Startup Cities, Urban Planning in the Internet Era
Startup Cities, Urban Planning in the Internet Era
How startups are fueling American urban dynamism to build the next generation of great cities
Cities have historically been constructed around the dominant technologies of the era. Irrigation systems during ancient times facilitated the rise of agriculture and led to the rise of urban centers. Innovation in naval trade during the classical era led to the creation of ports and urban centers powered by their ability to import and export of goods/ideas. Over the last century, cars have been the dominant technology enabling the movement of people and therefore have demanded structural ownership in the form of space allocation in our cities. The internet, as the dominant technology of today, is positioned to be the technology that cities are built around for centuries to come.
Just as cities are designed differently, they are also organized differently over time and geography. In the U.S, cities have traditionally centered around labor markets. People live where there are jobs and people move to be closer to those jobs. Thanks to the ease of travel, ability to obtain quality employment remotely, and the ability to learn new skills via the internet, the onus of choosing where to live has fallen more on the individual than ever before. The technological capabilities of today has decoupled the need to be physically located where you work. The opportunity that presents itself is the newfound ability to organize cities around characteristics other than work— shared values, interests, and even solutions to the commonly held issues with the cities of today.
What is Wrong With U.S. Cities Today
Car Centered Urban Design
Modern U.S. Cities have been built around the popularization of the car. This has come the expense of other forms of transportation.
It is estimated that as much as one half of a modern American city’s land area is dedicated to streets and roads, parking lots, service stations, driveways, signals and traffic signs, automobile-oriented businesses, car dealerships, and more.
Why is this bad?
Traffic. It is estimated that on a national level, roadway congestion costs the economy more than $165 billion each year in lost productivity and wasted fuel. The average commuter in Boston and Chicago loses nearly 150 hours per year and greater than $2,100 thanks to traffic congestion. In the most American fashion, our solution has been to increase roadway capacity and expand the number of lanes. Typically, increasing roadway capacity has actually increased congestion as a result of induced demand (increased roadway capacity encourages more people to drive).
There’s less space for cool things. With 50% of the average city being taken up by the spaces dedicated to the storage of and movement of cars, there is less room for quality housing, public parks, museums, storefronts, etc. This development of car specific infrastructure can result in the vicious cycle seen below.
Environmental impact. Cars emit the highest amount of CO2 out of any form of transportation. Trains, e-bikes, e-scooters, even buses are all more environmentally friendly forms of transportation when considering emissions on a per passenger basis.
Death and Injury. Vehicle accidents are a leading cause of death globally (8th). 1.35 million people are killed in car accidents every year globally and another 20-50 million are injured. Cars have been unable to successfully share space with other forms of transportation—half of these deaths and many of the injuries involve pedestrians, cyclists and motorcyclists.
Cost of Living
The cost of living in the major U.S. cities has risen, mainly due to housing demand far outweighing the ability to produce more supply.
Housing in San Francisco costs 5x the national average
In NYC it’s the norm to pay a 15% of annual rent brokers fee due at signing when renting an apartment
In LA the median home price is nearly $1,000,000
What is going on?!
Less Building. While U.S. apartment construction is at a 50-year high, San Francisco could see a 58% drop in new apartments in 2022.
Less building of the right kind of homes. Despite NYC having built nearly 200,000 new apartments over the past decade, likely more than any other city in the nation, NYC average home prices nearly doubled. With new buildings being developed, a recent trend is that many of them contain fewer apartments than they are zoned for or in some instances fewer apartments than the building they replaced. Many developers feel that the cost of land and construction is too high for anything other than luxury condos.
Poor Waste Management Systems
One of the most common reasons I hear when describing why someone prefers one city to another is that city x is cleaner than city y.
Point blank, cities generate ALOT of trash and most of it is not managed effectively. Worldwide cities generate over 720 billion tons of wastes every year. In part, due to the heavy reliance on industrialized and packaged food which significantly increases the quantity of household waste generated every day.
Heavy reliance on Landfills. In NYC, residents produce nearly 13,000 tons of waste every single day. Like many other U.S. cities, the vast majority of this waste ends up in landfills and incinerators in other communities outside the city itself. The diesel trucks that lug Manhattan's garbage to these communities drive 7.8 million miles every year and cost nearly $290M in taxpayer dollars. Once at the landfills, the garbage decomposes and releases methane, a greenhouse gas 30x more potent than CO2. For a better idea of the minimal usage of alternative removal tactics, nearly one third of the waste New Yorkers produce is organic material yet only 1.4% is composted.
Poor Waste Collection Systems. Trash in NYC can sit for days on sidewalks completely obstructing the already limited walking space of sidewalks. The lack of in-ground containers, street-level sorting bins, and technological solutions make the pickup process inefficient, messy and frankly hazardous.
Neglected & Outdated Public Transportation Systems
Public transit systems in the U.S. have been neglected for years— underfunded and improperly managed all while accruing massive amounts of debt. With ridership down and the cost to manage these ancient systems rising, the American transportation system that at one point was the envy of the world, is now hanging on for dear life.
Between 2012 and 2018, bus ridership in the U.S. declined 15% and rail ridership declined 3%, in part due the following reasons.
Frequency & Reliability. Most urban U.S. public transportation systems are not reliable. This is in part due to their age which require frequent maintenance and therefore increased closures/delays. A general lack of resources for these systems leads to understaffing and further limits service. The MBTA, better known as Boston’s T is a prime example of this with riders excessively padding their commutes due to such schedule uncertainty.
Below is a set of maps for five U.S. cities that show the network rail and bus lines that operate at the bare-minimum service level required for people to be able to live adequately car free. This means, at least every 30 minutes, all day to midnight, seven days a week. The Toronto map is for comparative purposes.
Infrastructure. A great quote that encapsulates the current state of American transit infrastructure is from transit blogger Alon Levy:
"In 1912, Boston had this great public transit system, with four subway lines and streetcars that fed it. Then they spent the next 60 or 70 years destroying it."
Many public transit and passenger rail system infrastructure assets have come to the end of their useful life and need to be repaired or replaced. With a backlog of $105.1 billion in deferred maintenance and replacement expenses, struggling intracity transit systems fall further and further behind in the absence of adequate maintenance. Additionally, intercity transit on a regional basis is also living in the metaphorical dark ages. In the U.S. today, we have zero miles of high speed rail. Amtrak's Acela is the fastest passenger rail we have traveling at 150 mph over a total of 49 miles. In comparison, China has a high speed railway network as long as 24,855 miles and capable of accommodating high speed trains running at 186 - 217 mph.
Painful Permitting Processes at the Municipal Level
It costs too much money and takes too much time to get things done at the municipal level. From breaking ground on construction projects, to starting a new business, to just hanging up a sign, approval to do things takes a long time and cost a lot in most U.S. cities.
High Cost. Nothing more astutely encapsulates this idea than the recently accepted (and since paused due to massive public backlash) plan in SF’s Noe Valley to create a singular 150 sq foot public toilet that would cost $1.7M and would not be ready until 2025. One toilet. $1.7 Million dollars. Nearly 3 years building process. HOW?
The craziest part, this is not an outlier. SF’s McLaren Park restroom was completed a couple years ago for a no-less-astonishing cost of $1.6 million.
Drawn out Timelines. Obtaining residential and commercial building permits can take greater than a year in some cities. The Honolulu Dept. of planning and permitting has been under fire as of recent for this exact reason. People created this detailed game just to show how crazy this process is. Play it, it’s wild. Other examples include:
San Francisco is currently being investigated by the state for taking longer than anywhere else in CA to approve much needed homes
Getting a permit to install a sign for a storefront in Washington D.C. to me greater than a month and a half
The clean energy permitting projects can require local, state, and federal permits, with the local permits always being required
Land-use permits based on the zoning and planning ordinances of the city or county are almost always required
There is a database of local ordinances for wind energy, which can face significant local opposition due to appearance, noise, and other localized impacts
Even getting rooftop solar can require a local permit
The Opportunity to Rethink Cities
Despite all the flaws of cities today ~83% of the U.S. still lives in them. The innate human need for proximity to others has resulted in a massive demand for density. The hundreds of millions of people living in these cities indicate that the positive agglomeration effects appear to outweigh the negatives. To our luck, we live in a time where we have the ability to consider the negatives and rethink the way urban environments have been fundamentally designed. What makes this opportunity possible today is the vast amount of uninhabited land in the U.S. paired with the benefits of the internet.
Space is plentiful. In the U.S. there is 1.78M square miles of uninhabited land—nearly half of the entire country is absent of any human habitation.
Digitally Native Communities. Technology has created the opportunity for individuals to create larger and more specialized communities, digitally. Today, there are greater than 6.7 million Discord servers, a growing percentage of which are not gaming related. It has also enabled considerable numbers of people from around the world to relocate without interrupting their ability to work or communicate.
What makes this opportunity worth pursuing? Other than philosophically wanting to make the world a better place of course…
The Market Opportunity
The potential economic value that results from creating great cities is massive. NYC has a gross metropolitan product (GDP but for cities instead of countries) of $1.85 trillion. NYC’s economy produces more value than entire economies of countries like Canada and Russia. If it was its own country its economy would be the tenth-largest in the world.
On the neighborhood scale, an example of economic success is Peter Cooper Village and Stuyvesant Town which thousands of New Yorkers call the 80 acres home. It was developed by the Metropolitan Life Insurance in the early 1940s, initially as a post WW2 housing project for returning veterans. Its goal was to be the neighborhood for New Yorkers who wanted “to live in a park - to live in the country in the heart of New York."
Peter Cooper Village and Stuyvesant Town was sold by its creator, Met Life for $5.4 billion, a net of taxes gain of ~$3 billion, STILL the largest residential real estate transaction in history.
From my perspective, the early success of startup cities will come from models that mirror more of the original idea behind Peter Cooper Village and Stuyvesant Town compared to those trying to create the next New York Citiy from scratch. On the spectrum of startups building cities, Peter Cooper Village and Stuyvesant Town falls closer to the target than building the next NYC.
How Does One Start a City?
Based on the early success of the few projects working on this today, the order of operation can vary, but what is needed to start a city is the following:
The order of operation can vary, depending on strategy, but what is needed to start a city is the following:
Create a community, to cast the widest net it should be digitally native
Design the city layout, governance/legal/ownership structures, values, etc
Raise funding
Equity (for corporate operations)
From the community
From institutional investors based on pre-generated demand (VCs, corporate venture arms, real estate funds)
Extremely wealthy individuals who are connected to the project
Debt (for the capital intensive assets, namely the land and construction)
Banks
REITs
Real estate funds
Acquire an uninhabited piece of land, best to do in partnership with a land bank or municipality
Develop infrastructure
Move in!
Although still early, there are companies attempting to do this today.
Who is Doing This Today
Notable startup cities that have gained traction over the past couple of years are few and far between. The short list of those pushing the boundaries of what is means to live in urban areas are nothing short of bold and original. Each comes in their own flavor and variety, but all related in their mission to improve urban living in some capacity. Here are some of them:
Coldesac is building the first car free neighborhood in Tempe, AZ. They Raised a $30M series A financing round from Khosla Ventures and Founders Fund and have designed the most walkable neighborhood in the U.S.
Praxis Society is changing urban organization by building a city around a shared way of life rather than around labor markets. They have organized a community around optimism, good health, clear purpose, and commitment to an idea greater than themselves, which they refer to as “Vitality”. Praxis raised a $15M series A financing round led by Paradigm Capital.
Although related to Startup cities, another classification of innovative city structures are called Charter Cities. The north star of these structures are legal, political, and institutional reform. Definitionally, they are not required to be built by startups. Charter cities build off the idea of special economic zones which transformed the cities of Shenzhen in China and Dubai in the United Arab Emirates and are responsible for the *politically confusing* Hong Kong and Singapore.
Prospera is the West’s first charter city that is being built by a startup. Located on a 60 acre tract of unoccupied land on the island of Roatan, Honduras, Prospera aims to be the tech hub of Latin America. They are working to provide a place where entrepreneurs and businesses can work freely while intentionally improving Honduran employment and economic options. Prospera has raised greater than $80 billion in aggregate from several investors including Pronomos Capital. The Apolo Group is also assisting in the development of their first property in Roatán.
The Line is one of the most futuristic projects being worked on today is the Line, a 656 foot wide, 105 mile long mega city in the middle of a Saudi Arabian dessert. The goal of this project is to consolidate a traditional city's footprint in order to provide healthier and more sustainable living. This project is funded by the Saudi government public investment fund and sovereign wealth funds in the region. Although not being built by a startup, it is part of special economic zone called “NEOM” which has a strong technological dimension, given its lofty futuristic vision.
Network cities are unique from Startup cities, but again live within the same family of innovative city structures. A Network city is a collection of dispersed properties tied together by a shared culture, community, economy, and governance. Cabin is a great example of an organization doing just this.
Cabin is creating a global network city for online creators and location flexible knowledge workers. Cabin residents can freely move between a network of neighborhoods sharing a similar culture and values. Cabin has ‘neighborhoods’ across the country which collectively creates their network city. They even enable interested parties to co-buy property.
Seasteading is the final and perhaps most far out idea that I’ll highlight related to new and innovative urban structures. Seasteading is the concept of building startup communities at sea, specifically in international waters outside the territory claimed by any government. The thesis being that nearly half the world’s surface is unclaimed by any nation-state, and building communities with political autonomy that float on the ocean can solve some of the world most pressing issues.
Because many of these projects are so early, very futuristic, and only marginally corelated to urban planning and design, I’ll link a couple notable projects below without going into too much detail.
Arktide, Atlantis Sea Colony , Ethos Island, Flexbase International, Blueseed (failed/on hold)
Risks
Community Building. Many of these startups have taken the following staged approach of city building:
Build a community
Raise $
Purchase land
Build
Inhabit
Engineering “communities”, both digitally and IRL is hard. A discord server of people that are interested in similar things does not automatically constitute a community. There is a fine line between being transactional and authentic and companies across the board are building group chats of people before they sell a product to generate hype and adoption. How many of these are artificial and temporary and how many will drive long term value for its members and the organizations they represent? That is yet to be seen, as this community centric approach to product building is a relatively recent phenomenon.
Community could be the most important piece of startup city building. Long term, people are what make cities great. Attracting and maintaining the best people will be one of the great challenges for all startup cities. The early adopters that make up the initial community of a place are incredibly important. Given that raising capital is predicated on the proven demand that comes with a community building, there is incentive to grow communities quickly and optimize for size + speed. Although discord growth of from 10 to 1,000 members in months is a great metric to put in an investor deck, it doesn’t necessarily reflect the quality of the community, which as an important metric to track in of itself.
Homogeneity. A big part of what makes NYC so great is the differences in people that live here. The varying backgrounds, occupations, cultures, nationalities, ages, etc all add to the charm, the dynamism, and fundamentally the success of the city. Constructing micro societies of individuals with shared basic values, could, unintentionally, result in very homogenous populations. At scale, this could exacerbate the modern segregation of race, class, gender, etc. This would negatively impact the upper bound number of people to that could be involved in a given city—effectively making a city less successful because of exclusion. Additionally, just as many tech companies of today have been riddled with problems of hateful communities congregating on their platforms, this risk is exacerbated IRL when digital communities turn into physical ones.
Re-building existing neighborhoods. Despite nearly half of the U.S being uninhabited by humans today (1.78 M sq miles of land), startup cities still may choose to re-build or build upon existing neighborhoods. This possibility, especially at scale, would obviously have an impact on those that live there.
Further Down the Rabbit Hole
About Startup Cities, Zach.dev
https://www.wsj.com/articles/3-d-printed-houses-are-sprouting-near-austin-as-demand-for-homes-grows-11635240601 ** to include or not?
https://thenetworkstate.com/miami
https://www.wired.com/2013/11/software-is-reorganizing-the-world-and-cloud-formations-could-lead-to-physical-nations/
https://twitter.com/FrancisSuarez?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1335037068108554241%7Ctwgr%5Eb3c0674c3564a0e670490d9afbe644d963331090%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fthenetworkstate.com%2Fmiami
https://www.forbes.com/sites/johnfrazer1/2019/08/06/the-reshaping-of-city-cores-that-were-designed-for-cars/?sh=15d944ab1e46