Urban Development

Today, some 56% of the world’s population – 4.4 billion inhabitants – live in cities. This trend is expected to continue, with the urban population more than doubling its current size by 2050, at which point nearly 7 of 10 people will live in cities.  

With more than 80% of global GDP generated in cities, urbanization can contribute to sustainable growth through increased productivity and innovation if managed well.  

However, the speed and scale of urbanization brings challenges, such as meeting accelerated demand for affordable housing, viable infrastructure including transport systems, basic services, and jobs, particularly for the nearly 1 billion urban poor who live in informal settlements to be near opportunities. Rising conflicts contribute to pressure on cities as more than 50% of forcibly displaced people live in urban areas.  

Once a city is built, its physical form and land use patterns can be locked in for generations, leading to unsustainable sprawl. The expansion of urban land consumption outpaces population growth by as much as 50%, which is expected to add 1.2 million km² of new urban built-up area to the world by 2030. Such sprawl puts pressure on land and natural resources, resulting in undesirable outcomes; cities represent two-thirds of global energy consumption and account for more than 70% of greenhouse gas emissions.  

Cities play an increasingly important role in tackling climate change, because their exposure to climate and disaster risk increases as they grow. Since 1985, about 76,400 km2 of newly urbanized land was added in locations with inundation depths of over 0.5 meters during severe floods – this corresponds to about 50 times the area of Greater London. Globally, 1.81 billion people (that is 1 in 4 people) live in high-risk flood zones. Exposure is especially high in the densely populated and rapidly urbanizing river plains and coastlines in developing countries, where 89% of the world’s flood-exposed people live.   

Cities are also in the frontline of combating epidemics. The COVID-19 pandemic was a massive challenge for cities and their citizens, rich and poor alike. Its impact and the measures taken to control the spread of the virus had disproportionate impacts on the poor, marginalized and vulnerable, revealing fault lines in cities’ economic structure, preparedness for such a crisis – especially the state of their public health and service delivery systems.  

Building cities that “work” – green, resilient and inclusive– requires intensive policy coordination and investment choices. National and local governments have an important role to play to act now, to shape the future of their development, and to create opportunities for all. 

Last Updated: Apr 03,2023

The World Bank’s work in urban development aims to build sustainable cities and communities through an urbanization process that is green, inclusive, competitive, and resilient, contributing to the Sustainable Development Goal (SDG) No.11, to the implementation of the New Urban Agenda, as well as to the World Bank’s goals to end extreme poverty and boost shared prosperity.

The World Bank invests an average of $5 billion in planning and implementing lending projects on sustainable cities and communities every year to help cities meet the critical demands of urbanization. The active portfolio stands at 231 projects amounting to $33.9 billion, through a combination of instruments, including investment project financing, policy development loans, and Program-for-Results funding.

Specifically, the Bank adopts integrated approaches to transform the fundamental systems of cities, focusing on five priorities, as follows:

    1. Enhance Planning System and Local Capacity for cities

The first key strategy is to help cities strengthen their planning systems and local capacities to better design, plan, and manage city assets and urban environments. In this context, the Bank provides cities with various diagnostic tools that enable informed planning decisions, as well as investments in urban infrastructure and service delivery.

    2. Strengthen Fiscal and Financing Systems 

The second strategy aims to maximize multiple financial resources for cities through enhancing fiscal and financial systems, to enable them to meet their infrastructure and service delivery financing and investment needs. Driven by sustained city growth and the need to adapt to and mitigate climate change, financing needs for urban infrastructure at a global level are estimated to be $4.5-5.4 trillion per year, including a 9-27% premium to make this infrastructure low-emission and resilient to climate change impacts. While most of this financing need is likely to be concentrated in developing countries, where historical infrastructure deficits are most pronounced, only a small fraction of the needed financing can be supplied by existing fiscal resources and development partners. Many cities face critical financial constraints to address their infrastructure challenges and make the needed investments.

The Bank is well-positioned to help cities expand access to finance from multiple sources, including private finance, but also to strengthen their fiscal capacities and systems that can be sustained in the long run. In addition to providing financing to cities and local governments, the Bank also works with them and national governments to strengthen the basic building blocks of sound city financing by strengthening institutional, fiscal, and regulatory systems. These include: own source revenue generation, including diversifying revenue sources; inter-governmental fiscal transfer systems, especially to regional and local governments in lagging regions which need more financing; improving financial management performance of municipalities and service delivery agencies; and creating an enabling environment for private sector participation and financing through appropriate regulatory frameworks.

    3. Promote Territorial and Spatial Development

The third key element is to promote territorial development in developing countries and cities. Economic activities are concentrated in only a few places – only 1.5% of the world’s land is home to half of its production. This concentration is inevitable, and it is also desirable. The evidence suggests that prosperous and peaceful countries have been successful by bringing people and businesses closer to each other in cities, harnessing agglomeration economies to boost productivity, job creation, and economic growth.

The Bank’s work on territorial development looks at cities not only as individual entities, but also at the coordination between them at different scales: identifying priorities of lagging regions; connecting urban and rural spaces, and addressing spatial inequalities within cities, aiming to allow faster economic growth and linking people to better jobs.

    4. Build Climate Smart and Urban resilience

With increasingly concentrated people and assets in cities, a complex range of growing shocks and stress imposes tremendous costs on the globe. Disasters disproportionately impact developing countries, which lose an average of 1% of GDP a year to disasters, compared to 0.1-0.3% in developed countries. 

Poorer segments of the population are particularly vulnerable, since they tend to live in more hazardous settlements and lack the necessary safety nets to recover from economic or environmental shocks. Without inclusive and climate-informed urban development, climate change can push more than 100 million urban residents back into poverty by 2030.  

The Bank focuses on improving cities’ capacity to adapt to a greater variety of changing conditions and to mitigate the impact of climate change through building infrastructure resilience, mobilizing capital, and financing at upstream climate strategy and analysis.

    5. Invest in low-income, marginalized urban communities

The last key element is fostering more inclusive cities and addressing issues related to urban poverty, slums, and safe and resilient housing solutions for existing and new residents including those relocating due to forced displacement. 

For decades, the World Bank has invested in upgrading informal settlement and neighborhoods with improved access to urban infrastructure and services. Targeted analytical work on the urban poor and comprehensive diagnostics mapping out physical, socio-economic and risk profiles of informal settlements have strengthened the World Bank’s advisory role and lending quality in the sector. To address the root causes of informal settlements, the World Bank pursues an integrated approach to the housing sector, operating along the entire value chain, including planning and building regulations, access to land, infrastructure, subsidies and financing, to build safe and inclusive cities. 

Capacity building and technical assistance to promote and implement participatory and community-focused development approaches have proven to play a powerful role in addressing acute poverty, inequality and exclusions in cities while also contributing to the process of democratization and empowerment. In particular, the World Bank has mainstreamed and deepened gender inclusion in its urban operations and has promoted disability inclusion in line with leaving no one behind and building accessible cities for all.

Given that housing represents about 50-65% of all tangible assets in cities and the construction industry is an important part of many developing countries’ GDP and source of jobs, improving and retrofitting existing housing, building new housing and promoting rental markets in developing countries is critical to activate economic activities and boost economic growth.

The Global Program for Resilient Housing was established to respond to the urgency for investments in the identification and improvement of poor-quality housing; and investments in service delivery for at risk urban populations.

ENGAGEMENT SUMMARY

The five priorities are translated into six business lines and the climate change platform:

• City management, governance, and finance

• Land and geospatial

• Resilience and disaster risk management

• Sustainable city infrastructure and services

• Territorial and spatial development

• Urban poverty, inclusive cities, and housing

• Cities and climate change

Last Updated: Oct 06,2022

Research and analytical services 

Understanding urbanization at different scales: The World Bank is conducting a rich set of research on sustainable urban development. At the regional and country scales, the Urbanization Reviews offer a framework for city leaders to identify policy distortions and analyze investment priorities. A series of prototypes have been piloted to build a body of knowledge on urbanization challenges and public policy implications in a variety of country settings, including Colombia, India, Indonesia, and Vietnam. 

Other recent analytical work and tools to help cities manage urbanization and support sustainable, inclusive growth include:  

• A Review of Integrated Urban Planning Tools for Greenhouse Gas Mitigation : Linking Land Use, Infrastructure Transition, Technology, and Behavioral Change (2020)   

• Cities, Culture, Creativity : Leveraging Culture and Creativity for Sustainable Urban Development and Inclusive Growth (2021) 

• Demographic Trends and Urbanization (2021)  

• Handbook for Gender-Inclusive Urban Planning and Design (2020)  

• Pancakes to Pyramids : City Form to Promote Sustainable Growth (2021)  

• Reconsidering Sites and Services : A Global Review, 2022; 

• Silver Hues : Building Age-Ready Cities (2022)  

• Transit-Oriented Development Implementation Resources and Tools, 2nd Edition (2021)  

• Impact of the COVID-19 Pandemic on Municipal Finance (2021)   

• Subnational Competitiveness Grants Guidebook: A Tool to Promote Jobs and Economic Transformation in Cities and Regions by Leveraging Performance-based Financing (2022) 

Addressing COVID-19  

• For decades, the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) have been helping national and local governments to prepare for and mitigate the impacts of naturally occurring events – floods, droughts, cyclones, earthquakes, tsunamis, and more – investing around $5 billion in disaster risk management, on average, every year. 

• Large systemic shocks — like pandemics or natural hazards — highlight the urgent need for resilient health systems for mitigating the loss of lives and prolonged impacts on people’s livelihoods. The effective response depends not only on the health care system itself, but also on its supporting lifeline infrastructure. GFDRR is contributing to strengthening the resilience of health systems and their enabling environment to a wide range of emergencies, through knowledge such as the Frontline report, tools, and operational analytics.  

Financing the New Urban Agenda 

The World Bank helps cities and national governments put in place the financial framework to attract investment and grow in a sustainable manner. The Bank is helping countries establish and strengthen urban institutions to deliver improved infrastructure and services, for example:  

• We support cities and local governments across the world to improve their institutional and service delivery performance through performance-based fiscal transfers. In addition to financing, we provide substantial technical assistance and advisory support to cities to improve their ability to design and develop investable projects, improve their creditworthiness, and raise financing for climate and disaster resilience.  

• Through the capital raising strategy of its City Resilience Program (CRP), the World Bank is pushing the boundaries in this area with its Capital Mobilization Strategy, which works with city leaders to consider the Bank a catalyst to development financial solutions beyond World Bank loans.  

• The City Creditworthiness Initiative (CCI) aims to strengthen the financial performance of local governments and prepare them to tap domestic / regional capital markets without a sovereign guarantee. The initiative has trained over 630 municipal officials from 250 cities in 26 countries. 

Enhancing urban resilience to climate change and disaster risks 

In recent years, the World Bank has worked in cities and towns across over 140 countries, investing around $4 billion in FY21 in disaster risk management, to improve their urban infrastructure and systems especially focused on climate and disaster resilience.  

• In Niger, the Bank is supporting cities build resilience to climate shocks, address flood risk and develop better urban and disaster risk management systems, through a $250 million project.  

• Building on lessons from previous typhoons such as Typhoon Haiyan (2013), the Philippines together with the World Bank designed a capacity building program Ready to Rebuild (R2R) for governors, mayors, disaster risk management officers, planners, and budget officers. Funded by GFDRR and the Japan-World Bank Program for Mainstreaming Disaster Risk Management in Developing Countries, The R2R Program provides the “how” — how to prepare people, communities, and local governments to be more resilient and ready to respond and recover from disasters better and faster. It provides tools, ready templates, and practical solutions to address disaster recovery issues and bottlenecks.  

• Urban resilience goes hand-in-hand with environmental sustainability. The World Bank’s Global Platform for Sustainable Cities (GPSC) is a partnership and knowledge platform that promotes integrated solutions and cutting-edge support for cities seeking to improve urban sustainability, build resilience and tackle two global crises: climate change and biodiversity loss.   

• The City Climate Finance Gap Fund (Gap Fund) is a multi-donor initiative that aims to help cities in developing and emerging countries realize their climate ambitions by turning low-carbon, climate-resilient ideas into strategies and finance-ready projects. The Gap Fund also strengthens knowledge generation for city climate action through its analytical work (Primer on global urban carbon emissions – data sources and trends, The Analysis of Climate Action Plans in Latin America and the Caribbean, etc.) and organizing knowledge exchange. 

Last Updated: Apr 03,2023