Insights

Best practice principles for urban renewal

Posted February 10, 2016

SGS Economics and Planning Best practice principles for urban renewal

In cities worldwide, urban renewal is transforming underutilised and degraded areas into spaces and built environments, which meet contemporary living, working, or cultural needs. Urban renewal can happen incrementally, as new investment modernises established urban areas, but is generally brought about by a dedicated public effort.

Successful urban renewal can generate many benefits, but as critics have highlighted, these have not always come to fruition. A review of recent case studies suggests ten guiding principles for urban renewal decision-making. Such principles will support good outcomes from a public interest perspective.

Urban renewal – benefits and critiques

Urban renewal can generate a range of benefits. These include better utilisation of existing and proposed infrastructure, increased city productivity from the co-location of more intensive jobs and housing, the attraction of visitors and additional expenditure, and new employment opportunities. Renewal projects that set clear delivery or efficiency targets can also offer more sustainable development. They achieve this through lower greenhouse emissions and more affordable housing compared to a 'business as usual' approach.

However, large-scale urban renewal processes often face criticism. In a recent paper, Mike Harris argues that "…large scale urban projects represent a new way of planning the city that is centrally concerned with marketing and the provision of competitive infrastructure.” He goes on to say, “much of today's city-making is undertaken by delivering a list of big, often disconnected projects with the primary aim of attracting investment, the benefits of which are almost always reaped by the private sector." [1]

Harris documents many critiques of the operational aspects of these projects. These include a global rather than local focus, minimal commitment to socially-just policies, and business-like governance processes. Such processes are undemocratic and don't provide opportunities for public participation. He also notes extensive criticism of their built outcomes. For instance, being similar in look and feel; typically being made up of large office buildings, luxury residential apartments, and iconic architecture rather than diverse uses. Lacking the layering of old and new, small and big and often disconnected from the surrounding city and in some cases containing lifeless, predictable and controllable public spaces, indifferent to specificities and uniqueness of context.

Best practice principles

There is no single way to undertake urban renewal as it depends on local context and circumstances. However, it is reasonable to expect that the 'public interest' would be a starting driver for action. After all, without a public interest motive, there would be no need for government action or intervention to facilitate renewal. Also, the criticisms of current urban renewal processes clearly show why there is a need for a public interest perspective.

A recent SGS study [2] drew from a number of case studies (Elephant and Castle, and King’s Cross, London; Barangaroo, Sydney; Docklands, Melbourne; Hafen City, Hamburg; and Brooklyn Navy Yards, New York) and other examples, to distil a set of core best practice or 'desirable' principles with a public interest perspective. It is possible to adapt these principles to most circumstances to guide the philosophy of renewal.

1. Create 'shared value' for the long-term public interest

The history of the city and its long struggle for rights, tells us that a re-made area can't belong to any single group or individual. Instead, it has to offer shared value to multiple stakeholders. So who has a stake in the creation of the shared value?

In cities of global, national, or regional importance, the community of stakeholders stretches on a continuum from the global community. Here, global stakeholders may be corporations or government agencies who view projects as ways to generate profit and brand development. In turn, this flows down to the current and future local community or residents, who are the 'every day' of the project. This principle argues that those who are part of the city; visitors, children, the underprivileged, workers, and students, should benefit from the increasing value urban renewal can generate, along with investors. These benefits extend to new community facilities or the reclamation of public space, etc.

The 'communities' for whom the value is created to share, should be those with long-term interests, rather than transient stakeholders with a primary focus on value extraction and repatriation. Private involvement must make a return on investment to deliver these projects. However, the community that must live in, and interact with the resultant developments should also gain value from this process.

2. Develop the plan with stakeholders

Part of delivering on the shared value idea is to engage with the community to establish meaningful stakeholder engagement and representation in preparing the plan.

Urban renewal within an existing community should share the development of vision and planning from an early stage, to encourage ownership within the community. Renewal projects without a direct incumbent community (e.g., industrial land redevelopment) should heavily invest in information-sharing. Effective communication will raise awareness and acceptance of the process across the wider urban community.

It's vital to strike a balance between community engagement whose focus is local short-term interests and one which draws out local knowledge and historical commitments to inform and underpin planning. It's possible to significantly assist this 'balancing act' by adopting rigorous, transparent, and holistic appraisal methods. These methods will ensure common ground for all stakeholders in the planning and evaluation process. Regarding the debate, in order to be truly influential, community stakeholders need to engage with key decision-making techniques. Utilising procedures such as cost-benefit analysis enable the promotion of community and non-financial values.

Engagement should continue in the development of a vision, the setting of objectives, preparation and evaluation of options, and detailed planning for a preferred outcome.

King's Cross Masterplan (London)
SGS Economics and Planning Kings Cross Masterplan London Alliesand Morrison2014 1
Allies and Morrison, 2014

3. Take a long-term view

Where planning and delivery time frames for major renewal projects are unrealistically compressed, the project rationale and objectives may likely be misguided. City building cannot be 'fast-forwarded' or made to fit an electoral or development cycle.

Some precincts may have short-term prospects to satisfy particular hot property markets or meet pressing objectives. In general, though, a long-term view should be adopted. An enduring and authentic development will take time. A commitment to the public interest and shared value necessitates an inclusive approach. Future development stages should have the flexibility to adapt to market and social changes. Plans for stages beyond ten years, for example, should be less prescriptive.

4. Agree on the non-negotiables, including design standards

There is rarely a 'blank canvas' in planning for the future. There may be a need to satisfy policies, with community expectations requiring codification for the precinct. In order to respect existing tenants' or leaseholders' rights, undisputed urban design standards need settling. Agreeing on a set of 'non-negotiables' is essential to frame and inform the planning process, which generates the development options. For example, non-negotiables might include respect for existing lease term, protection against key public domain being overshadowed by new buildings or social mix, and a commitment to a fixed share of affordable housing.

Brooklyn Navy Yard Development Map
SGS Economics and Planning Best practice principles map 2
Brooklyn Navy Yard Development Corporation, 2014

5. Agree on a reasonable financial profile

Minimise up-front costs and de-risking development while providing an appropriate return on government land and infrastructure investments.

Agreeing how the renewal site is expected to perform from a financial perspective begins by setting the parameters for the generation of development options. These parameters are fundamental to serving public interest outcomes.

When contemplating urban renewal strategies for large, government-owned sites, financial returns to government can trump the economic, social, and environmental returns to the community at large. Governments may prioritise high-yield private sector propositions trading off long-term value gain in the precinct, relating to State cash returns, for up-front payment. Forgoing land use mixes that are more advantageous for the economic development of the region.

To overcome the problem, State Governments may consider several options. They could develop the land in joint ventures, where the State retains an equity stake. This option can work well when the land in question has prime development potential. It is possible to sell development rights with inbuilt, value-sharing arrangements so that the community gains a share of rising property prices. Alternatively, instead of selling the freehold, the State Government could lease the land. The lease period would need to be lengthy to attract substantial investment. Ideally for 50 years plus, but ultimately, the value created via public investment in infrastructure would flow back to the community. There is an opportunity to introduce deferred infrastructure charges. Such charges would provide an incentive for early investment while retaining the capacity to garner some uplift in land value over time.

The aim is to recognise that government is best placed to carry early development risk associated with planning, providing the infrastructure, and preparing the site for development. Beneficiaries are distributed widely beyond the site and through different generations. Therefore, the government will need to provide some up-front financing. As land sells and private sector development proceeds, the government should be entitled to an appropriate share of the land value realised, to fund a return on its initial investment.

6. Establish clear development objectives

With a clear understanding of the development rationale and the non-negotiables, the planning process involving engagement with stakeholders should develop and confirm clear objectives. The best of which are not 'motherhood-Statements' but rather anticipate physical, economic, and social outcomes in the place of focus. To this end, they should be measurable.

Elephant and Castle Strategic Plan
SGS Economics and Planning Elephant and Castle map 3
Southwark Council, 2012

7. Establish clear development options to meet objectives

There may be multiple ways to achieve objectives. A rigorous planning process involves the development and evaluation of multiple possible future options. It's not practicable to properly evaluate these options without the establishment of a 'base case.' A base case estimates what might happen without the urban renewal intervention or project.

For a clear picture of the marginal benefits and costs associated with any particular development, it is necessary to compare the development options identified through the planning process with the base case.

8. Embody 'localness' and reintegrate with surrounds

A common critique of major urban renewal projects is that in the desire to build an economic 'brand,' the renewal process leads to homogenous urban landscapes. These often appear interchangeable with any number of other global renewal projects.

In effect, however, reputation derives from the successful replication and projection of an authentic local vibe onto a national or global market. Local distinctiveness, derived from the street pattern, services, landscape, climate, and socio-cultural traits (among others), should be at the heart of future renewal projects. The inclusion of these elements will create identity and engender community acceptance.

HafenCity, Hamburg
SGS Economics and Planning Hafen City

9. Evaluate options from a holistic perspective to maximise net community benefits

Development options should be tested from a holistic, society-wide perspective to maximise net community benefits. Achieving this will involve the use of rigorous cost-benefit analysis (CBA). This analysis evaluates the marginal differences in costs and benefits of the various development options. It then compares it to a 'business as usual' or 'base case.' Unfortunately, economics is often seen as the 'enemy,' supporting the elevation of short-term financial gain over the long-term interests of the city. However, this misunderstands its potential in the urban renewal context. Here, it can be used to evaluate the contribution of different potential options to social or community wellbeing.

The CBA technique takes the traded benefits (explicit financial returns generated by the development) and the non-traded benefits (received by parties external to the immediate financial transaction). It then compares them with the traded costs (direct labour, land and capital invested in the project) and non-traded costs (felt by external parties as a result of the construction or operation of the project once complete).This comparison identifies whether there is a surplus of benefits over costs. Using well established and rigorous techniques, it is possible to value items which the community rates highly. These items include open space, social capital, urban amenity, and heritage/culture.

Not all aspects or impacts can be valued quantitatively. CBA also requires the documentation of non-quantifiable costs and benefits so these can have due consideration in the ledger. Without using such techniques, it may be that financial considerations or otherwise vague community aims, end up dominating choices between options. A factor which does not necessarily allow for judgements serving the long-term public interest.

10. Align the procurement model with the planning vision

Ultimately, the governance, implementation and procurement path, the way the development proceeds, should be determined by the planning vision. The aims and objectives should drive a bespoke, rather than an off-the-shelf, approach to procurement.

An approach allowing for as many owners, architects, investors, and developers as possible, is generally more likely to deliver the shared value, authenticity, and diversity that a planning vision will usually embrace.

Prior to multiple private sector players becoming involved in individual housing or commercial projects, the government may have a more significant role as an infrastructure provider and developer. It may be that a smaller project, with a limited range of objectives, would opt for a single developer solution. Not necessarily a single architect solution as the developer may choose their own subdivision and development approach.

These principles are not locked in place but are guides to ensure that urban renewal benefits the broadest community possible. The renewal of strategically important urban sites must have the needs of communities, both social and commercial, at its core.

Footnotes and references

1. Harris, M 2014 ‘Megaprojects: A global review and the Australian context’ a research abstract submitted for the Festival of Urbanism, University of Sydney, 2014
2. SGS prepared ‘Best practice urban renewal: Input into Bays Precinct Forum’ a discussion paper for City of Sydney, documenting the planning principles, processes and governance arrangements that have led to best practice urban renewal outcomes. The study analysed six urban renewal case studies to draw out core, and process-related principles for urban renewal processes. It is available at http://sydneyyoursay.com.au/ba...