Urban Finance Research Articles

Building Stock and Building Typology of Kigali, Rwanda

This study uses very high-resolution Pléiades imagery for the densely built-up central part of the City of Kigali for the year 2015 in order to derive urban morphology data on building footprints, building archetypes and building heights. Aerial images of the study area from 2008–2009 were used in combination with the 2015 dataset to create a change monitoring dataset on a single building basis. A semi-automated approach was chosen which combined an object-based image analysis with an expert-based revision. The result is a geospatial dataset that detects 165,625 buildings for 2008–2009 and 211,458 for 2015. The dataset includes information on the type of changes between the two dates. Analysis of this geospatial dataset can be used for a range of research applications in economics and the social sciences, as well as a range of policy applications in urban planning and municipal finance administration.

The urban dimension of Chinese infrastructure finance in Africa: A case of the Kotokuraba Market Project, Cape Coast, Ghana

ABSTRACT For many years, Chinese infrastructure finance has been secured by African governments to provide infrastructure of national significance, while cities continue to lack fiscal tools for the provision of large-scale urban infrastructure. This article not only demonstrates that Chinese infrastructure finance is being extended to municipal authorities in Africa to undertake critical urban infrastructure but also scrutinizes the urban dynamics and local impact of using Chinese infrastructure finance for urban regeneration. Through empirical scrutiny of the regeneration of Kotokuraba Market in Cape Coast, Ghana, findings reveal that municipal authorities, like national governments, are subjected to political and embedded conditionalities. However, the conventional resource-backed repayment conditionality characteristic of Chinese-funded national projects differs from the project finance model—relying on the project’s cash flow for repayment—adopted in Cape Coast. We found in Cape Coast a locally-driven emphasis on affordable rents that stands in stark contrast to the practice of project finance, resulting in potential default of the Chinese loan. The wider consequences of this disjuncture for urban development, financing and governance in Cape Coast, Ghana, and Africa are discussed.

Impact of Agricultural Financial Support on Agricultural Economic Development in South China

Aim: In order to establish and improve the rural financial system and solve the problem of insufficient funds in rural areas, to push forward and promote the development of agricultural economy, rural construction and farmers’ income. Results: Due to the influence of various factors, there are many problems in the development of rural finance in China. Not only are there few funds and networks, but also there is a big gap between financial products and services and urban finance. The problem of difficult loans for small and mediumsized enterprises and ordinary farmers in rural areas is very prominent, and the gap in rural capital deposit and loan is very serious. A large number of rural capital outflows cannot effectively support the development of agricultural economy. Conclusion: At the same time, the problems and deficiencies in the development of rural finance in Guangdong Province are found out, and the corresponding policy recommendations are put forward to provide ideas and reference for the improvement and perfection of the rural financial system in Guangdong and even the whole country, the rapid and healthy development of rural finance, and the enhancement of rural finance support for agricultural development.

Urban infrastructure financing in India: a proposed framework for ULBs

Infrastructure has been identified as the backbone of any economy as it provides channels of economic growth. For emerging economies like India, with 31% current urban population and contribution of 63% to GDP; the pie is expected to increase to approximately 40 percentages by 2031 with a GDP contribution of 70%-75%. This creates a need for rapid development as well as the strengthening of existing urban infrastructure to accommodate growing demand and to exploit its economic contribution. The extent of urban infrastructure development is delivered at three levels of governance; Centre, State and urban local bodies (ULBs). ULBs being the last level of governance for infrastructure development in urban India, they are grossly under-equipped to effectively generate revenues and raise capital. The present study has identified issues in the existing financing and assessment framework of ULBs and suggests a framework to rationalise their funding patterns and to bring competitiveness. The paper stresses the need of the proposed framework to bring smart city SPV and other ULBs at the equal platform.

Changing modalities of urban redevelopment and housing finance in Turkey: Three mass housing projects in Ankara

ABSTRACTThis study aims to critically analyze the transformation of the Turkish state’s role in urban redevelopment and housing finance by focusing on 3 mass housing projects from Ankara in 3 different historical political conjunctures. The analysis reveals that the Turkish state, with its peculiar institutional artifices, not only creates rent gaps in varying forms but also increasingly coordinates appropriation of them. This involved not only reformulation of strategies to cope with the social problem of continuing expansion of urban population by planning efforts of various scope but also incorporating low-income households into the dominant logic of urban space redevelopment.

Metrópole, moeda e mercados. A agenda urbana em tempos de reemergência das finanças globais

Resumo O presente artigo explora a complementaridade entre a economia política e os estudos sociais das finanças para compreender a variedade de mecanismos pelos quais o capital financeiro se articula com a (re)produção da metrópole, com ênfase no contexto brasileiro. Depois de introduzir alguns conceitos básicos dos estudos sociais das finanças e de qualificá-los à luz da abordagem ortodoxa das finanças corporativas, apresento dois exemplos – a securitização dos tributos e a precificação da água na Grande São Paulo – de como essa vertente pode contribuir para a análise do maior entrelaçamento entre “a finança” e a metrópole. Concluo com recomendações para uma agenda de pesquisa que articule a economia política com os estudos sociais das finanças urbanas.

The Governance Model of Project Institutions and the Expansion of Local Government Debt

With the completion of tax-sharing system reform in 1994, the financial capacity and governance capacity of the central government have been rapidly improved. In order to encourage the local government to actively achieve the goal of promoting economical growth and maintaining people’s livelihood”, after 2002, the central government gradually came to allocate the transfer payment in the form of projects” downward. The special transfer payment allocated by the project application increased rapidly from 37.5 billion yuan in 1995 to 1894.1 billion yuan in 2014, with an average annual growth rate of 22.93%. The huge amount of the special transfer payment has strengthened the governing effect of the central government in relying on the top-down system and gradually formed a unique governance model of project institutions”. Project institutions establish the hierarchical governance mechanism between the central and local governments, which not only fully arouses the enthusiasm of local governments to carry out the campaign of project competition and develop regional economy, but also increases the debt financing needs of local governments. Actually, project institutions form a financial capital chain with the project as the carrier, the central special transfer as the guide, and the local supporting funds, bank loans and other funds extensively involved. By constructing the dynamic game model which reflects the relationship between central and local governments, we analyze the impact of project institutions on financing decisions of local governments. Then based on the special subsidy and local debt data of 278 cities, we test the expansion effect on the debt of project institutions and the mechanism. The research shows that project institutions significantly promote the expansion of local debts. The effect, on the one hand, comes from the increase of debt financing of public investment demands; on the other hand, comes from soft budget constraints of the special subsidy, which may induce local governments to carry on moral risk behaviors on debt financing, and the effect is more pronounced in poorer regions. The policy implications of this paper include the following: first, a transparent and scientific project application mechanism should be constructed; second, the central government should clearly define the inter-governmental authority and expenditure responsibility as soon as possible; third, the central government needs to tighten budgetary constraints on local governments, and makes its attitudes clear at local debts and reduce the expectations for aids. The potential contributions of this paper lie in two aspects: First, previous literature is mainly based on the perspective of central-local relations, which studies the causes of local government debts, generally emphasizes the influence of the decentralization governance model characterized by lumpism”. However, it ignores the possible debt expansion effect of project institutions, which is more characterized by centralism. Second, existing empirical literature mostly uses the data of provincial government debts or chengtou” debts to calculate the total amount of local government debts, but the main body of Chinese government debt issuance is the local government below the provincial level, the main source of debt funds is bank deposits, and the direction of investment of debts is mainly municipal infrastructure construction projects. Therefore, we select the sum of various types of long and short term debts of urban financing platforms and fixed assets investment of municipal public facilities construction from bank loans as the agent variable of local government debts, so as to make the empirical results more reliable.

INNOVATIONS IN THE SUSTAINABLE MANAGEMENT OF LOCAL GOVERNMENT LIABILITIES IN CHINA

Through the first and second year of China’s 13th five-year plan coincided with local governments holding their own “Two Sessions” before attending the “Two Congresses” in Beijing in March. As one of the frequent results, the issue of local government debt naturally became a popular topic. The scale of local government debt in China was/is considerable, and the structure is complex, which poses a threat to sustained economic development. To address this situation, China must regulate local government debt, clean up urban financing vehicle debt, foster and manage the local bond market, and introduce innovation in the management of local government liability. Only through initiatives such as this will China gain control of local government debt and thus support and promote the long-term sustainable growth of the economy.

Transformation of urban public transport financing and its effect on operators’ efficiency: evidence from the Czech Republic

The purpose of this study is to analyze changes in the efficiency of urban public transport in the Czech Republic. Network data envelopment analysis and cluster analysis were applied to data from 19 urban public transport systems during 2004–2016. The series structure of the network was considered, including production and consumption stages with three external inputs (employees, rolling stock, and energy), one final output (passengers), and two intermediate products (vehicle-kilometres and seat-kilometres). The relationship between changes in efficiency and the method of financing for the operation of transport services was explored through standard statistical methods. One of the main findings was that the efficiency of smaller transport systems with complicated access to sources of funding were systematically less efficient, particularly in the consumption stage. These trends were even more significant after the reorganization of urban public transport funding in 2010.

Local food environments: Australian stakeholder perspectives on urban planning and governance to advance health and equity within cities

ABSTRACTUrban planning policy has the potential to improve population health outcomes and reduce health inequities within cities. In Australia, however, the pathways for implementing policy approaches are unclear, and responsibilities are contested and dispersed across sectors, portfolios and levels of government. This study investigated government, non-government and private sector perspectives on spatial planning for local food environments and aimed to identify governance opportunities to advance healthy equitable food access. Informed by health governance frameworks, 27 key informant interviews with policymakers and practitioners from urban planning, public health, urban economic and partnership development were conducted in Melbourne, Australia, a city experiencing rapid growth. Stakeholders identified regulation, urban planning policy, finance, coordination and partnerships as key governance processes for the creation of healthy food environments; political leadership as a driver for action; and distributed leadership as essential for implementation. Urban health is a recurring theme in the UN Sustainable Development Goals with targets for health and wellbeing, and sustainable urbanisation. Our study contributes to an understanding of the governance actions required to deliver healthy equitable urban food environments, and demonstrates the importance of comprehensive action, particularly when two of the potentially most powerful levers, regulation and finance, are weak.

WHAT DRIVES HOUSE PRICE IN MALAYSIA? IN SEARCH OF AN ALTERNATIVE PRICING BENCHMARK FOR ISLAMIC HOME FINANCING

The current practise of the Islamic banks to rely on market interest rate as pricing benchmark for their home financing products has been a subject of intense debate among many parties. Muslim scholars have warned that it is highly discouraged as it could lead to a possible convergence between the practices of the Islamic and conventional banks. This paper intends to address the financing issues in the discussion of human settlement or housing policy by presenting the determinants for house price index as well as looking into the possibility of adopting the House Price Index (HPI) to replace the market interest rate as a pricing benchmark for the Islamic home financing. The study applies Auto-Regressive Distributed Lag (ARDL) method on a model comprising HPI as the dependent variable and a set of independent variables consisting of economic, housing demand and housing supply factors. The findings lead to the formulation of recommendations as a way forward for the Islamic banking industry in particular, and the economy in general. This will require a paradigm shift from basic financing products to a more holistic approach which integrates supply of housing factors, as well as urban planning and urban finance, with human rights and recognizes the need to place and shelter people.

WHAT DRIVES HOUSE PRICE IN MALAYSIA? IN SEARCH OF AN ALTERNATIVE PRICING BENCHMARK FOR ISLAMIC HOME FINANCING

The current practise of the Islamic banks to rely on market interest rate as pricing benchmark for their home financing products has been a subject of intense debate among many parties. Muslim scholars have warned that it is highly discouraged as it could lead to a possible convergence between the practices of the Islamic and conventional banks. This paper intends to address the financing issues in the discussion of human settlement or housing policy by presenting the determinants for house price index as well as looking into the possibility of adopting the House Price Index (HPI) to replace the market interest rate as a pricing benchmark for the Islamic home financing. The study applies Auto-Regressive Distributed Lag (ARDL) method on a model comprising HPI as the dependent variable and a set of independent variables consisting of economic, housing demand and housing supply factors. The findings lead to the formulation of recommendations as a way forward for the Islamic banking industry in particular, and the economy in general. This will require a paradigm shift from basic financing products to a more holistic approach which integrates supply of housing factors, as well as urban planning and urban finance, with human rights and recognizes the need to place and shelter people.

U.S. Infrastructure Gap(s): Federal Policy and Local Public Institutions

Urban infrastructure development and maintenance needs in the United States are not being met. Likewise many U.S. cities have been slow to adopt innovative new procurement models for infrastructure development and smart city programs despite their apparent benefits. This paper assesses the impediments to the adoption of new models for urban infrastructure development and finance unique to the United States as a function of federal, state and local investment policies and institutions, and how those institutions differ from other developed economies globally. The paper identifies institutional reform, via the creation of new public infrastructure organizations and institutions in U.S. states and cities, as a solution to spur the adoption of life-cycle based infrastructure procurement, smart city programs, and other proven reforms to urban infrastructure development and maintenance.

Promoting investment in sustainable urban development with JESSICA: Outcomes of a new EU policy initiative

Between 2007 and 2015, the European Commission invested €1.846 billion in a new policy initiative called JESSICA (Joint European Support for Sustainable Investment in City Areas). Since European cities in particular have perceived a shortage of investment dedicated to urban regeneration projects, JESSICA will finance more than 2000 higher risk projects through Urban Development Funds as a financial intermediary in order to create economic stimulus. Moreover, replacing traditional grant funding by revolving financial instruments (loans, guarantees and equity capital) is a central part of the ongoing reform of EU cohesion policy. The special challenge of JESSICA is to combine these financial engineering instruments with integrated urban planning issues in a sustainable fund model. However, it is not yet clear whether this new policy instrument is as effective as European decision-makers believe, because up to now there has been no evaluation available on how successful JESSICA has been in achieving its ambitious objectives. Our empirical analysis is the first one to cover the impact of this innovative EU initiative in all 28 EU member states by making outcomes of the policy change measurable in monetary terms. Since revolving financial engineering instruments are a central part of the Europe2020 strategy, we derive key success factors for sustainable urban finance and give recommendations to adjust the policy instrument in the current programming period as part of the ongoing process of a reformed EU cohesion policy.

Efficiency measurement and improvement of housing provident fund in China

Housing provident fund system plays an active role in promoting social stability and development, which further influences efficiency and sustainability of the society and harmony of people's life. This paper first sets up a multiple appraising system of efficiency and equilibrium of housing provident fund by integrating housing fund collection, housing fund extraction, loans and the statistics of national economy. The operational efficiency model is then set up based on Data Envelopment Analyses (DEA), and the model is optimised using the algorithm of differential evolution (DE) together with the constraint handling techniques, i.e. Deb's feasibility-based rule and multi-objective optimisation. The efficiencies of the whole country and 31 provinces are quantified, and some suggestions are finally obtained. This study quantitatively reveals the differences and imbalances of housing provident fund operation efficiency, and provides technical support for reforming the national housing provident fund development strategy, perfecting the national urban housing finance and security system, and strengthening the system top-level design.

Towards an inclusive formal housing finance sector: A case for rural population

Shelter is one of the basic human needs and is universally construed as a human right that is vital to the attainment of the right to live with dignity. Given the rapid pace of urbanization and rising personal incomes, urban housing finance has become increasingly attractive for lenders. However, the rural population has been neglected or at best, served out of compulsions of regulatory requirements. Rural households depend more on government sponsored housing projects and subsidized credit rather than on the formal housing finance system. In this context this article analyzed the trends in the rural demand for formal housing finance with the purpose to gauge the extent of inclusiveness in the Indian housing finance system and carried out a preliminary econometric investigation into the selected economic factors that may have a role in influencing rural demand for formal housing finance.

Passing the buck without the bucks: Some reflections on fiscal decentralisation and the Business Rate Retention Scheme in England

In an era of continuing Local Government austerity and enhanced urban financialisation, Local Government in England is increasingly reliant upon decentralised methods of urban finance (typically based on ‘new economic growth’ extracted from non-residential property development) to fund public services, economic development and urban regeneration. Opportunities for greater territorial governance and economic development often frame fiscal decentralisation, yet, critical appraisals of this agenda are less common. Reflecting upon this issue, this paper critically appraises the underlying method of ‘localist’ finance in England, the Business Rate Retention Scheme. In doing so, it describes a picture of geographical variegation in England, one that suggests that the Business Rate Retention Scheme could lead to splintered urban development, based on the necessity (and underlying viability) for new development. The paper concludes that a minority of ‘premium locations’, characterised by buoyant property market characteristics, could outperform more numerous ‘stranded’ and ‘redundant locations’. The result is that those areas most in need of investment, that exhibit some kind of market failure and geographical disadvantage, could be less able to generate new development in order to fund the Business Rate Retention Scheme. Under these conditions, rather than correcting incidences of spatial inequality, fiscal decentralisation could further polarise uneven development.

The political economics of investment Utopia: public–private partnerships for urban infrastructure finance

This article explores the policy disconnect between the pursuit of private investment return and the public desire for enhanced social value from public–private partnership (P3) investments in urban infrastructure. Investors view infrastructure finance as an opportunity for relatively safe, high-return investing. But infrastructure-financing architecture to achieve high private returns frequently clashes with financing models that sustain long-term social benefits. The full implications of relational tensions in the structuring of P3s are analyzed. The principal policy conclusion is that, because of these tensions, the use of P3s for this purpose should be restricted.

Social Assistance Under Capitalist Authoritarian Rule: Two Management Models in Chinese Municipalities

This study uses a micro set of Chinese city-level data to understand the varying choices taken by municipal officials in their distribution of a minimum livelihood scheme. It explores the variation in the apportionment of allowances offered to disparate types of poor groups in poor versus wealthy cities. The paper argues that in China, where profits, modernisation, competition and globalisation have become significant to leaders at all levels, there is a logic undergirding welfare allocation that has nothing to do with the calculus that spurs its delivery in democracies, and yet that is more nuanced than stylised models of dictatorship/authoritarianism presume. The paper also demonstrates that, where lower echelons of governmental administration have the authority to make rules about the rationing of social assistance, urban finances appear to have an impact upon (or at least to correlate with) administrators’ allocational decisions to groups among the poor. This influence of municipal financial health is exerted directly in the case of poor places, by enticing officials to attempt to save on funds; it also seems to operate indirectly in wealthier municipalities, by disposing richer cities’ authorities to design their urban areas as showcases, in the hope of attracting tourism and foreign investment.

Scintillant Cities: Glass Architecture, Finance Capital, and the Fictions of Macau’s Enclave Urbanism

This article analyzes articulations among urban enclaves, finance capital, and glass architecture by exploring MGM’s corporate investments in the Las Vegas CityCenter development and the Chinese enclave of Macau. CityCenter is an unsuccessful $9 billion master-planned urban community financed by MGM and Dubai World. Macau is a former Portuguese colony and Special Administrative Region of the People’s Republic of China which has, since its return to the PRC in 1999, replaced Las Vegas as the world’s most lucrative site of casino gaming revenue. Taken together, CityCenter and Macau are illustrative of the political economy and cultural logics of financialization. Foreign investment from Las Vegas entrepreneurs has vitrified Macau, transforming it into a phantasmagoria of glass resorts. Macau in turn plays a crucial functional role in capitalism’s recomposition in East Asia, similar to the autochthonous role of the Italian city-states of Venice and Genoa in the historical origins of capitalism. In order to ‘read’ the cities of Las Vegas and Macau, I explore intertextual legibilities among fictitious capital that relies on glass fiber-optic technology to enable grand architectural projects; expressionist fictional representations of glass architecture and its utopian transformative potential; and glass buildings that themselves dissimulate in a manner not unlike fiction.