The DMI Approach for Urban Development Funding

Abstract

With the introduction of the JESSICA (Joint European Support for Sustainable Investments in City Areas) Initiative, the European Commission aimed at strongly enhancing investments in urban areas to meet the steadily increasing requirements, arising from urbanisation, for European cities. One major challenge now is to find out where the establishment of so called Urban Development Funds (UDFs), with their revolving nature, is a suitable means to achieve this goal. A concept for the determination of funding targets for UDFs is discussed in this paper with the help of three subsequent steps – distance, movability and capital market imperfections – which we name the DMI approach. An example on selected European regions demonstrates the application and compares the results with actual UDFs on the one hand and over different geographical levels on the other hand. The latter reveals that the currently existing regional budget allocation for urban development leads to deviations of funding amounts from actual urban need for support.