This week in Quito as many as 45,000 people have gathered for Habitat III, the global UN summit which, every 20 years, resets the world’s urban agenda.

Why should we care? Well, to start with, in the next 20 years, we will witness more than two billion more people moving to cities. Depending on what we do to accommodate them, this could be good – or very bad – news.

It’s good news because people are demonstrably better off in cities than outside them. For the poor, cities are efficient vehicles to satisfy basic needs. Having people in a concentrated space makes the implementation of public policies more effective (think of access to sanitation, and the consequences for reducing child mortality and epidemic disease).

For the middle class, meanwhile, cities are a concentration of opportunities for jobs, education, healthcare and even recreation. They offer the promise of social mobility. And for a certain elite, cities are a powerful vehicle to create wealth; their critical mass generates the appropriate environment for knowledge creation and prosperity in the broadest sense of the word.

In short, cities are like magnets, with the potential to take care of everything from the most basic needs to the most intangible desires.

Now for the bad news, which we could call the “3S menace”. The scale and speed of this global urbanisation, and the scarcity of means with which we must respond to it, has no precedents in human history.

Of the three billion urban dwellers today, one billion live below the poverty line. In two decades’ time, five billion people will be in cities, with two billion of them below the poverty line.

Facebook Twitter Pinterest A ‘half house’ by Chilean architect Alejandro Aravena. They are exactly that – houses that leave one side for residents to complete themselves. Photograph: Cristobal Palma

To accommodate such growth humanely, we would need to build a city of one million people every week, spending no more than $10,000 per family. If we don’t solve this equation, it’s not that people will stop coming to cities; they will still come, but they will live in awful conditions.

What’s at stake here is not just poverty but inequality too. Cities express in a very concrete and direct way the distance between the haves and have-nots.

Urban inequalities are often reflected in brutal ways – from the distance people must travel to work every day, to the lack of quality public spaces, urban amenities and civic services. No wonder so much anger and resentment is accumulated in the peripheries.

Of course, this is problem is not exclusive to developing countries. Rich countries, despite having solved all their basic needs, experience a similar accumulation of social pressure as if it was a ticking time bomb.

A way to grow

To add one more level of complexity to the phenomenon of urbanisation, even if we do eventually find a way to build for that extra million people each week, we will go into environmental crisis, such is the carbon footprint of today’s construction process.

This would not only be a “green” problem, but a major security threat too. According to a report by the US defence department, the next conflicts, wars and terrorist threats will be triggered by climate change.

There is a one-to-one correlation between zones of military conflict and a global map of water drought. This not only creates problems in the afflicted countries but also migrations towards less-affected areas, adding to the social pressure in the countries of destination too.

These are the kind of challenges that needed to be addressed at Habitat III. Fortunately, an appeal by Dr Joan Clos, the executive director of UN Habitat appointed by Ban Ki Moon to guide the event, already carries a promising approach.

Clos’s framing of the problem can be synthesised like this: we need to invert the way we view the relationship between economic development and good cities.

The current approach is: first a country creates wealth. Once that is achieved, good cities will follow automatically, becoming a kind of passive outcome of economic development.

Clos’s task has instead been to convince the world’s mayors (and development experts, and ministers of finance) that good cities can be a source of development, rather than the other way around. This reframing, and what results from it, can be summarised as follows …

Lesson 1: good cities may be the source, instead of the passive outcome, of economic development

For this inversion of the paradigm to take place, however, you need three things: the right rule of law, the right financial plan and the right design. Imagine the mayor of City X in a rather poor country (which is, of course, where the majority of future urbanisation will take place). He or she may look out of their window and see an informal settlement growing by the hour.

Regarding the rule of law: in this settlement, property rights are unclear, so the shacks that actually cost quite a bit of money cannot have a “parallel life as capital”, as the economist Hernando de Soto puts it. Regarding the financing: there is only one source – people’s own resources. And regarding design: there is no access to sanitation, so no clean water nor sewerage system.

There is no creation of value here, merely expense. The proportion between public and private space in such spontaneous urbanisation is invariably less than 1:10. Evidence shows that only when this ratio is close to 1:1 can one expect some value gain for residents (Manhattan is the ultimate example of this). . In such cases, each individual action not only gains individual value but also adds to the common good. In a slum, individual interventions, however well intentioned, cannot guarantee that.

Lesson 2: the scarcest resource in cities is not money, but coordination

There is one good side to the informality of the city growing outside the mayor’s window. Since it is spontaneous, there is no zoning regulation (a kind of fundamental truth of planning). Instead, we can expect a richly mixed fledgling city, where residential, businesses, retail services and productive activities all coexist together.

Facebook Twitter Pinterest The interior of a ‘half house’ by Aravena, before and after. Photograph: Tadeuz Jalocha

Lesson 3: a certain urban intensity is desirable

Now our mayor ponders: what can I do with an annual budget of just $6 per inhabitant to invest in this new city? Once again, this financial plan has only one source: a state with scarce resources. Such a limited budget may force our mayor to transform agricultural land into urban land, adding to the already underserved peripheries and expanding the sprawl.

The mayor will likely devote only a very small area to public space (as little as 20%) so more land can be dedicated to accommodating the mass of people that are pressing to be given a house. Zoning regulations will very likely be applied, resulting in a separation of functions and a very low urban intensity. Finally, since the tight budget won’t allow to build “middle-class standard” housing units, evidence shows that as much as 50% of the built environment will be self-built all the same (despite, not thanks to, the design of the units).

Facing this adverse scenario, a private real-estate developer may approach the mayor of City X and request, say, 20 hectares of land to build a housing project. And the mayor, spotting the opportunity for someone else to take care of his housing headache, may make a counter-offer: that the project will only be approved on the condition the developer actually takes 40 hectares of land.

Naturally the developer will agree, then proceed as usual: property rights will be secured and zoning regulations complied with, resulting in low urban intensity. The financing plan will still depend on one source – this time private capital, which will look for a two-digit return in a short period of time.

The crucial point here is to secure the 'void' of the future city

Such a miserly way of investing will dedicate as little area as possible to public space (again, as little as 20%) in order to maximise the area that can be sold. The developer may add some meandering streets to make the urban footprint more appealing, and some decoration to the tiny units. But design-wise, the contribution of the private market will be like putting lipstick on a gorilla.

So, what to do? Perhaps the mayor of City X has come to Quito looking for clues, ideas and tips. And one could be to join up the forces of the (poor) state and the (mediocre) developer, without expecting either of them to change their nature.

Rather than giving away a whole slab of land as a closed package, the mayor could instead partition the area the developer is asking for, then create reserves of public space between the lots: ecological corridors with a civic standard the developer would never be incentivised to deliver.

The developer would then follow his usual model, adding a further 20% of public space – so that, overall, the project now possesses a much more liveable 40% of public space.

For this scheme, the financial plan now has two sources: state funding, to take care of the public space and eventually some urban services too, and private funding, which looks after the urbanisation and some public space as well. Such a development will still have low urban intensity, but the higher ratio of public space may open it up to some value gain in future.

The crucial point here is to secure the “void” of the future city. The quality of its residents’ future mobility, for example, will depend on the quality of the space we reserve in between the buildings.

Lesson 4: in a “good” city, what is not built is more important than what is

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An even greater disruption from the predictable, mediocre norm would be for the state and the market to join forces with people’s own resources.

To allow the inclusion of a third source in the financial plan, the design has to be an open one. The starting point would be the same as the previous one: public space reserved between the conventional real estate. But the developer should then be required leave 50% of the lots not built.

In such a scheme, these voids are intended to channel people’s own initiative – and, consequently, their resources. Property rights will be secured, but the “porosity” of the structures allows them to be customised, and leaves room for a higher level of urban intensity in the future. The process of reaching a middle-class standard through self-construction will happen thanks to the design, not despite of it.

Lesson 5: people’s own building capacity is part of the solution, not the problem

As Habitat III draws to a close this week, I wonder whether by 2036, when the next Habitat conference comes around, Clos’s “paradigm shift” will have gained traction among decision-makers. I hope the real-estate world will have moved from its current, standard two-digit return to a (fair enough) one-digit return which prioritises predictability over profitability in the way developers invest in cities.