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

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.