Tackling big challenges in urban development policy and law

An article by Arno Bunzel

The biggest challenges of our times – climate change mitigation, climate change adaptation, social justice and social solidarity – must also and primarily be tackled on the municipal level. The clock is ticking. The 2021 German federal law on climate change mitigation enshrines in law the binding objective of reducing greenhouse gas emissions to achieve net greenhouse gas neutrality by 2045. By 2030, emissions should already be reduced by 65 percent compared to 1990 levels. Towns and cities also have to act. The development and transformation tasks resulting from the demands of climate change mitigation and climate change adaptation are extensive: decarbonisation, infrastructure sufficiency, reduction in the consumption of resources, the recycling economy, sponge cities, green and blue infrastructure, and threefold internal development. These challenges primarily affect the stock in settlements because the towns and municipalities are essentially already built.

Furthermore, tasks also arise from the structural change in the economy. In many places, inner cities have noticeably grown less important and this change should be used as a chance for “reinvention”. The conversion of stock will be the central task for the next decade. However, this task requires improved incentives, better provision of support and more effective instruments.

Increasing land prices affect housing as well as trade, business, schools and public green spaces.

Equally, social justice as a constitutional obligation and as the basis for solidarity in our society is and remains a great challenge. It is illustrated above all by the issue of housing in prospering towns and cities. In the future, shop assistants, bus drivers, nurses and police workers must also be able to afford a home in these cities. Displacing citizens with low or average incomes to the peripheries with increasingly long journeys to their employment is neither socially nor environmentally acceptable.

The huge and sustained increase in the price of land does not only affect housing costs but also impacts small trade and businesses, such as cobblers, tailors, bakers and hairdressers etc. Small shops, the gastronomy sector and public infrastructure, such as schools, nurseries or public green spaces also find themselves under price pressure. This state of affairs gradually leads to social and urban structural distortions.

Support for towns and cities

Admittedly, the starting point in the individual cities, towns and municipalities are not the same. The circumstances for development outside of such growth regions are very different. Land supply and price development are not the problem, rather there is a lack of demand and dynamic. The leverage used in growing towns and cities for cooperative development is not effective in such places or only effective to a limited extent.

By way of incentives, support and a better legal framework, the German Federal Government and the individual federal states must create the conditions to master the impending Herculean tasks faced by towns and cities. It is also crucial that the hurdles around the observation of constitutional barriers are kept as low as possible so that municipalities with fewer employees can also practically apply the schemes.

Unburdening internal development

The key to meeting the challenges is effective internal development for the purpose of climate change mitigation and climate change adaptation. Cooperative solutions and private initiatives must be supported and are also a priority in regard to acceptance and the question of proportionality. However, they need to be accompanied by effective official instruments. Where cooperation fails, official action must ultimately be possible. The new German Federal Government’s coalition agreement shows promise in this respect.

Internal development needs conceptual foundations, such as the recording and evaluation of the starting position, the development of objectives, inspection and evaluation of options for action or the determination of measures and priorities. Such internal development planning is of central importance for future urban development tasks. Therefore, it should be correspondingly anchored in law and become binding. A transition period and suitable support should also be stipulated.

The scope of urban-development redevelopment schemes must focus more on the requirements of climate change mitigation and climate change adaptation. Further to the building stock, the remodelling of the technical supply and waste disposal infrastructure should be looked at in order to tap into its potential for more energy and resource efficiency and also to implement climate change adaptation measures by planting vegetation.

As leverage and incentives for cooperative development, in particular for the mobilisation of gap sites, waste land and building infill, the official support measures must be improved. One instrument is the introduction of an internal development scheme, which is widely supported by experts. The coalition agreement lists this suggestion as worth examining. If the acquisition of properties can be linked to the application of instruments of urban development law, financing options are to be created or further developed. Also other regulatory factors, e.g., pre-emption rights in social conservation areas, urgently need toughening up.

Increasing land prices as the central challenge for growing towns and cities

The main challenge for growing urban regions is the unrestrained and disproportional increase in land prices over the long term despite adjustments for cyclical fluctuations. The development of price-subduing mechanisms is absolutely necessary in order to maintain or make possible a viable urban structure with uses of varying yields now and in the long term, and furthermore to stimulate investment in the towns and cities.

Even private investments can benefit from lower land prices. The starting point is introducing a provision to building plot permits similar to the provision in the permits for agricultural plots as per Grundstücksverkehrsgesetz (German property transaction law), meaning that in strained housing markets the sale of property may be prohibited if the market value is exceeded. In this way, the price development would slow down and become closer to the general consumer price development. Additionally or alternatively, it may make sense to let go of the traditional concept of market value (sec. 194 BauGB - German Federal Building Code). In its current interpretation, the market value reflects the price development of a speculative land market fuelled by the conditions on the capital market. Today, the price paid for housing property is sometimes more than forty times the annual return, which means the purchase is a bet on higher rents and it ultimately makes additional benefit payments in the field of housing benefit/accommodation costs necessary. If the market value was primarily derived from the return, then this change could break the current system, which over time will overstretch the public authorities.

Making instruments permanent

Towns and cities require reliable foundations that extend beyond the next four years. Therefore, the newly created temporary regulations in the Baulandmobilisierungsgesetz (German law for the mobilisation of development land) must be made permanent! Otherwise it is not worth the effort of becoming familiar with the sometimes complicated new instruments, such as the sectoral development plan as per sec. 9, para. 2d BauGB (German Federal Building Code). The announcement to this end in the coalition agreement gives hope. The same applies in regard to instruments, which may only be used in strained housing markets.

Translation of the Point of view that was originally published in Difu-Magazine Berichte 4/2021: difu.de/publikationen/2021/difu-berichte-4-2021