The Other Home Equity: WRI on the Urban Housing Crisis in the Global South

Published: Wednesday, August 2nd, 2017 by Lenora

The World Resource Institute (WRI) recently waded into affordable housing after years of focusing primarily on energy, water, conservation and other traditional environmental sustainability themes. Although the inaugural working paper Confronting the Urban Housing Crisis in the Global South: Adequate, Secure, and Affordable Housing does not break new ground, it does a positive service by elevating the topics of inclusion and sustainability in housing.

The WRI paper focuses tightly on three complex and interconnected challenges and three recommended approaches to addressing them:

Urban Housing Challenge WRI Recommended Approach
Growth of under-serviced, substandard, insecure housing disconnected from livelihood options Participatory in situ upgrading of informal settlements
Overemphasis on home ownership, which excludes the poor Support rental housing for affordable market segments
Inappropriate land policies and regulations, which can push the poor to city peripheries Conversion of under-utilized inner city land and buildings to affordable housing

In some ways, this short paper does an excellent job despite being driven by secondary research and expert interviews with well-known examples like Shack/Slum Dwellers International in Africa and India, Elemental in Chile and CODI’s Baan Mankong of Thailand. For starters, adopting more precise language than the often used word “slums” is most welcome; adequacy, security and affordability are the more appropriate descriptors to include both formal and informal housing.

When the authors point to the difficulty of defining affordability, they also press for housing cost to include housing plus transport costs. This makes the most sense for calculating housing’s carbon footprint. The schematic “spectrum of existing housing conditions” also captures the range of housing form and finance efficiently.

Spectrum of existing housing conditions
Source: Confronting the Urban Housing Crisis in the Global South: Adequate, Secure, and Affordable Housing

Finally, and perhaps most importantly, the authors shift the focus away from the “holy grail” of home ownership. Rental housing is what poorer people need. Selling low quality, poorly located formal housing to lower income people has only led to abandoned and unsold units. Thank you, WRI, for repeating this loud and clear.

It’s also interesting that the WRI takes a stand on “industrialized mass production” as “not desirable, feasible, or financially possible, whether public or privately provided.” This is controversial: formalizing incremental building with community participation will not happen fast enough to absorb demand from lower income households. In addition, if WRI wants to ramp up rental housing, this will almost certainly require rapid construction with a declining cost curve. It’s not clear whether WRI intends to stake that position out in the future or if the main complaint is primarily the peripheral location of these large scale, industrially produced communities.

Throughout the paper, WRI points to governments and communities as the main players and policy, public finance and planning as the most critical vehicles. There’s no question that empowering the poor in urban communities requires innovative structures and partnerships, as well as time, trust and energy. As noted, governments, especially cities, have loads of opportunities to loosen regulations to promote community driven solutions, to unlock underutilized, well-located land, keeping it from being bid up by speculators and to put in place financial incentives for lower income housing solutions with higher levels of government.

In not stepping much beyond governments and communities, the main disappointment in the WRI paper is not considering the role of the private sector or impact investors or innovative finance for cities. Microfinance is referred to only obliquely despite the fact that funds like MicroBuild have helped to advance the small housing loans that would support incremental building. Financial institutions like Trust Urban Housing Fund have worked to revitalize inner city communities and nurture property entrepreneurs for inclusive, well-located housing. Reall is moving toward leveraging development finance to support community builders. International Housing Solutions‘ private equity funds have resulted in thousands of units of affordable housing.

While it’s true that these more market-led solutions haven’t mobilized housing for the very poorest, they have certainly innovated to generate housing solutions for lower and moderate income households in many of the economies noted in the WRI paper. The outcomes that WRI hopes for likely won’t be reached by governments and communities alone. Hopefully, the more extensive analysis that’s forthcoming will be able to embrace a wider range of innovations for lower income housing.