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How Smart Cities Will Change the Future of Urban Housing

By Melody Yuan

Sept. 18, 2017
City view from the high-rise building construction site
Smart cities are changing urban life. (Photo credit): Gettyimages.com/DuKai photographer

Trends and decisions that are shaping smart cities and urban homes.

More than half of the world’s almost eight billion residents live in cities today. By 2050, that number is estimated to double. In the United States, most major cities are experiencing housing shortages, and there’s a rapid shift taking place in today’s metropolitan landscape. Because of the growing urban population, disparity between supply and demand, and higher cost of living, developers and urban planners have had to reassess what it means for the future of cities and the concept of comfortable living. Housing demands and other financial burdens have caused housing prices to skyrocket beyond the reach of millennials, who are at the age where baby boomers were once able to afford a standard home.

Additionally, living preferences and priorities for millennials are worlds apart from their parents’ generation. Apartment units, condominiums, and mixed-use spaces that have a wide range of amenities (such as a gym and a pool, proximity to public transit and commercial areas) are highly desired among urban residents looking to buy or rent property.

These factors have contributed to the development of new housing trends and urban planning priorities.

“As I look at the future and think about how an additional four billion people are going to move into urban environments within the next 30 years, it makes me think of how this is going to become a bigger epidemic,” says Dr. Patrick Condon, chair of the Urban Design Program at the University of British Columbia. “Bear with me for a moment, but our current housing landscape has been based upon the middle-class’ ability to buy things. That’s changing, and, on average, Americans will no longer have the individual capacity to buy into the existing model of urban development.”

Among the various solutions proposed—from tiny homes to micro-apartment units—the growing millennial population and middle class are beginning to accept and embrace a more modest urban living condition.

“That condition has very interesting aspects to it—from a sustainability standpoint, we can see that a real communal lifestyle is being embraced and resources are being shared,” says Condon.

The future of housing for consumers

“Why are we experiencing rapid urbanization? We’ve got to answer that question first in order to understand what residents want and how to create a smarter city,” says Deanna Weber, principal at AECOM, a multinational engineering firm.

The bottom line for most people who move to urban areas and larger cities comes down to better job prospects and bigger networking opportunities.

California is leading the way in consumer-friendly and sustainable housing solutions. “In California, we probably have houses that are 30 percent more energy efficient than anywhere else in the country,” says Dr. Michael Mehaffy, director of Stockholm’s Future of Places Research Network, a collaborative platform for sustainable urban development. “How did that happen? Through policies that require aggressive performance criteria that include low-income housing, sound infrastructure and sustainable energy.”

An existing example of innovative solutions that attract affordable housing includes the location efficient mortgage. This mortgage takes into account where consumers are buying houses, and how much it costs for residents to travel around the city from their homes. For residents living in high-density, transit-rich environments that require little to no automobile dependency, extra savings are factored in and the total debt-to-income ratio to qualify for a loan becomes more forgiving. Calculating mortgages and affordability is transforming from a one-dimensional product, to one that encompasses and encourages a more holistic lifestyle.

Another city leading the way for sustainable urban population growth is Medellín, Colombia. The city is in the process of incorporating smart technology with existing infrastructure, which has created an efficient yet informal urban planning system. Residents in Medellín are building their own communities through comprehensive urban projects with innovative solutions, such as mollifying rush hour woes with the installation of an urban escalator that ascends 1,300 square feet, and electric trams to diffuse traffic. The rehabilitation of the Medellín River and stronger efforts to build more public spaces have caused the crime rates in the city to drop significantly and attract more developers to build housing units.

The future of smart cities

With the majority of urban residents favoring interconnectedness and innovative urban spaces, initiatives around smart cities involve higher density housing capacities, more public transit and environmentally sustainable energy systems.

“As you look at the emergence of smart cities, you see a lot of urban planning that involves the shifting of micro-grids, more renewable energies, secure power and water ways, and better transit and walkability around the city,” says Weber. “There’s a whole new horizon when we look at smart cities and stronger communities.”

While most are optimistic for a future of efficient smart cities, skeptics like Mehaffy say, “The caveat is that the illustration of a smart city shows happy people on their balconies growing tomatoes together. But realistically, the cost-per-square-foot is enormous, and there’s no way a normal person with an average income is going to able to afford this style of living. There’s a bigger danger of being seduced by this depiction, which is fundamentally not going to be available for the majority of people 20 years from now.”

The future of housing for developers

“For the last five years, I’ve been the chief planner for some of the biggest housing projects here in Southern California,” says Mehaffy. “I’ve been sitting at the table watching how large-scale urban development projects are being built with considerations on how to be financially feasible and affordable for future residents—and, I’ll tell ya, it’s really hard.”

Mehaffy claims that for every 10 projects development companies start, only one project actually gets built. “For a number of those projects, we’ve ended up investing millions of dollars in design, going through entitlements, settled deals with land-sellers, only to end up walking away from it,” he says. The main reasons why these development projects fail to launch are due to strict requirements set by local municipalities, the cost and value of land, and the inconsistencies with policies in a given region.

“There’s a myth out there that big developers have a lot of money and push urban trends from the development side. In reality, our cash flow is really tight,” Mehaffy continues. “If you look at this from a performance standpoint, the lack of flexibility for developers to build what they want to build for the community, and also the inconsistencies in policies, push back timelines and deter developers from building anything at all.” In order to address tomorrow’s housing shortage, there needs to be conversations around stronger financial incentives, along with more systematic solutions to attract developers to build more affordable urban housing, he says.

Despite their differences in what’s realistic for the future of smart cities, both Weber and Mehaffy agree that, in order to advance cities for the future, the existing structure and fundamental backbone need to be re-examined. “The bones are the framework of a city, upon which core systems like transits and public centers are built. If you can build those good bones, you’re going to have a better total cost of habitation,” says Weber.

“What we need is a bigger and more coordinated approach to urban housing that has a systematic approach to things such as policies, land values, taxes and sustainability models that will help build a stronger urban structure and future landscape,” adds Mehaffy.

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