The opening of the urban commons
In a seminal 1968 essay on "The Tragedy of the Commons," Garrett Hardin described how self-interest drives individuals to overuse publicly shared land and resources until the commons either collapse or closed to everything but private profit.
Ultimately, enclosure leads to the exploitation and degradation of our environment for the profit of a few. Despite the long-running history of Hardin's tragedy, I think we are in the middle of a remarkable reversal — although this time, the action is concentrated in our cities.
It is a phenomenon I call the "opening of the Urban Commons," where private infrastructure is increasingly becoming shared and where huge monopoly energy systems are giving way to shared ownership of generating assets.
The opening of the urban commons is inherently democratic. Decisions about resource use are fragmenting and distributing down to the individual level, where both buyers and sellers receive information enabling informed and mutually agreed-upon transactions. This shift has the opposite impact of the closing of the rural commons.
The opening of the urban commons creates greater job opportunity, flexibility and resilience. A direct consequence of this shift is to dramatically reduce the environmental damage on the real world — the ecosystems our species and economy is embedded in and entirely reliant upon for its existence and survival.
Shifting to sharing
The American ideal of large, standalone suburban homes and driving (usually alone) in privately owned cars to jobs, specialized shops and services is starting to give way.
Urban preferences for smaller, connected homes or apartments within walking distance go hand in hand with declining car ownership and the explosion of shared services headlined by firms such as Uber and shared bike services such as Washington D.C.'s Capital Bikeshare.
An app showing real time location of smart bikes and smart bike racks enables far more biking because bikes are available and droppable almost anywhere, cutting congestion and reducing needs for taxis. Shared transport ownership reduces CO2 footprints, tons of steel on the road and creates a fellowship of two-wheeled travelers that feels like community.
The great Jane Jacobs, in her seminal work "The Death and Life of Great American Cities," describes the importance of proximate neighbors in urban areas for crime reduction and for creating connections and community. We are seeing a rapid growth in exactly such urban and suburban walkable green communities.
The explosion of Uber and Lyft reflects a market view that taxi services are shifting permanently and rapidly from centrally owned, controlled and dispatched fleets to individual services through a direct client-to-provider, time-and-price brokered market. For Uber or Lyft drivers, the average car ownership cost of about $8,700 per year is now allocated across longer usage hours, meaning low marginal cost for private car usage for income generation.
Increased time of use of cars by Uber drivers in turn reduces need for additional taxis, driving a net societal reduction in automobiles. And because privately owned cars — either driven via an Uber or rented via firms such as RelayRides — now have opportunity costs measured in forgone income, owner personal use of cars probably goes down.
Real time ridesharing platforms also enable and foster increased occupancy and community links, further reducing tons of steel on the road or parked.
Similarly, Airbnb — with a market value of about $50 billion, or enough for all 35 million American families with children under 18 to spend a week at a nice hotel — occupancy rates of existing homes and apartments are rising, reducing demand for construction of new hotels.
The trust-based network of clients and hosts (often the same) also creates a basis for community built on transparency and accountability, features characteristic of local community management of shared natural resources, as existed before the closing of the rural commons.
The new economics of urban life
The growth of the urban commons encompasses where and how we live, therefore largely determining what transport we use. Together, this represents a huge part of our expenses and has the potential to directly reduce the economic risks we experience in our lives.
The Wall Street Journal recently reported on a study by Airbnb that found over 10,000 hosts on the platform relied on rental income while launching new businesses. The flexibility and control of being able to earn income from your home and car increases income options, reduces risk, adds financial flexibility and strengthens household and community financial resilience.
The shift in preferences among millennials and empty nesters from sprawling, car-dependent houses to smaller, walkable mixed-use dwellings can cut energy use and climate pollution by more than half due to smaller living units, shared walls (less heating and AC) and greatly reduced driving.
Huge kitchens in sprawl homes featuring rarely used specialized appliances are traded in for smaller kitchens in walking distance to coffee shops, bakeries and bistros. Increased exercise and community also improves health, happiness and longevity (you are likely to live eight years longer if you have strong social networks than if you are lonely).
A Big Data real estate platform called Places has developed a set of real estate risk metrics that provide a more accurate default risk predictor than the industry norm FICO score.
Places’ thesis includes that walkable mixed use buildings near public transit have far lower credit risk than sprawl buildings, in large part because they require less or no private automobile ownership, have much lower energy and water bills and provide greater employment access. In the case of job loss, a nurse in a walkable, mixed-use area with public transit access has far lower car costs and can access more new jobs than if she were stuck in a suburbia. In theory, that makes the nurse less likely to default on her loan.
To test this thesis, a top 10 U.S. residential loan provider screened a 100,000-home loan portfolio using the Places screen. Compared to its own FICO-based loan decisions on the portfolio, the analysis found that the Places screen would have saved $250 million by avoiding bad loans to high FICO scorers and would have resulted in an additional $5 billion in good loans to lower FICO scorers.
A nurse in a walkable, mixed-use neighborhood that can access public transit and shared bike and car services does not need to own a car and, with a FICO score of 600, turns out to be better credit risk that a sprawl-occupying, car-dependent worker in an isolated area with a FICO score of 700.
The greater flexibility of shared urban-based services provides cost avoidance and income generating options that greatly enhance economic resilience — and cause far less environmental damage.
Still, greening is sometimes inaccurately portrayed as being an option only for the wealthy.
I had the good fortune of being the principal advisor to Enterprise Community Partners in designing and developing what is now the national standard for green low-income housing.
The design standard at Green Communities cuts energy and water use by a third, increases tenant comfort and air quality, increases on-site power generation. The standards encourage cost-effective design and have been used as the basis for over 100,000 low-income units, generally in dense, mixed-use areas with walking access to amenities.
Walkable, green, healthy design reduces car dependence and costs while also improving health (especially respiratory), enabling fewer sick days from school and work. Lower costs of transportation, increased resilience, fewer work and school sick days and lower energy bills — all those things really matter to the well-being and financial security of low income families.
Powering the next generation of cities
Hardin, in his "Tragedy for the Commons" essay, notes that acquisition of energy is a problem that drives resources overuse and pollution of the common air and water.
While Hardin wondered if atomic energy might change the limits on energy, it turns out that sunshine combined with energy efficiency is the driver that is most rapidly democratizing energy.
While solar PV has exploded in the last decade, most people — including apartment dwellers — do not have roofs on which to put solar panels. A fast-emerging area is shared or community solar that allows people with or without sunny roofs to buy an ownership stake in local or remote renewable energy generating projects, financing new clean energy and ensuring lower, fixed long-term utility payments.
The motto of the community solar wind company UnitedWind is “Be Your Own Power Company." A new firm, Solstice Initiative, is aiming to enable middle- and low-income renters to buy a piece of a solar PV project with no capital cost, locking in lower long-term rates than conventional dirty power.
New forms of financing such as Pace bonds offered by firms such as Renovate America and PACE Funding Group allow efficiency and renewable energy to be financed at long term low rates via an assessment of the property tax bill. Because energy savings exceed the cost of financing, homeowners save money and home values rise. Such measures increase home value and reduce home ownership costs, in turn reducing risk of default.
Proliferation of smart energy efficiency management tools, such as Nest's smart thermostats, along with building energy optimization platforms, such as AtSite and BuildingIQ, allow homeowners and businesses to actively reshape power consumption. From there, it is possible to cut energy bills and earn money by reducing power or providing power quality services on demand.
In the multi-state PJM power market, most peak generating capacity (required to provide peak demand in air condition intensive summer months) is no longer provided by occasionally operated power plants but by utility clients who, for a fee, reduce electricity consumption or generate power to meet utility-wide peak power needs.
The effect of providing these new, distributed-revenue sources is to reduce construction of new power plants, increase systemwide energy efficiency and cut pollution.
With these smart distributed generating and energy efficiency strategies, subscribers can monitor the power output or see real time generation, savings and even see visuals of turning wind turbines or working solar PV systems in which they have an ownership stake.
This transparency and accountability for household, school and business-owned energy assets is a huge democratic transformation with positive environmental benefits. Consider newly available energy options, as illustrated by my own home.
My family lives in a house with a Sunpower, U.S.-manufactured 8.25 KW solar PV solar energy system powering most of our home and charging our electric car, a BMW i3, currently the most fuel efficient commercial car in the world and a blast to drive. The electricity generated from sunlight hitting our roof displaces gasoline from an unknown source.
Increased transparency, individual control and accountability are also more general characteristic of the new Urban Commons. An Uber driver or passenger who is repeatedly rude is likely to be shut out. An Airbnb host or guest who is abusive will be excluded from the network.
This accountability enables the Urban Commons to work effectively at efficient resource sharing, community building and cutting pollution. The emerging Urban Commons is good news for all of us, especially for future generations whose quality of life depends on the decisions (especially on climate change) that we make today.
The opening of the Urban Commons is enabling a richer, healthier, lower-risk, less costly and less environmentally damaging way of life. Welcome to the opening.