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1 The sustainable urban real estate agenda
There is more to it than the âgreenâ thing
Introduction
Sustainable cities have existed much longer than the sustainability1 discourse. From a historical perspective it can be argued that private investment was always paramount for creating the great cities where ingenuity flourished in both civic and business arenas. This was the case in late medieval Florence and (perhaps incorrectly) is assumed to be the case in contemporary Manhattan â the âFlorence of our timesâ. Innovations in the banking-sector tend to generate property investments and eventually the accumulated prosperity further fosters high-level social and cultural life. In other words, sustainable investment practices much steer urban development â historically and in todayâs circumstances, where âsustainabilityâ runs the risk of becoming a buzzword. Therefore, when assessing various possibilities for such sustainable investment practices, one vital task we cannot escape is to assess the contribution to energy savings that could be made by cities, their buildings and their citizens. To leave it here would, however, only serve only a narrowly defined sustainability agenda that neglects dimensions other than the âgreenâ ones. In fact, it can be argued that social and economic sustainability issues show more resonance with property investors than that of the older type of environmental-energy sustainability (see Sayce et al., 2007).
This study merges and meshes concepts from a variety of specific urban and real estate discourses. In doing so it argues for the prime importance of an economic sustainability dimension rather than the environmental and social dimensions. Ideally, it would be the other way, but in todayâs reality this is unfortunately not the case. The basic assumption here is that we need economic growth, to be able to extract the funds necessary to deliver other, âsofterâ amenities. There really is no other way. Otherwise, the population growth â which is happening anyway â will cause scarcity of resources on such a level that conflicts become unavoidable. This goes on as long as the majority of people on this globe are not either altruistic or long-term planners. Exceptions obviously exist, such as those who have too much and those who have nothing and do not know of materially better circumstances, but it would be naĂŻve to assume that such marginal actors have a substantial role yet in todayâs development and market making of urban real estate.
The sustainability discourse stretches, of course, beyond investment issues that drive urban development. It is evident that progress in sustainable urban development requires improvement in our capacities of acting professionally as well as in the civic sphere. How can academics contribute to such improvement? The idea is to sell what resonates with the masses rather than to sell the science per se; while this âproductâ needs to be based in solid science, what matters is the possibility to improve decision-making communities related to the urban environment. It is furthermore not only about the poorest on the globe, but it is also challenging to sort the problems of those who were part of a âwestern middle-classâ, but who subsequently have fallen due to unemployment, mortgage default or other personal crisis. Obviously, the key question is as to whose responsibilities fixing these problems are: the politiciansâ, the NGOâs or the private sectorâs?
In the same spirit as the point about Florence earlier, Keivani (2009) underscores the importance of understanding interactions between environmental concerns and social and economic domains (this triple bottom line approach to sustainability is nevertheless different from the stance taken in the present study). The economic role of cities has now gained further importance due to the current era of globalisation, he continues. The issue is also one of accessibility; namely, policy making can be influenced and development agendas can be best set in cities as these are centres of political power and administration, Keivani adds. He also notes that social issues are often more contrasted in cities than elsewhere â and this is obviously an alarming development in the global south. Indeed, cities pose huge challenges for us but fortunately, due to agglomeration economies/benefits, cities also allow great efficiency in the use of resources as well as offer space for greater innovation and production (cf. Glaeser, 2011).2
Regardless of oneâs particular strand taken, there is an apparent need for a more precise conceptualisation of sustainable development.3 While various competing visions of sustainable urbanism exist, these comprise a multiplicity of potential futures. The problem is that in some areas of knowledge the advances have been huge and in others less so. The challenge is that while the notion of the sustainable city is immediately appealing, it also is complex and intangible. Here a âone-size-fits-allâ model is inadequate to understand the way social and technical solutions interact; in fact, these two spheres of action (i.e. the social and technical realms) need to be combined into an integrated approach. Some solutions require top-down actions whereas others require more of a bottom-up approach. It is furthermore important to admit that despite planning for change, not all changes can be foreseen. It is realistic nevertheless to see some opportunities arising in the midst of the crisis. (Williams, 2010; cf. Fisher, 2010).
The problem of top-down and bottom-up coordination together with the problem of dealing with uncertainty and opportunities arising involve various spatial scales. At the extremes we might compare for instance an individual house-buyer at a given time and place with the institutional investorâs systematic pooling of portfolios. And sustainable development is argued to be spatial, although the scale varies (Zuindeau, 2006). Real estate is a spatial factor of sustainability too. The spatial element is in fact one of the core issues of this book. And as real estate is a vital ingredient in the urban environment it becomes paramount for the argumentation here: how to use real estate data to design a socio-economic sustainability approach based on measurable indicators (e.g. house price).
Indeed, according to the United Nations Economic Commission for Europe (UNECE) real estate is important for the economy, especially in relation to the financial crisis. Furthermore, a sustainable real estate market, which would be reached by appropriate regulations and education of actors, would therefore enhance the sustainability of the economy. UNECE has stated ten principles for reaching a sustainable real estate market: integrated legal framework, efficient land register and cadastre, efficiency of services, prerequisites for development of sound real estate markets, good governance, sustainable financing, transparency and advanced financial products, property valuation, social housing, training and capacity building. This issue involves measures to be implemented at the local level and in cooperation with the private sector. In particular, an inter-sectorial approach is required here (UN, 2010).
While the abovementioned logical argument supports an overall strengthening of the real estate economy, the reality is different. Traditionally, buildings or their locations are not perceived as a core operation in oneâs business, neither from the occupiersâ nor the investorsâ point of view. However, this perception is now changing, as the long-term occupancy costs de facto affect the way the business is run (e.g. McMillen, 2005; see also Addae-Dapaah et al., 2009). Thus it can be argued that sustainability matters in real estate context. On the other hand, without definitions of criteria any arguments concerning sustainability remain vague. Therefore, on the basis of various literatures ranging from economics and social sciences to planning and construction engineering, I have compiled the following list of twelve issues that currently surround the urban land use and real estate sustainability agenda. These are listed from the most localised (the building) to the widest (region) scale.4
Some of the issues are selected for further discussion, insofar as they are central for the argumentation of this contribution.
- 1 Energy efficiency in buildings (during their life cycles)
When assessing various possibilities for such sustainable investment practices as discussed so far, one vital task we cannot escape is to assess the contribution to energy savings that could be made by cities, their buildings and their citizens. EU objectives aim at 20% energy savings by 2020.
This figure of energy saving in buildings can for example be achieved by an appropriately-designed lighting system which reduces total building electricity (Jackson, 2009, p. 96). Zalejska-Jonsson (2013), however, does not detect a major impact of energy and environmental building on the purchasing or renting decision.
- 2 Use of renewable energy in buildings (during their life cycles)
- 3 Pollution control in building (during their life cycles)
EU objectives aim at 20% reduction in greenhouse gas emissions by 2010.
- 4 Real estate quality (economic sustainability)
As a grossly substandard level of housing is unacceptable for health and safety reasons, the quality (largely a subjective indicator though) ought to develop in the same direction and with the same pace as the price level. This concerns the site and building specific attributes as well as the characteristics of the surrounding environment, neighbourhood and the city as a whole. Related to this argument, Jones et al. (2009) suggest that the affluence of the area â thus the socio-economic situation and its consequence, the neighbourhood house price level â is a more important determinant for the viability of a housing development than planning policy or risk and costs caused by brownfield developments. In other words, the sustainability of new housing development varies across local housing market areas and also within cities, and that this is not so much due to the compact cities policy as it is due to the affluence of the neighbourhood where the development takes place, according to this study. For such economic sustainability arguments to be taken on board by investors and developers as well as architects and regulators above all requires a steady and sustained price lift, and not only for the price levels set by the project but for the property values created in the surrounding area and adjacent neighbourhoods too. In this way, prices and values of the dwellings and rents of office space contain powerful information for the purpose of deciding on the feasibility of the strategy from an economic sustainability point of view. What unfortunately complicates the picture is that while the property value in fact can be substantially increased by acknowledging sustainability in general and the environmental-ecological dimension (i.e. âgreenâ issues) in particular, it can also be increased by unsustainable elements (Kauko, 2011b).
- 5 Real estate affordability (economic sustainability)
As it is not sufficient with high quality unless people cannot afford to buy (or rent) it, the affordability (often approximated as net income) of the dwelling also ought to develop in the same direction and with the same pace as the price level.
- 6 Real estate diversity (economic sustainability, with causal links to points 10 and 12)
Even if the quality and affordability criteria are fulfilled, it is not sufficient for economic sustainability unless there is a wide enough range (i.e. product variety generated for most apt selections to be made) of different quality and affordability levels on the market. This is because the drivers of sustainability: production technology, community governance and consumption fashions all tend to change quickly and then it is vital not to have neglected any specific property/housing package even if it may seem marginal at some stage. Or put it differently, if a potential market trend setter or other innovation in terms of quality or affordability is not recognised this will have harmful impacts for the evolution of the property portfolio (cf. Foxon et al., 2012).
The role of diversity has (following Polèse and Stren) become an established concept in the international urban sustainability discussion and is relevant also here. However, not all diversity is sustainable â it can be seen either as âan asset and an engine of the sustainable development of the cityâ or, less politically correctly, âas a liability and a source of potential tension and conflictâ whenever the cultural differences between the natives and the newcomers become too wide for their peaceful coexistence (BituĹĄikovĂĄ and Luther, 2010).5 In general, management of diversity in an urban area (public space together with land and housing) influences its social and cultural sustainability in two hypothetical directions: increased diversity either is sustainable (theory) or unsustainable (practice of failures of certain immigrant groups to integrate in western European and North American cities).
- 7 Optimal density for a block/neighbourhood (with causal links to points 10 and 12)
Compact city is often applied as a model for a sustainable city but in many cases, and for numerous reasons, this model has failed; for example, because sealed surfaces without green spaces are vulnerable to climate effects. In economic terms higher density normally should be considered more energy efficient, but there are exceptions; for example, small projects might allow better use of innovations, as they can be tailored to the particular green features, such as water collection systems (e.g. Ganser and Williams, 2007), or a heating-cooling system that utilises differences between day and night time ground temperatures (see e.g. REEEP, 2011). Or it can be similarly concluded that the highest building efficiencies, while environmentally sustainable, are not socially sustainable due to the deteriorated sense of community and safety experienced by the inhabitants (see e.g. Bramley et al., 2009). The literature here is abundant. Reading this literature the conclusion is that the optimal density is relatively high but not as high as possible.
- 8 Public transportation availability (functional issue)
Lucas and colleagues (2010) in turn emphasise the role of accessibility planning. They argue that sustainable communities require sufficient poor peopleâs accessibility, which will be achieved by improving public transport together with land use decisions concerning accessibility. They illustrate this by the case of Thames Waterways, where the travel possibilities with public transportation are currently considered poorly planned.
- 9 Traffic pollution (ecological issue)
- 10 Social cohesion in the neighbourhood/city/region (with causal link to point 12)
Social sustainability has been approached by Manzi et al. (2010a, b), whose starting point is to define sustainability in terms of social equity, access to resources, participation, social capital, human rights and exclusion. The nature of social sustainability is holistic embracing inclusion, care and governance (p. 10). The key question posed by Manzi and colleagues (2010b) concerns the competence of governments to steer partnerships and networks so as to achieve social sustainability in the sense of incorporating a wider range of stakeholders in the delivery of urban processes (pp. 10â15). Here is obviously a link to point 7.
According to Manzi et al. (2010b, p. 17), sustainable communities are defined by eight sectors (the Egan Wheel model): governance, transport and connectivity, services, environment, equity, economy, housing and the built environment, and social and cultural factors. Moreover, while sustainability agendas [sic] neglect the political dimensions, evidence tells us that social sustainability levels are highest in egalitarian societies (p. 22). Manzi and colleagues (2010b) conclude that, despite conceptual flaws and practical difficulties, social sustainability is an important guiding principle for direction of policies and environment; furthermore, these authors argue that it is inseparable in relation to environmental and economic dimensions. The overall conclusion of Manzi and colleagues (2010a) is that social sustainability requires investment and not only plans.
To open up a different avenue of research, White and colleagues (2010) argue that the impact of ICT on reaching social sustainability is far from straightforward and may even be counter-intuitive. The crux of the argument here is that the travel reduction mainly concerns high income workers, and therefore ICT is likely to lead to a more divisive development than what one would intuitively assume. This argumentation ties with the Smart City debate. According to the proponents of the Smart City, hi-tech solutions that utilise electronic data collected through sensors and card readers would help planning for peopleâs movements and making life more comfortable as well as improving the security concerns. Examples of this type of development include Songdo in South Korea and Masdar in United Arab Emirates. (We come back to the Smart City approach and these two places in Chapter 3.)
This overt reliance of ICT also exposes this approach to critique from mainly leftist and environmentalist circles; it can namely be argued that democracy is lacking in a place so completely dominated by propagation of technology and surveillance systems. Instead an alternative approach based on a more community oriented agenda is proposed (one well-known example being the Holzmarkt project in Berlin).
- 11 Communicativeness in local/regional planning (governance transparency)
- 12 Innovativeness of the region (economic sustainability, including financial transparency of corporations, and also favouring local products ...
