Eight stubborn facts about housing policies

As John Adams famously warned, “facts are stubborn things” that we cannot wish away. Governments in the developing world are finally facing up to the increasing need for affordable housing: today 1.2 billion people live in substandard housing; by 2030, 3 billion will need new housing . While challenges may vary by country, I believe there are at least eight “stubborn facts” about housing policy that should not be ignored:

1. Poor families want livable neighborhoods, not slums. No family ends up in a shanty or barebones concrete structure by choice. Good housing, however, comes with a price tag that is prohibitive for the poor, who typically have no alternative but to accept levels of physical discomfort, overcrowding, legal insecurity, and dangers that would be scandalous in the US and Europe. In Latin America & the Caribbean, 1/3 of the urban population lives in informal settlements, where most of the housing does not comply with construction codes. In many African cities less than 10% of the population lives in formal housing .


2. Substandard housing is not just a legal issue; it’s a matter of life and death. Inadequate housing exacerbates a multitude of physical and mental health risks : from asthma, allergies, and other respiratory problems to low self-esteem and other psychological issues. Worse still, slums are generally located where natural disasters are likely to do the most damage . In my country, Peru, an 8.0-degree earthquake near Lima would kill 50,000 people and destroy more than 200,000 houses, leaving 350,000 units uninhabitable.


3. The formal housing market is not able to provide decent housing for everyone: government intervention is needed. In most countries, mortgage loans are usually limited to a maximum of 15 years and a 30% debt to income ratio. Therefore, an “affordable” house should cost between 3 and 5 times the mean annual income. In Sub-Saharan Africa, however, the average house costs 17 times the mean annual income.


4. The menu of policy options is varied. Governments can provide assistance through direct subsidies or tax incentives. They can use their regulatory powers to influence private sector decisions regarding the availability of mortgages; the type, the quantity and the legal tenure of housing (ownership vs. rental); the cost of building vs. renovating. Housing programs can be deployed nationally or through block grants that give local governments more autonomy. Local governments can launch housing programs and finance urban redevelopment with their own revenues or through the use of land value capture instruments. International experience shows that the menu of housing policy options is varied and adaptable to countries with different contexts , income levels, institutions, and cultures.


5. 
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   Financing must be combined with territorial planning. To be successful, government housing policies must achieve balanced and inclusive urban growth by promoting diversity , and by helping families work and build wealth. How authorities manage urban expansion and redevelop existing urban areas is critical. Mexico and the US, for example, have learned that concentrating housing in peri-urban areas and jobs in city centers increases transportation costs—and the government’s costs for providing infrastructure and decreasing pollution. Building basic urban infrastructure in Mexico is 50% more expensive in the periphery than in the center. In the US, households in very high-density areas generate about half the CO2 in their daily commuting compared to households in very low-density areas. In addition, smart territorial planning can help minimize the impact of natural disasters such as landslides or floods .


6. Property formalization is not a substitute for a comprehensive housing policy. The typical government response to rapid urbanization has been reflexive. Peru, for example, focused for years on regularizing land that was already occupied informally – a short-term solution to migration that, if not combined with other policies, can cause an array of long-term problems to local and national governments, such as congestion, insecurity, and financial challenges.


7. Investing in housing serves the needs of the people – and boosts economic growth. New housing interventions generate employment, income and tax revenue, during construction and after , while creating opportunities for the introduction of efficient and environmentally friendly technologies.


8. Future generations will have to live with today’s housing policies . Decisions over densities and mixed uses will affect the availability of land, and determine how livable and prosperous our neighborhoods and cities will be. Demographic trends will reshape future housing demand. We need to keep an eye on them .

To be sure, there is no quick fix for housing 3 billion people over the next 15 years. But a number of countries have made real progress , offering late starters a template to adapt to their own situations. Adding these eight stubborn facts about housing to the policy mix will increase the odds for success.