Three reasons why the crises of 2020 have underlined the importance of good city governance

Nearly everywhere, cities have recovery and reinvestment requirements that exceed their existing fiscal and decision-making capability

Cities’ ability to ‘build back better’ and lead a sustained economic recovery after COVID-19 depends on whether the fiscal conditions and operational control are conducive. The fiscal and financial stress experienced by cities has intensified. Before the onset of the pandemic, nearly all global cities had already accumulated big investment deficits to serve the high demand they were facing. Only a small minority – including Singapore, and to a lesser-extent Hong Kong, Seoul and Hamburg – had been regularly investing in extra capacity as they grew. Delivering infrastructure investment and a new spatial equation to suit the post-COVID economy requires more networked leadership and more financial tools compared to earlier cycles of urbanisation when it was easier to pick the ‘low-hanging fruit.’  

The future economy, in a context of climate change, requires cities to co-ordinate as a whole ecosystem in order to innovate, compete and insure against disruption

Costs and incentives are no longer the primary driver for many urban businesses. Instead, corporates and scale-ups feed off the maturity of cities’ ecosystems, talent and enterprise models, and are accelerated by initiatives to foster a more circular and climate-aware economy. Nudging these processes will require more nuanced longer-term policies and better integration between different partners and industries in the city governance system. This includes at the neighbourhood and ‘place’ level, where co-ordination between owners, businesses and governments is needed to achieve the standard of ‘total experience’ around real estate assets that can meet the quality of life expectations of scarce talent. Meanwhile, the rise of companies that deploy advanced platform technologies puts pressure on cities to be capable partners, customers and regulators. This trend also makes ‘smart’ solutions more possible at ‘whole district’ and ‘whole city’ scales but only if cities can overcome fragmentation and capacity issues.

Political and systemic risks are becoming more pervasive and permanent

The resilience of urban assets and infrastructures against pandemics, climate change, cyberwarfare and trade conflicts relies on how systematically cities can invest, prepare and co-operate with higher levels of government. The sustainability push starkly reveals how quickly or slowly cities can build ‘whole system’ and ‘whole life cycle’ approaches to optimising infrastructure. Many top-tier cities also now confront the rise of populism, anti-immigrant and anti-globalisation sentiment – especially among electorates beyond city borders. This not only presents an additional source of political and regulatory volatility for real estate. It also poses a new kind of governance and negotiation challenge for cities to reach positive settlements with their nations and non-urban electorates. And it creates a diplomacy task for how business in cities can retain its social license to operate, as well as new opportunities for companies to demonstrate their social responsibility working together with city leaders.

These trends are set to define the 2020s and together demand that those investing, occupying and owning physical assets in cities take greater   account of whether their ‘home’ or ‘target’ cities have the span of powers and levels of co-ordination, competence, know-how, distributed leadership and trust to optimise the demand they enjoy and safeguard against the risks they encounter.