View of the city of Addis Ababa in Ethiopia. Photo by Edwin Remsberg/VWPics/Universal Images Group via Getty Images.

Economics meets urban planning: Developing effective land use plans in fast-growing cities

Policy brief Cities and Cities that Work

This policy brief highlights the importance of considering land and labour market dynamics when developing urban land use plans. It also outlines the three fundamental questions faced by policymakers when it comes to urban planning: a) the division between public and private space; b) what use to assign to public space, particularly concerning public good provision; c) what regulations to impose on private space, including rights and obligations.

Land is the most valuable asset in a city. Effective urban land use planning creates a platform from which city inhabitants can cluster together to access basic services, productive jobs and social networks; and where firms benefit from opportunities to scale and specialise.

However, as many low- and middle-income cities in developing countries rapidly expand, there is a risk of land becoming occupied without supporting infrastructure and services. This can lead to urban sprawl, informal settlements, congestion, pollution, and other issues – which, in turn, exacerbate inequality and poverty. The result is an urban development that is inefficient, unliveable, and environmentally unsustainable.

To avoid or mitigate these issues, cities need to plan ahead. This entails making important decisions around land use on public and private space. On the former, governments need to proactively allocate land for the provision of public goods, including roads and public transit, water and sanitation infrastructure, and adequate open space. On the latter, policymakers need to leverage various tools to regulate, tax, and empower private decision-making (Collier, 2016).

It is also vital to acknowledge that, while planning is important, implementation is where most cities fail. To ensure the best chance of success, plans need to be tailored to local realities, account for local enforcement capacity, and be clearly focused on few, achievable goals.

Importantly, urban land use plans should balance the constant tension between the long-term predictability needed to guide core investments, and the required flexibility to adapt to ever changing economic realities, which often cannot be fully anticipated and therefore covered in plans.

Key messages

  1. Poor implementation is often a greater constraint than poor planning. Plans therefore need to be tailored to local realities, account for local enforcement capacity, and be clearly focused on few, achievable goals.
  2. Land and labour markets are important drivers of urban development. The dynamics of these markets should be embedded in planning decisions aimed at improving spacial connectivity; facilitating the clustering of firms and formation of neighbourhoods; and ensuring the right to affordable housing.
  3. Governments should allocate public space, as well as regulate and tax private space, to optimise the public good. Public space must be allocated for the provision of public goods, and the anchoring of private investment in housing, and commercial and industrial activity. Private space can be optimised for the public good through improvements in land rights, zoning and density regulations, and land value capture tools.
  4. Urban land use plans should be constantly revised to ensure they remain suitable and fit-for-purpose. This includes moving away from viewing plans as static blueprints and recognising the dynamism of cities. Regulations should undergo periodic revisions, so they remain responsive to the city’s current and evolving needs.