housing as part of the larger city plans. Examples here include the Transit Oriented Affordable Housing Fund of San Francisco, the Arlington County (Virginia) Affordable Housing Trust Fund and the Denver (Colorado) Regional Transit Oriented Development Fund.

New Tools Are Needed to Fill the Knowledge Gap

While extensive research has been conducted on TOD in North American and European cities, little knowledge has been compiled on regulatory frameworks and financing mechanisms in the Global South—particularly with an eye to inclusion and equity. For a project to be successful, decision makers need to become familiar with the challenges related to TOD and how they can support each stage of the implementation process. As global urbanization continues, cities will need to meet the mobility, housing, social and economic needs of their residents in a way that is equitable and sustainable. Transit-oriented development can be critical for achieving this, but new tools, information and resources are needed to empower cities to meet the challenge at scale.

Overcoming the Knowledge Gaps for Transit-Oriented Development: What’s Lacking?

Tue, 2017-03-28 18:44

Transit-oriented development can bring economic, cultural and societal benefits to urban residents. Photo by Bradley Schroeder / Flickr

With an increase in their rate of urbanization, many low- to middle-income countries are feeling additional demand for services, amenities and infrastructure. To address this, several cities have followed unorganized development practices (like building bigger and faster), only to meet additional challenges down the road—displacement, uncontrolled migration, greater traffic, higher land prices, insufficient affordable housing and more.

Transit-oriented development (TOD)—a strategy for creating walkable, compact urban areas with a mix of uses around transit systems—can avoid many of these negative effects and bring economic, cultural and societal benefits to the residents of these expanding cities. However, TOD requires an integrated approach to project implementation at all levels of the planning process, and this can be a challenge for cities worldwide. Decision makers must familiarize themselves with the supporting mechanisms to enable TOD if they are to effectively implement this development strategy, but few resources and tools exist at a global level for building capacity and knowledge.

So how do we overcome these barriers, and what’s needed to take them to scale?

A Lack of Common Knowledge Contributes to Common Barriers

Without an extensive knowledge base, TOD remains vulnerable to three reoccurring implementation challenges: coordinated planning, regulatory frameworks and project funding.

First, a lack of coordination between land and transportation planners has historically prevented an integrated planning approach to land, transportation and economic development. This disconnect has led to lost time, increased infrastructure costs, poor health and the loss of public space. For example, in Warsaw, Poland a demand for housing was not paired with the creation of a transportation network. The result was resident dependence on private vehicles and increased congestion on available road networks. To achieve TOD, participating agencies must set clear objectives for growth, ensuring project momentum through political transitions and between development departments while securing citizen support.

Second, an absence of supportive TOD policies in cities has prevented progress by creating isolated areas of development with little foresight for long-term growth. TOD projects require policies that permit high-density and mixed-use developments, often supported by form-based codes that respond quickly to changing economic patterns and space needs. Without local mechanisms in place for land redevelopment, TOD is restricted by national regulations and financial constraints.

Lastly, because TOD is a capital-intensive venture, initial funding for large-scale projects is difficult for many cities to secure. By creatively using and combining financing mechanisms, cities like São Paulo, Brazil are able to tap into value capture instruments that produce the highest returns for their communities. These models can also indicate which projects and technologies are the most advantageous, but local decision makers often aren’t familiar with the options available to them.

The success of Curitiba’s transport-oriented development strategy can be a model for others. Photo by whl.travel / Flickr

Key Lessons from Brazil and Beyond

Although the context of a city is always different, many examples of success in TOD have revealed four common lessons for getting it right: the importance of political economy, planning and regulation, finance and implementation.

A strong planning and regulatory framework can help address political economy concerns by ensuring that TOD projects are developed and maintained throughout implementation. Once a project has been accepted, a strong planning and regulatory framework can help integrate individual initiatives into the larger vision for the city or region. The success of Curitiba is widely credited to the vision and agency of its former mayor, Jaime Lerner, who supported investment in public transit systems and green city initiatives. Curitiba’s zoning codes and design parameters were readjusted to attract new development while maintaining the integrity of the city at the institutional level. The Curitiba example also provides insight on the coordination, handover and delivery of TOD projects, as the city established a network of agencies to protect the interests of those who interact with the city at every level.

The appeal of TOD lies in the distribution of transportation modes and the opportunities that are created for those who use transit in that area. For a project to truly encompass inclusive TOD, there must be provisions that offer affordable housing, grow access to a diverse job base and preserve local culture. Unfortunately, this task can become challenging at the finance and implementation stage. To attract private investors, the public sector must be willing to not only take on initial financing, but also promote incentives for affordable housing preservation and production.

For example, Brazil’s Outorga Onerosa do Direito de Construir (OODC) instrument allows developers to build at increased density in exchange for a fee. These funds are then shared with under-developed areas of the city. In São Paulo, for example, between 20 to 30 percent of these funds are then allocated to affordable housing.  Another financial innovation includes tying specific funds to TOD by making loans to developers to build affordable housing as part of the larger city plans. Examples here include the Transit Oriented Affordable Housing Fund of San Francisco, the Arlington County (Virginia) Affordable Housing Trust Fund and the Denver (Colorado) Regional Transit Oriented Development Fund.

New Tools Are Needed to Fill the Knowledge Gap

While extensive research has been conducted on TOD in North American and European cities, little knowledge has been compiled on regulatory frameworks and financing mechanisms in the Global South—particularly with an eye to inclusion and equity. For a project to be successful, decision makers need to become familiar with the challenges related to TOD and how they can support each stage of the implementation process. As global urbanization continues, cities will need to meet the mobility, housing, social and economic needs of their residents in a way that is equitable and sustainable. Transit-oriented development can be critical for achieving this, but new tools, information and resources are needed to empower cities to meet the challenge at scale.

Financing: The Next Step in Facilitating Transit-Oriented Development in India

Wed, 2017-02-01 20:37

Busy Road in Jaipur, India. Photo by EMBARQ / Flickr

India’s urban population is expected to reach 600 million by 2031. Providing infrastructure to accommodate this growth will be a huge task. The Ministry of Urban Development (MoUD) is encouraging Transit-Oriented Development (TOD) as one of its strategies for sustainable urban growth. There has been increased interest in India for scaling-up TOD projects in order to solve issues in existing and newly emerging urban areas. Therefore, it is important to understand that implementation requires cross-disciplinary integration and partnering at various tiers of government.

However, owing to the significant capital investments required, and long gestation periods without definite returns, few have signed on for TOD projects. There is a need to develop suitable financing mechanisms and concrete policy frameworks and regulations to encourage success.

Financing is Crucial to TOD

Successful global practices have shown that TOD cannot adhere to a one size fits all policy, especially when it comes to the financing model involved. Each component of the project needs to be looked at separately and the appropriate financing model applied. In addition, the role of all stakeholders in the financing process and the possible changes to the financing model need to be charted out.

There is significant capital available, allocated by the local, state and central governments, in addition to available funds from public transit agencies, businesses, financial institutions, community based organizations, philanthropies and developers. However, this money needs to be accessed and channeled effectively.

Existing Mechanisms to Finance Infrastructure

At present, there are several financial mechanisms that have been used for large-scale infrastructure projects in India. Depending on the type of project and the stakeholders involved, replicating these models could help future TOD projects get off the ground.

Public-Public Partnership: When two or more public agencies come together for a project, resources and responsibilities are pooled within a partnership agreement. For example, when the Ministry of Urban Development approved the Delhi TOD policy in July 2015, a pilot TOD project was initiated by the Delhi Development Authority (DDA) and the state-owned NBCC (India) Limited to take the project forward.

Credit Assistance: This method is traditionally used for large-scale infrastructure projects in India and involves budgetary support, grants and loans from multilateral or bilateral development agencies. One such example is the Delhi Metro, which is an equity joint venture between the state government and the central government, along with significant soft-loan assistance from Japan International Cooperation Agency (JICA).

Land Value Capture: This method recovers all or some of the increase in land and property value as a result of public infrastructure provision. The Delhi Metro Rail Corporation (DMRC) has successfully employed this financing method through property development. Phase-III of the Delhi Metro is looking to generate funds of close to INR 2500 crore (US $367 million) through the same method. The new Value Capture Framework Policy could help the government recover value generated via public infrastructure investments.

Public- Private Partnership (PPP): This approach involves private finance and advanced technical expertise made attractive with guarantees from the government. For instance, the Hyderabad Metro Rail Ltd (HMR) has been set up as a Special Project Vehicle (SPV) between the state government and the concessionaire, L&T.

Municipal Bonds: Tax-free bonds are issued by Urban Local Bodies (ULBs) in order to finance city improvement projects. The Ahmedabad Municipal Corporation was the first ULB to issue redeemable tax-free bonds in 2005. While the municipal bond market in India has thus far played only a limited role as a funding source, it has a high-track record in terms of repayment across all ULBs that have issued them.

Dedicated Funds Model: The Government of Karnataka has established a Dedicated Funds Model, where money is mobilized by imposing a Transfer of Development Rights (TDR) tax based on the market guidance value of all properties within a distance of 500 meters (1640 feet) from the Phase-II of the Bangalore metro line. The funds would be credited to the Metro Infrastructure Fund and shared proportionately between the ULB and infrastructure providers.

Moving Forward

While TOD has had widespread global success, as with any infrastructure project, TOD will not be successful in India until the question of finance is answered. Infrastructure financing mechanisms should be contextual and financially sustainable. These could include tax increment financing (TIF), betterment tax, user charges, selling of air rights, green bonds, project bonds and others.

An encouraging sign is that the government has become flexible in terms of allowing commercial bank lending, using tools such as take-out financing, infrastructure financing institutions, infrastructure debt funds, external commercial borrowing and foreign direct investments (FDIs). The applicability of existing finance mechanisms and the possibility of innovative methods for financing will be crucial for the implementation and scaling-up of TOD.

This was originally published by WRI India

The Next Step in Financing Transit-Oriented Development in India

Wed, 2017-02-01 20:37

Busy Road in Jaipur, India. Photo by EMBARQ / Flickr

India’s urban population is expected to reach 600 million by 2031. Providing infrastructure to accommodate this growth will be a huge task. The Ministry of Urban Development (MoUD) is encouraging Transit-Oriented Development (TOD) as one of its strategies for sustainable urban growth. There has been increased interest in India for scaling-up TOD projects in order to solve issues in existing and newly emerging urban areas. Therefore, it is important to understand that implementation requires cross-disciplinary integration and partnering at various tiers of government.

However, owing to the significant capital investments required, and long gestation periods without definite returns, few have signed on for TOD projects. There is a need to develop suitable financing mechanisms and concrete policy frameworks and regulations to encourage success.

Financing is Crucial to TOD

Successful global practices have shown that TOD cannot adhere to a one size fits all policy, especially when it comes to the financing model involved. Each component of the project needs to be looked at separately and the appropriate financing model applied. In addition, the role of all stakeholders in the financing process and the possible changes to the financing model need to be charted out.

There is significant capital available, allocated by the local, state and central governments, in addition to available funds from public transit agencies, businesses, financial institutions, community based organizations, philanthropies and developers. However, this money needs to be accessed and channeled effectively.

Existing Mechanisms to Finance Infrastructure

At present, there are several financial mechanisms that have been used for large-scale infrastructure projects in India. Depending on the type of project and the stakeholders involved, replicating these models could help future TOD projects get off the ground.

Public-Public Partnership: When two or more public agencies come together for a project, resources and responsibilities are pooled within a partnership agreement. For example, when the Ministry of Urban Development approved the Delhi TOD policy in July 2015, a pilot TOD project was initiated by the Delhi Development Authority (DDA) and the state-owned NBCC (India) Limited to take the project forward.

Credit Assistance: This method is traditionally used for large-scale infrastructure projects in India and involves budgetary support, grants and loans from multilateral or bilateral development agencies. One such example is the Delhi Metro, which is an equity joint venture between the state government and the central government, along with significant soft-loan assistance from Japan International Cooperation Agency (JICA).

Land Value Capture: This method recovers all or some of the increase in land and property value as a result of public infrastructure provision. The Delhi Metro Rail Corporation (DMRC) has successfully employed this financing method through property development. Phase-III of the Delhi Metro is looking to generate funds of close to INR 2500 crore (US $367 million) through the same method. The new Value Capture Framework Policy could help the government recover value generated via public infrastructure investments.

Public- Private Partnership (PPP): This approach involves private finance and advanced technical expertise made attractive with guarantees from the government. For instance, the Hyderabad Metro Rail Ltd (HMR) has been set up as a Special Project Vehicle (SPV) between the state government and the concessionaire, L&T.

Municipal Bonds: Tax-free bonds are issued by Urban Local Bodies (ULBs) in order to finance city improvement projects. The Ahmedabad Municipal Corporation was the first ULB to issue redeemable tax-free bonds in 2005. While the municipal bond market in India has thus far played only a limited role as a funding source, it has a high-track record in terms of repayment across all ULBs that have issued them.

Dedicated Funds Model: The Government of Karnataka has established a Dedicated Funds Model, where money is mobilized by imposing a Transfer of Development Rights (TDR) tax based on the market guidance value of all properties within a distance of 500 meters (1640 feet) from the Phase-II of the Bangalore metro line. The funds would be credited to the Metro Infrastructure Fund and shared proportionately between the ULB and infrastructure providers.

Moving Forward

While TOD has had widespread global success, as with any infrastructure project, TOD will not be successful in India until the question of finance is answered. Infrastructure financing mechanisms should be contextual and financially sustainable. These could include tax increment financing (TIF), betterment tax, user charges, selling of air rights, green bonds, project bonds and others.

An encouraging sign is that the government has become flexible in terms of allowing commercial bank lending, using tools such as take-out financing, infrastructure financing institutions, infrastructure debt funds, external commercial borrowing and foreign direct investments (FDIs). The applicability of existing finance mechanisms and the possibility of innovative methods for financing will be crucial for the implementation and scaling-up of TOD.

This was originally published by WRI India

Live from Habitat III: Talking All Things Mobility at Transport Day

Thu, 2016-10-20 06:04

Natalie Draisin, US Manager, FIA Foundation, speaks at Transport Day at Habitat III. Photo by Alex Rogala/WRI.

TheCityFix is live on the ground from Habitat III. Click here for our full coverage. 

“We need to stop building cities for vehicles, and build cities for people,” remarked Quito’s Deputy Mayor, Eduardo del Pozo, setting the opening tone for Transport Day, hosted by the Paris Process on Mobility and Climate (PPMC). While the host city continues to grapple with air pollution and congestion, the city has made positive strides toward a low-carbon future, including expanding its electric bike share program and nearing implementation for a metro system. With Quito as its backdrop, Transport Day proved to be full of stimulating discussion.

Ensuring Road Safety for the Most Vulnerable Users

“1.8 billion children want to get to school safely every day, but around the world, millions can’t, due to risks of injury or death from cars. This needs to change,” implored Michelle Yeoh, UNDP Goodwill Ambassador.

We often think of unsafe streets and neighborhoods as threatening children’s rights to health and well-being, but as Eduardo Vasconcellos of the CAF Development Bank of Latin America noted, poor urban design can have implications beyond that. Without genuinely safe access to schools, children may have a formal right to education, but no real opportunity to learn. The formal right to education can’t be exercised unless the transport system works for them—and in a safe way.

Vasconcellos elaborated on how unsafe transport systems are failing another vulnerable user as well—the poor. For example, he mentioned how the rich make three times the number of trips as the poor in São Paulo, Brazil, yet they suffer disproportionately. Vasconcellos’s research shows that the poor suffer 12-15 times more traffic fatalities and injuries than the well-off. A more equal city, like London, has a much lower ratio, with the poor suffering three to four times the impact as the well-off. Of course, London still has a way to go to equitably serving all its residents.

Women and gender-specific issues are referenced in 32 paragraphs of the New Urban Agenda (of 174). This should be considered an accomplishment, argued Katia Araujo, Director of Programs, Huairou Commission, but there’s still a lot to do to ensure that the New Urban Agenda works for the most vulnerable users, including children and those less able. Different populations have different needs, and it will be critical going forward that integrated transport and land use planning—an imperative for well-planned cities—works for all people.

All this will require strong leadership at all levels of government. Jean Todt, President of FIA, called on mayors to address the 1.25 million traffic fatalities and 15 million injuries that are occurring every year, as half of these take place in cities. The New Urban Agenda elevates road safety to an unprecedented level, creating an opportunity for action. Andrés Gómez-Lobo, Chile’s Minister of Transportation and Communications, echoed this, emphasizing the critical role that good public policy—like subsidizing fares and integrating metropolitan transport systems—can play in make cities safer and more equal for all.

Comparing Common Challenges for Transit-oriented Development

A session on transit-oriented development (TOD) examined experiences both from the city-side and from the investor-side. Laura Ballesteros, Director of Mobility for Mexico City, noted how weak housing policy in Mexico and weak metropolitan governance allowed for unplanned development over the past several decades of the country’s history. As a result, homes in the Mexico City metropolitan area are about 21 km (13 miles) away from the city center on average, and a staggering 31 percent of homes are abandoned, due to the high costs of transport in these isolated areas. However, she did note that the city and surrounding state are making advances toward an integrate transit system and metropolitan governance.

Madhav Pai, Director of India of WRI Ross Center for Sustainable Cities, discussed the challenges of TOD in the Indian context, including the tension between development with services access and the unaffordability that this tends to bring. Delhi, for example, has been moving forward with TOD projects, but while low parking requirements are a positive sign, disagreement about housing has stymied many projects from moving forward more quickly. Developers typically push for larger unit sizes in order to maximize profits, but this reduces affordability and puts the benefits of TOD out of reach of lower-income populations.

Xiaomei Tan, Senior Climate Change Specialist, Global Environment Facility, discussed the role that banks play in supporting clean vehicle technologies and fuels, rapid transit systems and non-motorized infrastructure. Max Jensen, Head of the Public Transport Division at the European Investment Bank, talked about how EU policy dictates the parameters of the types of projects that the EIB can invest in. Both agreed that there needs to be a range of financing instruments that can be assembled in different combinations depending on the policy, project and context.

5 Priorities for Catalyzing Global Action at the Local Level

From the recent ratification of the Paris Agreement to the Sustainable Development Goals (SDGs) and even the most recent agreement on hydrofluorocarbons in Kigali, Rwanda, the international community is proving that it can make real progress and commitments. More than 61 percent of countries’ national climate plans, known as Nationally Determined Contributions (NDCs), propose actions to mitigate emissions from the transport sector. This is a good start, but how do we break down these global commitments into city-level action?

Holger Dalkmann, Director of Strategy and Global Policy, WRI Ross Center for Sustainable Cities, presented five priorities:

  1. Bring transport initiatives together within national government frameworks – a recent report from WRI shows that transport initiatives can play a major role in galvanizing climate action
  2. Link global processes and commitments – the SDGs, Paris Agreement and New Urban Agenda are all major advances, but how will we bring them together to maximize impact?
  3. Finance is criticalresearch from WRI shows that investment in sustainable transport could save US $300 billion a year, and that achieving these savings is just a matter of shifting investment, not increasing it.
  4. Strengthen institutions and build capacity – many cities lack the technical knowledge and ability to shift to low-carbon transport systems.
  5. Partnerships are key – cities can’t do it alone. A sustainable urban future will require the active participation of civil society, the private sector and people.

Follow our daily coverage of Habitat III on TheCityFix.

 

Live from Habitat III: Talking All Things Mobility at Transport Day

Thu, 2016-10-20 06:04

Natalie Draisin, US Manager, FIA Foundation, speaks at Transport Day at Habitat III. Photo by Alex Rogala/WRI.

TheCityFix is live on the ground from Habitat III. Click here for our full coverage. 

“We need to stop building cities for vehicles, and build cities for people,” remarked Quito’s Deputy Mayor, Eduardo del Pozo, setting the opening tone for Transport Day, hosted by the Paris Process on Mobility and Climate (PPMC). While the host city continues to grapple with air pollution and congestion, the city has made positive strides toward a low-carbon future, including expanding its electric bike share program and nearing implementation for a metro system. With Quito as its backdrop, Transport Day proved to be full of stimulating discussion.

Ensuring Road Safety for the Most Vulnerable Users

“1.8 billion children want to get to school safely every day, but around the world, millions can’t, due to risks of injury or death from cars. This needs to change,” implored Michelle Yeoh, UNDP Goodwill Ambassador.

We often think of unsafe streets and neighborhoods as threatening children’s rights to health and well-being, but as Eduardo Vasconcellos of the CAF Development Bank of Latin America noted, poor urban design can have implications beyond that. Without genuinely safe access to schools, children may have a formal right to education, but no real opportunity to learn. The formal right to education can’t be exercised unless the transport system works for them—and in a safe way.

Vasconcellos elaborated on how unsafe transport systems are failing another vulnerable user as well—the poor. For example, he mentioned how the rich make three times the number of trips as the poor in São Paulo, Brazil, yet they suffer disproportionately. Vasconcellos’s research shows that the poor suffer 12-15 times more traffic fatalities and injuries than the well-off. A more equal city, like London, has a much lower ratio, with the poor suffering three to four times the impact as the well-off. Of course, London still has a way to go to equitably serving all its residents.

Women and gender-specific issues are referenced in 32 paragraphs of the New Urban Agenda (of 174). This should be considered an accomplishment, argued Katia Araujo, Director of Programs, Huairou Commission, but there’s still a lot to do to ensure that the New Urban Agenda works for the most vulnerable users, including children and those less able. Different populations have different needs, and it will be critical going forward that integrated transport and land use planning—an imperative for well-planned cities—works for all people.

All this will require strong leadership at all levels of government. Jean Todt, President of FIA, called on mayors to address the 1.25 million traffic fatalities and 15 million injuries that are occurring every year, as half of these take place in cities. The New Urban Agenda elevates road safety to an unprecedented level, creating an opportunity for action. Andrés Gómez-Lobo, Chile’s Minister of Transportation and Communications, echoed this, emphasizing the critical role that good public policy—like subsidizing fares and integrating metropolitan transport systems—can play in make cities safer and more equal for all.

Comparing Common Challenges for Transit-oriented Development

A session on transit-oriented development (TOD) examined experiences both from the city-side and from the investor-side. Laura Ballesteros, Director of Mobility for Mexico City, noted how weak housing policy in Mexico and weak metropolitan governance allowed for unplanned development over the past several decades of the country’s history. As a result, homes in the Mexico City metropolitan area are about 21 km (13 miles) away from the city center on average, and a staggering 31 percent of homes are abandoned, due to the high costs of transport in these isolated areas. However, she did note that the city and surrounding state are making advances toward an integrate transit system and metropolitan governance.

Madhav Pai, Director of India of WRI Ross Center for Sustainable Cities, discussed the challenges of TOD in the Indian context, including the tension between development with services access and the unaffordability that this tends to bring. Delhi, for example, has been moving forward with TOD projects, but while low parking requirements are a positive sign, disagreement about housing has stymied many projects from moving forward more quickly. Developers typically push for larger unit sizes in order to maximize profits, but this reduces affordability and puts the benefits of TOD out of reach of lower-income populations.

Xiaomei Tan, Senior Climate Change Specialist, Global Environment Facility, discussed the role that banks play in supporting clean vehicle technologies and fuels, rapid transit systems and non-motorized infrastructure. Max Jensen, Head of the Public Transport Division at the European Investment Bank, talked about how EU policy dictates the parameters of the types of projects that the EIB can invest in. Both agreed that there needs to be a range of financing instruments that can be assembled in different combinations depending on the policy, project and context.

5 Priorities for Catalyzing Global Action at the Local Level

From the recent ratification of the Paris Agreement to the Sustainable Development Goals (SDGs) and even the most recent agreement on hydrofluorocarbons in Kigali, Rwanda, the international community is proving that it can make real progress and commitments. More than 61 percent of countries’ national climate plans, known as Nationally Determined Contributions (NDCs), propose actions to mitigate emissions from the transport sector. This is a good start, but how do we break down these global commitments into city-level action?

Holger Dalkmann, Director of Strategy and Global Policy, WRI Ross Center for Sustainable Cities, presented five priorities:

  1. Bring transport initiatives together within national government frameworks – a recent report from WRI shows that transport initiatives can play a major role in galvanizing climate action
  2. Link global processes and commitments – the SDGs, Paris Agreement and New Urban Agenda are all major advances, but how will we bring them together to maximize impact?
  3. Finance is criticalresearch from WRI shows that investment in sustainable transport could save US $300 billion a year, and that achieving these savings is just a matter of shifting investment, not increasing it.
  4. Strengthen institutions and build capacity – many cities lack the technical knowledge and ability to shift to low-carbon transport systems.
  5. Partnerships are key – cities can’t do it alone. A sustainable urban future will require the active participation of civil society, the private sector and people.

Follow our daily coverage of Habitat III on TheCityFix.

 

4 Keys to Unlock Innovative Urban Services for All

Fri, 2016-02-19 02:50

To compete in the urban century ahead, cities like Istanbul, Turkey will need to innovate how they deliver and finance sustainable services for all. Photo by Benoit Colin/Flickr.

With rising air pollution to costly traffic congestion and increasingly burdened public finances, cities need to transition onto a sustainable path towards healthy, productive and equitable urban communities. To thrive in the coming urban century, cities will need to innovate how they deliver sustainable urban services to meet people’s needs.

While there is no unique recipe for delivering sustainable urban services, many of the successful solutions around the world share common characteristics. An ongoing project between World Resources Institute (WRI), the Citi Foundation and C40 is working to identify global examples of sustainable urban innovation and draw out commonalities across them. The partnership helps develop locally-customized business models that can accelerate the implementation of sustainable solutions around the world. Through a global scan of urban innovations, the partnership has distilled four key elements that are critical ingredients to thriving, sustainable cities.

Rethinking How We Meet People’s Needs

Traditional thinking about services focused on simply expanding the supply of infrastructure, like roads, highways, bus rapid transit (BRT), and metro in and between cities. The idea was that more infrastructure would give more people access to mobility options.

The problem with simply expanding infrastructure, is that it misses how people will use it. Exclusively increasing road space without giving people alternatives to use public transit leaves people no choice but to rely on private vehicles. This in turn leads to a vicious cycle of more congestion. The costs of this business as usual approach are staggering: in Mexico City thousands of people spend hours stuck in congestion every day, costing the local economy 2.6 percent of GDP every year.

Innovative service solutions are reversing the traditional thinking that has led to congestion, sprawl, and inefficiency by taking into account how people actually use infrastructure to meet their needs. For example, transit-oriented development (TOD) brings people into compact neighborhoods where they need fewer—or don’t need any—roads and highways to access amenities and jobs in the city. TOD makes efficient use of infrastructure, reducing the distance between people and their destinations and connecting them with efficient transport options like mass transit and bike share.

Shifting Traditional Roles in Service Provision

Urban services are typically considered the responsibility of the public sector. But growing urban populations and constrained public finance mean that the public sector cannot deliver successful services entirely on its own. Many urban innovations are the result of shifting roles and responsibilities between public, private, and civil society actors, including people.

New service operators are emerging to deliver non-traditional infrastructure services, such as efficient street lighting and building efficiency. In Bhubaneswar, India  (as in many other places) an energy service company is taking on the task of upgrading and maintaining public lighting, in exchange for a share of the savings generated through more energy efficient infrastructure. Even service users are taking on more active roles by opting for residential solar rooftops, enabling them to generate their own power or lease out their roof space to third party companies who operate the infrastructure.

Unlocking New Sources of Funding

One persistent challenge for many sustainable services has been a lack of funding – viable revenue streams or transfers that support services through the cycle of planning, construction, operation, and maintenance. In Mexico City, for example, internal budgeting barriers and legal constraints are holding the city back from investing in retrofits of public buildings.

Many urban innovations are succeeding by unlocking previously untapped willingness-to-pay. In the “sharing economy” of shared cars, bikes, and rides, new service providers have succeeded in turning end users’ desire for point-to-point, no hassle mobility into a viable stream of income for their business. Rather than paying for ownership of the infrastructure, users are paying a fee for mobility services from providers like Uber, Lift, and a range of bike share operators

Finding value in unexpected places is also possible in large-scale urban developments. Rio de Janeiro is capturing the value of land by auctioning additional development rights in Porto Maravilha ahead of the 2016 Olympics. These tradeable securities, so-called “CEPACs”, effectively put a price on every square meter of vertical development above a certain threshold and are used to fund much-needed public infrastructure and mixed-use urban revitalization.

Evolving the Financial Toolkit

While new sources of funding are critical, urban innovators often face the financial challenge of mobilizing sufficient capital to make the upfront investment. The reason for this is that many sustainable solutions can appear too risky to be attractive for financiers looking to make a return on their investment. This perceived riskiness can result in limited access to the upfront capital that many urban innovations so desperately need.

While commercial banks may not be willing to lend to a start-up, there are new financial products and approaches that are bypassing traditional lending institutions. In the Philippines, the GETCAPITAL  crowd-microfinance approach has proven critical in supporting independent owners of new electric buses. Thanks to this financing strategy, new buses are replacing outdated, dangerous and inefficient “Jeepneys”—the traditional mode of transport—in Manila. Investors are guaranteed a 6 percent return on their investment, which is paid back by shares in the fare and advertising revenues.

Financial innovations also include those that put a twist on traditional debt products—such as loans and bonds. For instance, in the case of “on-bill financing” for building efficiency, a utility or third party will put up the upfront costs (often financed through a fairly standard low-interest loan), while the customer repays the investment through a charge or tariff on the utility bill.

The Urban Century of Innovation

Disruptive changes are needed in order to achieve global climate commitments, the Sustainable Development Goals (SDGs) and improve cities for people. New business models that combine sustainable service solutions with creative approaches to funding, financing, and delivery are already reshaping cities today. They offer a glimpse at the future of urban innovation.

4 Keys to Unlock Innovative Urban Services for All

Fri, 2016-02-19 02:50
With rising air pollution to costly traffic congestion and increasingly burdened public finances, cities need to transition onto a sustainable path towards healthy, productive and equitable urban communities. To thrive in the coming urban century, cities will need to innovate ...

Why Sustainable Transport Is a Key Driver of Sustainable Urban Development

Wed, 2016-01-20 21:06

Comfort and safety is necessary for active transport and non-motorized mobility. Photo by Mariana Gil / WRI Brazil | EMBARQ Brazil.

About 80 percent of all wealth generated in the world comes from the cities, which attract millions of people every year in search of opportunities. There are already 3.9 billion people living in urban areas and, in 2050, that number will be 9.6 billion. However, a lack of planning has been costly for individuals, governments and the planet. Cities consume two-thirds of global energy and are responsible for over 70 percent of CO2 emissions. It is therefore not a coincidence that making cities sustainable is featured in one of the 17 Sustainable Development Goals (SDGs), which were adopted last year by the United Nations. With this set of 169 goals, the global agenda aims to end extreme poverty, inequality and injustice, and minimize the impacts of climate change by 2030.

The 193 UN member countries are now committed to inclusive, secure, resilient and sustainable cities. Additional agreements reaffirm this position, such as the Compact of Mayors. During COP 21, which was held in December in Paris, the Compact of Mayors, the largest coalition focused on helping mayors combat climate change, announced the aggregate impact of their initiative: the 400+ commitments made by urban leaders so far have the potential to contribute to a 50 percent reduction of greenhouse gas greenhouse in the world by 2020. And transport is a key factor in changing the direction.

Transport infrastructure directs and determines the spatial structure of cities. Integrating transport planning and land use planning can accommodate growth without expanding urban areas. Sprawling cities have repeatedly been shown to be the world’s most unsustainable communities. Copenhagen, for example, has a density 4.8 times that of Houston while its per capita annual emissions are just 4.7 tCO2 compared to the American city with 14.1 tCO2.

Because it is impossible to prescribe universal actions for sustainable mobility, each urban center needs to recognize its unique context when trying to transfer international best practices. An appropriate strategy is the Avoid-Shift-Improve framework, which balances sanctions and rewards and builds success in the short term while aiming at longer horizons. Some actions can reduce greenhouse gas emissions, improve road safety and increase the efficiency of transport systems. Others can incentivize people to switch from cars to more sustainable modes such as walking, cycling and public transport. However, the most sustainable initiatives are those that target the long term and avoid displacing people, while also satisfying the basic needs of the community. This includes transit-oriented development (TOD), people-oriented urban planning models and integration of transport and urban planning. Prioritizing public transport has proven to reduce traffic deaths. Ahmedabad, India, and Bogota, Colombia, reduced the number of fatalities along corridors after introducing bus rapid transit (BRT) systems by 55 percent and 48 percent, respectively.

No real change, however, can be achieved without including public participation and a focus on meeting local needs. This reinforces the importance of engaging communities in formulating their mobility plans. Furthermore, with Brazil’s private sector responsible for 50 percent of commutes in urban centers, a range of actors will need to take responsibility for addressing the role of transport in sustainable cities.

This article was originally published in Portuguese on TheCityFix Brasil.

Why Sustainable Transport Is a Key Driver of Sustainable Urban Development

Wed, 2016-01-20 21:06
About 80 percent of all wealth generated in the world comes from the cities, which attract millions of people every year in search of opportunities. There are already 3.9 billion people living in urban areas and, in 2050, that number ...

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