Urban Challenges in Post-COVID Times

The COVID-19 crisis has exacerbated existing challenges in the domain of social inclusion and housing. Cynthia Goytia on how cities can rise to these challenges and which solutions have already proven successful in urban Latin America.

For the post-COVID phase, the continuing global recovery faces multiple challenges as the pandemic enters its third year, and those are set to increase sharply in cities’ land and housing markets. Record debts and rising inflation increasing fiscal pressures have an adverse impact on cities’ public investment capacity for infrastructure, services, affordable housing, and mortgage. At the same time, rapid and unplanned urbanisation will continue forcing people to live in informal settlements. The absence of preventive action nowadays is storing up pricey problems for the future; infrastructure and land rights are proved to be very hard to retrofit.

How Can Innovative Land-Use Planning and Inclusionary Housing Strategies Support the Post-Pandemic Recovery?

It is important to remember that historically, cities have reacted to diseases and pandemics with innovative measures, from water and sewer infrastructure improvements prompted by cholera outbreaks to new public spaces, better building and zoning codes, and new design practices intended to keep people healthier in congested urban areas. A critical element of our post-COVID recovery must be a commitment to inclusivity.

The importance of land markets and land policies, as well as their centrality to housing and affordability, has been often underestimated. It is indispensable to take on a fresh look at the new opportunities opened by the post-pandemic trends. This is the time to address the affordable and serviced land and housing supply shortage and bring all households out of the crisis and onto the road to a full socioeconomic recovery.

Land management instruments and small regulatory changes in land use can have a big impact on land supply and affordability. They unlock unsuspected public resources to redistribute investments and produce more socially and spatially inclusive balanced cities. Tools like land-based financing and inclusive zoning may become major contributions to increasing the size of the formal land and housing markets.

To make formal housing affordable, coordinated reforms will need to target all the regulatory barriers that drive up formal land and housing costs. First, reforms to land-use regulations can significantly reduce land costs – which are responsible for up to 80 per cent of housing costs in developing cities. A large segment of the population cannot realistically comply with strict urban standards and “exclusive” land-use regulations.

One of the greatest long-term challenges is to provide affordable land at scale that is already serviced by basic infrastructure before people settle there: providing core infrastructure at this stage is three times cheaper than retrofitting it in unplanned settlements. Additionally, this prevents unpopular slum clearance plans and costly upgrading schemes alike.

The question is: is it possible to amplify short-term initiatives, which provided remedial infrastructure during the pandemic – like access to water, sanitation, and hygiene – into long-term solutions that serve urban land development? National and local governments in Latin America acted swiftly to implement financial rescue packages and remedial infrastructure for those affected by COVID-19, such as placing low-cost public water containers throughout informal settlements. However, many measures did not reach the vast majority of informal settlers: eviction and rental moratoria, as well as subsidised service tariffs on electricity, gas, and water, only applied to formal housing markets, while informality was growing sharply during the pandemic.

Governments can use land value appreciation to fund the initial infrastructure investment. This is based on the idea that the financing of infrastructure and services should be made possible by mobilising the land valorisation produced by urbanization. In fact, many authors point to the idea of value capture as a wealth redistribution instrument. Capturing the increase in land values created by public investment and the broader process of urban development enables scarce public resources to be recovered and reinvested in additional public goods, such as the infrastructure services the development requires.

What Are Best-Practice Examples in Latin America?

Today, many local governments in Latin America are using tools like betterment levies, building rights charges, and land readjustment schemes, and even, in some countries, regulating their implementation by national laws.

Betterment levies are fees paid to the municipality by specific owners who benefit from a public improvement or service. The instrument is a longstanding practice in some Latin American countries and is included in the legislation of most. Cities in Colombia and Ecuador apply betterment contributions earmarked to fund public services and infrastructure.

Some city governments, for example, San Pablo, are establishing building rights charges to fund public improvements as an integral part of urban redevelopment projects.

Land readjustment programmes have the greatest impact on increasing the size of the formal land and housing market, as they oblige developers to allocate part of the land from new developments to social and priority housing or infrastructure development. Brazil has pioneered the use of Special Zones of Social Interest (ZEIS), and Bogota employs land readjustment to set aside land for basic infrastructure. Exaction fees are required for some new developments, funding public services or goods in return for specific approvals or permissions. Such exactions, which can take the form of cash, land, or other in-kind revenues (for example services or infrastructure) help with the upgrading of informal settlements and with providing more affordable housing options.

Documentation of these innovations is highly relevant from a public policy perspective because they constitute a major input for the development of organised urban growth and expansion while closing the infrastructure gap (transport, water, and sewage networks) between central and peripheral areas.

Evidence from Latin American cities suggests that there is potential for urbanisation to transform and raise living standards if suitable land management conditions are established. The prospects of inclusion and the supply of affordable well-located housing in cities hinge on the quality of their land policies foundation. Land policies underpin not only the effective implementation and enforcement of “inclusive” land-use regulation, but also include a diverse set of land management tools. These tools have the potential to increase affordability by correcting of land markets’ dysfunctionalities that prevail in many countries of the Global South.