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What Is Urban Economic Development?

By Maggie Worth
Updated May 17, 2024
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Economic development is a long-term initiative by lawmakers and local officials intended to raise the overall economic performance and stability of an area. Urban economic development is such an initiative carried out in an area classified as "urban," generally meaning a highly populated city or metropolitan center. Urban economic development usually consists of programs intended to bring businesses into the area and increase employment levels, ultimately resulting in economic growth. Common components include tax incentives for companies offering new jobs, programs designed to attract new residents, social development programs and tourism efforts.

The primary goal behind urban economic development is to increase the economic soundness of an area. Sometimes referred to as "urban renewal," such initiatives are generally launched in areas that are in decline, have already declined or have never experienced economic success. Most economic development initiatives, urban and otherwise, involve both business and social programs, and combine policy making with specific development projects.

One major facet of many urban economic development programs is business recruitment. Bringing new businesses into a city or increasing the hiring potential of existing businesses produces jobs for local citizens. This can, in turn, increase the per capita income; attract new residents; decrease area unemployment; and increase the city's tax base, both through income tax collections and business taxes. In addition, people who are employed and those who make more money generally buy more things, improving the local economy.

To attract new businesses, those involved in urban economic development will often offer tax incentives. They may also reduce or waive fees associated with setting up a business and may help negotiate favorable property purchases or lease rates. Another option for bringing in jobs is to initiate city development projects, such as road resurfacing, bridge repairs, landscaping projects and more. These projects have the dual benefit of creating jobs and beautifying the community.

Social programs often play a factor in urban economic development as well. This can include recruiting healthcare facilities and professionals to improve the area's health, launching school improvement projects, offering continuing education at attractive rates and building or expanding community and cultural centers. Literacy campaigns, anti-drug campaigns and anti-violence campaigns are also common.

As the area begins to rebound, additional efforts are often made toward recruiting residents and attracting tourists. This might include improving temporary and permanent housing and developing areas of interest, such as museums, parks and historical sites. Urban economic development is an ongoing process that can take years to fully realize its potential. In a successful model, the result will be a higher standard of living and quality of life for all residents, along with a thriving business community.

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Discussion Comments
By ysmina — On Nov 29, 2014

@candyquilt-- You touched on a great point. Crime rates can deter economic development in an urban area. High crime rates don't just keep away tourists but also businesses that might find it too risky to invest due to the crime.

Another important factor affecting economic development is transportation. Poor transportation systems, poor roads, poor infrastructure and the general difficulty in getting around is a huge blow to economic development in an urban area. People won't be able to look for jobs, travel for work or school or even go shopping very effectively without a good transportation system.

By candyquilt — On Nov 29, 2014

Unless the area has some historical importance, I imagine it will be difficult to attract tourists to a place that is doing bad economically. I think if the place was a touristic area, the economy would have never gotten so bad in the first place. If there are also high crime rates, it can be near impossible to get enough tourists to come to generate enough income to boost the economy.

By bluedolphin — On Nov 28, 2014

Low lease rates are a great way to encourage economic development in an urban area. My brother wants to start a small bakery. He has been saving money to make it happen but the rent is so high that he cannot afford to lease a place for the bakery. For most small business owners, rent is usually the biggest cost they have to manage, aside from equipment they may have to invest in.

Once a business is established and has a regular stream of income, it's easier to handle rent. But it can be debilitating for small businesses that are just getting started and haven't made a name for themselves yet.

It's essential for local policymakers to make it as easy as possible for new small businesses to get started. One of the best ways to do that is to offer affordable lease rates for their place of business.

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