The likely economic effects of public realm interventions

21st November, 2014

Public realm interventions are often popular with practitioners and policymakers. But the underlying rationale and expected outcomes are not always entirely clear. Part of the problem comes from the term itself, which is applied to describe a range of activities, from landscaping an existing park, or cleaning up street rubbish, to creating a new and attractive public space as part of a new housing development. Any one of these interventions can be important in their own right, but it is also often claimed that they may have wider benefits for the local economy.

Our first briefing assesses the conventional wisdom on public realm and tries to distinguish between different types of interventions and their likely impact (whether direct or indirect). The briefing is different from the evidence reviews we have produced to date because we have been unable to find high quality impact evaluations that look at the economic effects of public realm interventions.

Instead we have produced a policy briefing that pulls together some of the available empirical evidence, as well as any existing survey material,1 and drawn on economic theory to provide a framework for thinking about likely impacts. We certainly do not provide the final word on the economic effects of public realm interventions. And we are not making a judgement on whether policymakers should or should not undertake public realm improvements, but rather we focus on clarifying the likely effects.

For example, a small-scale park improvement is likely to have positive direct impacts in that it will make the park a nicer place to be and improve residents’ wellbeing. But as a stand-alone measure, there are unlikely to be any major effects on the local economy. A public realm intervention that is sufficient to cause major change (such as an increase in property prices and boost to the local economy) is likely to be on a large scale and associated with a programme of physical redevelopment: a new train station or residential development, for instance.

But more often than not, it is the indirect, economic effects anticipated as a result of public realm improvements that are publicised and used to justify investments in public realm. From improving jobs prospects for residents in a run-down area by making it a nicer place to live and attracting businesses, to improving economic growth in a poor area by building luxury flats to attract new residents.

Our briefing urges caution on the extent to which these effects occur:

Public realm interventions may help create more attractive places to live, but this might lead to higher housing costs and displace existing residents.Large-scale public realm interventions may help attract new residents and create mixed communities. But it is unclear that mixed communities deliver significant economic benefits to existing residents.Smaller-scale public realm interventions that aim to modestly improve the wellbeing of existing residents are likely to have fewer undesirable or unintended consequences than large-scale radical transformations.Public realm improvements in commercial areas might boost overall business activity, but will not necessarily increase jobs or firm profits in the long-term and might also displace existing businesses.

Ultimately, more rigorous evidence and evaluation is required to establish the effect of public realm interventions on the local economy. And many questions remain unanswered by the evidence available: how do public realm improvements affect residential and commercial rents? To what extent do improvements attract new residents and what are the economic impacts on existing residents? What are the impacts on the commercial attractiveness of an area and how do the effects differ across new entrants and existing businesses?

But the evidence available does suggest that the likely effects may involve a tricky trade-off between benefits to existing residents and the ability to attract new residents. Our briefing provides important insights on the likely effects allowing policymakers to better consider the host of direct and indirect effects of an intervention as part of their decision whether to undertake public realm interventions of different types.

Find out more about our public realm briefing here.

1 For introductory reading on urban economic theory, see: Brueckner, J. (2011). Lectures on Urban Economics. MIT Press.

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