Urbanizing requires formalization: Part 1, the theory
I had finished up my presentation at GYODER’s Turkish national real estate summit, and was listening to a well-reasoned statement from Faruk Goksu on the necessity for Turkey developing a policy to tackle the formalization of gecekondu (informal housing), when what should have been obvious to me years ago struck me with full force: urbanizing modern cities requires bringing informal neighborhoods into formality.
Not is correlated with formalization
Not proceeds better with formalization.
Not is a good thing to do with formalization.
Rather, requires. Not optional, mandatory. Not after, but before.
Mandated?
If I’m right, as I will explain in Part 2 of this blog, this is a huge deal for urban policy in the expanding megalopolises of the global south. But let’s put out the theory and explain why I think it’s right – starting, as one should always start, with definitions.
Urbanization is what we think of as bringing housing and homes up to a basic standard. That’s how the folks in
Formality means the governmental and administrative systems recognize the structure, so the electrons and pieces of paper match what one finds when one goes to the neighborhood to look.
It’s not self-evident that the first term – a physical observable condition of tangible objects like bricks and pipes – must always be directly equivalent to the second term, which is an abstract condition of papers and reports. So allow me to take you through the seven steps, which for the impatient reader [Is there any other kind? – Ed.] I will summarize in the table below.
Each step is distinct, and none is a leap.
One little logical step at a time …
1. Urbanization implies density. The globe has only so much land, and cities become unmanageable if they cannot be crossed in a reasonable period (say, two hours). To urbanize requires having more people live in the same area, which means more people per hectare or acre.
2. Density implies verticality. As far as I can tell, the highest density of human habitation, over 1,000 people per acre, has been achieved twice: the Lower East Side, circa 1900, and modern Kibera, in Nairobi. [Anyone who claims a higher density, please let me know! – Ed.]. In Kibera, the average human being has ten feet of space – living space, work space, common space, all space. That is habitable only in the most wretched way, and it’s certainly not urbanization.
Yet the densest block of housing is probably on New York’s Upper West Side, where thirty-story residential high-rises are common. Let’s say the lot is an acre: 43,560 square feet. Assume that the building footprint is half of that, or 21,780. Assume further that 25% of the result is building core, lost to residential, and that the typical apartment, 1,500 square feet, holds 4 people. Spacious by
If you want high density with truly urbanized living the only way, therefore, to go is up.
Density rising, values to follow
3. Verticality implies (building) technology. Until the early twentieth century, the world’s tallest occupied buildings were no more than a hundred and twenty feet (lack of elevators), and the world had only a small handful of taller structures like the
The world’s greatest engineering feat: 1889
The reason was technology. The materials were not available. Reinforced concrete was invented in 1849, the elevator in the 1850’s, electricity as a power grid arrived in the 1890’s, and it is no surprise that this period coincided with the great explosion of skyscrapers, starting with the Flatiron, capped by the Empire State Building. Such buildings didn’t just go up, they also went down, drilling pilings 70-80 feet into the
The world’s greatest engineering feat: 1931
4. Building technology implies capital finance. People can build houses; in much of the world, especially in rural areas, self-built housing is common if indeed sometimes predominant. However, we’ve never seen self-built high-rises – or to be more precise, when we see a self-built or amateurishly built property of more than two stories, we shudder with worry.
Though the value of urban land is a residual, genuine technology in residential building has a high cost that can neither be compressed much (we don’t want our skyscrapers to collapse, now do we?):
Nor to fall over, either …
Nor repaid in a year or two. Nor can the cost be financed out of the ordinary rents – the capital costs are simply much too high relative to the net operating income (NOI) that derives from any form of residential occupancy, whether rental or ownership. In short, when an asset is long-lived, its capital cost can be recovered only over a long period (say, half or more of the anticipated useful life). That means tapping capital finance, and in large sums (if we want to build many-storied buildings) – from the capital markets.
5. Capital finance implies collateral. As I’ve previously posted, large capital finance is predicated on business without personal trust. As the loan is much greater than the borrower is worth as a person, the lender must rely on the collateral – the home itself.
Nobody home, but I can still collect
6. Collateral implies legal recourse. If the borrower doesn’t pay, the lender wants to take the collateral. In accepting this, the lender accepts the ordinary commercial risks (the building may fall down, the market price may fall). But lenders also worry about the broader spectrum of risks:
Lack of an assignable title. How can I who do not live there prove that now I own the property?
Foreclosure and adverse possession. Even if I own the property, how do I physically compel you to leave it?
Government expropriation or remedy estoppel. When I go to resell the property, vacant, how do I know that the government or other agency doesn’t rush in and order me to leave you in place?
In every case, the answer is, I must have recourse to the legal system. I need the power of the state, and the rule of law, on my side.
7. Legal recourse implies formality. The law may be an ass, as Mister Bumble said, but it is a punctilious ass. The law is a place where paper is the only reality, because paper is the proof of writ and testimony and transcript and judicial order. The law is decided in a courtroom, a place of utmost formality.
Where even the most horrific crimes are heard with decorum
By seven algebraic steps, we have proved our theorem:
Urbanization implies Formality
Why is this so important for the world’s growing cities?
What happens next, do you think?
[Continued tomorrow in Part 2.]
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