Frequently Asked Questions
Background for FAQs
Printable FAQs (pdf)
A charter city is a city-scale special reform zone that can take many forms. The common elements are:
- An uninhabited piece of city-sized land, provided voluntarily by a host government.
- A charter that specifies the rules that will govern the new city.
- The freedom for would-be charter city residents, investors, and employers to move in or out.
Each charter city requires one or more nations to play three logically distinct roles:
- The host country provides uninhabited land.
- The source country or countries provide residents.
- The guarantor country or countries ensure that the city’s charter is respected.
The FAQs that follow address general issues as well as the specifics arising from three hypothetical charter cities. Please note that these hypothetical cases are strictly for the purposes of illustration and do not reflect actual projects or conversations:
- India is Host, Source, and Guarantor
- Mauritania is Host; New Zealand and Norway are Guarantors; multiple Source countries
- Brazil is Host and Guarantor; Haiti is the primary Source
General FAQs
Q: How much land is required for a new city?
A: Bigger cities are much more likely to succeed and support a high standard of living. The value of the land will increase more than proportionally with the total land available for development. A good target size is 1000 square kilometers, roughly the size of Singapore and Hong Kong.
Q: What density and population would be viable?
A: A density of 100 people per hectare or 10,000 per square kilometer is half the density of central Paris. At this density, 1000 sq km gives a maximum population of 10 million people. Most forms of public transit are efficient at this density. As central Paris shows, densities of more than 100 people per hectare can be achieved in an attractive setting without high rise buildings.
Q: Who would finance the infrastructure for a new city?
A: City infrastructure could be financed by private investors who collect fees for the services they provide. For example, the municipal water system could be built and operated by a firm like Suez or Aquas de Barcelona that earns a return by charging users fees. An airport could be financed in a similar way and built by a private firm like Aeroports de Paris or the Changi Airport Group. They, and other firms like them, might leap at the chance to build an airport that could grow to be an important regional hub. With the predictable rules specified in the city’s charter, each type of firm could count on a stream of fee income, agreed to by regulators, that would last for many decades.
Q: Who would get ownership of the land?
A: The development authority that governs the new city could retain ownership of all land and use the gains in the value of the land to finance public expenditures. The development authority would lease land to private developers. Those developers or people who buy from them would own the structures but not the underlying land. This arrangement gives the development authority both the incentive to spend wisely and the the resources to do so. For example, a truly effective educational system will raise wages for workers in the city and encourage more firms to come hire them. Higher incomes and more demand for space from employers will in turn lead to higher lease payments for land.
As a side effect, this arrangement also ensures that there will be no boom and bust cycles from speculative bubbles in land prices and that no private fortunes are amassed from the ownership of land in the special zone.
Q: How would the local government finance its operations?
A: If the government starts with ownership of the land in the city, it can finance its operations from the rents on the land. This is effectively the same as a 100% tax on the value of the land. In practice, land rents can be captured by issuing long term leases to private developers who would build and own structures. Hong Kong and Singapore have used this arrangement extensively.
Q: Who would be eligible to enter the new city?
A: Anyone. Charter cities are not gated communities for the rich. The goal is to establish rules that maximize employment opportunities for workers, regardless of the level of experience or education. The rules must also make sure that basic services like housing and transit are affordable even for someone who starts in an entry level job.
Q: What skill level would typical workers have? What kind of jobs would they find?
A: In the beginning, many of the target workers would be people with little formal education who get their first paid job after moving to the city. They would work in jobs similar to those in factories that produce garments and toys.
Q: Could a less-skilled worker afford privately provided municipal water?
A: Yes. The people who work in garment assembly factories all over the world pay for their water now. The hundreds of millions who live in slums that lack utilities often pay far more for clean water than the rates charged by firms like Suez or Aquas de Barcelona.
Q: Why would a city want to attract people with low levels of skill?
A: If you think about starting cities as a business, the billions of low skill workers who will move from rural areas to cities this century represent the biggest market. In the language popularized by C.K. Prahalad, they are the underserved bottom of the pyramid. Most of them currently have no chance to move to a city where they can be safe from violence, get a formal sector job, access basic utilities, and send their children to school. Cities that cater to this group could create enormous social value by catering to this market and do it without relying on philanthropic giving.
Q: What kind of apartments could these workers afford?
A: Small apartments. We know from existing data that living space varies linearly with income. As income grows, people will rent larger, nicer apartments. A city that starts by catering to people getting entry level jobs would start by building small, minimalist apartments and add larger ones with more amenities as incomes rise.
Q: Would the government in the city subsidize the housing for the workers?
A: The government can’t give residents in a city a higher standard of living by charging higher rent for the land and then giving renters their money back as a housing subsidy. People who work can afford to pay rent.
Q: If charter city residents live in small apartments with few amenities, would life there be any better than life in a slum?
A: In a charter city, all residents would have access to utilities like safe municipal water at costs below those that they would pay in a slum. They would not be subject to arbitrary relocation by predatory officials or gang leaders. They would live in a place with no tolerance for violence and crime, a place where people have to follow formal rules, rules that prevent harmful activities like dumping garbage in the street or building unsafe structures.
Q: Would housing in a charter city be constructed according to building codes?
A: Possibly. The people who rent apartments can’t verify after the fact that the building where they will live was constructed to be safe. Building codes are one way to solve the informational asymmetry. Efficient building codes can ensure safety without restricting the supply of small, low cost apartments.
Q: What kind of health care system could people living in a charter city afford?
A: A system that is better than those that many would leave behind in rural villages and better than those offered to comparable workers in other parts of the world. Health care is a labor intensive activity. Labor would be inexpensive in a charter city. Well-organized systems that rely on health care workers with modest levels of training (like those in many villages in the developing world) can offer substantial improvements in health. In a densely populated city, a few well trained medical specialists can also be readily available to serve those who need special care.
In many developing countries, firms who run factories provide their own health clinics to their workers because there is no alternative. Firms do this because they want their workers to be healthy. A city-wide system would be much more efficient. The government would have an incentive to see that efficient care is available because it makes the city more attractive to workers and employers. Firms would be willing to pay higher wages in a city where they can avoid the cost of offering their own on-site health care. As with most other non-core activities, firms would rather “outsource” this task if someone else can do it more efficiently.
Q: Would the charter city government have an incentive to invest in education?
A: For a city government funded by land rents, the best way to raise more revenue is to pursue policies that lead to higher real wages. Higher wages will increase per capita consumption of housing and increase the rental value of city land. Because education directly increases labor productivity, it pays a high return in the form of increased real wages. The availability of a good educational system also makes the city more attractive to migrants. It will therefore help the city leaders meet their mandate if they provide effective education.
Q: Would a charter city have a master plan devised by the government?
A: Some aspects of planning inevitably fall to the government. For example, the government needs to decide whether vehicles drive on the right or the left and enforce that rule. Other planning activities are better left to private actors. For example, the government clearly shouldn’t tell firms what to produce.
Setting up a new city does not mean that the spatial location of economic activity needs to be centrally planned either. The city’s charter is a foundational legal document, not an exhaustive plan. The world can support a range of urban development strategies. Some cities might follow a more planning intensive strategy similar to that of Haussmann’s rebuilding of Paris in the 19th century. Others might opt to do away with zoning restrictions or to rely more on the decentralized process of individual decisions celebrated by Jane Jacobs.
Q: What would a new city mean for migration within a host country?
A: A key test of the success of the zone is whether it can attract the people who currently leave to pursue social and economic opportunities outside of the country. To find work, too many migrants from low-income countries leave their families behind and travel long distances under perilous conditions to go to countries where they face the threat of deportation. A charter city can bring social and economic opportunities closer to home, allowing would-be migrants to find work in a safer environment—one where they have legal residency, equal protection under the law, and the freedom to bring their entire family.