How to Design the Most Profitable City

Relevant for California Forever, Próspera and others: A practical guide to maximising property values through urban aesthetics.

A new generation of private city projects is emerging. Próspera in Honduras is building a charter city from scratch. California Forever is planning a new city for tens of thousands of residents in Solano County. Other projects are in various stages around the world. These ventures share a common challenge: how do you design a city that maximises value for investors and residents alike?

For these projects, urban design isn’t just an aesthetic choice—it’s a core business decision. The rules they set for architecture, green spaces, and building heights will determine whether their developments command premium prices.

The good news is that decades of research now give us clear answers. Studies from the US, UK, Europe, and Asia all point in the same direction: beautiful, green, human-scaled cities aren’t just nicer to live in—they’re significantly more profitable. The choices covered in this guide can add 30-50% to total property values.

This guide pulls together findings from dozens of peer-reviewed studies to give city developers a practical blueprint for maximising returns.

Why Regulate?

Before diving into specific recommendations, it’s worth understanding why regulation beats laissez-faire when it comes to urban aesthetics. The answer comes down to externalities.

What are externalities?

An externality is a cost or benefit that affects someone other than the person who created it. When a factory pollutes a river, the people downstream bear the cost—that’s a negative externality. When someone plants a beautiful garden that passersby enjoy, that’s a positive externality.

Urban design is full of externalities. A beautiful building raises not just its own value, but the value of neighbouring properties.¹ A tall building that blocks sunlight lowers the value of properties in its shadow.² Neighbourhoods with street trees and parks have higher property values.³

The problem with laissez-faire

Without regulation, developers only consider their own costs and benefits. They don’t capture the value their beautiful building creates for neighbours, so they underinvest in beauty. They don’t bear the cost their ugly building imposes on neighbours, so they overinvest in cheapness. The result is a city that’s less valuable overall than it could be.

In theory, property owners could solve this through private contracts—agreeing to maintain certain standards. Houston, Texas, which has minimal zoning, uses deed restrictions this way. But contracting is expensive and imperfect. It requires getting many property owners to agree, keeping agreements updated, and enforcing them through courts. Because of these transaction costs, private contracting consistently undersupplies urban quality.

Why large landowners and proprietary governments should regulate

A large landowner or proprietary government is in a different position. If you own all (or most of) the land in a development, you capture both sides of every externality. When you require traditional architecture, you bear the cost of the regulation—but you also capture the 10-25% value premium it creates across all your properties.⁴ When you plant street trees, you pay for them—but you capture the $8,870 per home they add to your land values.⁵

This is why projects like Próspera and California Forever have a huge advantage over traditional cities. Democratic governments face political pressures that often override economic logic. A proprietary government or large landowner can simply ask: what rules maximise total property value? The research provides clear answers.

The three areas that matter most

Research identifies three areas where externalities are large enough to justify regulation: architecture, green infrastructure, and building height. Each creates spillover effects that individual property owners won’t account for on their own. The rest of this guide explains what the research says about each, and what rules will maximise value.

1. Use Traditional Architecture

The most important finding is simple: traditional architecture makes property worth more. Across many countries and cities, traditional architecture raises property values by 10-26%.⁶

What the numbers show

• Properties in traditional conservation areas sell for up to 26% more than elsewhere

• Poundbury, a new traditional development in England, sells for 29% more than nearby modern developments⁷

• Traditional styles like Colonial, Victorian, and Federal add about 20% to a home’s value⁸

• Traditional buildings appreciate faster than modern ones⁹

Why this works

Traditional architecture creates positive externalities—benefits that spill over to neighbours. When you build a beautiful traditional building, you raise not just your own property value, but the value of properties around you.¹⁰ Research shows that high-income households sort into areas with traditional architectural amenities, further driving up values.¹¹ Modern buildings rarely create these effects; studies show most generic modern buildings create neutral or negative effects on neighbours.¹²

Crucially, traditional architecture doesn’t have to cost more. Symmetry, good proportions, and well-defined borders around windows and doors are design choices, not expensive additions. Simple brick or plaster facades in traditional styles cost the same as modern ones. Ornament is optional.

What to require

1. Ban modern architecture. Keep a list of permitted traditional styles and require adherence to style conventions.

2. Require traditional elements. Symmetrical designs, well-defined borders around windows and doors, and traditional proportions.

3. Allow affordable traditional styles. Simple brick or plaster facades with good proportions cost no more than modern designs. Ornament is optional.

4. Create a pattern book. Give developers approved designs they can use, making compliance easy.

2. Plant Trees and Create Parks

Green spaces are one of the best investments you can make. Trees and parks create large, measurable increases in property values—and the costs are low compared to the returns.¹³

What the numbers show

• Each street tree adds about $8,870 to nearby home values¹⁴

• Homes with mature trees sell for 7-15% more¹⁵

• Homes within a quarter mile of a park sell for 10-20% more¹⁶

• Homes next to greenbelts sell for up to 32% more¹⁷

• Shops in areas with trees can charge 9-12% more¹⁸

What to require

1. Trees on every street. Target 40-60% canopy coverage.¹⁹ The planting cost ($500-1,000 per tree) is tiny compared to the $8,870+ value added.

2. Parks within walking distance. Every home should be within a quarter mile of green space.

3. Protect existing trees. Land with mature trees sells for 18-22% more than bare land.²⁰

4. Start with more parks, not fewer. It’s easier to build on parkland later than to tear down buildings for parks.

3. Keep Buildings at Mid-Rise Heights

Building height is a balancing act. Taller buildings bring density benefits, but they also create problems for neighbours—shadows, wind, and strain on infrastructure.²¹ Research shows the sweet spot is usually 4-8 storeys.

What the numbers show

• Every hour of sunlight lost to a tall building’s shadow reduces nearby property values by 2.6%²²

• Doubling employment density in commercial areas increases worker productivity by 12.5%²³

• Mid-rise buildings (4-8 storeys) capture most density benefits with minimal downsides²⁴

• The benefits of height level off above 8-12 storeys, but the costs keep growing²⁵

What to require

1. Set default heights of 4-6 storeys in residential areas. Allow up to 8 storeys with larger setbacks from neighbours.

2. Allow 6-8 storeys in commercial and mixed-use areas. Require step-backs above 6 storeys to keep streets feeling human-scaled.

3. Require shadow studies. Any building over 4 storeys should show it won’t steal too much sunlight from neighbours.²⁶

4. Only allow taller buildings where they make sense. Near transit hubs or in dedicated high-rise zones where infrastructure can handle it.²⁷

Implementation Tips

Make compliance easy

• Create a pattern book with pre-approved designs

• Fast-track approval for designs that follow the rules

• Use AI-powered preliminary review to cut processing time

Use carrots and sticks

• Tax credits for excellent traditional design

• Higher impact fees for non-conforming designs

• Subsidies for facade improvements on existing buildings—research shows these investments pay for themselves many times over²⁸

The Bottom Line

The research is clear: beauty pays. A city that requires traditional architecture, plants a lot of trees, and keeps buildings at human scale won’t just be a nicer place to live—it will generate 30-50% more property value than one that ignores these factors.

For projects like Próspera and California Forever, this is a competitive advantage waiting to be seized. Unlike democratic governments, which face political pressures that often override economic logic, proprietary city developers can simply implement what the research shows works. The developers who understand that beauty is profitable—not a luxury—will build the most successful cities of the 21st century.

Quick Reference: Value Premiums

• Traditional architecture: +10-25%

• Street trees: +$8,870 per home

• Park proximity (within ¼ mile): +10-20%

• Mature trees on property: +7-15%

• Commercial areas with trees: +9-12% retail prices

• Shadow from tall buildings: -2.6% per hour of lost sunlight

• Combined effect: +30-50% total property value

1. Ahlfeldt, G. M., & Holman, N. (2017). Distinctively different: A new approach to valuing architectural amenities. The Economic Journal, 128(608), 398-427.

2. Fleming, D., von Graevenitz, K., & Santer, N. (2018). The economic value of sunlight: Evidence from the Manhattan apartment market. Journal of Real Estate Economics, 46(4), 745-778.

3. Wolf, K. L. (2010). Community economics - A literature review. In Green Cities: Good Health. University of Washington.

4. Studies show premiums ranging from +10% to +26%. See: Asabere et al. (1989); Leichenko et al. (2001); van Duijn & Rouwendal (2012); Moro et al. (2013); Lazrak et al. (2014); Franco & Macdonald (2018); Yang Zhou (2019).

5. Wolf, K. L. (2010). Community economics - A literature review. In Green Cities: Good Health. University of Washington.

6. Studies show premiums ranging from +10% to +26%. See: Asabere et al. (1989); Leichenko et al. (2001); van Duijn & Rouwendal (2012); Moro et al. (2013); Lazrak et al. (2014); Franco & Macdonald (2018); Yang Zhou (2019).

7. Greenwood, L. (2016). Investment in place pays off. Savills.

8. Asabere, P. K., Hachey, G., & Grubaugh, S. (1989). Architecture, historic zoning, and the value of homes. Journal of Real Estate Finance and Economics, 2(3), 181-195.

9. Smith, B. A., Holston, K., & Steelman, T. (2018). Traditional architecture and the housing market premium. Journal of Housing Research, 27(2), 143-167.

10. Ahlfeldt, G. M., & Holman, N. (2017). Distinctively different: A new approach to valuing architectural amenities. The Economic Journal, 128(608), 398-427.

11. Brueckner, J. K., Thisse, J. F., & Zenou, Y. (1999). Why is central Paris rich and downtown Detroit poor?: An amenity-based theory. European Economic Review, 43(1), 91-107.

12. Manganelli, B., Tajani, F., De Paola, P., & Del Giudice, F. P. (2023). The impact of the historical-architectural component on property value. Heritage, 6(7), 4934-4955; Barreca, A. (2022). Architectural quality and the housing market. Sustainability, 14(5), 2565.

13. Wolf, K. L. (2010). Community economics - A literature review. In Green Cities: Good Health. University of Washington.

14. Ibid.

15. Ibid.

16. Ibid.

17. Ibid.

18. Ibid.

19. Sander, H., Polasky, S., & Haight, R. (2010). The value of urban tree cover: A hedonic property price model in Ramsey and Dakota Counties, Minnesota. Ecological Economics, 69(8), 1646-1656.

20. Wolf, K. L. (2010). Community economics - A literature review. In Green Cities: Good Health. University of Washington.

21. Ali, M. M., & Al-Kodmany, K. (2012). Tall buildings and urban habitat of the 21st century: A global perspective. Buildings, 2(4), 384-423.

22. Fleming, D., von Graevenitz, K., & Santer, N. (2018). The economic value of sunlight: Evidence from the Manhattan apartment market. Journal of Real Estate Economics, 46(4), 745-778.

23. Ali, M. M., & Al-Kodmany, K. (2012). Tall buildings and urban habitat of the 21st century: A global perspective. Buildings, 2(4), 384-423.

24. Ibid.

25. Turner, M. A., Haughwout, A., & van der Klaauw, W. (2024). Do households value lower density: Theory, evidence, and implications from Washington, DC. Regional Science and Urban Economics, 107, 103974.

26. Fleming, D., von Graevenitz, K., & Santer, N. (2018). The economic value of sunlight: Evidence from the Manhattan apartment market. Journal of Real Estate Economics, 46(4), 745-778.

27. Ali, M. M., & Al-Kodmany, K. (2012). Tall buildings and urban habitat of the 21st century: A global perspective. Buildings, 2(4), 384-423.

28. Clark, D. E., & Herrin, W. E. (1997). Historical preservation districts and home sale prices. Review of Regional Studies, 27(1), 29-48; Koster, H. R., & Rouwendal, J. (2017). Historic amenities and housing externalities. Economic Journal, 127(605), F396-F420.