Housing for the Poor

This article was originally drafted by the Strategic Foresight Group for the newsletter “Asian Horizons” as part of the Rockefeller Foundation’s Searchlight Process. For more Searchlight content on futurechallenges.org, please click here.

Recent years have witnessed a rise in the number of successful low-cost housing initiatives in five Asia Pacific countries: India, Bangladesh, Indonesia, Thailand and Vietnam.  These countries, all facing rapid urbanization, increasing slum population and inadequate infrastructure, have come up with individual ways of dealing with housing shortage among poor communities, especially those living in urban areas. However, there was a widening gap between policy formulation and the implementation process that led to limited success and poor expansion of the pro-poor housing facilities. Some of the major obstacles that led to this gap were:

• Lack of security of tenure
• Inadequate supply of affordable land and basic infrastructure in urban areas led to rehabilitation on city perimeters that was met with resistance from poor communities
• Poor and inadequate housing finance
• Poor utilization of local building material and technologies
• Inadequate participation of poor communities

In order to tackle these hindrances, certain trends emerged that increased the accessibility of housing facilities to the poor people. These emerging trends, in terms of innovative programs, technology, and policies, were tailor-made to meet the requirements of low-income and vulnerable communities. The following observations emerge from a comparative analysis:

Bangladesh:

Over the years, several NGOs and small innovators have developed and modified various designs of low-cost housing, both in rural and urban areas. A majority of the housing programs run by NGOs are generally linked to livelihood promotion activities leading to improvement in income and food security of the poor families. Prominent innovative low-cost housing models developed by organizations such as Practical Action Bangladesh, Bandhan Society, CARE Bangladesh and iDesign incorporate a number of flood resistant features. The iDesign ‘Lift Houses’, which cost USD 3500 per 400sq.ft., is built using bamboo and ferro cement and is capable of floating with rising waters. Most of the low-cost houses require minimal time for construction and could be replicated in regions that are prone to frequent flooding.

Indonesia:

The government recently outlined a new Rp 14 trillion (USD 1.5 billion) program to provide subsidized housing loans to low-income earners. The program will run alongside the government-assisted home-ownership credit program, known as Subsidized Home Mortgage (KPR). The new scheme would offer lower interest rates and long-term subsidies than the KPR. Banks will disburse and manage the credit, as in the KPR program. The current program is an improvement over the existing KPR as people buying low-cost apartments will pay a fixed Rp 1,055,000 (USD 119) per month until the purchase is completed after 20 years; however, under the KPR, the government only subsidizes mortgage payments for the first four years.

The government also initiated the National Movement for One Million Houses for poor communities to improve basic facilities in housing areas, and community-based housing development. The program will build affordable houses with locally-sourced, low-cost building material and therefore, the cost of the house will substantially reduce. The cheapest house would be around USD 560 to USD 1120 within reach of many people in a country. The best practices of this could be used by developers and builders in countries such as Vietnam as a base-model and customize low-cost houses to the needs of the poor.

Vietnam:

Low-cost housing projects in Vietnam are taken up by large companies such as Vietnam Construction Import-Export Corporation (Vinaconex) and the state-owned Vietnam Glass and Ceramics for Construction Corporation (Viglacera). In order to boost affordable housing projects, the government launched several incentive policies for investors in this segment. Exemptions were provided to investors from land use fees, land rents, value added tax (VAT) for social housing leasing and purchasing contracts, and free corporate income tax. They were also guaranteed 10% of the profits. From 2010 to 2015, around 15,000 apartments for low-income earners will be constructed in Hanoi city. The primary reason for the success of social housing projects in Vietnam has been the cooperation among various investors to share experiences and building materials in developing affordable housing projects. Such partnerships could serve as the basis for standardizing housing projects in the long-run.

Overall, given the increasing growth of urban poverty in the last few years, it has been observed that the governments in these countries are consciously responding for provision of pro-poor housing solutions. Although most of the housing initiatives are geared towards helping the urban poor, housing finance policies and low-cost housing models can help the rural poor as well. Most low-cost housing plans in these countries are moving towards market-oriented and community-based solutions. There is also a general consensus on the role of housing construction in employment generation, particularly for unskilled labor, which is extremely important in these countries. In addition, steps have been taken to utilize the potential and capacity of civil societies and the private sector in providing housing finance and technology.