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Housing affordability and smart cities

Only a few decades ago there were only a handful of megacities around the world. Now there are more than 1000 cities with between 1 and 2 million inhabitants, and 40 cities with more than 10 million people.

If we look at population growth in these megacities it is interesting to note that in general there are more urban deaths than urban births. The growth is totally driven by migration. In China alone 600 million people will move into their cities over the next 10 years.

A similar trend will take place in Africa, where the population will double from 1 billion to 2 billion by 2050.

Looking towards the future the largest cities are growing the fastest. These are also the cities that are hosting the poorest people.

Another interesting statistic that is relevant to housing affordability is the fact that 1 in 1000 people are taking a large trip. This means that some 7 million people are on the move all the time, so it is no wonder that services such as Airbnb and Uber are flourishing. This massive amount of travel also makes it possible for airlines to offer very affordable air tickets, which will only further increase the volume of people movement.

All of this has its effect on housing affordability, which has been sharply decreasing over recent years in all of the larger cities. While there is a stark difference between large cities in the developed world and those in developing economies, housing affordability is decreasing across all of them.

Across the world we see that those who can’t afford the high house prices in and around the centres are being pushed further and further out. Megacities are also notorious for poor mobility – travelling to and from work from the outer areas can take up to 3 or 4 hours each way. This is unsustainable. In order to run cities properly you need all levels of labour to be available, and the way housing affordability is dropping large numbers of workers can no longer afford to work in the city. This in turn will make work and life for everybody else in cities increasingly less economically viable.

In relation to people movement (read tourists) several cities are now putting policies in place to manage this situation. Amsterdam, Venice and Barcelona are some of the leading cities to address the issue in a strategic and structural way; but most cities have no strategic plan in place, while others resort to band-aid solutions. In general governments are doing a poor job of addressing the issue of housing affordability.

For real housing affordability solutions we have to look at projects developed in smart city environments in, for example, London, Copenhagen, Amsterdam, New York City and Barcelona. All of these cities have exactly the same problems as, say, Sydney and Melbourne, with average house prices around or above the $1 million mark. It is innovative organisations rather than government policies that are successful in addressing this issue.

Some are driven by local communities, often facilitated by local governments leaning more towards the left politically. We also see some innovative projects led by universities, and in China by large companies as well. In both situations we are looking at campus projects and many of these projects are also based on smart buildings with zero-net energy and water use.

The housing crisis in Spain saw in Barcelona the arrival of a new political party Plataforma de Afectados por la Hipoteca (PAH) (Platform for People Affected by Mortgages), they won the local council elections in 2015; one of their leaders, Ada Colau, became the new mayor. PAH was set up in Barcelona in 2009 in response to the rise in evictions caused by unpaid mortgage loans and the collapse of the Spanish property market in the wake of the 2008 financial crisis. Housing affordability is a big discussion in Barcelona which also spilled over in the discussions at the Smart City World Congress that is taking place in that city.

At the upper end of the market developers are also coming up with new solutions to satisfy customer demand for more ‘smart’ developments. This is tending to free up housing in the suburbs and some of these projects are trickling down to social housing estates as well.

Sydney is addressing the situation by creating three different economic centres, each with its own mobility solution, in order to avoid everybody moving into the heart of the ‘old’ city.

However there is still a very long way to go before we will see more balanced policies in relation to housing affordability for all levels of income.

As smart cities require a holistic approach all the problems these large cities are facing, including housing affordability, need to be dealt with in a far more integrated way.

Paul Budde