Enablers of Inclusive Cities: Enhancing Access to Services and Opportunities A G20 INITIATIVE © 2023 The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Disclaimer This work is a product of the staff of the World Bank, which serves as secretariat of the Global Infrastructure Facility, a financial intermediary fund. The findings, interpretations and conclusions expressed in this work do not necessarily reflect the views of the donors, technical or advisory partners, or the governing body of the Global Infrastructure Facility or the World Bank. The World Bank, donors, or technical or advisory partners of the Global Infrastructure Facility do not guarantee the accuracy of the data included in this work and do not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Acknowledgements This report was prepared by a team comprised of World Bank staff members and consultants from its Urban, Resilience, and Land Global Practice and its Infrastructure Finance, PPPs & Guarantees Global Practice, working in close collaboration with the Government of India Presidency of the G20. The World Bank team was led by Mark Roberts and Horacio Terraza and included Sara Ahmed and Jane Park. Jane Park and Mark Roberts are the report’s primary authors. Preparation of the report was overseen by Imad Fakhoury and Bernice Van Bronkhorst. The team is grateful to members of the G20 Infrastructure Working Group (IWG) for their excellent comments on earlier drafts of the report, as well as to Aijaz Ahmad, Jeffery Delmon, Towfiqua Hoque, Sebnem Madan, Joanna Masic, Megha Mukim, Rupi Rai, and Jemima Sy of the World Bank for their feedback and inputs to the report. Luba Vangelova was the report’s editor. Design and layout of the final report was performed by Victoria Adams-Kotsch. The Global Infrastructure Facility contributed to the funding for this report. Table of Contents Main Messages ................................................................................................................. 2 Chapter 1: Introduction ................................................................................................ 5 Why does inclusion matter for tomorrow's cities? ................................................................ 5 What is an inclusive city and what does this report do? ...................................................... 8 Chapter 2: How Inclusive Are Cities Today? ....................................................... 10 How do levels of access to services, markets, and spaces vary across countries and cities? .................................................................................................. 11 How does access to services, markets, and spaces vary within cities? ............................. 22 How do outcomes of inclusiveness vary across and within cities? ..................................... 28 Summary and conclusion ...................................................................................................... 31 Spotlight: How Does Inclusiveness Interact with Sustainability and Resilience? .................................................................................. 32 Inclusion and environmental sustainability .......................................................................... 33 Inclusion and resilience ......................................................................................................... 35 Chapter 3: Planning, Connecting, and Financing for More Inclusive Cities ...................................................................................................... 38 Planning to set guiding principles for the provision of land, housing, and services .......... 39 Connecting cities to facilitate access to markets, services, and spaces, and to promote convergence ................................................................................................. 53 Financing capital outlays for the provision of infrastructure and services ......................... 62 Summary and conclusion ...................................................................................................... 73 Annex 3A: Summary of recommended actions .................................................................... 73 Chapter 4: Who Makes the Choices? The Roles of Stakeholders .......... 75 Local governments ................................................................................................................. 76 National governments ............................................................................................................ 77 The private sector ................................................................................................................... 80 Civil society groups ................................................................................................................. 81 International organizations .................................................................................................... 83 Summary and conclusion ...................................................................................................... 87 References ........................................................................................................................... 88 MAIN MESSAGES In both G20 and non-G20 countries alike, cities have a crucial role to play in the achievement of national development goals. Already, cities generate more than 80 percent of global GDP and, with a share of the global population that is projected to reach nearly 70 percent by 2050, up from the current share of around 57 percent, the global importance of cities will only grow further in the decades ahead. However, whether the cities of tomorrow can fulfil their potential as drivers of national economic development will depend, to a large extent, on how inclusive they are—that is to say, the extent to which they are able to provide all their residents with quality access to services, markets, and spaces. This is because not only is inclusion in and of itself important, but because more inclusive cities are also both more prosperous and more resilient cities. At the same time, many policies that contribute to inclusive urban development carry important co-benefits for both climate change mitigation and adaptation, as well as vice versa. In this context, this report addresses four important questions: (a) What is an inclusive city? (b) How inclusive are cities in G20 member and guest countries, as well as in other countries, globally today? (c) What instruments should policymakers draw-on to make the cities of tomorrow more inclusive or, to put it more succinctly, what can policymakers do to make their cities more inclusive? And, finally, (d) What are the roles of different stakeholders—city leaders and their associated local governments; national governments, including their ministries of finance; the private sector; civil society organizations; and others—in the effective wielding of these instruments? Or, to put it more bluntly, who needs to do what? What is an inclusive city? While various definitions exist, for the purposes of this report, an inclusive city is defined as one in which all residents— regardless of, for example, gender, age or disability status— have the ability and opportunity to fully participate in quality services (basic urban services, as well as digital and financial services), markets (land, housing, and labor), and spaces (political, physical, cultural, and social), thereby enabling them to lead their lives with dignity. 2 | MAIN MESSAGES How inclusive are cities today? • Although many factors are correlated with a city’s level of inclusiveness, cities in more developed and urbanized countries tend to provide higher levels of access to services, markets, and spaces than do cities in lower-income and less urbanized countries. This is true for both G20 (member and guest) countries and non-G20 countries alike. • Within both G20 (member and guest) and non-G20 countries, larger cities tend to provide better access to services, markets, and spaces than do smaller ones. This better access also translates into lower poverty rates. The better access provided by larger cities can be partly explained by the existence of economies of scale in the provision of large-scale urban infrastructure, as well as by the concentration of financial and human resources in larger cities. • Notwithstanding the better overall average levels of access, many large cities struggle with problems of, often severe, residential segmentation characterized by large discrepancies in access to quality services, markets, and spaces between high- and low-income neighborhoods. In cities in low- and middle-income countries, such residential segmentation most obviously manifests itself in the divides that exist between formal and informal/slum neighborhoods. • Inadequate planning, compounded by dysfunctional land and housing markets, contributes to a city’s lack of inclusiveness. Meanwhile, unequal access to affordable transportation and digital spaces exacerbates residential segregation, creating a tendency for within-city income inequalities to increase as cities grow. What can be done? To make the cities of tomorrow more inclusive, city leaders and their associated local governments, working in close collaboration with other stakeholders, including national governments and their finance ministries, need to better plan, connect, and finance their cities. • Planning: To deliver quality access to services, markets, and spaces to residents, cities need to, at a minimum, improve land market institutions; encourage compact, mixed-use, and transit-oriented development; integrate any existing informal settlements into the formal urban fabric; plan effectively for future urban expansion to avoid the emergence of new informal settlements; and build resilience against climate change-related hazards. • Connecting: To increase both physical mobility and the ability to access digital spaces for all, cities need to employ the full range of policy actions, encompassing improvements in “hard” transport and digital infrastructure, as well as softer policy measures to expand access to the services facilitated by this infrastructure. • Financing: To close existing gaps and to meet growing demands for better accessibility, cities need to better tap various financial resources, notably intergovernmental transfers, local revenues, subnational borrowing, and financing from the private sector—including climate finance. MAIN MESSAGES | 3 Who needs to do what? Although city leaders and their associated local governments are at the forefront of building more inclusive cities, other stakeholders, including national governments and their finance ministries, the private sector, and civil society groups, are also indispensable to achieving greater inclusiveness. • City leaders and local governments are at the forefront of devising, implementing, and enforcing both policies and regulations for better planning, connecting, and financing for more inclusive urban development. By defining an ambitious but realistic future vision for their city that is grounded in the local and national context, city leaders can also play a key role in rallying different actors around the achievement of that vision. • National governments can provide a powerful impetus for the realization of a more inclusive urban future by articulating the importance of such a future for the achievement of wider national development goals (including goals for economic growth, climate change, and the environment more broadly speaking), and aligning national policies, including national urban policies, accordingly. Within this context, finance ministries have an important role to play through the exercise of their policy, regulatory, and transactional functions. This includes through, for example, their allocation of funding to local governments through the intergovernmental transfer system, their setting of fiscal rules, and policies on public sector budget management. • The private sector, civil society groups, and international organizations can bring their unique experiences, knowledge, perspectives, and networks to the table, thereby helping government leaders tap into the diversity of ideas and innovate, and thus better respond to inclusiveness concerns. The private sector and international organizations are also important sources of financing. 4 | MAIN MESSAGES CHAPTER 1 INTRODUCTION Key messages This chapter defines an inclusive city, addresses the question of why inclusion matters for tomorrow’s cities, and lays out the objectives and structure of the rest of the report. • An inclusive city is one in which all residents have the ability and opportunity to fully participate in quality services (basic urban services, as well as digital and financial services), markets (land, housing, and labor), and spaces (political, physical, cultural, and social), thereby enabling them to lead their lives with dignity. • Although urbanization brings with it a wide range of potential benefits for economic growth and prosperity, a lack of inclusiveness threatens the full realization of these benefits, in Group of 20 (G20) countries as well as elsewhere. • Policies and investments to transform cities into more inclusive places can also help to foster more resilient and sustainable urban development in the face of challenges such as climate change, aging populations, global economic shocks, and intensified pressures on government finances. • This report provides a policy compass to help cities become more inclusive by discussing three broad sets of instruments relating to planning, connecting, and financing on which city leaders can draw. It also discusses the respective roles of stakeholders, including national governments and their finance ministries, in promoting more inclusive cities. Why does inclusion matter for tomorrow’s cities? Cities act as the economic, political, and social pulse of both countries and subnational regions. As people and firms cluster in cities, it becomes easier for them to share amenities and CHAPTER 1 | 5 suppliers, find well-suited jobs and workers, and exchange ideas and knowledge (Duranton and Puga 2004). These positive agglomeration forces arise from factors such as economies of scale in supplying infrastructure, which help provide urban residents with better access to services, more diverse markets, and various physical, social, and cultural spaces. Given the benefits that cities bring, it is no surprise that the number of people moving to cities continues to increase. Today’s cities are home to about 4.4 billion people, or nearly 60 percent of the global population. However, urbanization has not been fully inclusive, in developing and developed countries alike.1 Even in 2023, the urban poor often lack access to basic services. This is especially so in the developing world, where safely managed drinking water is only available to about 60 percent of the urban population and improved sanitation to at most 40 percent of those residents.2 Although access per se may be less of an issue in the cities of higher-income countries, key problems relating to the quality of many basic services remain. For too many people in cities, housing also remains unaffordable. In developing countries, the lack of affordable formal housing is reflected in the more than 1 billion slum dwellers estimated to exist in 2018.3 Although slums may no longer be a problem in many higher-income countries, housing affordability is a serious concern there, particularly impacting young households, whose residents are attempting to set their first foot on the housing ladder. In England and Wales, for example, the house-price-to-annual- income ratio was about 8 in 2022, whereas houses are considered affordable only if the ratio does not exceed 3 (Hilber 2023). Moreover, the needs of the marginalized are often overlooked. For example, limited access to safe transportation options within cities could lead women to choose a worse-ranked college than they otherwise would, according to evidence in Delhi (Borker 2021). Among Americans aged 18 to 64, only 20 percent of people with travel-limiting disabilities work full- or part-time, as opposed to more than 75 percent of people without such disabilities (USDOT 2018). Older persons are easily exposed to the risk of social exclusion and isolation, especially if they are housed in designated care facilities without access to safe and affordable transportation options (Das et al. 2022). Such exclusions can combine with emerging crises to deepen existing inequalities. In developing countries, for example, a lack of affordable housing often pushes the marginalized into unsafe locations—on hillsides, in floodplains, or near open drains and sewers—increasing their exposure and vulnerability to natural hazards (Mukim and Roberts 2023). During the COVID-19 pandemic, disparities in the ability to access and use digital services exacerbated educational, financial, and health inequalities by excluding lower-income households from virtual classrooms and workspaces, as well as vaccination and telehealth arrangements (Das et al. 2022). Those excluded from various services and markets are less likely to be upwardly mobile because they lack opportunities to remain safe and healthy, accumulate human capital, and access jobs. Lacking a voice in decision making processes (World Bank 2013a), their low income and poorer health conditions tend to persist throughout life. Indeed, a review of health inequalities in England reveals that, on average, people in poorer neighborhoods have lifespans roughly six years shorter than their wealthier 1 In this report, we use “developing world” to refer to low- and lower-middle income countries based on the World Bank’s country income classification. 2  Calculations based on the World Bank’s World Development Indicators. 3  Calculation based on data from the United Nations Department of Economic and Social Affairs. 6 | CHAPTER 1 counterparts, while spending more time with limited physical capacity (WHO 2015). A similar result— the rich have longer lifespans than the poor—is found in data for the United States (Chetty et al. 2016).4 The harms of exclusion extend well beyond the individual level. Evidence in developing countries shows that rising inequality can lead to public policies that hurt productivity and growth—notably, limited provision of infrastructure and public services. Extreme inequality can furthermore fuel social unrest and crime by intensifying the grievances felt by the disadvantaged (Dabla-Norris et al. 2015). This is probably why more unequal cities, being also both less attractive and less productive, tend to experience slower population and income growth, according to evidence from the United States (Glaeser, Resseger, and Tobio 2009). The good news is that policies and investments designed to transform cities into more inclusive places can not only confer benefits to traditionally excluded groups but also foster resilient and sustainable development for all residents. For example, compact and mixed-use development alongside well- connected and easily accessible public transport systems can increase job accessibility, and thus incomes, especially for low-skilled workers or people with disabilities who would otherwise be priced out of living close to economic opportunities. Higher incomes are fundamental to building the resilience of urban residents to various shocks by increasing their capacities to cope. At the same time, policies that promote compact, transit-oriented development can significantly reduce carbon emissions and local air pollution by lowering household energy consumption and traffic congestion. By discouraging sprawl, such policies can also prevent unnecessary conversions of natural land, with positive implications for crop and livestock productivity, biodiversity protection, and carbon sequestration (Dizon, Sherwani, and Su 2023; Mukim and Roberts 2023). A separate Spotlight, which appears at the end of Chapter 2, provides further discussion of the power of inclusive development to drive resilient and sustainable cities for tomorrow. Looking forward, the United Nations projects that global population growth will take place almost exclusively in cities. By 2050, 6.7 billion people, or nearly 70 percent of the world’s population, will live in cities. Of these, about 2.1 billion will likely be at least 65 years old (Das et al. 2022), resulting in a so-called “silver tsunami,”5 and nearly 1 billion, including the elderly, will be living with some type of physical disability.6 Although urbanization is expected to be fastest in the developing parts of Asia and Africa, emerging crises may accelerate the trend elsewhere too. By 2050, for example, climate change and natural disasters are expected to displace about 1.2 billion people globally, suggesting that cities, particularly larger and more developed ones, could face large influxes of climate migrants (IEP 2020). In short, city leaders need to better manage and plan for their cities to embrace every resident, including new migrants and aging populations, as well as traditionally marginalized groups. This will also do much to determine whether tomorrow’s cities fulfill their potential as engines of sustainable 4 Another interesting finding from the study by Chetty et al. (2016) is that the poor living in large metropolitan areas—such as New York City and San Francisco—tend to live longer than the poor living elsewhere. Although the exact mechanism has yet to be fully understood, the authors conjecture that the highly educated populations concentrated in those cities might trigger better health habits and public health policies, benefitting the poor as well as the rich. 5 Notwithstanding the “silver tsunami,” many cities in the developing world, especially in Africa and South Asia, continue to have extremely young populations—for example, Dhaka, Bangladesh, has, on average, 0.68 children per working-age adult, whereas Bamako, Mali, has, on average, one child per working-age adult. More generally, although age dependency ratios have, on average, been increasing across cities in high- and middle-income countries globally in recent decades, they have remained relatively stable, on average, across cities in low-income countries (Jedwab, Pereira, and Roberts 2021). 6  UN 2015. CHAPTER 1 | 7 and resilient development. Perhaps most urgently, city leaders need to think through innovative solutions for mobilizing financial resources for the provision of infrastructure and basic services, given worsening fiscal conditions (largely triggered by overlapping global crises) and upward pressure on expenditures to accommodate growing populations (and, in some cases, aging societies) and withstand changing climates. What is an inclusive city and what does this report do? This report’s main objective is to inform the G20’s thinking on what is required to make cities—not just in G20 countries, but also globally—more inclusive. In doing so, the report also aims to contribute to the ongoing global discourse on how best to achieve the 2030 Agenda’s Sustainable Development Goal (SDG) number 11, “making cities and human settlements inclusive, safe, resilient and sustainable.” The report considers inclusiveness broadly in terms of (a) access and (b) outcomes. In relation to access, it defines an inclusive city as one in which all residents have the ability and opportunity to fully participate in quality services (basic urban services, as well as digital and financial services), markets (land, housing, and labor), and spaces (political, physical, cultural, and social), thereby enabling them to lead their lives with dignity (figure 1.1). The definition concerns all residents, regardless of income, gender, age, physical ability, and/or migration status—that is, regardless of whether they are voluntary migrants who have moved for work or forced migrants (e.g., displaced people due to conflict, violence, or climate change-related shocks). As for outcomes, this report focuses on poverty and income inequality, as measured by the Gini coefficient, within and across cities. FIGURE 1.1: A FRAMEWORK FOR AN INCLUSIVE CITY SERVICES Basic services Digital services Financial services SPACES Political ABILITY Physical Cultural Social OPPORTUNITY MARKETS Land Housing Labor DIGNITY Source: Adapted based on World Bank 2013a. 8 | CHAPTER 1 With the above aims and definition in mind, Chapter 2 takes stock, through a combination of original empirical analysis and insights from existing literature, of how inclusive cities are today. In doing so, it identifies barriers to the achievement of inclusive cities. The Spotlight then discusses various channels through which inclusiveness contributes to resilience and sustainability. By discussing these three interlinked aspects of urban development, the Spotlight aims to broaden stakeholder understanding of the need for policies that integrate inclusiveness, resilience, and sustainability. Chapter 3 provides a policy compass to help cities become more inclusive, using three broad sets of instruments—planning, connecting, and financing (box 1.1). Finally, Chapter 4 concludes the report with a brief discussion of the roles of both local and national governments, including their ministries of finance, as well as of various other stakeholders, in wielding those instruments. It also touches on issues of voice in the planning processes. Box 1.1 Planning, connecting, and financing cities This report articulates a policy framework that is rooted in the World Bank’s global experience of assisting governments and city leaders, through both its analytical and its operational work, to successfully build inclusive cities. The framework has three key pillars: • Planning: Charting a course for cities by setting the terms of urbanization, especially policies for using land and expanding basic infrastructure and public services. Inadequate planning generates spatial mismatches between people, on the one hand, and services, markets, and spaces on the other, while pushing marginalized groups into hazardous locations and encouraging unnecessary urban expansion into fertile agricultural lands. • Connecting: Enhancing accessibility of residents to services, markets, and spaces within and across cities through investments in connective infrastructure and policy reforms that can potentially contribute to better physical and virtual mobility. This report acknowledges that such mobility is determined not only by the quality of connective infrastructure, but also by factors such as the price of transportation and digital services, urban designs, residence requirements, and digital skills. Inadequate connectivity contributes not only to the exclusion of certain groups from services, markets, and spaces, but also to a spatial misallocation of resources that hinders economic efficiency. • Financing: Mobilizing sources of financing and funding for large capital outlays needed to provide new infrastructure and services for rapidly growing cities, to replace and upgrade aging infrastructure in developed-country cities, and to support operations and maintenance for existing assets. Insufficient financing and funding, together with limited institutional capacity, leads to inadequate investments in infrastructure and services. It is important to coordinate these three dimensions. Putting financing first, without full consideration of the other dimensions, can result in exclusion by neglecting the overriding need to coordinate infrastructure improvements (connecting) with policies (planning). Source: World Bank 2013b. CHAPTER 1 | 9 CHAPTER 2 HOW INCLUSIVE ARE CITIES TODAY? Key messages This chapter presents strong evidence that inadequate planning and lack of connectivity have been key barriers to achieving inclusive cities across the globe. • As countries develop and urbanize, cities generally become more inclusive in terms of access to services, markets, and spaces. • Partly because of economies of scale, as well as the concentration of human and financial resources, larger cities tend to provide better access to various services, markets, and spaces, and hence, tend to have lower poverty rates than smaller cities. • Inadequate planning, compounded by dysfunctional land and housing markets, divides cities into lower- and higher-income neighborhoods, pushing the poor far away from services, markets, and various spaces. • Unequal access to affordable transportation and digital spaces exacerbates residential segregation, creating a tendency for within-city income inequalities to increase as cities grow. A first step towards achieving inclusive cities is to better understand where cities currently stand in terms of their inclusiveness. By exploring trends and patterns in levels of access to services (basic urban services, as well as digital and financial services), markets (land, housing, and labor), and public spaces across and within cities worldwide, this chapter gauges how cities are performing on various dimensions of inclusiveness and identifies where they may be falling short. In doing so, the trends and patterns are explored across different types of cities—categorized based on the city’s population as well as the level of development of the country in which it is located—with an emphasis on highlighting differences between G20 (member and guest) countries and other countries. The results show that the inclusiveness 10 | CHAPTER 2 challenges faced differ across different types of cities, although the challenges stem, in large part, from inadequate technical and financial resources that lead to inadequate and uncoordinated urban and infrastructure planning. How do levels of access to services, markets, and spaces vary across countries and cities? Cities are more inclusive than rural areas According to the World Bank’s index of social inclusion, cities are overall more inclusive than rural areas (Cuesta, Madrigal, and Pecorari 2022). That analysis of 79 countries circa 2020 shows that the overall gap between cities and rural areas is mainly driven by better access to the internet, electricity, and adequate sanitation—that is, better access to basic services and digital spaces. But the urban advantage tends to decline, without fully disappearing, with a country’s level of development (figure 2.1), due to catch-up by rural areas, even as inclusion continues to improve in cities. FIGURE 2.1 SOCIAL INCLUSION INDEX: URBAN-RURAL GAP VS. NATIONAL GROSS DOMESTIC PRODUCT (GDP) PER CAPITA 0.3 Social inclusion index gap 0.2 Low-income Lower-middle-income 0.1 Upper-middle-income 0.0 7 8 9 10 GDP per capita, PPP (log) Source: Cuesta, Madrigal, and Pecorari 2022. Notes: The social inclusion index is constructed separately for each country’s urban and rural populations, and is based on the equal weighting of six indicators: (a) labor force participation rate; (b) share of the population with a bank account; (c) share of households with access to adequate sanitation; (d) share of households with access to electricity; (e) secondary school enrollment rate; and (f) share of households with access to the internet. The index has a value from 0 to 1, where higher values indicate higher average levels of access to markets and services. The y-axis shows the value of the social inclusion index for urban areas minus the value for rural areas. PPP = Purchasing Power Parity. CHAPTER 2 | 11 Cities become more inclusive as countries develop and urbanize Access to affordable housing across countries Urban advantages have not been shared equally. As a result of rapid urbanization and city growth that has been outpacing the provision of land and affordable housing, in 2018 the absolute number of people living in slums or informal settlements grew to more than 1 billion people, or nearly 25 percent of the global urban population. The share of urban residents living in slums decreases as a country develops and urbanizes (figure 2.2, panel a), therefore slums are not a major concern for high-income G20 member countries. However, cities in these countries still grapple with the problem of housing affordability in different ways, such as residential segregation across socioeconomic groups, or young adults living with their parents because they are unable to get a foot on the housing ladder, which, in turn, constrains their geographic mobility with repercussions for their economic mobility as well. Meanwhile, slums remain a concern in several mainly lower-income G20 member and guest countries (figure 2.2, panel b). FIGURE 2.2 SHARE OF URBAN POPULATION LIVING IN SLUMS (PERCENT) a. Global b. Selected G20 members and guest countries 100 y = -0.50x + 57.96 Turkey 14.1 Share of urban population 80 R2 = 0.19 Mexico 17.6 living in slums (%) 60 Indonesia 19.4 40 South Africa 24.2 20 Nigeria 49.0 Bangladesh 51.9 0 0 20 40 60 80 100 0 10 20 30 40 50 60 Share of population living in urban areas (%) Share of urban population (%) Source: World Bank elaboration based on data sets on slum population from the UN-Habitat Urban Indicators Database and urban population from the United Nations Department of Economic and Social Affairs (UN DESA). Note: Panel a is based on 91 low- or middle-income countries for which data on the share of urban population living in slums are available. The bubble size indicates the size of a country’s urban population. In panel b, yellow and blue indicate G20 member and guest countries, respectively. Access to basic urban services across countries Inadequate integration across urban planning and design, basic service delivery, and urban transport compounds the limited provision of land and affordable housing, particularly in low- and middle- income countries. Outside G20 member and guest countries, only 63 percent of the urban population in lower-middle-income countries has access to safely managed drinking water, and access is even lower, at approximately 46 percent, for safely managed sanitation services. Even in upper-middle-income countries, access to adequate sanitation services appears more challenging in non-G20 member or guest 12 | CHAPTER 2 countries (figure 2.3). However, access to safely managed drinking water and sanitation services reaches only 45 percent and 39 percent of urban residents respectively in lower-middle-income G20 member and guest countries (figure 2.3, panel b). FIGURE 2.3 SHARE OF URBAN POPULATION WITH ACCESS TO DIFFERENT TYPES OF BASIC SERVICES, BY COUNTRY INCOME CLASSIFICATION a. Rest of the world b. G20 members and guest countries 98 93 98 100 90 100 Share of urban population (%) Share of urban population (%) 88 80 76 80 63 66 60 60 46 45 40 39 39 40 40 27 20 20 Safely managed Safely managed Safely managed Safely managed sanitation drinking water sanitation drinking water Low-income Lower-middle-income Upper-middle-income High-income Source: World Bank calculations based on the World Development Indicators (http://wdi.worldbank.org). Note: Panel a is based on 68 (sanitation) and 69 (drinking water) non-G20 member or guest countries. Panel b is based on 30 (sanitation) and 17 (drinking water) G20 member and guest countries. The values are unweighted averages across countries within each income group. Access to urban public transport systems across countries Easy access to public transport services is crucial for inclusive cities because such services help connect residents to jobs, health, and education services, as well as to various urban amenities, including stores, museums, libraries, and parks. This is especially true for those who have limited mobility due to economic and/or physical challenges and have been priced out of living close to services, markets, and spaces. During the COVID-19 pandemic in the United Kingdom, for example, people with limited connectivity were disproportionately vulnerable to the virus because of their remote distances from vaccination sites, which was compounded by a lack of access to transport services. As a result, they were less able to get regular testing and take advantage of early vaccine rollouts (Burn-Murdoch and Neville 2021). Relatedly, research shows that, in the United States, shorter commuting times are a reliable predictor of an individual’s probability of escape from poverty (Chetty et al. 2014). However, access to public transportation is far from universal. Outside of G20 member and guest countries, fewer than 40 percent of city residents have access to a low-capacity public transport system (such as a bus system) within 500 meters and a high-capacity system (such as metro, bus rapid transit, trains, and ferries) within 1,000 meters.7 Although access is better in non-G20 (member and guest) 7 The level of access may be understated for many cities in non-high-income countries because informal public transport systems are not fully mapped in this data set. CHAPTER 2 | 13 high-income countries, more than a quarter of city residents, on average, are still distant from public transport services (figure 2.4, panel a). Overall, G20 member and guest countries perform better than the rest of the world. However, even in those countries, on average, only about one-third (in lower-middle-income countries) and a little more than half (in upper-middle-income countries) of urban residents live close to public transport stops. Even in high-income G20 member and guest countries, about 10 percent of city residents are outside easy walking distance of such services (figure 2.4, panel b). FIGURE 2.4 AVERAGE SHARE OF A CITY’S POPULATION WITH ACCESS TO A LOW-CAPACITY PUBLIC TRANSPORT SYSTEM WITHIN 500 METERS AND TO A HIGH-CAPACITY PUBLIC TRANSPORT SYSTEM WITHIN 1,000 METERS a. Rest of the world b. G20 members and guest countries High-income 72.9 High-income 89.7 Upper-middle-income 37.4 Upper-middle-income 53.7 Lower-middle-income 33.8 Lower-middle-income 31.1 Low-income 30.9 0 20 40 60 80 0 20 40 60 80 100 Share of urban population (%) Share of urban population (%) Source: World Bank calculations based on data from the UN-Habitat Global Urban Indicators Database (2020). Note: Panel a is based on 551 cities globally (excluding those in G20 member and guest countries), which consist of 65 cities in high-income countries, 195 cities in upper-middle-income countries, 188 countries in lower-middle-income countries, and 103 cities in low-income countries. Panel b is based on 969 cities in G20 member and guest countries, which consist of 742 cities in high-income countries, 172 cities in upper-middle-income member countries, and 55 cities in lower-middle-income countries. Low-capacity public transport systems include bus and tram, among others, and high-capacity public transport systems include trains, ferries, etc. The data cover both formal and informal public transport stops, although the latter may not be fully captured. The values are unweighted averages across cities within each income group (regardless of country). Access to open urban public spaces across countries Public spaces, if properly designed and managed, can be pathways toward inclusive development by providing benefits such as social engagement opportunities. Outdoor public spaces proved particularly important during the COVID-19 pandemic, enabling people to exercise and socialize while distancing for safety (UN-Habitat 2020). However, an analysis of 289 cities outside G20 member and guest countries reveals that, even in high-income countries, on average, only about 70 percent of residents live within a 400-meter walking distance of an open public space. The picture is worse for cities in developing countries—on average, only 44 percent of residents in low-income countries are within walking distance of an open public space (figure 2.5, panel a). For G20 member and guest countries, additional analysis based on 220 cities shows that, in terms of distance, the average level of access to public open spaces across high-income countries is roughly the same as the average level across upper-middle-income members. It is, however, below the average for non-G20 member/guest high-income countries (figure 2.5, panel b). 14 | CHAPTER 2 FIGURE 2.5 AVERAGE SHARE OF A CITY’S POPULATION WITHIN 400-METER WALKING DISTANCE OF AN OPEN PUBLIC SPACE (%) a. Rest of the world b. G20 members and guest countries High-income 72.4 High-income 60.6 Upper-middle-income 54.0 Upper-middle-income 62.6 Lower-middle-income 50.9 Lower-middle-income 42.2 Low-income 44.2 0 20 40 60 80 0 20 40 60 80 Share of urban population (%) Share of urban population (%) Source: World Bank calculations based on data from the UN-Habitat Global Urban Indicators Database (2021). Note: An open public space is defined as an area that is openly and freely accessible for all (without any cost impli- cation) for enjoyment of social services such as recreation. The identification of open public spaces is based on data compiled from city land use plans and open sources including OpenStreetMap and Google Earth. Panel a is based on 289 cities globally (excluding those in G20 member and guest countries), which consist of 45 cities in high-income countries, 140 cities in upper-middle-income countries, 76 cities in lower-middle-income countries, and 28 cities in low-income countries. Panel b is based on 220 cities in G20 member and guest countries, which consist of 82 cities in high-income countries, 119 cities in upper-middle-income countries, and 19 cities in lower-middle-income countries. The values are unweighted averages across cities within each income group. Access to internet by urban residents across countries In addition to connectivity to physical spaces, it is increasingly recognized that access to digital services is a cornerstone of inclusive development. That is, digital connectivity expands access to education and information via the internet, thereby increasing skills, job opportunities, and raising household incomes, all of which contribute to economic growth and poverty reduction (World Bank 2016). Conversely, a lack of equitable digital connectivity will likely exclude certain groups of people from important services, notably banking, health, education, training, and government public services, thereby exacerbating existing inequities in already often marginalized groups of people such as the poor, youth, the elderly, people with disabilities, and women (box 2.1). Unfortunately, access to digital services in cities varies widely across countries at different development stages.8 Nearly 91 percent of the urban population in high-income G20 member and guest countries used the internet from any location, including home, circa 2019. For high-income countries in the rest of the world, the corresponding figure was about 95 percent (figure 2.6, panel a). Outside high-income countries, roughly 77 percent and 81 percent of the urban population in lower-middle and upper- middle-income G20 member and guest countries had access, respectively (figure 2.6, panel b). Meanwhile, non-G20 low-income countries lag far behind, with only about 30 percent of the urban population having access (figure 2.6, panel a). For school-age children, access to the internet and digital services plays an increasingly prominent role in completing school assignments, pursuing various interests and hobbies, and connecting with friends 8 The results in this paragraph need to be taken with caution, given that the data set covers only a limited number of countries, especially for the rest of the world (31 countries). CHAPTER 2 | 15 and classmates. Among non-G20 member or guest countries, however, less than two-thirds of school- age children in urban areas of high-income countries have internet access at home.9 This share drops to about 20 percent in low-income countries (figure 2.7, panel a).10 FIGURE 2.6 AVERAGE SHARE OF URBAN POPULATION USING THE INTERNET FROM ANY LOCATION, CIRCA 2019 a. Rest of the world b. G20 members and guest countries High-income 95.2 High-income 90.7 Upper-middle-income 86.1 Upper-middle-income 81.0 Lower-middle-income 69.0 Lower-middle-income 76.6 Low-income 30.1 0 20 40 60 80 100 65 70 75 80 85 90 95 Share of urban population (%) Share of urban population (%) Source: World Bank calculations based on data from the International Telecommunication Union database. Note: Panel a is based on three high-income, 15 upper-middle-income, 11 lower-middle-income, and two low-income countries. Panel b is based on 20 high-income countries, six upper-middle-income countries, and two lower-middle- income (guest) countries. The values are unweighted averages across countries within each income group. FIGURE 2.7 AVERAGE SHARE OF SCHOOL-AGE CHILDREN LIVING IN URBAN AREAS WITH AN INTERNET CONNECTION AT HOME, BY COUNTRY INCOME CLASS, 2010 ONWARD a. Rest of the world b. G20 members and guest countries High-income 63.6 High-income 77.3 Upper-middle-income 59.6 Upper-middle-income 67.9 Lower-middle-income 34.5 Lower-middle-income 32.6 Low-income 20.2 0 20 40 60 80 0 20 40 60 80 100 Share of school-age children (%) Share of school-age children (%) Source: World Bank calculations based on data from UNICEF. Note: Panel a is based on 69 non-G20 member or guest countries. Panel b is based on 11 G20 member and guest countries. The values are unweighted averages across countries within each income group. 9  School-age children are defined as children who are approximately 3 to 17 years old, depending on the country. 10 The UNICEF-ITU (2020) found that globally (regardless of urban and rural areas) approximately 759 million young people ages 15 to 24, or 63 percent, lack home internet access. 16 | CHAPTER 2 This contrasts to nearly 80 percent and nearly 70 percent of school-age children having home internet access if living in high-income and upper-middle-income G20 member or guest countries, respectively (figure 2.7, panel b). This, however, suggests that significant challenges of access remain even in those countries. As long as the use of online schooling tools outside of the physical classroom continues to grow, those children who cannot get online are at risk of missing opportunities to advance their education and of falling behind their peers. This, in turn, can deepen inequalities across communities as well as across countries by limiting their prospects for economic mobility. Box 2.1 Gender gaps in access to public transportation, the internet, and labor market outcomes When women are empowered, societies overall benefit. One reason for this is because women’s status and decisions within families have tremendous impacts on aspects such as family nutrition, physical and mental health, finances, and children’s education. As empowered economic actors, women can also contribute to productivity growth and economic diversification (IMF 2018).a Transportation and digital services are essential for women’s empowerment. With access to reliable public transportation services and the internet, women can gain opportunities to obtain health and financial services, pursue education and economic activities, and participate more fully in public life. However, evidence reveals that current systems are inadequate for allowing women to realize their potential. Public transportation Women tend to rely more on public transportation, partly for socioeconomic and cultural reasons that limit their access to automobiles. In Buenos Aires, for example, women represent more than 60 percent of public transport users. Women also tend to make more multipurpose trips as they juggle household and work activities, and they also tend to accompany other family members, such as young children and the elderly. Women in London and Buenos Aires, for example, are likely to make 23 percent and 13 percent, respectively, more trips with a young child than men. Nevertheless, public transportation systems often fail to accommodate women’s mobility needs, catering primarily to the needs of those who travel straight between home and work. Safety concerns further limit women’s ability to use public transportation systems. In Australia, for example, 30 percent of girls limit their movements and avoid taking public transportation when they are unaccompanied after dark. a For example, it has been found that, for the United States, between 20 and 40 percent of the growth in aggregate output per person that occurred from 1960 to 2010 can be explained by the improved allocation of talent across occupations associated with reduced discrimination against women and black men in labor markets and the provision of education services, as well as changing social norms that have contributed to their increased labor force participation (Hsieh et al. 2019). CHAPTER 2 | 17 Box 2.1 Gender gaps in access to public transportation, the internet, and labor market outcomes, continued Internet access Internet access expands women’s opportunities to participate in economic activities while maintaining a balance between work and family life. However, women are less likely to have access to the internet than men, even in cities. The gender gap in internet access tends to be wider in lower-income countries. Hence, although the level of access is on average 1 to 2 percentage points lower for women than men in high-income countries (regardless of whether or not a country is a G20 member or guest), the average difference increases to about 4 percentage points in lower-middle-income G20 (guest) countries (figure B2.1.1, panel b) and to 10 percentage points in low-income non-G20 countries (figure B2.1.1, panel a). FIGURE B2.1.1 SHARE OF URBAN POPULATION USING THE INTERNET FROM ANY LOCATION, BY GENDER, CIRCA 2019 a. Rest of the world b. G20 members and guest countries 95.7 91.7 High-income 94.7 High-income 89.9 86.7 82.2 Upper-middle-income 85.6 Upper-middle-income 79.6 72.6 78.6 Lower-middle-income 68.4 Lower-middle-income 74.7 35.4 Low-income 25.4 Male 0 20 40 60 80 100 Female 0 20 40 60 80 100 Share of urban population (%) Share of urban population (%) Source: World Bank calculations based on data from the International Telecommunication Union. Note: Panel a is based on three high-income, 15 upper-middle-income, 10 lower-middle-income, and two low-income countries. Panel b is based on 18 high-income countries (EU members counted separately), five upper-middle-income countries, and two lower-middle-income (guest) countries. It is worth noting that countries with a relatively small gender gap in internet access may nevertheless have a large gap in digital skills and, hence, the ability to use digital tools. In China and Mexico, for example, more than 30 percent of women—as opposed to 15 percent of men—who use mobile phones report that they are not using mobile internet because they do not know how to use it. The digital gender gap is even wider when it comes to advanced and specialized skills. In Europe, for instance, although men and women show only a slight difference in basic digital skills, women account for only 20 percent of graduates in the field of information and communication technology (ICT). This naturally translates into even fewer female experts who specialize in emerging technologies such as artificial intelligence, blockchain, cloud computing, and robotics. 18 | CHAPTER 2 Box 2.1 Gender gaps in access to public transportation, the internet, and labor market outcomes, continued Labor market outcomes Those limitations on public transport and internet access have marked repercussions for women’s abilities to access education and employment, which—together with other factors, such as discrimination in the labor market and social norms against women accumulating occupation-specific skills—partly contribute to their lower labor force participation rates and wages relative to men’s. According to the United Nations, the labor force participation rate around the world for women ages 25 to 54 is 63 percent compared to 94 percent for men. Also, women earn, on average, 23 percent less than men. The real extent of the pay gap may be even wider, especially in developing countries, due to unaccounted for informal self-employment. Source: Public transportation based on Goel et al. (2023); IDB (2020); World Bank (2020). Internet access based on ITU (2022) and World Bank (2016). Digital skills gap based on OECD (2019) and Levorato (2021). Labor market outcomes based on Hsieh et al. (2019) and UN (2018). Disparities across cities within countries Irrespective of whether they are G20 members/guests or not, outside high-income countries, larger cities tend to provide better access to both various services and housing markets than smaller cities. This is consistent with a concentration of planning capacity and financial resources in large cities, as well as economies of scale that allow larger cities to spread the large fixed costs of providing infrastructure and services across more people. Access to basic services across cities For example, an analysis of low- and middle-income countries in Latin America and the Caribbean, South Asia, Southeast Asia, and Sub-Saharan Africa shows that households in larger cities tend to have better access to safely managed drinking water and improved sanitation services than those in smaller cities. This pattern holds regardless of whether cities are located in low- or middle-income countries, although cities in middle-income countries offer better access across cities of all size classes (figure 2.8, panels a and b). Access to jobs across cities Similarly, a global comparison of job access in cities shows that people in larger cities generally have better access, where this is measured based on the cumulative number of jobs accessible by transit within 30 minutes (Wu et al. 2021).11 This may be a result of better public transport systems designed to accommodate higher population and employment densities in larger cities. 11 The analysis covers nine cities in Australia, seven in Brazil, 10 in Canada, seven in China, 14 in Europe, two in New Zealand, and 49 in the United States, as well as one each in Cameroon and Kenya. CHAPTER 2 | 19 FIGURE 2.8 SHARE OF HOUSEHOLDS WITH ACCESS TO ADEQUATE WATER SUPPLY AND SANITATION SERVICES (%), BY CITY SIZE AND COUNTRY INCOME CLASS a. Safely managed drinking water b. Improved sanitation Small 66.8 Small 79.0 Low Low Medium 70.6 Medium 79.8 Large 68.6 Large 86.7 Small 80.5 Small 90.9 Middle Middle Medium 81.9 Medium 92.1 Large 84.4 Large 94.2 60 70 80 90 100 60 70 80 90 100 % households with access % households with access Source: World Bank calculation based on population data from the European Commission’s Global Human Settlement Urban Centre Database R2019A and services data from Henderson and Turner (2020). Note: A city is categorized as small, medium, or large when its population is between 50,000 and 199,999; between 200,000 and 1.499 million; or at least 1.5 million, respectively. Low and middle, respectively, refer to low- and lower-middle-income (low) and upper-middle-income (middle) countries based on the World Bank income classifications for fiscal year 2021/22. However, patterns vary across regions. For example, in Europe, access to jobs within 30 minutes’ travel time tends to be better than in Australia, Canada, New Zealand, or the United States for cities of all sizes. This is presumably because in Europe, even small cities can provide relatively good levels of job access because they are generally compact in form and equipped with good transit infrastructure. In the United States, by contrast, only automobiles provide moderate levels of access, whereas access via transit, walking, and cycling is low. As such, access to jobs within 30 minutes tends to be worse there than in Europe, for cities of all sizes. Meanwhile, unlike cities elsewhere, Brazilian cities show a negative relationship between job access by transit and city size—i.e., access is worse in larger cities (figure 2.9). This may be explained, in part, by the fact that large Brazilian metro areas, such as São Paulo and Rio de Janeiro are: (a) large territories with relatively low population densities; (b) have job concentrations in the city centers; and (c) have relatively poor transit networks and services (Wu et al. 2021). Relatedly, Fee (2020) finds that from 2007 to 2017, 74 out of 96 U.S. metro areas studied experienced declines in job access, measured as the number of jobs found within a fixed distance or travel time from a worker’s residence. Improving mobility by expanding or upgrading public transportation infrastructure is one option for tackling this challenge. However, in countries such as the United States—where sprawling development is accompanied by intensive road networks, and public transit infrastructure, service, and usage rates vary widely across metro areas—public transit options must be accompanied by other strategies. Encouraging more mixed-use development and/or introducing incentives for employers to locate nearer to population centers are options that could be considered here, although, in the latter case, the costs of such place-based interventions need to be carefully weighed against their benefits. 20 | CHAPTER 2 FIGURE 2.9 THE RELATIONSHIP BETWEEN NUMBER OF JOBS WITHIN 30 MINUTES BY TRANSIT AND METROPOLITAN POPULATION, VARIOUS COUNTRIES AND REGIONS 16 Shanghai 14 Paris Guangzhou Access to jobs by transit (log) Shenzhen London New York Vienna Xian 12 Amsterdam Xiamen Montreal Beijing The Hague San Francisco Kunming Nairobi Utrecht Rotterdam Warsaw Sydney Melbourne Toronto Chicago Krakow Vancouver Brisbane Washington, DC Wellington Curitiba Boston Douala Sao Paulo Los Angeles Ottawa Seattle Christchurch Minneapolis Philadelphia Quebec 10 Canberra Calgary Portland Denver Auckland Rio de Janeiro Las Vegas Miami Houston San Diego Phoenix Dallas Detroit Atlanta Orlando 8 6 11.5 12.5 13.5 14.5 15.5 16.5 17.5 Metropolitan population (log) Africa Australia & New Zealand Brazil Canada China Europe United States Source: World Bank reproduction based on data from Wu et al. 2021. Note: Each line shows the best fitting straight line for each country or region. Access to financial services across cities Larger cities tend to be more inclusive in terms of financial services as well. In Africa, for example, the share of individuals with a bank account is two to three times higher in cities than in rural areas, and even higher in larger cities (figure 2.10). Although patterns in higher-income countries are not analyzed in this chapter, the Federal Deposit Insurance Corporation (FDIC) reports that the total number of bank branches in the United States declined throughout the 2010s (Kopf 2019). This decline was driven by a sharp drop in the number of bank branches in smaller cities and rural communities, where more people tend to use local bank tellers as their primary method of accessing financial services, and the diffusion CHAPTER 2 | 21 of digital financial services is slower than in larger cities (Wood 2020). Declining access to financial services is a key barrier for households when it comes to investments in education and health. Lack of access to financial services also undermines the ability of households to manage adverse income shocks, including income shocks arising from climate change-related events, and to access economic opportunities, because it hampers local businesses’ capacities to remain and grow in small cities. FIGURE 2.10 SHARE OF INDIVIDUALS IN HOUSEHOLDS WITH A BANK ACCOUNT IN AFRICA, BY TYPE OF AREA 60 55.6 53.4 50 46.8 38.7 40 Percent 30 20 17.5 10 0 Rural 10,000– 50,001– 250,001– More than 50,000 250,000 1 million 1 million Source: OECD 2022. Note: The shares of individuals in the figure are unweighted averages across all areas in each size group. The share for a given area was calculated based on the data on individuals from the Demographic and Health Surveys (DHS) for various years during 2010–19. The calculations cover 30 countries in Africa, namely, Angola, Benin, Burkina Faso, Burundi, Cameroon, Chad, Comoros, Côte d'Ivoire, the Democratic Republic of Congo, Gabon, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Sierra Leone, South Afri- ca, Tanzania, Togo, Uganda, Zambia, and Zimbabwe. For more details on the methodology, see box 1.2 in OECD (2022). How does access to services, markets, and spaces vary within cities? In large developing-country cities, spatial segregation of various socioeconomic groups often takes the form of the concentration of the poor either in inner-city neighborhoods or in urban peripheries. For example, in Jakarta, Indonesia, the poor population is concentrated along the periphery of the city (map 2.1, panel a). In developing countries, these poor neighborhoods often take the form of informal settlements as shown, for example, in map 2.2 for Niamey, Niger. However, cities in developing countries are not alone in experiencing spatial segregation. In high- income European countries, spatial segregation between the top and bottom socioeconomic groups grew consistently across 11 out of 12 capital cities from 2001 to 2011 (Musterd et al. 2016).12 Likewise, U.S. The 12 capital cities studied were Amsterdam (the Netherlands), Athens (Greece), Budapest (Hungary), London (United Kingdom), 12  Madrid (Spain), Oslo (Norway), Prague (Czech Republic), Riga (Latvia), Stockholm (Sweden), Tallinn (Estonia), Vienna (Austria), and Vilnius (Lithuania); among them, Amsterdam was the only city that did not experience an increase in spatial segregation. 22 | CHAPTER 2 cities are severely segregated by income (see the example of Chicago in map 2.1, panel b). More generally, there are trends of suburbanizing poverty in the United States (Kneebone and Garr 2016).13 This spatial segregation of higher and lower income populations within an individual city is partly driven by inadequate planning alongside dysfunctional land markets, which in turn results in unequal access to well-located affordable housing across different socioeconomic groups. And where a person lives in a city determines their access to job opportunities, services such as healthcare and education, and various urban amenities, including public open spaces. Depending on the availability of well- connected affordable transportation infrastructure—including bicycle and pedestrian infrastructure— the level of income inequality across space can increase or decrease. MAP 2.1 SPATIAL SEGREGATION ACCORDING TO INCOME a. Poverty rate at the national poverty line, (%) b. Proportion of average individual income, Jakarta Chicago, by census track, 2016 Source: Panel a from Roberts, Gil Sander, and Tiwari (2019). Panel b from Kursman and Zettel (2018). Note: In panel a, a household is considered poor if its per capita household consumption is below Indonesia’s official poverty line (Rp 350,000 a day). Panel b shows the area-weighted average income of working-age individuals across 1,976 census tracts in the city of Chicago relative to the seven county Chicago metro area (Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will). 13 Further evidence of spatial segregation can be found online for: (a) London (the United Kingdom) by indices of deprivation and ethnicity; (b) New York City (the United States) by race and poverty rate; (c) Paris (France) by salary; and (d) Rio de Janeiro (Brazil) by race. CHAPTER 2 | 23 MAP 2.2 URBAN EXPANSION IN NIAMEY, NIGER, BY Access to job markets across SHARE OF INFORMAL SETTLEMENTS, 1985–2021 neighborhoods Returning to the Chicago metropolitan area as an example, central neighborhoods have the best accessibility when assessed by the share of regional jobs reachable by public transit within a 45-minute commute (map 2.3). By contrast, in poor  neighborhoods located far from the city center        Pre-1985   (map 2.1, panel b), less than 5 percent of jobs in the metropolitan region are accessible by transit  Share of informal settlements (%)  <20 20–40 within the same 40–60 travel time. >60 Source: Chlouba, Mukim, and Zaveri 2023. Access to services, jobs, and public spaces: formal versus informal residents MAP 2.3 SHARE OF JOBS IN THE METROPOLITAN REGION ACCESSIBLE BY TRANSIT WITHIN A In Greater Buenos Aires, Argentina, and Fortaleza, 45-MINUTE TRAVEL TIME (PERCENT), CHICAGO Brazil, evidence also shows significant gaps in METROPOLITAN AREA, UNITED STATES access to services and amenities between formal and informal settlements (table 2.1). If the quality of services—measured as the frequency of service interruption—is considered, the gap becomes even larger. Nearly 75 percent of slum households in four selected Latin American cities—Bogota (Colombia), Buenos Aires (Argentina), Caracas (República Bolivariana de Venezuela), and Fortaleza (Brazil)—report experiencing interruptions of more than 24 hours in the power supply or tap water supply during the six months prior to being surveyed. This compares to less than one-third in the formal settlements (CAF 2018).14 14 The city of Buenos Aires also reports that in 2018—prior to Source: World Bank reproduction based on data from the World Bank’s intervention—significant gaps existed the United States Environmental Protection Agency’s between the formal part of the city and Barrio 31 (an informal Smart Location Database. settlement) in terms of the share of population with: (a) complete secondary education (72 percent vs. 24 percent); Note: The 45-minute threshold includes time spent on (b) health coverage (81 percent vs. 26 percent); and (c) formal waiting, transfers, and walking to/from transit stops. income (75 percent vs. 36 percent). 24 | CHAPTER 2 TABLE 2.1 LEVEL OF ACCESS TO SERVICES, BY SETTLEMENT TYPE, IN GREATER BUENOS AIRES, ARGENTINA, AND FORTALEZA, BRAZIL Greater Buenos Aires Fortaleza Formal Informal Formal Informal Household composition % of households with >3 people per room 5 7 3 3 Square meters per person 23.8 13.0 17.0 12.2 Access to basic services (% of households) Tap water 87 28 96 89 Sewer system 78 31 62 31 Connection to public electricity grid (billed) 96 49 99 93 Natural gas (via pipeline) 75 18 31 31 Waste collection 94 76 96 86 Tenure regime (% of households) De facto occupant 2 6 0 0 Tenant 22 6 30 23 Available amenities within a 10-minute walk or less (% of households) Hospitals 49 63 63 63 Schools 82 71 78 71 Kindergartens 78 72 54 52 Parks 75 61 65 54 Libraries 27 16 5 4 Available transport within a 10-minute walk or less (% of households) Bus (formal) 96 89 96 95 Bus (informal) 45 11 53 51 Subway 9 8 7 4 Train 28 17 8 3 Taxi 45 22 58 58 Motorcycle-taxi/bike-taxi 4 0 54 48 Source: CAF 2018. Note: The bold-faced numbers indicate differences between the two types of settlements that are statistically significant at the 10 percent level at least. Access to health and education services across neighborhoods Partly due to inefficient public transportation systems, residents of poorer neighborhoods in Jakarta, Indonesia, likewise need to spend more time and money to reach adequate health and education services than do the residents of richer neighborhoods (map 2.4, panels a and b). Hence, accessing regional public hospitals from a neighborhood using public transportation services takes on average about 40 minutes, at a median cost of Rp 4,000, but it takes almost two hours and costs Rp 20,000 from CHAPTER 2 | 25 some remote neighborhoods. A significant gap is also found in transport access to the three top- ranked senior high schools—it takes 107 minutes and Rp 16,000 using public transportation services for students living in poorer neighborhoods, as opposed to 35 minutes and Rp 3,500 for those living in a neighborhood with an average poverty rate (Roberts, Gil Sander, and Tiwari 2019). MAP 2.4 TRAVEL TIME TO REGIONAL HOSPITALS AND TOP-RANKED SENIOR HIGH SCHOOLS, JAKARTA a. Travel times to Jakarta’s nine regional b. Travel times to the three top-ranked senior high public hospitals schools in each of Jakarta’s kota Source: Roberts, Gil Sander, and Tiwari 2019. Notes: Calculations of travel times based on data from Google Maps and Trafi and of poverty rates on data from Smeru Research Institute’s Poverty and Livelihood Map of Indonesia 2015. The PPP $3.10 Poverty rate refers to the share of the population that lives on less than $3.10 a day at 2011 PPP constant international prices at purchasing power parity (PPP) exchange rate. Kota = city. Access to open public space across neighborhoods Finally, analysis of neighborhood-level open-source data reveals significant within-city inequalities in accessing infrastructure and amenities across the globe (Boeing et al. 2022). For example, access to large open public spaces—which can provide various benefits, including better health, heat mitigation (in the case of open green spaces and/or open spaces with water features), and opportunities for social connectedness—are unequal across neighborhoods within cities, especially in most cities in middle- income countries and sprawling cities in the United States (map 2.5). 26 | CHAPTER 2 MAP 2.5 ACCESS TO LARGE OPEN PUBLIC SPACE WITHIN 500 METERS, 25 SELECTED CITIES Source: Adopted from Boeing et al. 2022. Note: Access for urban neighborhoods was considered achieved when at least half of the sampled walkable area was estimated to be located within 500 meters of areas identified as public open space of 1.5 hectares or larger. CHAPTER 2 | 27 How do outcomes of inclusiveness vary across and within cities? Reliable infrastructure is the backbone of a healthy economy. It not only helps attract higher-value- added firms by enhancing the business environment, but also connects people to higher-quality jobs generated by those businesses, as well as services. Better access to services helps people stay healthy and accumulate human capital. And agglomeration economies, which are facilitated by better access to services, markets and spaces, make workers more productive. Hence, differences in access to services, markets, and spaces, and the quality of connective infrastructure, help to determine differences in welfare outcomes. Larger and more developed cities tend to show better poverty outcomes Consistent with the tendency for larger and higher-income cities to provide better access to services, jobs, and various spaces, figure 2.11, panel a, shows that, in Chile, cities provide “escalators out of poverty,” with the probability of a household’s escape from poverty increasing with city size.15 The same relationship also holds for both Colombian and Indonesian cities (Nakamura et al. 2023). In line with this, at the middle-income global poverty line of $3.20 a day, poverty rates tend to be lower in more densely populated larger cities (urban centers) than in less densely populated smaller towns and suburbs (urban clusters) (figure 2.11, panel b). Evidence shows that, in addition to Indonesia, the tendency also holds for some cities in G20 member countries such as Brazil and Mexico (Ferre, Ferreira, and Lanjouw 2012). As discussed earlier, however, unequal access to well-located affordable housing—partly due to insufficient housing supply in good locations—contributes to residential segregation along socioeconomic lines, and concentrated poverty is a big problem for many cities regardless of the level of country development. Low-skilled workers who have been pushed to the margins of society tend to have limited access to services, including high-quality healthcare and education, which in turn contributes to limited access to formal and better-paid jobs (figure 2.12, panel a). This is especially true for persons with disabilities (box 2.2). Inadequate connective infrastructure compounds residential segregation to deepen within-city income inequalities. Although an important channel of upward mobility is knowledge spillover from high- skilled to lower-skilled workers, there is little scope for such spillovers in segregated cities with limited within-city mobility options. Income inequalities tend to be more severe in larger cities, because they likely host populations with varying levels of skills and education, whereas smaller cities tend to consist of relatively lower-skilled populations (figure 2.12, panel b).16 15 The figure also reveals that climate hazards, represented by flood risk, slow down the escalators. This suggests that policies designed to include the marginalized—for example, providing adequate basic services and helping them afford housing in safer locations— can make them more resilient to various shocks and stresses. This issue is discussed further in the Spotlight. 16 The relatively high average level of Gini coefficient for small cities in low-income countries is driven by cities in Latin America and the Caribbean—a region well known for its high level of income inequality (Busso and Messina 2020). 28 | CHAPTER 2 FIGURE 2.11 PROBABILITY OF ESCAPING POVERTY AND POVERTY RATES (PERCENT) a. Probability of escaping poverty, Chile b. Poverty rate at poverty line of $3.20 0.78 Vietnam Egypt, Arab. Rep. Predicted probability 0.76 Bangladesh 0.74 Ghana Angola 0.72 Tanzania Ethiopia 0.70 6 7 8 9 10 11 12 13 14 15 16 0 20 40 60 80 Log of population, 2015 Poverty rate (%) Low flood risk High flood risk Urban cluster Urban center Source: Panel a from Nakamura et al. (2023); panel b from Combes et al. (2022). Note: Panel a shows how the predicted probability of escape from poverty varies with city size for households that live in low- and high-flood risks areas of cities in Chile, thereby providing insights into how, in addition to city size, exposure to climate change related hazards affects this probability. In panel a, poverty is measured by the upper-middle-income poverty line of $5.50 per day, 2011, purchasing power parity-adjusted. In panel b, the $3.20 global poverty line is defined in 2011 constant international prices at the purchasing power parity exchange rate using country-specific spatial price deflators. Urban centers (cities) and urban clusters (towns and suburbs) are defined using the European Commission’s degree of urbanization methodology. FIGURE 2.12 RESIDENTIAL SEGREGATION BY SKILL LEVEL AND INCOME INEQUALITY a. % of adults with tertiary education, Jakarta b. Gini coefficient Small Low-income Medium Large Middle-income Small Medium Large Small High-income Medium Large 0.3 0.4 0.5 0.6 Gini coefficient Source: Panel a from Roberts, Gil Sander, and Tiwari (2019). Panel b from Mukim and Roberts (2023). Note: In panel b, Gini coefficients are calculated based on income for the United States and 16 countries in Latin America and the Caribbean and based on consumption for Indonesia. CHAPTER 2 | 29 Box 2.2 Barriers to employment for persons with disabilities According to International Labour Organization (ILO) estimates, 1 billion, or 15 percent, of the world’s population live with some form of disability. Although most of them are of working age, they are more likely to be economically inactive (neither in employment nor actively seeking employment) than those without a disability. One important reason is because people with disabilities tend to face more barriers to education. Relative to those without disabilities, they are twice as likely to have a less than basic level of education and half as likely to have an advanced-level education. Given the strong correlation between educational attainment and skill level, they are more likely to be unskilled. Physical barriers, and mobility barriers in particular, compound the problem. In the United States, for example, lack of transportation (10.6 percent) was identified as the third most reported barrier to accessing jobs, following one's own disability (79.0 percent) and lack of education or training (12.2 percent). Relatedly, employers’ fear about potential additional costs of employing people with disabilities, including special transport costs, often inhibits hiring. The consequences of these barriers are clear in labor market outcomes. Globally, persons with disabilities show a higher unemployment rate relative to those without. A prolonged period of unemployment is likely to lead many of them to inactivity—the ILO’s analysis shows that the average inactivity rate across 60 countries (for which data are available) is 65 percent for persons with disabilities as opposed to 40 percent for those without. Even if employed, they are more likely to be (unpaid) self-employed, or to work part-time and/or in the informal sector, because their low skillsets do not allow them to access better-paid high-skilled jobs. Source: ILO 2022; UN 2007. 30 | CHAPTER 2 Summary and conclusion This chapter has taken stock of how inclusive cities worldwide are today, revealing significant room for improvement in achieving inclusiveness. Cities generally become more inclusive in terms of extending access to services, markets, and spaces to more people as development occurs, perhaps because of higher financial and social capacities that higher-income countries generally have for planning cities and providing well-located and affordable housing, infrastructure, and basic services. At the same time, cities tend to become more inclusive on many measures as they become more populated. One reason for this is the fact that it is easier to cover the large fixed costs of infrastructure provision in more populated cities. A second reason might be because urban policies—and hence, financial and technical resources—are often more geared towards the needs and interests of larger cities. As the evidence presented in this chapter shows, larger and more prosperous cities provide people with more opportunities to escape from poverty. However, evidence also reveals that within-city income inequalities tend to rise as countries move from lower- to middle-income level and cities grow in size. This may be partly because urban planning, policies, and practices, intentionally or unintentionally, have been forcing the poor to live in locations from which access to vital services, markets, and spaces is limited. Unfortunately, in many cities, investments in mobility-enhancing connective infrastructure have not been sufficient to offset such limitations, as is evident in differing levels of access to services and jobs from different neighborhoods. Access to services, markets, and spaces is crucial to ameliorating socioeconomic inequalities because it helps city residents stay healthy, accumulate human capital, interact with higher-skilled people, and therefore access better economic opportunities. Access can be enhanced through various pathways, but the analysis of this chapter points to three dimensions of urban development: (a) planning to provide affordable housing in easily accessible, safe locations, and to bring local schools, healthcare facilities, and public spaces close to where people live, by governing zoning, densification, and expansion, among others; (b) connecting to improve mobility through better design and coverage of public transportation infrastructure, and to enhance equitable access to digital spaces; and (c) financing to incentivize and pay for access-enhancing infrastructure and services. Chapter 3 discusses each of these dimensions in detail. CHAPTER 2 | 31 SPOTLIGHT HOW DOES INCLUSIVENESS INTERACT WITH SUSTAINABILITY AND RESILIENCE? Fast-growing cities—despite a range of benefits—can give rise to various stresses, especially if their urbanization is not well managed (Ellis and Roberts 2016; Mukim and Roberts 2023). Indeed, cities have been a significant cause of sustainable development challenges by emitting 70 percent of man- made greenhouse gas (GHG) emissions globally (Hopkins et al. 2016) and a significant amount of local pollutants such as particulate matter of 2.5 microns or less in diameter (PM2.5). In addition to climate challenges, cities have been enduring multiple intersecting challenges, including as a result of overlapping global crises, and in some cases, rapidly aging populations resulting in a so- called “silver tsunami.” As challenges overlap in time, their impacts intensify. By disproportionately affecting the least resilient—who tend to be more exposed to and less able to adapt to and recover from shocks and stresses—they can exacerbate existing marginalization, poverty, and inequality. Excluding certain groups of people from critical services, markets, and spaces not only undermines inclusiveness, but will also likely undermine broader efforts for sustainable urban development in various ways. For example, the marginalized can be forced to rely on more polluting fuels for both cooking and transport (UNOPS 2022). They can be pushed onto land on the peripheries of cities, thereby contributing to sprawl and thus traffic congestion (Mukim and Roberts 2023). They can be compelled to depend on unsustainable groundwater extraction that can contribute to subsidence (Rodella, Zaveri, Bertone 2023). 32 | SPOTLIGHT Conversely, inclusive cities—in which all residents can fully access quality infrastructure and services, markets, and spaces (political, physical, cultural, and social)—have the potential to promote sustainable behaviors and thus reduce emissions of man-made GHG and local pollutants while building adaptive capacity. This, in turn, can mitigate the damages and disruptions generated by shocks and stresses to cities and residents. This spotlight describes various channels through which inclusive urban development can contribute to resilient and sustainable cities for all. Inclusion and environmental sustainability Land use Land use regulations induce changes in urban form and the spatial distribution of residents, thereby affecting total commuting miles traveled and congestion levels. In addition, when floor space per household changes, household energy consumption of lighting, cooling, and heating also changes. Hence, land use and other policies (including building height and floor area ratio regulations) are critical to altering both city density and the degree of sprawl, by affecting the costs of vertical construction, the walkability of cities, and, more generally, the choice of transportation mode. Such changes, in turn, can reduce the emissions of carbon dioxide (CO2) and local pollutants (such as PM2.5) through lower usage of private vehicles and energy. Compact development can also help save fertile agricultural land and natural land more generally. The conserved structure and function of an ecosystem can increase opportunities for reducing the amount of CO2 in the atmosphere, contributing to climate mitigation. Furthermore, protecting floodplains and forests in the urban fringe can improve urban water supplies by increasing natural water retention and groundwater recharge (World Bank 2021). The above mentioned environmental benefits can translate into both physical and mental health benefits, including: (a) food security and better nutrition from a greater variety of food sources; (b) lower risks of morbidity and mortality associated with local air pollution; and (c) lower risks of lifestyle diseases—such as obesity, diabetes, and heart disease—by promoting more active lifestyles, including more walking and cycling. In particular, research on French metropolitan areas shows that a city that is designed to provide considerable variations in building structure and arrangements along street networks encourages walkability by providing both greater legibility (which makes a place comprehensible to an observer moving through it) and greater diversity of visual experience (Blaudin de Thé, Carantino, and Lafourcade 2021). However, it is noteworthy that with current technologies, the construction of tall buildings—which is required to accommodate a large number of people in a compact area while avoiding overcrowding— embeds high up-front CO2 emissions (Mukim and Roberts 2023).17 To take full advantage of mitigation benefits, therefore, technological innovation in construction materials, as well as the decarbonization of energy supplies, needs to be accelerated. 17 Carbon emissions are released during the manufacturing, transportation, construction, and end-of-life phases of all built assets, as well as during operational life. Those emissions—also known as embodied carbon—contribute about 11 percent of all global carbon emissions (WorldGBC 2019). SPOTLIGHT | 33 Housing Housing structures for the poor, especially those living in informal settlements, are often made of temporary and/or substandard materials with low energy efficiency. Due to the unplanned nature of informal settlements, building designs tend to be inferior, without adequate lighting or ventilation, and residents tend to rely on bio/fossil fuels for cooking, lighting, and heating, without access to clean energy sources. These not only diminish indoor air quality but also can increase GHG emissions and local air pollution through, for example, excessive use of building materials whose extraction, manufacturing, transport, construction, and disposal embody significant amounts of carbon emissions. This conversely implies significant opportunities for shifting towards sustainable development through housing improvement for the poor. For example, slum upgrading using energy efficient building materials and designs can not only decrease utility bills for households but also reduce carbon emissions associated with energy needs. Also, policies and funding, which enable lower-income families to access low-carbon building materials and to use them efficiently and correctly, will help scale up the use of such materials in the housing upgrading process (City Climate Finance Gap Fund 2023). Water and sanitation In many cities across the globe, population and water demands are growing faster than their water services. When renewable local water resources are insufficient to meet increasing demand and per capita consumption, the result may be overexploitation of water resources, especially in informal settlements on the urban fringe, due to a lack of municipal water connections and inadequate public service delivery (Baker 2012). This may also create harmful competition for water among cities, as well as between cities and rural areas, with potential implications for agricultural yields (Mukim and Roberts 2023). Meanwhile, the urban water system is exposed to various sources of contamination, including dumping of garbage or hazardous materials, fuel storage tank leaks, and industrial wastes. Inadequately treated wastewater not only harms water quality in urban areas, but also affects farmland downstream of cities that rely on contaminated urban wastewater for irrigation. Untreated wastewater also generates three times more GHG emissions than wastewater treated at a sewage treatment plant (Warming 2020). Hence, expanding equitable access to reliable water and sanitation services, especially in informal settlements, can significantly contribute to better environmental health and living conditions, as well as mitigating climate change. Adequately treated water from a variety of sources can further be used for productive and beneficial purposes, such as potable water, industrial processes, environmental restoration, and even irrigation, thereby facilitating water resource management with a wide range of benefits (including power generation and food production). Solid waste management Whereas waste collection and disposal services are spreading globally, so is municipal waste, due to fast- growing urban populations and changing lifestyles and consumption patterns. Many municipal solid waste disposal facilities in low- and middle-income countries are open dumpsites. Additionally, many informal settlements are located near, or even on, city landfills without adequate solid waste 34 | SPOTLIGHT management services. In combination, these factors contribute significantly to air, water, and soil pollution, as well as GHG emissions.18 Conversely, well-planned solid waste disposal, collection, and treatment services can bring various environmental benefits, such as: (a) reduced environmental pollution; (b) lower GHG emissions, including of carbon dioxide and methane, which is more than 25 times as potent as CO2 at trapping heat in the atmosphere (EPA 2023); (c) energy conservation, by converting solid waste from landfills into fuel sources, as well as by consuming less energy when using recycled rather than raw materials for production; and (d) natural resource conservation through recycling and reuse of materials. Inclusion and resilience Urban planning policies, institutions, and building codes Current urban planning policies and institutions in many countries lack effectiveness, failing to manage the urban spatial form in ways that promote green, resilient, and inclusive development. Hence, by limiting housing supply in safe and well-connected locations, inflexible planning policies, along with dysfunctional land markets, often result in sprawling development in urban peripheries or the formation of informal settlements in hazard-prone areas. Effective planning policies and strong enforcement can help the vulnerable be less exposed to natural hazards by preventing urban growth in hazard-prone areas and safeguarding ecosystems from degradation. Healthy forest ecosystems, for example, can protect communities from avalanches and landslides. Likewise, coastal ecosystems—including coral reefs, wetlands, and mangroves—are critical to buffering against coastal hazards, such as flooding, cyclones, storm surges, and tsunamis (World Bank 2021). Together with effective urban planning, reforms that strengthen formal institutions for titling and property transfer can increase the provision of affordable housing in safer locations by encouraging investment in formal structures. The security of land and property rights would furthermore encourage the current residents of informal settlements to invest in property and neighborhood protection measures against natural hazards. In addition to land use policies, building regulatory frameworks are mechanisms to guide both new urban development and the protection of existing assets to reduce losses and damages associated with natural as well as chronic hazards, such as fires and building collapse.19 For example, flood and wind resistance building regulations—such as enforcing low-cost hurricane straps in residential buildings in Jamaica—can help reduce vulnerability in new and existing building stocks in hazard-prone waterfront areas (World Bank 2015). Likewise, when Türkiye was struck by deadly earthquakes in February 2023, all 24 schools in affected areas that were built in accordance with the country’s latest seismic code survived completely 18 Burning refuse is a common practice that results in an increase of black carbon in the atmosphere. Globally, waste management is estimated to contribute to about 5 percent of total GHG emissions. Methane emissions associated with waste management alone account for 1 to 2 percent of GHG emissions into the atmosphere (Guatam and Agrawal 2020). 19  For more information, see World Bank (2015) for details on mobilizing building code regulations for risk reduction. SPOTLIGHT | 35 undamaged. More generally, all schools built through the Education Infrastructure for Resilience project have been providing seamless learning opportunities in a safe environment for students and teachers by complying with Turkish codes and regulations on energy efficiency, fire protection, workplace safety, and access for persons with disabilities, as well as seismic safety (World Bank 2023).20 Infrastructure and basic services The delivery of urban infrastructure and basic services is increasingly difficult, largely due to rapid urbanization in developing countries and poorly maintained and/or aging infrastructure in developed ones, not to mention the tightening of fiscal space for both national and local governments arising from overlapping global crises. In developing countries, issues of informality compound the challenges because governments can be reluctant to invest in illegal settlements, and the private sector may perceive investments in such areas to be overly risky.21 Climate change is exacerbating this problem by, for example, threatening the ecosystems that supply water resources, and by causing critical infrastructure and services to fail during extreme weather events, which have become increasingly frequent and intense. This is the case even in cities such as Washington, D.C., where the sea walls in the tidal basin are no longer fit to protect the land surrounding them from rising water levels driven by climate change. As a result, the U.S. National Park Service has been forced to initiate an investment program to raise the level of the sea walls.22 Tackling those challenges, however, opens-up opportunities to enhance a city’s resilience. The provision or upgrading of adequate drainage systems, for example, can reduce chances of heavy rainfall turning into a disastrous flood. Proper solid waste disposal and collection can further help lower the risk of devastating floods by preventing waste from blocking drainage channels. Likewise, expanding access to reliable water and sanitation services would improve urban water supply, especially during droughts, while protecting people from contamination. In addition to gray infrastructure, green infrastructure also plays a key role in climate resilience. For example, green roofs, parks, tree planting, and urban wetlands not only help relieve heat stress by regulating city air temperatures, but also complement drainage systems by reducing surface runoff and increasing infiltration. Green infrastructure can also improve the quality of urban wastewater by trapping pollutants, microbial contaminants, and sediments, which in turn reduces the contamination of water sources for urban residents (Reid 2020). All these can bring significant health benefits through lower risks of morbidity and mortality associated with heat stress, inadequate hygiene, and the spread of waterborne diseases. Potential cost and time savings due to a reduced need for healthcare can help people accumulate human capital by improving attendance and performance at school and work. This eventually enables them to participate in formal labor markets and increase income. In turn, this provides households with opportunities to accumulate resources to invest in self-protection against various shocks, as well as savings that can act as a form of self-insurance against such shocks. 20  The Education Infrastructure for Resilience project has been implemented since 2017 by Türkiye’s Ministry of National Education in partnership with the World Bank, Global Facility for Disaster Reduction and Recovery (GFDRR), and European Union (EU). As of June 2023, a total of 57 schools have been built. 21 The reality is, however, the urban poor tend to pay more than the non-poor because they rely on expensive vendors to cope with inaccessibility to formal services (Baker 2012). 22  https://chesapeakebaymagazine.com/dc-tidal-basin-wall-to-be-raised-5-feet/. 36 | SPOTLIGHT Meanwhile, safe and reliable public transportation systems help urban residents not only physically adapt and accumulate human capital by connecting them with education and health services, but also facilitate income growth by connecting them with formal labor markets. Reliable transportation systems can further serve as efficient evacuation and rescue options in emergencies, especially for poorer households that do not own personal motorized vehicles. Financial services and fiscal incentives In line with access to labor markets and income growth, expanding equitable access to financial services can assist households in buffering and insuring against crises in various ways. Financial services allow households to save financial resources more securely and conveniently. Access to borrowing opportunities would also reduce an exposure bias against poorer households by allowing them to afford higher rental prices in safer locations. Governments can help households reduce the risks they face from natural hazards by providing financial incentives to retrofit and upgrade their properties. The government of Türkiye, for example, provides families with financial support in the form of either an interest rate buy-down for loans from commercial banks or rental support for up to 18 months, which helps them upgrade or retrofit residential units at risk of damage or collapse in the event of an earthquake or other hazard. Digital connectivity A study by Striessnig, Lutz, and Patt (2013) suggests that education is important for grappling with climate change-related shocks and stresses. Better-educated people tend to have higher adaptive capacities, because they tend to have more access to information, such as early warnings; better cognitive skills to process new information; more willingness to change risky behaviors; and more capacity to extend the personal planning horizon. Although the internet and digital tools are not the only channels through which people can access training, education, and information, they do help establish alternative communication systems for diverse groups of people and facilitate real-time information dissemination. Digital connectivity also helps people participate in political, physical, cultural, and social spaces, which provides them with a voice. This voice can, in turn, lead to policies that are more inclusive of otherwise marginalized groups in society, thereby helping build their resilience. SPOTLIGHT | 37 CHAPTER 3 PLANNING, CONNECTING, AND FINANCING FOR MORE INCLUSIVE CITIES Key messages Although the relevance and applicability of policy instruments depend on local circumstances, city leaders need to better plan, connect, and finance their jurisdictions to achieve inclusiveness. • Planning: To deliver quality access to services, markets, and spaces to residents, cities need to, at a minimum, improve land market institutions; encourage compact, mixed-use, and transit-oriented development; integrate any existing informal settlements into the formal urban fabric; and build resilience against climate change-related hazards. • Connecting: To increase both physical mobility and the ability to access digital spaces for all, cities need to employ the full range of policy actions, encompassing improvements in “hard” transport and digital infrastructure, as well as softer policy measures to expand access to the services facilitated by this infrastructure. • Financing: To close existing gaps and to meet growing demands for better accessibility, cities need to better tap various financial resources, notably local revenues, subnational borrowing, and financing from the private sector, including climate finance, in coordination with intergovernmental transfers. Chapter 2 revealed that, although the extent and nature of the challenges vary by context, cities have significant room for improvement in providing all residents with access to quality services, markets, and spaces. Broadly speaking, city leaders 38 | CHAPTER 3 can enhance access in two ways.23 The first is by implementing policies and undertaking investments to bring services, markets, and spaces closer to where people live. This involves investing in cities as well as in neighborhoods from which access to services, markets, and spaces lags. The second is by improving people’s connections to the locations where services, markets, and spaces can be accessed. For instance, this could be accomplished by improving mobility (by, for example, augmenting the coverage and quality of transportation infrastructure and services) and/or by improving digital connectivity. Whether spatial targeting of specific neighborhoods or connecting—or a combination of both methods—is more appropriate for improving access for all city residents will depend on the particulars of the situation. It may be appropriate for all neighborhoods to have, for example, a local clinic and primary school, but it does not make sense for each neighborhood to have a hospital and a university. Nonetheless, to close existing inequalities and accommodate growing needs, it is important to have a shared understanding of how those methods can contribute to better accessibility. This chapter provides a policy compass for how cities can become more inclusive through planning and connecting, and—having identified priority actions—how cities can tap resources for financing the necessary interventions.24 Important to note in this context is that the word “connecting” serves as shorthand for the full range of both capital investments (i.e., investments in hard transport infrastructure and the physical infrastructure that underpins digital networks) and other policy interventions that can potentially contribute to enhancing accessibility through better mobility in physical and virtual spaces. Annex 3A at the end of this chapter provides a summary of the recommended actions that are discussed in the main text. Planning to set guiding principles for the provision of land, housing, and services Easy access to quality services, markets, and spaces requires urban households to spend substantial amounts of money and time on housing and transportation. To reduce those costs, poor households often must choose informal jobs that can be found near home, or to live in (precarious, informal) settlements in remote and/or unsafe areas (Duranton and Guerra 2016). Cities in both developed and developing countries continue to grapple with this problem, partly due to inadequate land use planning that has failed to bring residents and key destinations close enough together, unless residents trade health and safety for accessibility. Bearing in mind that overcoming spatial mismatches requires a concerted effort across sectors and jurisdictions, this section discusses some urban planning policies that can allow city leaders to use land and the built environment in more inclusive, sustainable, and resilient ways. These cover the following topics: improving inefficiency in the use and exchange of land; achieving compact, mixed-use, 23 This chapter uses the term “city leaders” to cover all subnational government policy makers responsible for governing a city. These can include leaders of large and small municipal governments, as well as metropolitan and regional governments. The structure and responsibilities of city governments are often complex and can vary significantly across and within countries (e.g., city-states, capital cities, large cities, and medium-sized cities). 24 A more in-depth discussion of options and policy reforms for increasing the access of city governments to sources of infrastructure financing is provided in the Organisation for Economic Co-operation and Development’s (OECD’s) Financing Cities of Tomorrow report, which was prepared for the G20 Infrastructure Working Group under the Indian presidency. CHAPTER 3 | 39 and transit-oriented development; integrating informal settlements into the formal urban fabric; and carrying out resilient urban planning practices. Improve land market institutions25 Land use is central to a city’s expansion and development. For economic efficiency, land should be able to shift among different uses in well-functioning land markets through the property rights embodied in land titles. Governments regulate land markets to offset market failure and to ensure: (a) the appropriate coordination of different land uses, such as preventing the location of heavily polluting industries in residential areas; and (b) the integration of private and public uses of land, such as space for transport infrastructure in densely populated areas. This is done by land market institutions, including a land registry; mechanisms for contract enforcement and conflict resolution; zoning laws; and subdivision regulations that help convert land for different uses. Versatile and well-implemented regulations governing land markets can enforce property rights, safeguard land tenure, facilitate beneficial land transfers, ease land use conversion to reflect market needs, and bolster land taxation. By contrast, excessively stringent regulations—such as rigid land use conversion rules and overly restrictive minimum building standards—can hinder the benefits of density and agglomeration. One unintended consequence of overly stringent regulations is shortages of affordable housing, hurting the poor, including migrants. Dysfunctional land markets help explain why the average ratio of the median house price to the median annual household income is higher in many African and Asian cities than in many large U.S. cities. City leaders can enhance the efficiency of land use by establishing systematic and transparent valuation. Developed countries determine the value of land by examining property attributes and market data from transactions. Many developing countries, however, cannot do this because they lack basic institutions, as well as the systems to record and manage potential income from land and the cost of inputs into land development. The implications of this bear heavily on local financing mechanisms, because land valuation is integral to local revenue generation—through land-based financing to be discussed in the Financing section—and the right-of-way for the provision of infrastructure and basic services. Inadequate land valuation also undermines investors’ confidence in a city’s prospects and responsiveness to future changes in the demand for land. Hence, cities need policies that clearly define property rights and determine land values. Bogotá, Colombia, made improvements in this regard in the previous decade by updating its cadastral database and revaluing its 2.1 million properties. To overcome the lack of transaction data and complete the cadastral update, the city consulted with a team of expert appraisers, who collected price data using a combination of approaches to yield an appraised value. To keep property taxes progressive and avoid resistance from property owners, the city capped property tax increases. To improve institutions for land valuation, city leaders should: (a) train a cadre of appraisers in property valuation; (b) ensure transparency in the valuation process; and (c) make information on land values widely accessible. In recent years, some countries have been modernizing their land administration systems through public-private partnerships (box 3.1). 25  This subsection largely builds on World Bank (2009) and World Bank (2013). 40 | CHAPTER 3 Box 3.1 Public-private partnerships in land administration and management systems Although some aspects of land administration services, such as registration, have certain public goods elements and are better suited to public sector provisioning, other services such as field surveys, land information system development, e-services, and customer management can benefit from private sector participation to introduce efficiencies and reduce the costs of service delivery. Public-private partnerships (PPPs) in regulatory services are not new, but there is now interest in using them to modernize land administration systems, to avoid some of the pitfalls of traditional procurement methods while supporting the goal of improving those systems and services. One of the first major concessions of this kind was in Ontario, Canada. It encompassed digitization and the operation of an electronic land registry system. Other examples include the e-Land (e-Tanah) project in Kuala Lumpur, Malaysia, and the Land and Property Information Concession in New South Wales (NSW), Australia. Source: World Bank 2020b. Promote compact, mixed-use, and transit-oriented development (TOD) for lower-income families If well located, well designed, and well-coordinated with public transportation, a compact and mixed- use transit-oriented development (TOD) provides a means of achieving higher population densities while avoiding overcrowding. This can bring a range of benefits for urban inclusion, such as increasing opportunities for housing and jobs by supporting and leveraging private investment in real estate and businesses located around transit stations. In turn, this makes it more affordable for residents to access services, markets, and spaces via transit, walking, or cycling, especially for low-income and other disadvantaged residents, who disproportionately rely on those modes. However, such development does not guarantee enhanced urban inclusion (box 3.2). Instead, by making transit areas more attractive, TODs and associated urban gentrification risk displacing existing residents and local businesses, especially those with limited financial resources and no ownership control over their property. Although gentrification poses risks in the cities of countries at all levels of development, the potential that the poor lose out is greater in lower-income countries, where poor households may lack the security of tenure and adequate legal protections. This is especially pronounced when poor households live in slums that, despite their poor-quality housing, are well- located and provide good physical access to job opportunities. To ensure disadvantaged residents fully benefit from TODs, the following two policy areas, among many others, warrant city leaders’ attention. CHAPTER 3 | 41 Box 3.2 Chicago’s effort to make transit-oriented development equitable Although transit-oriented developments (TODs) have become increasingly common in Chicago in recent years, most of them have been upscale buildings in affluent or gentrifying neighborhoods. Indeed, according to an article published in 2020, of the more than 200 TOD projects approved since late 2016, all are located on the relatively affluent North and Northwest sides, or downtown. To promote socioeconomic inclusion, the city of Chicago published and mandated its first-ever Equitable Transit-Oriented Development (ETOD) Policy Plan in 2020. ETOD elevates and prioritizes investments and policies that intend to close socioeconomic gaps between neighborhoods that are predominately populated by people of color and those that are majority white. The key issues the plan intends to address include: (a) disparities in health and life expectancy between people of color and their white counterparts; (b) the city’s insufficient development of dense, walkable retail and housing near transit stations in Black and Brown communities; and (c) displacement pressures experienced by residents living near transit stations. The city government drafted the plan through a cross-sector engagement process, by working with a group of representatives from the planning, housing, public health, and transportation departments and the Chicago Transit Authority, as well as those from the private sector and civil society groups. It also aimed to standardize community engagement practices to elevate community voices in decision making processes. Source: Greenfield 2020; City of Chicago Equitable Transit Oriented Development (https://www.chicago.gov/city/en/sites/equitable-transit-oriented-development/home.html). Respond to housing needs by revisiting land use regulations Land use and, more generally, urban spaces are regulated for good reasons, such as ensuring that a toxic industry is not located in the middle of a residential neighborhood, or better managing the inflow of residents. However, land use regulations and policies can have unintended consequences. For example, planning instruments, such as the floor space index (FSI), also referred to as the floor area ratio (FAR), and minimum lot sizes, can drive up housing prices by reducing densities and limiting the supply of land and housing if they are set inappropriately high. The same is true of overly restrictive zoning. This, in turn, can push poorer households to remote areas of a city—from which access to services, job markets, and spaces can be costly and time consuming—while transferring wealth to landlords, who benefit from increased rents. Indeed, it is estimated that cities currently realize only about one-third of the welfare potential of tall buildings, presumably because of low maximum FARs and stringent land use regulations, compounded by dysfunctional land markets, especially in low- and middle-income countries, that artificially constrain the development of such buildings. To illustrate this, Ahlfeldt and Jedwab (2022) conducted a model-based thought experiment in which development of a city’s buildings was constrained to 15 floors. They estimated that, in cities with a population of at least 3 million, this constraint results in a 10 42 | CHAPTER 3 percent loss in worker welfare and a more than 15 percent increase in aggregate land rent. This suggests that the poor, as well as younger adults who are entering the housing market for the first time, will likely suffer the most from this welfare loss because of the higher than necessary rents they must pay. To meet growing needs for affordable housing while discouraging sprawl and the proliferation of informal settlements, city leaders can create market-based policies and incentives, such as the relaxation of building height controls, where appropriate, and density bonuses. They can also promote highly granular patterns of variation in land uses and FSIs/FARs to accommodate different levels of density needs across different land uses—such as central business district (CBD), commercial, and residential—while facilitating transfers of development rights. In doing so, it is important to put in place urban design guidelines to create walkable urban environments with adequate open public spaces (Ellis and Roberts 2016). Include the disadvantaged through inclusionary housing policies To prevent the disadvantaged from being priced out of well-connected, safe locations, city leaders can maintain land affordability and incentivize affordable housing development by deploying policies such as inclusionary zoning, mixed-use housing development, and, for cities with well-developed taxation systems, property tax relief. On the supply side, Virginia’s Arlington County, in the United States, for example, attracts private developers through: (a) bonus density or parking incentives26 for those that directly provide affordable units or make cash contributions to an affordable housing investment fund;27 (b) a transfer of development rights (TDR) program, which allows density or other development rights to be transferred from one site to another if a housing developer preserves affordable housing, open space, and community facilities, among others; and (c) tax incentives, such as a property tax credit for developers. On the demand side, city leaders, with the support of the national government, can help bridge the gap between lower incomes and higher costs of housing through housing allowances, subsidy vouchers, social rental housing, and rent control programs, among others (Moreno Monroy et al. 2020).28 However, providing housing vouchers may not suffice. Indeed, the Creating Moves to Opportunity (CMTO) project in the United States suggests that the chances of low-income families moving to high- opportunity areas are significantly higher for those who receive “navigator” support—which helps leases go through in such areas—on top of housing vouchers, than for those who receive no or minimal additional support (Chetty et al., forthcoming).29 26  The reduction in the parking requirement from 1.125 to 0.825 spaces per unit. 27  Based on Financial Tools for affordable housing development identified by Virginia’s Arlington County in the United States (https://www.arlingtonva.us/Government/Programs/Housing/Development/Financial-Tools). 28 Housing allowances are cash benefits to which eligible households are entitled. However, housing allowances may not be useful for the most vulnerable, who cannot find private rental contracts due to unstable incomes or complex social assistance needs (Moreno Monroy et al. 2020). Subsidy vouchers are similar to housing allowances. But subsidy vouchers may expose those in need to hardships—such as homelessness, overcrowding, or eviction—while on the wait list because receiving a voucher is contingent on the availability of funding (Acosta and Gartland 2021). 29  A high-opportunity area refers to a neighborhood that offers opportunities for upward income mobility to children from low- income households. CHAPTER 3 | 43 Also, city leaders must consider the medium- and long-term impacts of such programs on housing affordability. Rent control programs,30 for example, may result in a reduced supply of rental housing stocks in the medium term, and hence, a lower stock of affordable housing units in the long run (Moreno Monroy et al. 2020). Policies and incentives that discourage land speculation and land idling could, meanwhile, help increase the supply of affordable housing by releasing land assets and encouraging vertical and compact development. Integrate existing informal settlements into the formal urban fabric As previously mentioned, well-intentioned but inappropriate land use regulations coupled with dysfunctional land markets often result in housing informality, particularly in developing countries, including in G20 countries such as Argentina, Brazil, India, Indonesia, Mexico, and South Africa. Given the negative implications of informal settlements—such as adverse public health and safety consequences, driven by limited access to essential public services—policy discussions around such settlements have tended to focus on demolitions and relocating people to better housing in safer locations. Such policies, however, are not always desirable, especially if residing in informal settlements is due to households trading off closer proximity to various opportunities against inferior living conditions. Although it is important to discourage the new formation or growth of informal settlements, renewed policy attention is also needed to acknowledge that residents in existing informal settlements have a right to live in decent conditions with basic dignity. To help with this, city leaders should consider addressing at least the following items. Legalize tenure through land and property titling A key aspect of informality is the lack of land rights and title. Tackling this issue can potentially increase access to essential services (box 3.3) and stimulate access to formal financial markets, using land or property as collateral, which helps to provide funding for low-income households to invest in their properties (such as constructing dwelling units with durable materials) and for communities to shape their own neighborhoods (through investing in small-scale infrastructure such as gutters or paving). Land and property titling, therefore, not only safeguards low-income residents in informal settlements from forced eviction, but also helps provide them with both the incentive and the financing to protect themselves against hazardous events. Upgraded dwelling units provide better working environments for low-income home-based workers as well,31 thereby helping them increase their incomes through higher productivity (Bonnet et al. 2021). Improved neighborhood conditions may also reduce community tensions and contribute to social cohesion, especially in cities that suffer from high levels of, for example, racial residential segregation as a historical legacy of past policy/planning failures (including outright discriminatory policies) and/or current policy failures (Kondo et al. 2018; Love 2021). 30 Among G20 member and guest countries, Luxembourg and Sweden apply rent controls to their entire rental sectors, whereas Australia, Austria, Denmark, France, Germany, the Netherlands, and the United States apply rent controls to only part of their housing stock. 31 An analysis of labor statistics from International Labour Organization Statistics (ILOSTAT; https://ilostat.ilo.org/) for 118 countries from 2000 to 2019 shows that there are 260 million home-based workers, nearly 60 percent of them women (Bonnet et al. 2021). 44 | CHAPTER 3 In implementing regularization programs, appropriate titling systems need to be chosen from a variety of options, such as freehold, leasehold, cooperative, land trusts, or communal ownership, in consideration of local context (Fernandes 2011). It is also important to ensure the participation of women as well as men; embedding gender equality in the process increases the effectiveness of titling systems in the long run (box 3.4). Box 3.3 Orissa, India: Land Rights for the Urban Poor—JAGA Mission Land rights serve as the central pillar for numerous essential socioeconomic rights worldwide, including a foundation for poverty reduction, increased food security, gender equality, cultural survival and environmental sustainability. Additionally, land being the primary economic resource, nearly 60 percent of the Indian population relies on it for their livelihood. Odisha's JAGA Mission was launched to further the "Odisha Land Rights to Slum Dwellers Act, 2017" (OLRSDA). The mission represents a remarkable social innovation that addresses systemic challenges around urbanization and affordable housing. Covering approximately 1.7 million people across all the 114 urban local bodies (ULBs) of Odisha, it aims to expand the land rights programme in the state and to transform existing slums into livable habitats, providing them with all essential civic urban infrastructure. The mission was implemented through: • Identification and Survey: The government conducted extensive surveys to identify landless and homeless families in rural and urban areas. Particular emphasis was placed on reaching out to vulnerable groups like Adivasis, Dalits, and fisherfolk. • Provision of Land Rights: Once identified, eligible families were granted land rights through various mechanisms like land redistribution, leasing, and regularizing encroachments on government land. • Record of Rights (RoR): Each family receiving land under the JAGA Mission was provided with a Record of Rights document, legally recognizing their ownership and safeguarding against future disputes. • Capacity Building and Awareness: Extensive awareness campaigns and capacity-building programs were conducted to educate beneficiaries about their rights, sustainable land use practices, and protecting natural resources. • Collaboration with Stakeholders: The government collaborated with local communities, NGOs, and civil society organizations to ensure inclusivity and transparency in the implementation process. Through the JAGA Mission, slum dwellers were no longer encroachers but upraised with the recognition to become city makers who bring in their unique skills into the city’s functioning. The Act entitled them to social benefits and urban services, starting with land tenure security. The mission increased access to essential services such as electricity, piped water, and sanitation. Ranking among the world’s largest slum titling exercises, it received international acclaim and recognition. Source: JAGA MISSION; Slum to liveable habitat. CHAPTER 3 | 45 Box 3.4 Gender (in)equality in land and property rights Potential benefits of supporting women’s land and property rights go well beyond those of women’s well-being and empowerment. Land and property rights offer women a greater say in household decisions, thereby improving family health and welfare while reducing gender- based violence (SDG Action 2023). However, women still face a significant gender gap in land and property rights, particularly in many developing countries, because legal systems have traditionally presumed that men control these rights as the heads of their households. Women in informal settlements in Latin American cities are no exception in this regard. Although they have long been active agents in informal land and housing markets, they lack full legal control over their assets. Some traditional statutory laws do not allow women to stop their husbands from selling land. When divorced or abandoned by their husbands, women generally have no legal right to the land. Upon the death of their husbands, women—together with their children—often face the risk of eviction and forced relocation because tradition prevents them from inheriting land from husbands or fathers. In an effort to redress historical gender imbalances, Brazil and Peru grant married couples joint titles to land and property. Progressive judicial decisions have strengthened women’s land rights by, for example, canceling the man’s title when separation is due to domestic violence. In Peru, 56 percent of COFOPRIa titles have been granted to women, which has shown a positive correlation with the labor force participation rate for women. Source: Fernandes 2011. a The Commission for the Formalization of Informal Property (COFOPRI) is supported by the Urban Building Registry (Registro Predial Urbano) and other legal instruments. The first phase of its titling program was jointly funded by the national government and the World Bank from 1998 to 2004. Notable accomplishments include reductions in time required to obtain a title, from seven years to 45 days; the number of required steps, from 207 to four; and cost, from $2,156 per title to $0. Upgrade existing slums Slum upgrading is another key element of integrating informal settlements into the formal urban planning regime and land and housing markets. With the aim of improving living conditions and the well-being of communities in accordance with a city-wide plan, slum upgrading prioritizes investments in physical infrastructure and basic services, such as streets and footpaths, clean water, sanitation, and drainage, among others, as well as housing quality upgrading. It also supports socioeconomic activities for social cohesion and community empowerment. Access to health and education services is often part of slum upgrading as well. Slum upgrading is normally undertaken by local and national governments, nongovernment organizations (NGOs), donor agencies, and, importantly, communities. Widely used approaches include: (a) incremental housing; (b) in-situ upgrading; (c) land readjustment; (d) high-rise redevelopment; and (e) “sites and services” schemes. The choice of approach depends on the type of slum, which is determined by such characteristics as the distance to the city center, slum density, exposure to disaster risks, and 46 | CHAPTER 3 the viability of specific interventions (table 3.1; City Climate Finance Gap Fund 2023). Box 3.5 introduces India’s Housing for All program, which has helped improve living conditions for millions of urban poor through slum rehabilitation and redevelopment projects. TABLE 3.1 SLUM UPGRADING APPROACHES FOR DIFFERENT TYPES OF SLUMS Type of Slum Characteristics Potential upgrading approaches City slums • Proximity to primary and • High-rise redevelopment: High land values due to proximity secondary infrastructure Ato city center allow private developers to cross-subsidize and transportation networks low-income housing with “for sale” units. • Haphazard layouts • Incremental housing; land readjustment; in-situ upgrading: • High density Reblocking with denser development may be possible to • Lack of public or green make land available for open space, basic services and open spaces infrastructure that can be connected to the city’s trunk infrastructure and grid. Peri-urban slums • Less dense • Land readjustment to plan for infrastructure and meaningful • Distant from the city center public open space. • Poorly connected to services, • Incremental housing; sites and services; in-situ upgrading: markets, and spaces Self-contained, decentralized, off-grid services such as sanitation, electricity, and water for greater accessibility and lower costs than conventional network services. Slums in • Located on steep slopes or • In-situ upgrading, e.g., slope stabilization and preventing soil precarious along riverbanks erosion, if relocation is not feasible or desirable. locations Source: Adapted based on City Climate Finance Gap Fund 2023. Box 3.5 India: Pradhan Matri Aawas Yojana (PMAY)—Housing for All In 2015, in response to the persistent urban housing shortage, the Indian government launched the Pradhan Mantri Awas Yojana-Urban (PMAY-U). PMAY-U has approved 11.9 million houses, with 7.6 million completed through August 2023. The mission addresses the economically weaker sections (EWS)/lower-income group (LIG) and middle-income group (MIG) categories including the slum dwellers by ensuring a pucca house to all eligible urban households. With the primary aim to achieve "Housing for All" PMAY lays strong emphasis on inclusivity, targeting various categories of beneficiaries, including the EWS/LIG and MIG groups. PMAY recognizes the importance of women's empowerment and promotes joint ownership of houses and encourages the inclusion of female family members' names in property documents. By targeting various income groups, emphasizing gender inclusivity, and providing financial CHAPTER 3 | 47 Box 3.5 India: Pradhan Matri Aawas Yojana (PMAY)—Housing for All, continued incentives, PMAY has improved the living conditions of millions while empowering marginalized communities. The scheme was implemented under four different verticals: • Affordable Housing-in-Partnership (AHP): AHP follows the "resettlement" approach, which entails relocating beneficiaries from their original settlements. Here, private developers are granted a subsidy for the construction of residential units intended for low- income households within their housing projects. • In-situ Slum Redevelopment (ISSR): ISSR follows the "redevelopment" model, which involves demolishing slums and constructing new housing in their place. Here, private developers receive a subsidy and a portion of the slum land for potential commercial development. • Beneficiary-Led Construction (BLC): BLC follows the "upgrading" model, supported by self-construction. Here, low-income households are provided a subsidy to build/enhance their housing, contingent upon land ownership. • Credit-Linked Subsidy Scheme (CLSS): CLSS adheres to both the "resettlement" and "upgrading" model, contingent on how the housing loan is utilized. Here, households receive an interest subsidy on housing loans, which can be utilized for the acquisition of new homes or the enhancement of existing ones. Through BLC, many states are actively ensuring tenure security for households to enable participation. For instance, Odisha enacted the "Odisha Land Rights to Slum Dwellers Act, 2017," which has already distributed land rights and entitlement certificates to more than 100,000 households. BLC's popularity is attributed to its affordability and adaptability. Unlike resettlement housing, BLC provides conveniently located, well-constructed houses that positively impact livelihoods while offering access to essential and social services. India’s PMAY-U effort is commendable, having sanctioned and built more houses than any previous housing scheme. It has benefited millions of urban poor by providing safe and affordable housing options. The slum rehabilitation and redevelopment projects have transformed many urban slums into organized housing colonies. Source: PMAY Government of India Website, ORF online research. 48 | CHAPTER 3 Box 3.6 Ghaziabad, India: Inclusive Sanitation Sanitation is recognized as a fundamental human right under Sustainable Development Goal (SDG) 6, which aims for universal access to sanitation, with a special focus on addressing the needs of women, girls, and vulnerable populations. Despite these efforts, women and girls continue to disproportionately suffer due to inadequate sanitation facilities, hindering their ability to use toilets as needed. The lack of access to household and public toilets, particularly those that cater to women's specific requirements, remains a significant challenge. Factors such as menstruation, pregnancy, caregiving roles, and the risk of harassment and violence further compound this issue. To address these concerns, the National Commission for Protection of Child Rights (NCPCR) proposed the PINK Toilet Model, utilizing a distinctive pink color to clearly mark and dedicate these facilities exclusively for women. This approach aims to improve accessibility, maintain dignity, and enhance safety for women when using public restrooms. The mayor of Ghaziabad inaugurated the first PINK toilet in 2018, symbolically dedicated to the entire female community with the phrase, "A toilet, all for women." Presently, Ghaziabad proudly boasts three such distinctive PINK toilets. These locations were thoughtfully chosen following a comprehensive survey that analyzed the frequency of female foot traffic in those specific areas. While the ownership of these innovative PINK toilets is under the jurisdiction of Ghaziabad Municipal Corporation (GMC), the day-to-day operations and upkeep have been entrusted to Sugam Samaj Seva, a nonprofit organization. Key Features of Ghaziabad’s PINK Toilet • Fully air-conditioned • Sanitary pad incinerator • CCTV camera-based surveillance to ensure safety for women • Features for those with disabilities • Sanitary pad vending machine • Childcare facilities such as feeding and diaper changing rooms • Operated by women caretakers to ensure privacy and generate employment opportunities for women Taking inspiration from Ghaziabad's pioneering efforts, several other cities in Uttar Pradesh, including Aligarh, Lucknow, and Meerut, have taken strides in constructing their own PINK Toilets. Looking ahead, GMC envisions the inauguration of specialized toilets catering to those who are gender nonconforming. Initiatives like the PINK toilet represent a promising advancement in gender-responsible sanitation, as they establish a secure, private, accessible, affordable, and well-maintained environment. By addressing the unique needs of women and promoting menstrual hygiene management, these Pink Toilets empower women, ensure their dignity, and contribute to the broader goals of cleanliness and waste management. Source: Gender Responsive Guidelines under SBM (Urban). CHAPTER 3 | 49 Build resilience against climate change-related shocks and stresses As a result of climate change, cities are being increasingly exposed to extreme weather events (Mukim and Roberts 2023). Building resilience to climate change is therefore a critical component of making cities more inclusive because mechanisms of exclusion tend to exacerbate existing inequalities during such events. Disadvantaged groups may face an exposure bias to, for example, floods, by living in flood- prone areas, or heat stress, by living in neighborhoods that suffer from stronger urban heat island effects due to a lack of urban greenery and a greater prevalence of impervious surface areas.32 When hit by a disaster, the poor suffer disproportionately due to their low capacities for adaptation and recovery.33 Tight streets, meanwhile, make it more difficult for emergency vehicles to reach slum residents. Inadequate infrastructure—which is typical in informal neighborhoods—may also burden the elderly, frail, children, and people living with disabilities during the evacuation process. To foster inclusiveness through greater resilience, city leaders should consider incorporating the following components in urban planning and governance. Risk-based land use planning The purpose of risk-based land use planning is to: (a) control development in hazard-prone zones; (b) facilitate rescue operations; and (c) provide for emergency refuges (Jha, Miner, and Stanton-Geddes 2013). Mainstreaming risk-based land use planning in urban development projects can dampen the impacts of natural hazards for the poor. Risk-based land use planning can be done by incorporating the results of risk assessments into land use maps (box 3.7); detailed land use zoning in targeted development areas based on hazard microzoning (such as flood and seismic zones); and other instruments (such as regulations and incentives) that govern site allocation and control. Resilient infrastructure planning Resilient infrastructure planning refers to continued investments and upgrading of infrastructure to improve the reliability of service provision, increase asset life, and protect asset returns. It includes a set of structural measures for improving the capacity and strength of key infrastructure (such as drainage, roads and bridges, embankments, telecommunications, and power lines); retrofitting assets (such as public buildings and private dwellings); and rearranging settlement layouts to enforce zoning. In doing so, it is important to establish comprehensive building regulatory frameworks, and comply with them; this not only ensures that physical assets achieve minimum levels of performance in terms of health, safety, accessibility, community welfare, and sustainability, but also incentivizes economic investment by providing the market with a clear set of design and construction requirements, quality standards, and competency expectations (World Bank 2015a). 32 For example, in Bandung, Indonesia, the difference in temperatures between the hottest and coolest neighborhoods reaches 7°C in the early evening, and a neighborhood’s evening temperature is also positively correlated with its poverty rate (Deuskar et al., forthcoming). 33 During the Mumbai floods in 2005, for example, losses by households below the poverty line were equivalent to six times their monthly income on average, higher than those for other income groups (Mukim and Roberts 2023). 50 | CHAPTER 3 Establishing a set of management measures, such as changing maintenance schedules and including adaptive management throughout infrastructure life cycles to account for future uncertainty (OECD 2018), and setting up detailed community-based procedures for evacuation in the event of disasters, also form an important part of resilience building. Table 3.2 provides examples of resilient infrastructure strategies for different types of hazards. Box 3.7 Tanzania: Digital mapping using drones for flood prevention in slums Every rainy season, Dar es Salaam, Tanzania, suffers from devastating floods that cause extensive damage, as well as many deaths and injuries. Although much of the damage could be prevented by adequate planning and infrastructure, a substantial portion of the city is made up of unplanned and informal settlements. Ramani Huria (“Open Map” in Swahili) is a community-based mapping project that was implemented from May 2014 through September 2016. The project assessed flood-prone areas in Dar es Salaam using digital maps produced by unmanned aerial vehicles (UAVs), i.e., drones, and identified appropriate upgrades to informal settlements, so that the city could take preventative measures to mitigate the impact of flooding before the beginning of the rainy season. To improve Tanzania’s capacity for development planning, the project also held training sessions for community members and local university students, where they could learn general mapping skills and how to use mapping tools such as OpenStreetMap, QGIS, and InaSAFE. The training equipped participants with skills to create highly accurate maps of features such as residential areas, roads, streams, and floodplains. More than 100 community members and 165 university students were engaged in data creation and knowledge transfer on community-based flood and disaster issues. Once the maps were ready they were combined with other data in InaSAFE, which allowed them to run realistic natural hazard impact scenarios for better planning, preparedness, and response activities. The project demonstrated how low-cost tools, such as drones and OpenStreetMap, together with community-led participatory methods, could provide a platform for innovation. It brought attention to areas that had been missing from maps and helped establish community-led emergency response mechanisms in urban areas. The digital mapping is now applied in Tanzania beyond flood resilience. For example, land tenure mapping based on drones is now used in the issuance of digitized land titles for small land holders. In 2016, Tanzania broke a record for the largest area in the world mapped entirely with drones by completing a digital map of the entire island of Zanzibar. Source: Dar Ramani Huria; Tanzania: Building Climate Resilience in the Water Sector. CHAPTER 3 | 51 TABLE 3.2 RESILIENT INFRASTRUCTURE STRATEGIES Type of hazard Strategies Flood, storm, • Clear storm drains and sewer systems to avoid blockages sea level rise • Elevate buildings, houses, and physical infrastructure to prevent inundation • Raise the height of bridges to account for sea level rise • Use permeable pavement and surfaces so that water can get absorbed by the soil beneath the pavement • Build floodwalls using permanent concrete or earthen barrier in high-risk areas • Install hurricane straps to help a structure’s roof remain attached in a high-wind event • Update and rigorously enforce building codes for new constructions to meet resilience standards • Consider relocating buildings and physical infrastructure to safer locations (if current locations are exposed to a serious/repeated risk) • Adopt nature-based solutions, such as urban forest, landscape terracing, river and stream renaturation, open green spaces and green corridors, mixed-purpose bioretention areas, inland wetlands, river floodplains, mangrove forests, salt marshes, and sandy shores Landslide • Add retaining walls made of concrete, metal, or wood to hold back soil • Use groundwater drainage systems, such as trench or surface drains, to prevent the water from reaching the soil in unstable slopes • Use nature-based solutions—such as urban forest and landscape terracing Earthquake • Construct buildings on top of flexible pads that isolate the foundation from the ground • Construct buildings with structural steel that is designed to be bendable Wildfire • Use fire-resistant materials, such as brick, fiberglass shingles, and concrete tiles when building new structures Source: World Bank 2021a; GovPilot 2023. Urban ecosystem management Ecosystem management refers to managing and restoring key ecosystem elements and services. Essential strategies relevant to urban resilience include: (a) watershed management; (b) coastal zone management; (c) urban landscape design; (d) green and blue infrastructure; and (d) environmental buffers. The following lists common ecosystem management interventions in practice (Jha, Miner, and Stanton-Geddes 2013): • Bio-retention • Forest repair/protection • Permeable pavement • Constructed wetlands • Green roofs • Public parks/gardens • Coral/shellfish reefs • Mangroves • Rain gardens • Coastal wetlands • Watershed/wetland repair/protection • Retention ponds • Repair/protection • Vegetation planting for landslides • Sand dunes/berms • Flood zone restoration • Nitrogen-fixing plants • Tree planting Incorporating ecosystem management into land use planning can significantly decrease the cost of urban infrastructure projects. It also provides people with benefits such as cooling, air quality regulation, recreation and tourism opportunities, and improved physical and mental health (Derkzen et al. 2017). For the poor, healthy ecosystems can help prevent them from falling deeper into poverty, by 52 | CHAPTER 3 acting as a physical buffer against natural hazards; mangroves, for example, reduce property damage from tropical cyclones (World Bank 2021b). To realize the full benefits, ecosystem management should be well planned, long term, and include labor-intensive interventions so that local communities can be continuously involved. Relatedly, a shift in focus from regulatory to incentive-based policies and tools, such as preferential tax treatments, can encourage stakeholders to safeguard the integrity of ecosystem services voluntarily (Jha, Miner, and Stanton-Geddes 2013). Urban ecosystem conservation and restoration should also be accompanied by options for the poor to adapt to new circumstances; otherwise, they can be at risk of becoming even more vulnerable and marginalized (Derkzen et al. 2017). Connecting cities to facilitate access to markets, services, and spaces, and to promote convergence Enabling people to travel far and fast, through investments in transportation infrastructure, has long been central to a pursuit of strong connections both within and between cities (Venter 2016). Although better transportation connections are essential for providing physical movement and accessibility, this distance- and speed-based approach does not guarantee easy movement, and hence equitable access to services, markets, and spaces, especially for the marginalized. This is even more the case in an increasingly digital world. This section discusses policy actions that city leaders can consider to better connect their residents to services, markets, and spaces, both physically and virtually, where the word “connect” is shorthand for the full range of policy actions that can potentially contribute to increasing both physical mobility and the ability to be mobile across digital spaces. Hence, this section goes beyond the discussion of improvements in physical transport and digital infrastructure by touching on other “softer” instruments—including safety measures and equitable fare schemes for public transportation services, as well as the improvement of digital skills. Connecting neighborhoods through intracity transport infrastructure Improving connectivity within cities is critical to improving their inclusiveness; better connectivity not only offers people better access to services, jobs, and spaces, but also boosts positive agglomeration forces, which benefit worker productivity and wages. By contrast, disconnection within cities is associated with residential segregation between the high and the low skilled, as discussed in Chapter 2, which dampens knowledge spillovers, hampers the ascension of the poor to the middle class, and exacerbates inequality. In planning the most needed investments for improving people’s access to services, markets, and spaces, city leaders can consider the following. Assess a city’s mobility constraints In planning for improved within-city connectivity, city leaders first need to identify their main constraint that confronts their city: Are gridlocks and lack of adequate public transportation systems deterring residents from accessing desired destinations, or are long commute times and/ or high fares forcing residents to live in crowded slums so that they can walk to work? CHAPTER 3 | 53 City leaders can assess the constraint by measuring the modal split of users (public mass transit, private vehicles, taxi, ride-sharing vehicles, walking, etc.), street density (such as the area of primary and secondary roads as a percentage of total area around job centers), and demographic trends (to estimate changes in demand, for example). Determine the most efficient and affordable modes In more peripheral neighborhoods, despite the potential to increase people’s access to services, markets, and spaces, relatively low profitability makes it hard for these areas to attract private transport operators and induce competition, whereas the provision of frequent and affordable public transport may place a large strain on a city’s budget. To overcome these constraints, city leaders can encourage intermediate modes of transport that connect remote areas to cities main transport systems (box 3.8). Box 3.8 Ecatepec, Mexico: Mexicable Ecatepec de Morelos is one of the 125 municipalities that compose Estado de Mexico (or the State of Mexico). The hillside municipality, which is part of the greater Mexico City metropolitan area, is inhabited by 1.8 million people, making it one of the most populous in the state and the second most populous in the country. It is also one of the municipalities with the largest number of people living in poverty in Mexico. Residents in the municipality used to endure hours-long commutes on highly congested roads. This changed in 2016, when the government of the State of Mexico added an aerial lift line, called Mexicable, to the public transportation system. The 4.9-kilometer-long cable car system transports passengers from disadvantaged hillside neighborhoods on the outskirts of the metropolitan area to where they can switch to the Mexibús system—a bus rapid transit system that serves Mexico City proper. Now they can reach the city proper in just 17 minutes. With easier access to downtown, people living in poverty can now feel more included in the city. Urban renewal near cable car stations—new streetlights, paved roads, and revamped public spaces—has made residents of Ecatepec, which used to have high rates of femicide, feel much safer in public spaces. The municipality commissioned more than 50 murals to help create a more scenic ride, leading to increased tourism.a The electric cable car system also contributed to reduced greenhouse gas emissions and energy consumption.b Source: Burnett 2016; Field 2019. a However, the murals should not disguise the problem, given that access to basic services, such as electricity, safely managed drinking water. and sanitation, remains challenging. b Because it is electrically powered, a cable car system is at risk of power outages. See this news article regarding the suspension of Cablebús, another cable car system in Iztapalapa, Mexico, due to power failure. In Medellín, Colombia, however, every vehicle of its cable car system, Metrocable, is equipped with a communication system, to be used should an emergency occur. 54 | CHAPTER 3 In high-demand areas, city leaders can foster competition among private operators for greater efficiency and affordable prices. Monopolies will likely encourage opportunistic behaviors, invite excessive markups, and create incentives for bribes. However, city leaders must be careful about fostering competition and regulating providers. Before a bus rapid transit system—TransMilenio—was introduced in Bogotá, Colombia, for example, the government granted nonexclusive permits to the route operators, while bus owners—who were affiliated with route operators—charged their drivers fixed rents. This motivated bus drivers to exceed speed limits and carry too many passengers in order to generate higher profits, putting passengers’ safety at risk (World Bank 2013). Increase the quantity and quality of transport services City leaders can increase transport capacity by investing in networks and maintenance, or by combining multiple modes. In augmenting the coverage of existing public transportation systems, closing the gap between public transit and destinations—namely, the first and last mile problem—is crucial to improving access to services. This is especially so for the poor and the marginalized, who tend to live in underserved neighborhoods and are more likely to need services outside of standard peak hours. Planning mass transit routes to intersect with well-planned and maintained walking and cycling infrastructure can help them better access the services and more easily move from one mode to another. A city’s transport authority can also consider connection services, such as a free shuttle bus system operating between underserved communities and existing public transportation systems. Improving connectivity for women takes on an extra dimension because their travel patterns tend to be more complex, with multiple responsibilities, as highlighted in Chapter 2 (see also Greed and Reeves 2005). To reduce the daily burden on women, the city of Nagareyama, Japan, for example, coordinated its public transport system with child drop-off/pick-up points at daycare centers. Together with entrepreneurship programs and co-working spaces, the revamp of public transportation helped women better manage work-life balance (Arumugam 2022). For women’s connectivity, enhancing safety in public transportation systems must also be placed high on the agenda. In the Middle East and North Africa, for example, only 19 percent of women participate in the labor force (relative to 75 percent of men), even though women outnumber men in tertiary education (Um and Effah 2020).34 A World Bank study (forthcoming) identifies safety in public transit systems to be one of the most important constraints on women’s mobility and access to economic opportunities. In addition to undertaking infrastructure investments, such as improving lighting at public transit stops, some Latin American cities attempt to address the safety issue using technology. For example, Bogotá, Colombia, uses an app, Safetipin, to collect georeferenced data on women’s perceptions of personal safety on transit systems. This data is then used to help the city design and prioritize relevant interventions. Likewise, Quito, Ecuador, launched a social inclusion initiative to combat harassment in the public transport system. Victims can alert the driver and set off an alarm inside the conveyance using a free text message platform, which can then prompt police activity (IDB 2018). 34  The ratio of women to men in tertiary education is 1.06. CHAPTER 3 | 55 Given the growing number of persons with some form of disability, especially in many G20 countries in which populations are aging rapidly,35 solutions are urgently needed to facilitate their mobility.36 Removing physical barriers can be helpful—for example, cities can add ramps and curb cuts to make it easier for a person with a mobility impairment to enter a building or use a sidewalk; upgrade poorly maintained streets; and better separate pedestrians, cyclists, and motorized vehicles. Another useful strategy is delivering passenger information at every step along a journey to help passengers plan ahead and prepare for disruptions. Such information must be designed in different formats to accommodate different types of disabilities. The use of smartphones has opened new possibilities in recent years (box 3.9). What enables such improvements are increased awareness and behavioral changes. This is required at all levels, from city leaders—who can factor the mobility needs of people with disabilities into policy formulations and implementation, as well as budget allocations—to everyone engaged in the design, delivery, and operation of the system, and, finally, fellow travelers (HVT 2019). Box 3.9 Smartphone apps: new possibilities for independent travel by disabled people BeMyEyes allows visually impaired people to get help via a video conversation with an artificial intelligence-powered virtual assistant. Users can send images via the app to the assistant, which then provides instant identification, interpretation, and conversational visual assistance for a wide variety of tasks. Faciligo is a French travel buddy platform. It connects travelers with reduced mobility, such as people with disabilities or the elderly, with a travel companion on public transit, thereby improving their access to public transportation. The travel companion receives a discount on the transit ticket. Wayfindr aims to help the visually impaired to navigate indoor environments using an audio navigation technology that is integrated into the smartphone app. Starting on the London Underground, it later ran successful trials on the Los Angeles Metro, California, as well as on public transit systems in cities in Australia, Italy, Norway, and Spain. Source: https://www.bemyeyes.com/; https://www.wayfindr.net/. 35 Except for Saudi Arabia and some European Union (EU) member states, all G20 countries are ranked in the world’s top 50 countries, with the largest number and share of population age 65 years or older (PRB 2019). 36 According to the United Nations, approximately 15 percent of the world’s population lives with some form of disability and, by 2030, more than 46 percent of people older than age 60 will be classified as disabled. 56 | CHAPTER 3 Increase equity using complementary fare systems and digital infrastructure Subsidies that target lower-income groups (equity) can boost ridership and reduce congestion (efficiency), and hence reduce energy consumption, emissions, and pollution (sustainability). For example, Brazil spreads the cost of transport subsidies between the government and formal sector employees through vale transporte (VT, or transportation voucher). The employers provide transit tickets to employees and get the VT expenditure deducted from taxable income. An integrated fare system across multiple modes allows public transport users to pay once and/or to benefit from a discounted price for trips that include multiple modes (table 3.3). Smart ticketing or payment systems can help automatically adjust the fare based on each passenger’s travel frequency and distance. Some suggestions on how to design and implement integrated fare systems can be found in Rebelo (2015). TABLE 3.3 EXAMPLES OF AN INTEGRATED FARE SYSTEM ADOPTED IN G20 COUNTRIES Country City or region Transport authority System name Australia Adelaide metropolitan area Adelaide Metro Metrocard Canberra Transport Canberra MyWay Melbourne Public Transport Victoria myki Perth Transperth SmartRider South East Queensland Translink Go card Sydney Transport for NSW Opal card France Paris RATP/SNCF Navigo pass; Mobilis/Jeunes one-day tickets Indonesia Jakarta PT Jakarta Lingko Indonesia Jak Lingko Italy Lombardy Regione Lombardia Io Viaggio Ovunque Korea, Rep. Seoul Metropolitan Area Seoul Metropolitan Government T-MONEY United Kingdom Greater London TfL Oyster card; Travelcard Source: Compiled based on information provided by the web page of each city. Meanwhile, providing digital infrastructure, such as free public Wi-Fi services, can help passengers better plan longer multi-modal trips and avoid unnecessary ones. By giving them access to digital services, digital infrastructure can also reduce the travel time opportunity cost for commuters. Finally, in addition to within-city connectivity, the overall inclusiveness of urbanization depends, in large part, on connectivity and hence integration across cities. Greater intercity mobility and connectivity enable a more efficient allocation of services, labor, and capital, creating more opportunities for people to prosper. Better connectivity also matters for less urbanized surrounding areas, because it helps residents of those areas access more sophisticated services, such as advanced healthcare and tertiary education. For the vulnerable who have fewer options to locally adapt to climate change-related hazards, better connectivity to other cities can facilitate adaptation through CHAPTER 3 | 57 internal migration. Box 3.10 discusses important steps that national and city leaders can take to improve intercity connectivity, and box 3.11 shows how a network of connected cities played an important role in generating social benefits in China. Box 3.10 Steps to improve intercity connectivity through transportation networks To identify the most effective additions and improvements to within-country networks, transport authorities—which have limited resources for investments—can take the following broad steps: Value a city’s external connections • Measure a city’s transport costs using direct vehicle operating costs (such as costs for maintenance, tires, fuel, and labor) and indirect costs (such as costs for licensing, insurance, road tolls, and roadblock payments). • Measure intercity connections using the total length of road networks alongside the quality of each network segment. • Determine where improvement is most needed by comparing a city’s transport costs and connectivity with those of other cities of similar size, with a similar development level, and/or with similar geographic constraints. Set the basis for competitive pricing • Foster competition for more affordable services through policies and regulations that limit monopolistic behaviors. Leverage the most efficient investments that yield the highest returns • Identify the intercity network segments that will reduce transport costs the most—that is, where demand is the highest for expanded networks and services, based on the analysis of demographic changes, and patterns of both economic growth and urban spatial expansion. In deciding which segments to improve or expand, leaders and transport authorities must consider equity, in addition to efficiency, to ensure that resources can be distributed equally throughout the country, and that the poorest in remote areas can be connected to better services and larger markets. Source: World Bank 2013. 58 | CHAPTER 3 Box 3.11 Connecting to opportunities: China’s bullet trains In developing countries, including those that are G20 members or guest countries, a desire to access larger labor markets has fueled megacity growth. Although megacities are engines for long-term economic growth, rapid population growth can impose large social costs, such as a high cost of living, and high levels of traffic congestion and pollution, thereby degrading the quality of life. Starting in 2007, China introduced several bullet trains to connect megacities with secondary cities within a 100- to 750-kilometer radius. Thanks to the train networks, residents in secondary cities—for example, Tianjin—gained rapid access to larger labor markets without having to live in megacities such as Beijing. This allowed the residents of Tianjin to enjoy some of the benefits of Beijing’s agglomeration economies without having to pay the higher cost of living there. Zheng and Kahn (2013) propose three critical factors for such an investment to work: (a) high population density; (b) a sufficient number of large cities in reasonable proximity to one another along railway corridors; and (c) congested traffic in competing modes of transportation. Source: Zheng and Kahn 2013. Connecting people through digital infrastructure The COVID-19 pandemic accelerated digital transformation—firms underwent rapid digitization, many businesses and schools went online, people got connected in digital spaces, and online healthcare services skyrocketed (OECD 2023). This implies that those who cannot afford reliable digital connectivity or cannot adapt to emerging digital technologies will likely experience greater socioeconomic exclusion. To leverage the tremendous potential of digital transformation, city leaders— together with national governments—must take action to ensure equitable and reliable broadband access for all while expanding digital literacy. Expand access Helping everyone participate in digital life begins with providing underserved socioeconomic groups with access to uninterrupted high-speed networks. Because the construction and maintenance of the relevant physical infrastructure involves a complex set of activities, including permits and easements, local governments should coordinate with higher-tier governments as well as service providers to streamline the process. City governments can facilitate this by revisiting local zoning requirements that may limit the size, placement, and scale of wireless facilities, such as towers and antennas (De Wit 2022). There are also a variety of ways that cities can support those who cannot afford a broadband subscription more directly. Cities can partner with private providers to offer open-access Wi-Fi hotspots at public transit stations and in co-working spaces in municipal buildings and public spaces (such as libraries and schools), an option that has already been implemented in many cities around the world. CHAPTER 3 | 59 In the case of Chattanooga in the US state of Tennessee, the city government installed its own fiber- optic cables on streetlights across the city to serve people and businesses seeking a reliable high- speed grid.37 Cities can use their pre-existing fiber-optic cables or wireless networks as well. San Antonio, Texas, for example, installed signal receivers at homes for some 20,000 students in the city’s most vulnerable neighborhoods, so that they could have at-home internet access through the signals sent from government buildings, libraries, and schools. Similarly, the Every1online program, piloted in the Pittsburgh, Pennsylvania, metro area during the pandemic, uses antennas mounted on top of tall structures to beam internet signals to the homes of residents in poor neighborhoods or poor school districts. Support the enabling environment To make access to the broadband infrastructure worthwhile, basic services, especially access to reliable electricity, is required. Measures to protect the broadband infrastructure from external shocks, such as extreme weather events and terrorist attacks, are also important. For the poor and marginalized, device affordability, in addition to internet accessibility, is a severe constraint to digital connectivity. Even in the United States, about one in eight (i.e., 15 million) households in 2017 lacked a home computing device, including tablets and smartphones (US Census Bureau 2018). The issue of device affordability is even more serious in cities in lower income countries. To buy a smartphone, for example, the average person in a low-income country would have to pay more than half of their monthly income, whereas in North America, that number drops to a mere 2 percent (A4AI 2021). To help the disadvantaged access internet-enabled devices, city leaders can work with community partners, such as established non-profit refurbishing organizations, to distribute low-cost equipment.38 If budgets allow, cities can provide financial support to schools, libraries, and other public agencies for bulk purchase of new devices. As in San Francisco, California, and New Orleans, Louisiana, facilitating device donation programs can also help communities most in need (Tomer and Fishbane 2020). Promote the effective use of digital technologies by expanding digital literacy Although access to broadband services using the right devices is the first step toward inclusive digital connectivity, access without digital skills may reduce the effectiveness of the technology. A lack of digital skills can also increase users’ risks of experiencing cybercrimes, such as digital fraud and identity theft, which can further increase their risks of financial losses. Cities can host digital skills trainings to help the disadvantaged use diverse technologies to retrieve necessary information (such as job postings); access services (such as online banking and prescriptions); communicate with friends, family, and colleagues; and participate in virtual civic spaces. 37 However, establishing local networks is deterred or prohibited in 22 U.S. states as of 2020, which is the result of lobbying from commercial providers. Hence, policy reforms are needed at the state or federal level to make this approach more widely applicable. 38 Large non-profit refurbishing organizations in the United States include PCs for People, the Kramden Institute, and Human-I-T. 60 | CHAPTER 3 Expand digital public services Provided that the physical infrastructure and soft skills are ready, digitizing public services goes beyond reducing unnecessary paperwork and increasing administrative efficiency—secure and standardized e-identities, along with 24/7 accessibility at lower costs, enable greater collaboration between city residents/communities and governments, which, in turn, can promote inclusion (box 3.12). In Honolulu, Hawaii, for example, a mobile application—Honolulu 311—developed by the city allows city residents to use personal smartphones to report various urban issues, including abandoned vehicles, broken streetlights, and illegal dumping. Jakarta’s Smart City Program has incorporated a similar mechanism for solid waste management. In Dublin, Ireland, the City Council transformed how it handles requests for repairs in social housing units from a paper-based system to an app-based one, allowing tenants to receive services more promptly and accurately (Warren and Buchholz 2022). Box 3.12 When urban planning meets technology Inspired by a dating app, city officials of Santa Monica, California, have been trying to gauge public opinion on their forthcoming urban plans using a digital tool named CitySwipe. The app shows residents images of potential scenarios alongside a caption of yes/no questions, making the consultation process easier and more cost effective. The contents cover everything from street furniture to parking, murals, and market stalls, as well as residents’ attitudes towards walking, cycling, housing, and beyond. In the United Kingdom—where the planning system is more complicated than in the United States—Manchester is leading the way with an interactive online map called the Greater Manchester Open Data Infrastructure Map.a This informs potential development sites across the city by aggregating an overview of the city’s physical, social, and green infrastructure with proposed development plots, bringing the planning process to public attention and facilitating residents’ participation. Augmented reality technologies also have tremendous potential for enhancing public participation on the ground, although their application remains fairly limited in the urban planning field. In 2016, the Massachusetts Institute of Technology Media Lab collaborated with the City of Hamburg, Germany, to identify potential locations for refugee accommodations. Augmented reality allowed city leaders and residents to experiment with different locations and attributes of accommodations and to see the results in real time, leading to quick government authorization and construction of the accommodations. With increasingly sophisticated digital urban planning tools, the importance of bridging the digital divide is growing. Otherwise, innovative technologies will further mute previously unheard voices. Source: CityLab 2018; Wainwright 2017. a  https://mappinggm.org.uk/gmodin/. CHAPTER 3 | 61 Financing capital outlays for the provision of infrastructure and services Funding and financing are key to implementing priority actions and investments for better planning cities and connecting people. However, city leaders today are facing magnified challenges. While the economic fallout of overlapping global crises have been contributing to reduced fiscal space for many cities, growing—and aging—populations alongside climate change-related shocks and stresses have been increasing needs for spending to provide sufficient, high-quality infrastructure. This places greater urgency on the need for cities to better tap existing sources of funding and financing while leveraging innovative solutions. This section discusses various approaches that city leaders in both developing and developed countries can mobilize for capital outlays, such as fiscal arrangements between cities and higher-level governments, local revenue generation, subnational borrowing, and financing from the private sector (including climate finance). Leverage intergovernmental transfers39 Many countries use intergovernmental fiscal transfers to finance subnational spending for planning and capital projects. Although the governance of intergovernmental transfers is complex, and practices vary widely across countries, such transfers can be broadly grouped into two types—unconditional (general purpose) and conditional (specific purpose). In Mexico, for example, the federal government provides support to states and municipal governments for infrastructure projects and public services through a mix of unconditional transfers, which cities can access by petitioning the Mexican Development Bank, Banobras. On the other hand, the U.S. Department of Housing and Urban Development (HUD) provides conditional transfers to transform existing, underinvested low-income neighborhoods into mixed- use, mixed-income communities. The now defunct Housing Opportunities for People Everywhere VI—commonly known as HOPE VI—program had been used to fund acquisition of sites; demolition of severely distressed public housing; major rehabilitation of public housing units; and new construction and other physical improvements. The Choice Neighborhoods Program is its successor, which provides conditional grants to cities that are ready to implement their transformation plans for neighborhood redevelopment. In South Africa, where many municipalities have struggled to meet the needs for infrastructure and public services, the National Treasury offers performance-based incentives for which metropolitan municipalities must meet various metrics. Municipalities must identify priority urban regeneration projects and submit a proposed implementation strategy—such as a Built Environment Performance Plan—to be eligible to access national grants. Lee et al. (2022) provides key lessons and good practices for the next generation of performance-based fiscal transfers, identified based on a review of World Bank urban infrastructure projects over the past two decades. Countries such as Indonesia have introduced equalization transfers from national revenues to address inequality between cities, particularly between larger cities that can generate higher own- source revenue and relatively smaller ones that cannot. Other countries, such as the Philippines, use differentiated capital cost-sharing policies between national and local governments based on income, 39 Examples in this section are based on World Bank (2015b). 62 | CHAPTER 3 where lower-income cities might enjoy higher portions of development funding for strategic projects. Predictable transfers from national revenues can also help city leaders leverage other sources of financing, including by underpinning public-private partnership projects. Generate local revenues Land-based financing In many countries, more than 90 percent of the total government capital stock is embedded in land, buildings, and infrastructure assets, according to the Lincoln Institute of Land Policy.40 Hence, land-based financing can be an integral tool to help local governments generate funds/revenues for infrastructure investments or recover costs from them. For a successful implementation of the tool, cities need to: develop strong legal and institutional capacities that clearly define property rights; objectively assess land values; and oversee land management, sales, and tax collection. Cities can generate initial capital for infrastructure investments by selling or leasing excess or underutilized public land. In addition to the one-time sale or leasing of public lands, city governments can leverage a range of municipal finance instruments to pay for the maintenance and expansion of infrastructure assets. They can also use incremental tax proceeds captured by increases in the land and property tax base as collateral for infrastructure loans. The following briefly introduces a range of land- based financing instruments; it is largely based on OECD/Lincoln Institute of Land Policy (2022), World Bank (2013), and World Bank (2017a). Tax- or fee-based instruments • Cities in developing countries—which tend to lack systematic land valuations—often use auction mechanisms, such as land parcel auctions, for land sales. • Where city governments want land ownership, as in China or Ethiopia, leaseholds have emerged as an option. However, as can be seen in China recently, cities relying extensively on land leases without other viable streams of own-source revenues can face significant financial challenges when the central government tightly controls urban land expansions. • Land and property taxes (including site value taxes), as well as transfer taxes, are important forms of land value capture, because well-functioning property tax systems base obligations on the market value of real estate. • Landowners who have gained land value benefits from public infrastructure investments pay betterment levies, also known as special assessments or infrastructure levies. According to the OECD/Lincoln Land Value Capture (LVC) survey, covering 60 countries globally, this instrument is most often used for transportation projects, followed by projects for public utilities and public spaces. • Cities can promote community investments through tax increment finance (TIF); that is, they can earmark anticipated incremental tax proceeds from infrastructure investments within a designated district for public investment loans. TIF has been widely used in the US for more than 40 years. • For these instruments to work properly, cities require well-functioning land markets, high-quality cadastres and land registries, as well as expertise in accurately estimating value increments. Hence, except for land sales through auctions, these are less commonly used in low- and lower- middle-income countries. https://www.lincolninst.edu/our-work/land-based-climate-finance. 40  CHAPTER 3 | 63 Cash- or in-kind contribution-based instruments • When developers seek approval or special permissions, cities require them to pay development obligations—such as impact fees, negotiated extractions, or development charges—to defray the costs of public infrastructure, services, or social housing. This is most commonly used for new land/property development initiated by private developers and landowners. • Cities can charge cash or in-kind contributions in exchange for the sale of development rights beyond a baseline defined in planning ordinances. This is used most often for density bonuses. As discussed earlier, cities can also implement a transfer of development rights (TDR) to a different parcel (where higher-density development is suitable) if developers contribute to providing affordable housing or preserving environmentally sensitive zones. • These instruments are particularly sensitive to well-defined land use and zoning regulations, and therefore tend to be more common in high- and upper-middle-income countries. Practices • Cities can pool fragmented land parcels belonging to private owners so they can be used for public development, and compensate them for a small parcel—the value of which will likely be higher due to the development. This instrument, land pooling or land readjustment, is extensively used in both developing and developed countries, especially for the conversion of rural land to urban use. It is often used for urban renewal or brownfield regeneration as well. • Cities sometimes actively take part in land markets for strategic land management, where they acquire vacant land for urban and infrastructure development at a predevelopment price, rezone and develop it, and capture capital gains by selling or leasing it. Cities in low- and lower-middle- income countries extensively use this instrument, as well as land readjustment, presumably due to rapid urban growth. In Australia, Canada, and Colombia, it is used for the provision of social housing and, in Ethiopia, to help control the spread of informal settlements. Revenues collected through the above instruments and practices can be used for land provision, housing subsidies, infrastructure investments, and service provision in deprived areas. Thus, land- based financing is a powerful tool to redistribute the unearned wealth in land values to the public and facilitate social equity. Land pooling/readjustment, sale/transfer of development rights, and strategic land management, in particular, can direct spatial growth in resilient and sustainable patterns by promoting urban development away from informal settlements in vulnerable areas. However, land-based financing can lead to overdevelopment and increase built-up areas if not linked to good planning practices and strong enforcement of land use regulations. It also bears the risk of challenging local government budgets during busts in real estate markets. Importantly, local governments must be mindful of how to maximize equity benefits using the resources mobilized by land-based financing. Otherwise, only the rich may benefit further from the development, while the disadvantaged get neglected (Mahendra et al. 2020). Box 3.13 presents various instruments of land-based financing successfully adopted across the globe. 64 | CHAPTER 3 Box 3.13 Examples of land-based financing in practice Manizales, Colombia In Colombia, a betterment levy (contribución de valorización) is the oldest form of land value capture, having been in practice for more than a century. It has been used in large and intermediate cities, primarily for road improvements and urban renewal. In the last decade, Manizales funded at least eight projects through betterment levies, which were assessed on 80 percent of the city’s properties. The renovation of the Alfonso Lopez Plaza was one of the projects, improving the quality of the city’s public space while enabling low-carbon mobility between the east and west sides of Manizales. United States Various states and cities in the United States use tax increment financing (TIF) as a vehicle for providing affordable housing units, including: • Chicago, Illinois, through its Multi-Family TIF Purchase-Rehab Program, allocates TIF revenues to support the redevelopment of vacant and foreclosed apartment buildings within specified TIF districts into affordable housing. • Massachusetts, through Urban Center Housing Tax Increment Financing, allows cities and towns to use TIF to build affordable housing in commercial centers that have lower population densities during non-business hours. • Minnesota authorizes cities and counties to create housing TIF districts, where tax revenues may only be used to finance housing projects for low- and moderate-income individuals. • Portland, Oregon has dedicated 45 percent of revenues generated by TIF districts to affordable housing since 2015, which has helped produce 2,200 units of affordable housing. • Texas allows cities to create Tax Increment Reinvestment Zones (TIRZs) without minimum criteria. Private property owners can also initiate a TIRZ, providing they allocate at least one-third of the area to housing and one-third of tax revenues to low-income housing. • Utah requires municipalities that have adopted TIF districts since May 1, 2000, and generated at least $100,000, to allocate at least 20 percent of the fund for the construction or retention of affordable housing. Curitiba, Brazil Using a transfer of development rights program, the city granted property-owning slum dwellers in flood-prone areas the right to build in designated safer areas of the city. The city converted the sending areas into large-scale parks and green infrastructure that can absorb and contain floodwaters and capture an estimated 140 tons of carbon dioxide (CO2) per hectare. The program was estimated to be five times less expensive than building flood protection canals. Maintenance costs were reduced by 80 percent by keeping sheep in the parks to eat grass and provide natural fertilizer. Land values adjoining the parks have increased together with property tax revenues. CHAPTER 3 | 65 Box 3.13 Examples of land-based financing in practice, continued The Netherlands Active Municipal Land Policy, i.e., strategic land management, plays a critical role in land value capture in the Netherlands, especially in large cities such as Amsterdam, Rotterdam, The Hague, and Utrecht. Local governments acquire vacant, abandoned, or unproductive land through debt financing in advance of needs.a After rezoning, local governments use the land for the public’s benefit, by building public spaces and infrastructure. The governments recover initial investments through the sale or lease of the developed plots. Singapore In Singapore, the government generates nearly 50 percent of its revenues through land-related development revenues. Charges for development rights and betterment levies are always used; land readjustment and strategic land management are also key instruments. The government never uses land sale proceeds, mainly to avoid: (a) favoring high bids for more revenues; (b) experiencing reduced revenues during property market busts; and (c) having fewer assets that can create future income. It puts proceeds into its investment vehicle (Temasek, a sovereign wealth fund), which can use as much as 50 percent of the expected investment return for government programs, while maintaining the endowment for future generations (promoting some intra-generational equity). Sources: Manizales from Schloeter (2016); USA from Local Housing Solutions; Curitiba from Dharmavaram (2013); The Netherlands from OECD/Lincoln Institute of Land Policy (2022); Singapore from the Ministry of Finance (https://www.mof.gov.sg/docs/default-source/resource/ gst/pdf/7-why-don't-we-use-money-from-land-sales.pdf) and OECD/Lincoln Institute of Land Policy (2022). a The conditions for how local governments act as market players in the land market is stipulated in Besluit Begroting en Verantwoording Provincies en Gemeenten (Decree Budget and Accountability of Provinces and Municipalities) and the Mededingingswet (Competition Law). Asset recycling In addition to land value capture, cities can pay for their capital outlays through the sale of government-owned assets, namely asset recycling (AR). Broadly speaking, AR programs consist of: (a) the monetization of existing infrastructure assets (brownfield); and (b) the subsequent reinvestment of proceeds to develop new assets. Some of the benefits of AR programs include: (a) alleviating or mitigating fiscal pressures or the impacts of recessions; (b) leveraging private sector knowledge and efficiencies; and (c) promoting infrastructure as an asset class, thereby providing diversified investment opportunities in infrastructure to institutional investors and proceeds that can be earmarked and used in a climate resilient manner or to meet environmental, social and governance (ESG) objectives. When developing an AR program, a government should strategically identify relevant assets for the private sector, determine capital value, create the necessary legal/regulatory environment, get public buy-in, engage the private sector, select suitable AR models, and identify appropriate reinvestment opportunities. 66 | CHAPTER 3 AR programs have been successfully established across countries—including in Australia (National Partnership Agreement on Asset Recycling) and India (National Monetization Pipeline)—and utilized across sectors, including roads and highways (e.g., brownfield concession agreements using the toll- operate-transfer model, National Highways Authority, India, and divestment of WestConnex motorway in Sydney, Australia) and electricity (long-term lease of transmission network operator Transgrid, NSW, Australia). The World Bank’s AR initiative prepared a heatmap that shows significant potential across many World Bank client countries. More information about AR can be found in the World Bank’s Asset Recycling Toolkit (World Bank 2023a). Commercial value capture While governments are increasingly looking for creative ways to pay for public infrastructure, commercial value capture (CVC) is a means to go beyond the traditional “user pays” or “government pays” funding models. CVC can increase revenues to fund facility improvements, and to expand services and/or asset maintenance without increasing taxes or user fees. CVC revenues have, in many instances, proven to be successful in mobilizing additional funding for various infrastructure projects and helping deliver better quality of public service. Although CVC is most common and well-established in urban transit (linked to TOD models), it can be relevant for a number of sectors, including urban services, public housing, government offices, hospitals, schools, libraries, stadiums, street lighting, parking facilities, airports, telecom services, urban renewal projects, parks, wastewater treatment, solid waste treatment, and conservation areas. By planning for spaces and avenues that create commercial opportunities, and tapping into private sector expertise, governments can explore and maximize the assets’ revenue generating potential. The private sector—including professionally run state-owned enterprises—is typically better positioned to explore and deliver commercial activities. Stakeholders, including communities, can play an active role in identifying and implementing CVC opportunities by voicing their needs in project design; providing a source of demand for commercial activities; operating businesses such as shops and restaurants in the project area; and ensuring that the additional services and opportunities created are inclusive (World Bank 2023b). Mobilize financing Enhance creditworthiness to facilitate responsible debt financing Once local governments secure cash flows from user fees and taxes, borrowing money from financial institutions seems to be a reasonable next option. Although experience in developed countries suggests that local credit can be an important instrument for long-term municipal financing, access to credit markets is generally difficult in developing countries, partly because subnational credit markets are rare. Even where such markets do exist, a lack of transparency in municipal finance makes it difficult for creditors to assess the creditworthiness of local governments in such countries, which in turn hinders their borrowing. To increase opportunities for debt financing, city leaders first need to enhance transparency in their operations and financial conditions, which would provide the credibility lenders look for when reviewing loan applications. The World Bank can provide local governments in developing countries with guarantees to help them raise commercial debt with lower interest rates, and longer maturities. CHAPTER 3 | 67 A strong regulatory framework is necessary to guide the issuance of debt and to manage the risks, and institutional mechanisms should be clearly defined to approve loans and monitor debt sustainability. Give smaller cities access to capital markets Smaller cities may not be able to gain direct access to long-term credit due to a lack of required financial infrastructure and capacity. Nonetheless, there are ways that local governments can access loans, including via specialized donor funds, such as municipal development funds. They can also consider the following routes: • Bond banks: Financial institutions can pool capacities to set up local government financial intermediaries, namely bond banks, which consolidate local bond issues into a larger pool and assign the resource to local authorities. In doing so, bond banks provide small cities with various advantages, such as lower transaction costs, increased liquidity by making the larger bond more attractive to investors, more favorable interest rates than when accessing finance as individual municipal borrowers, and technical assistance in the debt issuance process (PIAFF 2017). G20 countries such as Canada, France, and the United States, as well as other developed countries including Spain and Sweden, have bond banks working at the provincial or state levels. • Resource pooling: Smaller cities can also pool their resources to enhance their access to capital markets. Based on the municipal credit rating, a city can issue a municipal bond, without a state guarantee, to finance its infrastructure projects. In case highly rated local governments are reluctant to lend weaker local governments the benefit of their credit rating, parallel financing can come into play, where each city borrows on its own terms to help finance a common infrastructure project, depending on its creditworthiness and ability to repay. Use public-private partnerships strategically Cities can raise financing from the private sector through public-private partnerships (PPPs), including hybrid PPPs (box 3.14). In addition to attracting additional financing, PPPs can bring some important benefits to city leaders if done well. First, PPPs have the potential to increase long-term efficiency in service provision, owing to the private sector’s higher capacity for cost management and innovation (among other factors), which can generate cost savings in the long run. Second, PPPs can offer internationally recognized innovative technologies and project delivery methodologies. Third, PPPs can help improve project selection, thereby reducing the risks of underutilized assets and poor service delivery. This is because non-viable projects are likely to be filtered out in the tender process, thanks to profit-driven, rigorous assessments and additional information the private sector can provide.41 However, PPPs will not address equity outcomes unless designed to do so. In government-pays PPPs, governments must ensure that the project design meets the needs of the poor and may have to invest in related infrastructure to achieve inclusiveness. For example, a government may need to support low-income households by investing in toilets if those households are to fully benefit from a wastewater management PPP. In user-pays PPPs, governments may need to provide capital cost buy-downs, subsidies, and other support to ensure that low-income families can afford service fees. However, care needs to be taken to ensure that government policies do not create perverse incentives— for example, if tariffs for low-income families were set at below cost recovery and there was no opportunity to offset this loss, a private investor would lose money if it made much effort to deliver services to low-income families. 41 See “Poor Planning and Project Selection” in World Bank (2017b). 68 | CHAPTER 3 Box 3.14 Hybrid public-private partnerships (PPPs) Hybrid PPPs—project structures where components of a project are financed through concessionary public sources in combination with private financing and operation—are another form of financing for cities. Adding concessionary funding to an otherwise "unbankable” or financially unviable project can positively affect the risk profile and render a project financially viable, bankable, and affordable. The precise structure of the hybrid PPP is determined based on the project’s specific circumstances, due diligence, and structuring to allocate risks to the parties best placed to bear them. Hybrid PPPs can be categorized broadly in three forms: (a) viability gap funding (VGF) for capital expenditure (capex) subsidy; (b) VGF for operational expenditure (opex) subsidy; or (c) build-concession. The World Bank and other multilateral development banks have been supporting hybrid PPPs, including in wastewater management (India and Tunisia), light rail (the Philippines) and hydropower (the Solomon Islands). The projects have demonstrated the benefits of coupling concessional and private sector financing, thereby delivering quality infrastructure projects. Source: The World Bank’s Infrastructure Finance, PPPs & Guarantees (IPG) Global Practice Tap climate finance The United Nations Framework Convention on Climate Change (UNFCCC) states that “Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts.” Given significant opportunities for climate mitigation and adaptation embedded in the inclusive urban development process (see the Spotlight “How does inclusiveness interact with sustainability and resilience?”), climate finance can be a useful source of funding to meet investment needs. Climate finance can come from various sources: public or private, national or international, bilateral or multilateral. The following are some of the most common types of instruments:42 • Green bonds: Debt issued by a public or private institution to be used for environmental purposes, such as fighting climate change. • Debt swaps: These entail the sale of foreign currency debt by the creditor country to an investor, such as a nongovernmental organization (NGO), which can then swap the debt with the debtor country for the development of mitigation and adaptation projects. • Guarantees: Commitments whereby a guarantor promises to fulfill the obligations undertaken by a borrower to a lender in the context of climate change activities. 42 Based on “Climate finance, essential for mitigating and adapting to climate change” by the Iberdrola group (https://www.iberdrola. com/sustainability/what-is-climate-finance). CHAPTER 3 | 69 • Concessional loans: Loans for mitigation and adaptation activities, which generally offer longer repayment periods and lower interest rates, among other distinctions, relative to traditional loans. • Grants and donations: Grants for projects against climate emergencies, without repayment obligations. Climate finance can be grouped broadly into mitigation and adaptation finance. Mitigation finance is for activities that can help reduce greenhouse gas (GHG) emissions (box 3.15), whereas adaptation finance is for projects that have the potential to reduce the risk and damages associated with climate hazards. Box 3.16 introduces recent examples of mobilizing private capital for climate finance through World Bank guarantees. Box 3.15 Emission reduction credits (also known as carbon credits) Cities account for 70 percent of global carbon dioxide (CO2) emissions, therefore decarbonizing cities is critical for achieving global, national, and local emission targets. Carbon emissions in cities largely come from energy use in buildings (residential, public, commercial, and industrial) and in motorized transport. Although reducing emissions represents a huge challenge for cities, it can also offer a new source of revenue. Mechanisms are proliferating to allow trading of emissions reductions through the generation of emissions reduction credits (ERCs). Markets to trade ERCs include those created voluntarily by companies to reduce their carbon footprint (voluntary markets), and those whereby companies are required by law to purchase ERCs if they have not achieved minimum emissions reductions (compliance markets). The ERC markets range across different sectors and include nature-based solutions, energy efficiency, and methane capture. These global ERC markets are expanding even more rapidly due to: country commitments made under the Paris Agreement (2015), also known as Nationally Defined Contributions; the ability to trade ERCs under Article 6 of the Paris Agreement; the commitments of the airline industry (and soon also the shipping industry) under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA); and the potential for ERC markets to support the Just Transition away from the use of fossil fuels. Cities in developing countries in particular need support to: (a) understand and consult with the global ERC markets, including as they evolve; (b) generate ERCs that satisfy the requirements of the global ERC markets, and access those markets to sell ERCs; and (c) mobilize debt against future ERC generation to finance investments that generate ERCs. The World Bank is developing an initiative called the Emissions Reduction Program, or ERP, to provide this support to developing countries (this is being launched in East Asia before being rolled out globally). Source: The World Bank’s Infrastructure Finance, PPPs & Guarantees (IPG) Global Practice 70 | CHAPTER 3 Box 3.16 Mobilizing private capital for climate financing World Bank guarantees have been instrumental in mobilizing private capital for climate financing, with innovative financing approaches in energy, transport, water, and other climate development projects. Recent examples include: World Bank guarantee in support of the water sector: To improve water security and meet the water supply needs of 2 million Greater Luanda residents, the government of Angola initiated the $1.1 billion Bita Water Supply project as a national priority investment to be carried out by Luanda’s water utility, Empresa Publica de Aguas de Luanda (EPAL). Due to lack of access to affordable financing, coinciding with the deterioration of its credit rating and a sharp decrease in oil prices, the government requested an International Bank for Reconstruction and Development (IBRD) credit enhancement to improve bankability and to mobilize commercial financing for the project. The World Bank structured the credit enhancement package with $500 million in an IBRD guarantee to mitigate the debt service default risk and mobilized $910 million worth of commercial financing. This innovative structure included an IBRD rolling guarantee with a cash reserve account to function as first loss and, combined with financial products offered by Africa Trade Insurance and Bpifrance Assurance Export, to cover the financing requirement of $1.1 billion. The project, which is currently under implementation, sets a precedent for future private capital mobilization in water sectors in Africa and other regions. Risk sharing facilities (RSFs) for low-carbon investments: RSFs are created to support the scaling-up of new technologies and low-carbon development projects, where World Bank credit enhancement support is provided through a domestic/regional financial intermediary to unlock long-term financing in hard and/or local currency. These RSFs provide financial products, such as partial credit guarantees and payment guarantees to mitigate credit risks in nascent markets; help build a domestic financial market ecosystem and a track record; and develop a programmatic approach to building a pipeline and financing green and climate-smart investments. The World Bank has been involved in structuring RSFs in several low-carbon development programs, including energy efficiency, rooftop solar in micro-, small- and medium- sized enterprises (MSMEs), electric mobility, and compressed biogas. RSFs also help leverage World Bank resources optimally by unlocking about four to six times as much private capital in nascent markets. Blended finance for transport decarbonization: The World Bank is also involved in conceptual- izing and potentially structuring a blended finance model for transport decarbonization through a regional transport decarbonization financing facility in Africa. Once established, this blended finance facility will offer different financial products to member countries to invest in bus rapid transits (BRTs) and e-buses, electric two- and three-wheelers, truck renewal, and charging infrastructure. The facility will be structured as a ring-fenced facility with a combination of potential funding resources from concessional climate funds, private capital, development partners and member countries to offer affordable financing for decarbonization projects. The blended finance model can also be replicated for other sectors and in other regions. Source: The World Bank’s Infrastructure Finance, PPPs & Guarantees (IPG) Global Practice CHAPTER 3 | 71 Steps to access climate mitigation finance The first step toward accessing climate mitigation finance is to clarify mitigation activities in the proposed project. Local governments may consider questions such as: (a) what are the major emission sources within a city? and (b) what interventions can reduce the emissions? Once the activities are determined, the next step is conducting a GHG analysis. In doing so, local governments should ensure that: (a) they consider all potential sources of emissions—positive and negative, direct and indirect— within the project area; and (b) they make the analysis conservative and robust while being transparent on assumptions, given that not every city has reliable data available. Next, local governments should determine project needs and potential by considering (a) whether the potential emission reductions are significant enough to make climate finance worthwhile, and (b) whether climate finance will be paid upfront or only when results—occasionally interim milestones— are achieved through result-based climate financing.43 Then, local governments should search climate finance sources and engage with them. It is important to clarify the necessary measurement, reporting, and verification (MRV) protocols, and, once the project is in the implementation phase, follow the protocols to ensure that the mitigation activities are properly carried out. Adaptation finance44 Unlike other types of development finance, access to adaptation finance requires an explicit intention of enhancing climate resilience. That is, for an urban infrastructure project to be qualified for adaptation finance, it must include resilience-enhancing components identified by a vulnerability analysis, such as using more durable materials that can withstand severe storms, or constructing elevated roads that are passable during a flood. Although adaptation finance has increased in recent years, the Climate Policy Initiative estimates that it represents just 7 percent of total climate finance, based on available data (CPI 2021).45 This is largely because of the context-specific nature of adaptation activities, whereas defining mitigation activities is more straightforward. Private-sourced adaptation finance is more limited because returns on investment are less clear. Due to a lack of capacity for structuring bankable adaptation initiatives, access to adaptation finance is even more difficult for cities in developing countries.46 Adaptation finance also carries the risk of adding to the financial burden for cities in developing countries, because the majority of adaptation finance is provided in the form of loans rather than grants. To tap adaptation finance, cities, especially in lower income countries, need strong political commitments to strengthening institutional capacity and improving creditworthiness for debt financing. 43 About 95 percent of international public climate finance is paid upfront, regardless of results, before a project is operational (https://www.worldbank.org/en/news/feature/2022/08/17/what-you-need-to-know-about-results-based-climate-finance). 44 Based on Larsen, Brandon, and Carter (2022). 45 The level of adaptation finance should be taken with caution given conceptual and methodological difficulties in tracking adaptation finance, as well as limited data. 46 Seventy percent of climate finance goes to middle-income countries; fragile and highly vulnerable countries receive less finance (Larsen, Brandon, and Carter 2022). 72 | CHAPTER 3 Summary and conclusion This chapter provides a policy compass for how cities can become more inclusive. Although the relevance and applicability of policy instruments depend on local circumstances, city leaders can adopt a “Planning, Connecting, Financing” framework corresponding to three key principles: bringing quality services, markets, and spaces close to where people live; increasing both physical mobility and the ability to access digital spaces for all city residents; and tapping a range of financial resources for necessary interventions—having identified priority actions. Rising to inclusiveness challenges requires a concerted effort across various stakeholders, not only local and national governments, but also the private sector, civil society groups, and international organizations. Chapter 4 of this report discusses how each of them can contribute to achieving inclusiveness goals. ANNEX 3A SUMMARY OF RECOMMENDED ACTIONS Dimension Recommended action Planning Bringing quality services, markets, and spaces closer to where people live Improve land market institutions • Define property rights clearly • Improve institutions for systematic and transparent land valuation Promote compact, mixed-use, and transit-oriented development for lower-income families • Respond to housing demands through market-based land use regulations and incentives • Include the disadvantaged through inclusionary housing policies • Put in place urban design guidelines to create walkable urban environments with adequate open public spaces Integrate existing informal settlements into the formal urban fabric • Legalize tenure through land and property titling • Upgrade existing slums Build resilience against climate change-related shocks and stresses by incorporating: • Risk-based land use planning • Resilient infrastructure planning • Urban ecosystem management CHAPTER 3 | 73 ANNEX 3A SUMMARY OF RECOMMENDED ACTIONS Dimension Recommended action Connecting Increasing physical mobility and the ability to access digital spaces for all city residents Connect neighborhoods through transport infrastructure • Assess a city’s mobility constraints • Determine the most efficient and affordable modes • Increase the quantity and quality of services • Enhance equity using complementary fare systems and digital infrastructure Connect people through digital infrastructure • Expand access • Support the enabling environment • Expand digital literacy • Expand digital public services Financing Tapping a range of financial resources for necessary interventions Leverage intergovernmental transfers such as: • Conditional and unconditional transfers • Performance-based transfers • Equalization transfers Generate local revenues through: • Land-based financing using instruments based on taxes or fees (e.g., betterment levies and tax increment finance), cash or in-kind contribution (e.g., development obligations and transfer of development rights), and practices (e.g., land pooling or land readjustment, and strategic land management) • Asset recycling by modernizing and selling government-owned assets • Commercial value capture by planning for spaces and avenues that create commercial activities Leverage financing by: • Increasing opportunities for debt financing through guarantees, bond banks, and resource pooling • Using public-private partnerships (PPPs), including hybrid PPPs that couple concessionary public resources and private financing • Tapping climate mitigation and adaptation financing that is available through a variety of instruments, including green bonds, debt swaps, guarantees, loans, and grants 74 | CHAPTER 3 CHAPTER 4 WHO MAKES THE CHOICES? THE ROLES OF STAKEHOLDERS Key messages Although city leaders and their associated local governments are at the forefront of building more inclusive cities, other stakeholders, including national governments, the private sector, and civil society groups, are also indispensable to achieving greater inclusiveness. • Local governments are at the forefront of implementing policies around planning and connecting. They also hold the key to financing necessary investments by implementing effective schemes for collecting own-source revenues and improving the local regulatory framework for facilitating private participation. They can also encourage greater inclusion through community engagement practices. • National governments provide strategic direction and clarify the roles of different entities so that all relevant parties work together to address challenges to inclusiveness. Finance ministries have an important role to play in promoting inclusive cities through the exercise of their policy, regulatory and transactional functions, including, for example, their allocation of funding to local governments through the intergovernmental transfer system and their setting of fiscal rules and policies on public sector budget management. • The private sector, civil society groups, and international organizations can bring their unique experiences, knowledge, perspectives, and networks to the table, thereby helping government leaders tap into the diversity of ideas and thus better respond to inclusiveness concerns. The private sector and international organizations are also important sources of financing. CHAPTER 4 | 75 Turning the framework of planning, connecting, and financing into actionable practices will require the integration of planning and regulations across land use and service provisions. This often calls for a concerted effort by various sectors and institutions, as well as across municipal boundaries, while engaging citizens and communities in the decision making process. Although city leaders are at the forefront of implementing relevant policies, national governments play a key role by designing national development objectives—such as distributional goals—and helping correct fiscal imbalances between revenues and expenditures that confront various government entities. In other words, an effective governance structure is essential for inclusive urban development. This concluding chapter of the report discusses the roles of key stakeholders. It acknowledges that each city resident—including the most marginalized—as well as members of the international development community can bring their unique experiences, knowledge, and perspectives to the table, which can help local and national government leaders find more effective and innovative solutions. Thus, this chapter addresses not only the roles of state entities—with particular attention to finance ministries— but also those of non-state entities, such as the private sector, civil society groups, and international organizations, while touching on the topics of coordination and participatory planning. Local governments Local governments play a preeminent role in achieving inclusive urban development. This is not only because they are knowledgeable about the local context, but also because they oversee investments in local infrastructure and basic services, alongside adopting land use planning and urban design. City leaders can also influence the choices and behaviors of residents through community engagement practices, by raising awareness about inclusion. More generally, local leaders set the vision for a city’s future development and can play a key role in rallying different actors around the achievement of that vision. In the case of low-income countries, the spatial/urban planning aspects of this vision toned to negotiate with reality: instead of a strict and detailed master plan, cities will be better served by a flexible plan with basic guidelines and rules of the game capable of absorbing informality in an orderly way and dealing with limited institutional capacity. How local governments deliver on their role largely depends on the scope of their responsibilities and their capacity to realize them. The scope varies widely across countries, mostly because of different levels of fiscal and procedural decentralization, as well as regulations and policies enacted by higher levels of government. Nonetheless, in line with fast-growing urban populations and resulting demands for infrastructure and services, fiscal and administrative decentralization worldwide has been increasing since 1990 (Yusuf 2016), and local governments now generally have more control over key aspects of infrastructure investments and service delivery. In particular, in both states (in federal systems) and cities, local governments can increase the resources available for infrastructure investments and service delivery by, for example: (a) implementing and enforcing user fees for public services—such as water and sanitation, solid waste management, and lighting—to make them sustainable; (b) improving the design of property tax collection schemes; (c) easing the regulatory framework for private participation; and (d) improving financial management practices to access a range of financial resources, including private financing. Oftentimes, however, inadequate institutional capacities limit the scope of what local governments can influence. For example, a lack of technical capacity to generate high quality cadastres and land 76 | CHAPTER 4 registries hinders local governments’ implementation of land value capture instruments in developing countries, which can further limit their fiscal sustainability and investment decisions. Inadequate legal and regulatory frameworks, along with local governments’ weak capacity for enforcement, can also limit their influence on inclusive urban development by, for example, undermining their ability to prevent haphazard development in hazard prone locations. Local governments can enhance their administrative, technical, and financial capacities by seeking technical support from higher tiers of government, the private sector, international organizations, and academia, or by building partnerships with cities that share similar characteristics and circumstances. Box 4.1 shows that different aspects of institutional capacity can reinforce each other; that is, increased technical capacity can allow a city to better enforce urban planning regulations, which has the potential to increase its ability to secure cash flows from land-based financing down the road. Box 4.1 Ho Chi Minh City, Vietnam: Harnessing technologies for capacity building Machine learning and artificial intelligence (AI), together with rapidly expanding sources of satellite data, are opening new opportunities for smart and stronger urban governance. By teaching computers what to check in satellite images, local governments can quickly discover how well the patterns of actual city growth align with urban planning policies and regulations. Ho Chi Minh City (HCMC), Vietnam, has already taken such steps. The city combines results from machine learning approaches with various administrative data, such as zoning boundaries and construction permits, and identifies inconsistencies and potential violations, or communities most prone to natural disasters. The data sets are linked to HCMC smart city and open data initiatives, enabling bottom-up reports from inspectors and citizens through a website and smartphone application. To build the necessary technical skills, HCMC worked closely with the World Bank and remote sensing scientists. Training was conducted for government officials and students as well. A higher technical capacity allowed officials to enhance their administrative capacity to enforce zoning regulations more efficiently and more strongly. Source: Goldblatt et al. 2018. National governments Although national governments are not on the frontline of implementing inclusive urban policies, they are vital in providing strategic direction and courses of action that integrate the housing, land use, and transport sectors. Relatedly, national governments can clarify the roles and responsibilities of various entities—from different sectors, levels of governments, and jurisdictions, in the case of metropolitan areas—and provide an overarching framework and incentives for their coordination, so that all relevant parties work together to address challenges to inclusion (box 4.2). CHAPTER 4 | 77 Box 4.2 Interjurisdictional coordination Many cities have urban areas that span multiple local government jurisdictions. This is especially true of sprawling metropolitan areas. São Paulo’s urban area, for example, stretches over 34 municipalities, whereas Mexico City’s spans 57 municipalities (Ferreyra and Roberts 2018).a For such cities, inclusive urbanization requires the effective coordination of planning and the delivery of services across multiple jurisdictions. When benefits and costs spill over municipal boundaries, however, it is often difficult to make coordinated decisions across local governments, especially for expenditures. Addressing this challenge requires not only adequate resources but also good metropolitan governance. The quality of metropolitan governance determines how efficiently costs are shared and service delivery is coordinated across local governments; how accountable and responsive local governments are to the demands of their residents; and how equitably people can access quality services, markets, and spaces. Slack (2019) shows that metropolitan governance models have evolved across the globe. Each model also reflects local and national contexts, including differences in country histories and politics, differences in constitutional provisions, and differences in structure (federal versus unitary). Thus, a metropolitan governance model may succeed in one country and fail elsewhere. Cape Town, for example, works under a large one-tier consolidated government, in which the entire metro area falls within a single boundary, with little or no spillover in service delivery. London and Barcelona, by contrast, work with two-tier government structures, where an upper-tier government and lower-tier governments split responsibilities for service provision, based on whether service benefits can be shared region-wide or are contained locally. In the United States, where metro areas are typically characterized by one-tier fragmented governments, the federal government encourages the formation of metropolitan planning bodies through financial incentives. São Paulo addresses a lack of metropolitan governance through a voluntary basis bottom-up approach, whereby mayors, the private sector, and civil society groups from a subset of municipalities have formed the Greater ABC Chamber to tackle metropolitan issues. Source: Ferreyra and Roberts 2018; Slack 2019. a Based on the identification of urban areas as “urban clusters” following the European Commission’s degree of urbanization methodology; see Chapter 2 of Ferreyra and Roberts (2018) for more details. Creating an enabling environment is another important role of national governments. For example, the capacity of a city to deal with upgrading and integration of informal settlements may depend on national land policies that govern aspects of land tenure and access. National laws and policies concerning migration and labor rights can guide local policy designs for the inclusion of the margin- alized, including migrants, in accessing basic services, social safety nets, and jobs, among other things. 78 | CHAPTER 4 When it comes to digital connectivity, it is the role of national governments to increase the coverage of high-quality broadband infrastructure to an adequate level. National governments can also help lower the service price by stimulating market competition, as has taken place in the United Kingdom, where switching from a duopoly of telephone and cable service to more competition significantly reduced prices.47 Federal policies can help raise private capital too. In the United States, for example, the federal government attracts private investments in economically distressed communities by providing preferential tax treatment through Opportunity Zones. As city leaders increasingly face gaps between available financial resources and municipal spending needs, the roles of finance ministries in all parts of the world are particularly critical.48 On the one hand, finance ministries can implement efficient and effective intergovernmental transfer systems. To ensure water connections to poor households, for example, Indonesia’s Ministry of Finance uses the water hibah49 coupled with a result-based payment scheme. Participating municipalities are reimbursed if the technical specifications and outcomes of their projects—evaluated by the line ministry—meet performance targets (Roberts, Gil Sander, and Tiwari 2019). Rao (2018), however, suggests that specific purpose transfers may not achieve a government’s equity objectives if the transfers are poorly targeted, or if multiple requirements for each transfer make compliance difficult for local governments. More generally, the design of a country’s intergovernmental transfer system, including the formula that determines the allocation of transfers from the central to subnational governments, plays a crucial role in determining the revenues that different local governments have available to finance inclusive urban development. In Indonesia, again, for example, the transfer formula for the country’s General Allocation Grant—known as the Dana Alokasi Umum (DAU)—favors less populous and more remote districts by not considering population. Although this should, in theory, help promote improved delivery in the places where services lag the most, it also implies declining per capita revenues to finance infrastructure provision and service delivery for rapidly urbanizing districts that are attracting population (Roberts, Gil Sander, and Tiwari 2019). This provides a crucial illustration of how the design of a country’s transfer system can have heterogeneous impacts on the capacities of cities to pursue inclusive development. A country’s finance ministry also needs to give careful consideration to how the design of the intergovernmental transfer system affects local government incentives for own-source revenue mobilization, trying to avoid the unintended consequence of perverse incentives towards such mobilization. In addition to paying careful attention to the design of intergovernmental transfer systems, finance ministries can help local governments raise more own-source revenues by working on the policies around local taxes and fees. This is especially relevant in developing countries, where establishing an effective tax system is a daunting task due to a range of issues, including the informal structure of the economy that narrows tax bases; limited technical capacities that hinder the 47 Competition has also spurred service providers to take proactive actions to target their offerings to users’ needs by increasing speeds. In the United States, in contrast, the two dominant service providers strongly oppose competition, keeping their prices unaffordable for low-income households (Karr 2019). It may be unreasonable, however, to directly compare cities in Europe and the United States, given that the populations in the latter tend to be more spread out, making the average cost of connecting each household much higher than that in European cities (Collins 2021). 48 In general, there are three types of functions that finance ministries tend to perform: policy, regulatory, and transactions. These functions cover three areas: fiscal policy; budget management; and accounting and reporting policies, internal audit, and control. In addition, a finance ministry may perform other functions, including in relation to intergovernmental fiscal relations. As an International Monetary Fund (IMF) review on the evolving functions and organization of finance ministries makes clear, the precise set of functions performed by finance ministries differs widely across countries (Allen et al. 2015). Consequently, the extent of the role that a finance ministry can play in promoting inclusive cities will likewise vary from country to country 49 Hibah is a type of grant provided to implement national priority programs. CHAPTER 4 | 79 development of an efficient tax system; and the economic and political power of the rich, who oppose fiscal reforms to avoid tax burdens (Tanzi and Zee 2001). Finance ministries can take the lead in getting the political will to implement necessary reforms and strengthen tax administrations. At the same time, finance ministries are well positioned to facilitate local governments’ debt financing from both public and private sources. Addressing the limited capacity of the domestic banking sector— such as limited abilities to develop infrastructure finance instruments, the dominance of short tenures, or the absence of recourse loans—will expand opportunities for subnational borrowing, especially in developing countries. Improving the legal and regulatory environment for public-private partnerships (PPPs), as well as assisting government contracting agencies and local governments with building capacities for project identification and preparation, will help build a strong pipeline of projects, thereby increasing the chances of attracting private investors. Finally, it is important to acknowledge the vital contribution that inclusive cities can make to national development goals. Better access to services, markets and spaces for a city’s residents helps to foster both the accumulation of human capital and agglomeration economies, which, in turn, contributes to the generation of national gross domestic product (GDP). In doing so, more inclusive cities also help to drive national tax revenues, providing funding for other critical areas of government spending. More inclusive cities, furthermore, tend to be more resilient to, for example, climate change related shocks and stresses, and more transport oriented and compact cities can make an important contribution to the achievement of national GHG emissions targets (Mukim and Roberts 2023). The private sector In addition to providing funding for the delivery of infrastructure and services, the role of the private sector is crucial for enhancing inclusiveness. As discussed in Chapter 3, when it comes to the financing of urban infrastructure through PPPs, the efficiency introduced by the private sector throughout the life cycle of infrastructure projects has the potential to deliver higher quality services to lower- income households at lower user fees. Also, the private sector can spur technological innovations in infrastructure designs in a way that meets the specific needs of disadvantaged groups, such as people with disabilities. With appropriate application of incentives and/or regulations, the private sector can also help local governments meet inclusiveness objectives. The provision of affordable housing units, with the sale or transfer of development rights, is an example (see the discussion in Chapter 3). Job creation is another critical role of the private sector. For example, during the implementation of private-led infrastructure or housing development projects, a number of low-skilled jobs are created to perform labor-intensive civil works. In the longer term, business climates improved by such projects may lead to additional job creation by stimulating entrepreneurship and local business activities. 80 | CHAPTER 4 Civil society groups Communities represent the interests of diverse groups—including the poor, women, the elderly, people with disabilities, and migrants—and play an important role in understanding and addressing inclusiveness challenges. As the frontline beneficiaries of inclusive urban policies, communities are trusted sources of information and practical experience, as well as the bedrock of behavioral change, when implementing urban policies. Actively listening to them can increase the chances of identifying the most pressing issues and blind spots, and hence, the chances of finding more effective and innovative solutions. Therefore, communities should be consulted and engaged in the decision making process to the largest extent possible (box 4.3). Box 4.3 Different aspects of a participatory approach In designing urban policies, it is important to ensure participation of communities that represent the interests of diverse groups, so that the marginalized have a voice in the process of addressing barriers to making a city more inclusive. For participatory planning to work, however, organizing meetings or increasing representation is not enough. Additional efforts are needed to raise the awareness of city authorities to ensure that inclusive policies, laws, and plans can be enacted. Organizing meetings is not enough In Denver, Colorado, many community engagements are organized to gather residents’ input on upcoming projects. The Colorado Department of Transportation, for example, conducted 432 community meetings about the Central Interstate 70 highway development over a period of 15 years. But attendance steadily declined, because people perceived that the city did not incorporate their concerns, such as air pollution and displacement, into planning decisions. In Massachusetts, Einstein, Glick, and Palmer (2019) shows that participation in zoning forums for new affordable housing developments tends to be dominated by older, wealthier, and whiter residents, leading to outcomes—such as refusal to build affordable housing developments—that benefit those residents at the expense of the marginalized. This is partly because people with children and/or long work hours, especially lower-income residents, cannot sacrifice their time with family and/or work to attend those meetings. How should city leaders encourage participation? Milkman (2021) suggests some options. For example, Denver invested in participatory budgeting. By allowing participants to decide how to spend a portion of the city’s budget, the process offers them the opportunity to form new alliances with fellow community members and learn how to navigate bureaucracy. Building housing stability through, for example, a community land trust can also help lower-income residents focus more on individual and community empowerment. Cities can adopt equity- focused community engagement processes, such as Minneapolis’ Equitable Development Scorecard. Finally, going digital can be not only more accessible but also more transparent, provided digital inclusion has been achieved. CHAPTER 4 | 81 Box 4.3 Different aspects of a participatory approach, continued Representation is just the first step Women’s needs and opinions are critical when planning for the inclusive provision of basic urban services. Take, for example, the provision of water, especially to water-scarce informal urban areas in lower-income countries. In these areas, female household members are often responsible for securing water for their families. However, women are still severely underrepresented in the water workforce, as well as in decision making roles in water governance. Efforts toward a more gender-inclusive water sector have been made across the globe, including maintaining gender balance in water user associations and catchment advisory committees (Kenya); requiring 40 percent participation by women in all local water committees by way of a Water Resource Management Act (Vanuatu); and promoting the participation of women as part of a multilevel water governance strategy (Nicaragua). However, only when women can set agendas and influence decision making will representation’s full potential be realized. Hence, continued efforts are needed to better understand the interventions that succeed in giving women a voice in decision making processes. Analyzing the transcripts of deliberations in water community governance, using text-to-data methods, may help. Nothing about us without us As the slogan of the international disability movement—“Nothing about us without us”— suggests, it is not possible to fully address mobility challenges without consulting and engaging people with disabilities. This is largely rooted in the ignorance of people without disabilities regarding what the real challenges are. In consulting with people with disabilities, it is important to train infrastructure designers and service providers, such as bus drivers, so they can understand the issues and design and operate accordingly. The mobility access audits conducted in Shanghai, China, provide a good example of effective community-based engagement in inclusive mobility. A World Bank-funded project engaged people with disabilities in auditing and reporting mobility issues to city authorities. They identified dropped curbs and repairs to damaged sidewalks as key issues for their mobility. The annual audit has helped city authorities and contractors understand and prioritize the needs of older people and people with disabilities, thereby bringing access improvement into mainstream city planning. Sources: Participation from Einstein, Glick, and Palmer (2019); Milkman (2021); gender representation from Mukim and Roberts (2023); disabilities from HVT (2019). 82 | CHAPTER 4 Academia includes universities, think tanks, and research and training institutions. Members of academic institutions are often instrumental in gathering evidence, facts, and data that inform both national and local urban policies. Academic institutions are also key players in assessing policy impacts on different segments of society, while continuing to improve methodologies based on new ideas, data, and tools. Therefore, the participation of the academic community is important, not only in policy design, but also potentially in policy monitoring and evaluation. International organizations Although they do not directly design and implement policies for inclusive urban development, international organizations and development partners nevertheless have an important role to play in defining the global agendas requiring worldwide mobilization and international financing flows. When cities need to borrow from commercial markets, for example, international organizations can improve debt terms and increase opportunities to tap new markets and institutional investors by providing policy-based guarantees. International organizations can also contribute research, helping to identify the most pressing issues related to inclusive urban development and to raising global, national, and local awareness about the issues. Together with international experience, knowledge generated by cross-cutting research can inform globally recognized best practices and evidence-based recommendations. Finally, these stakeholders can directly support local governments in closing the gap in local debt financing (see box 4.4 on the World Bank’s City Creditworthiness Initiative), climate financing (City Climate Finance Gap Fund), or private financing more generally (see box 4.5 on the Global Infrastructure Facility) through, for example, capacity building, technical assistance, knowledge generation, and even matchmaking with investors. Box 4.4 City Creditworthiness Initiative (CCI) The World Bank, with Public-Private Infrastructure Advisory Facility support, has been leading the City Creditworthiness Initiative, which is a comprehensive technical assistance program that offers a tested operational template and suite of analytical products that can quickly • Identify critical demand and regulatory-side issues • Improve quality and transparency of financial management systems to increase creditworthiness • Recommend policy changes that bolster regulatory frameworks supportive of municipal debt In order to improve local governments’ options for debt financing, a wide spectrum of intersecting issues need to be tackled in order to alleviate binding constraints. These relate to: the local government’s financial management practices and creditworthiness; the fiscal framework and intergovernmental transfer system; the legal and regulatory framework enabling transparency and access with sound oversight; and investor and commercial banks’ appetites for subnational financing. CHAPTER 4 | 83 Box 4.4 City Creditworthiness Initiative (CCI), continued The initiative entails comprehensive city creditworthiness academies and toolkits, creditworthiness technical assistance, and a global knowledge data base on local government borrowing in developing countries. The City Creditworthiness Academies are week-long learning events with city-level and national government officials, delivered in-country, that help participants better understand the factors that can improve cities’ creditworthiness, to enable them to access more financing from private sources. Topics include the core principles of creditworthy public financial management, revenue management, climate smart capital investment planning, and debt management. The initiative has completed 15 academies since the program’s inception, involving more than 250 city governments and 600 officials from 26 countries, most recently in India and the Philippines. • In India, the academy held in November 2022 resulted in the findings’ inclusion in the design of the new National Urban Mission. Improvements are also planned for the state- level regulatory environment, including creating more conducive conditions for municipal borrowing and PPP activity. • In Indonesia, on the basis of an academy held in 2019, 13 participating subnational governments (including regions, cities, and districts) later borrowed funds from the government’s dedicated infrastructure financing facility (PT Sarana Multi Infrastruktur), which is also supported by a World Bank financing operation (Regional Infrastructure Development Fund). 2022 marked the launch of the Local Government Borrowing Database, which comprises quantitative and qualitative information on developing country governments’ prevailing situations with respect to accessing debt financing. The database covers 10 countries and 30 cities, and is expanding to cover more jurisdictions. Each country profile includes four sets of data: (a) aggregated data on local government borrowing at the country level; (b) data for the three largest cities in each country; (c) legal and regulatory policy coverage; and (d) debt securities issuances. The data is also summarized in a written country profile. Source: World Bank’s Public-Private Infrastructure Advisory Facility (PPIAF) team. 84 | CHAPTER 4 Box 4.5 The Global Infrastructure Facility's support for inclusive cities The Global Infrastructure Facility (GIF), a G20 initiative housed in the World Bank, is an open- access project preparation facility (PPF) platform that supports developing countries through its 10 multilateral development bank (MDB) technical partners to create a pipeline of bankable, sustainable infrastructure investments that mobilize private financing alongside public and development finance institution (DFI) financing. Since its inception in 2014, the GIF has raised $190 million in funding and supported 165 projects in 67 countries. The GIF anticipates mobilizing investments of approximately $107.19 billion, including about $70.94 billion in private investment, provided all current GIF-portfolio projects reach successful closure over the next four to six years. As of August 2023, 21 GIF-supported projects have successfully reached commercial closure, 16 of which have also reached financial closure, and have raised $3 billion in commercial financing. The cases highlighted in this box provide examples of how GIF is supporting the development of inclusive cities. Brazil: Street Lighting Program In partnership with the World Bank, the International Finance Corporation (IFC)—the private sector arm of the World Bank, the Federal Government of Brazil, and CAIXA—one of Brazil’s public banks, the GIF supported the structuring and procurement of a series of public street lighting modernization projects across 12 Brazilian municipalities. The $20 million in GIF support encompassed developing a standardized approach that included funding, technical assistance, and the enhancement of project preparation capabilities. This approach enables interested stakeholders to replicate these transactions in a scalable manner, thereby reducing costs and facilitating implementation in numerous municipalities. So far, more than $180 million in private sector capital mobilization has been contracted across 10 pilot transactions, benefiting more than 6 million individuals. The project holds significant potential for carbon emission reduction because lighting contributes nearly 5 percent of global CO2 emissions. The ongoing program, which began in 2018, is expected to curtail emissions by approximately 18,000 tons of CO2 annually and establish a model for future investment programs. Enhanced street lighting has bolstered security within the project areas, making it safer for women after dark, which, in turn, has helped to improve access to public services and the job market. The program has distilled lessons learned from the project and international best practices into a practical toolkit for structuring forthcoming public-private partnerships (PPPs) in public street lighting. The program's success has spurred the establishment of additional concession contracts in various municipalities, with the goal of modernizing, financing, operating, and maintaining other public lighting networks throughout Brazil. In addition to energy and economic savings, the program has yielded a range of other socio-economic benefits. These include: (a) improved lighting quality; (b) reduced opportunity crime; (c) enhanced perceptions of security, particularly in areas where women are most vulnerable; and (d) fostering of local economic activity due to increased safety. CHAPTER 4 | 85 Box 4.5 The Global Infrastructure Facility's support for inclusive cities, continued Senegal: First Electric BRT in Dakar In March 2022, the government of Senegal, through the Dakar Urban Transport Executive Council (CETUD), along with a consortium consisting of Meridiam (GIF’s Advisory Partner), Keolis, and Fonsis, signed a concession agreement to implement the first electric bus rapid transit (BRT) system in Africa. The GIF provided support to the International Finance Corporation (IFC) for various aspects of the project, including project preparation, investment feasibility, transaction support, and serving as a technical advisor to the government, all of which led to bringing the project to a commercial and financial close. It is anticipated that the project will attract more than $150 million in investments, including at least $50 million from the private sector. This funding will support the acquisition of more than 120 fully electric buses, batteries, and depots. The private consortium will oversee the operation and maintenance of the BRT for a 15-year period. The initiative is set to benefit more than 300,000 passengers daily, covering 18.3 kilometers of dedicated BRT lanes and serving 14 municipalities. It is expected to reduce travel time along the network significantly, cutting it in half from 90 to 45 minutes. It is also anticipated that the project will create more than 1,000 direct and local jobs, many of which will be filled by women and young people. Additionally, access to a further 8,000 job opportunities through the BRT—both from the development of the BRT and from greater access to employment opportunities via the expanded transport network—is foreseen for the local inhabitants. Simultaneously, the project aims to enhance Dakar's air quality by preventing emissions of more than 59,000 tons of CO2 annually. Ultimately, the project aligns with Dakar’s ambitious strategy to modernize urban mobility and its transport network by 2025. Indonesia: Legok Nangka Regional Final Waste Treatment and Processing Facility The Legok Nangka Regional Final Waste Treatment and Processing Facility project signifies a pioneering endeavor in waste management through a PPP framework. The project, which targets six municipalities within the Greater Bandung Area of West Java, Indonesia, aims to establish a cutting-edge facility that will serve as a pivotal point for the comprehensive treatment and processing of municipal solid waste. The IFC and the Japan International Cooperation Agency (JICA) have jointly undertaken the role of providing PPP transaction advisory support. Their collaboration extends to the Ministry of Finance of the government of Indonesia and the West Java Regional Waste Management Agency. GIF support was critical to IFC’s involvement as the transaction advisor to the Indian government and to complement JICA’s technical expertise. GIF’s $1 million funding supported the IFC in developing a feasibility study and legal documents, including the standardization of project agreements such as the power purchase agreement, waste supply agreement, and PPP agreement, to ensure replicability of the documents in other waste-to-energy projects in Indonesia. 86 | CHAPTER 4 Box 4.5 The Global Infrastructure Facility's support for inclusive cities, continued The project envisions a holistic approach to waste management. The plan entails the collection and transportation of waste from the participating municipalities to a state-of-the-art waste- to-energy facility. The selected private sector partner will manage a significant daily volume of about 2,000 tons of waste at the facility, utilizing advanced waste-to-energy technology to generate electricity. This not only addresses pressing waste management challenges but also aligns with Indonesia's commitment to achieving net-zero emissions by 2060. Economically, the project is expected to mobilize $200 million in private investments. This also indicates the potential for sustainable business opportunities in the region’s waste management sector. Beyond its immediate impact, the Legok Nangka project serves as a model for innovative waste management practices, contributing to the sustainable development of the region and the realization of Indonesia's long-term environmental objectives. Source: Global Infrastructure Facility (GIF) team. Summary and conclusion This chapter has discussed the roles various stakeholders must carry out in order for the “Planning, Connecting, Financing” framework to work. As frontline actors, local governments hold the key not only to implementing policies around planning and connecting, but also to financing necessary investments by generating local revenues and improving relevant regulatory frameworks. National governments are also indispensable to addressing inclusiveness challenges because they provide strategic direction and clarify the roles of different entities. Given that the way city leaders finance and fund necessary investments is critical to how well residents can access services, markets, and spaces, the role of finance ministries—including the allocation of funding to local governments and the setting of fiscal rules and policies on public sector budget management—is particularly noteworthy. In addition, non-state entities—such as the private sector, civil society groups, and international organizations—can bring their unique experiences, knowledge, perspectives, and networks to the table, which helps government leaders tap into the diversity of ideas and innovate, and thus better respond to inclusiveness concerns. The private sector and international organizations are also important sources of financing. 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Metropolitan Governance: Principles and Practice. Washington, DC: Inter-American Development Bank. Tanzi, V., and H. Zee. 2001. “Tax Policies for Developing Countries.” Economic Issues 27, International Monetary Fund, Washington, DC. Yusuf, S. 2016. Developing a Common Narrative on Urban Accessibility: A Fiscal/Finance Perspective. Washington, DC: Brookings Institution. REFERENCES | 95 Photo Credits Cover © Towering Goals/Shutterstock Page 2 © Matt Gush/Shutterstock Page 5 © Diego Grandi/Shutterstock Page 10 © Sableng212/Shutterstock Page 32 © AlexAnton/Shutterstock Page 38 © StandARTP/Shutterstock Page 75 © Mazur Travel/Shutterstock About the GIF The Global Infrastructure Facility (GIF), a G20 initiative, has the overarching goals of increasing private investment in sustainable infrastructure across emerging markets and developing economies, and improving services that contribute to poverty reduction and equitable growth, aligned with the Sustainable Development Goals (SDGs). The GIF provides funding and hands-on technical support to client governments and multilateral development bank partners to build pipelines of bankable sustainable infrastructure. The GIF enables collective action among a wide range of partners— including donors, development finance institutions, country governments, private sector investors and financiers— to leverage both resources and knowledge to find solutions to sustainable infrastructure financing challenges. A G20 INITIATIVE