A guide to fixing the urban housing crisis

Housing in Tondo, Manila, Philippines. Photo by: Danilo Pinzon / World Bank / CC BY-NC-ND

As urbanization in the developing world accelerates, the poorest city dwellers will face a shortage of housing options. Currently, some 330 million urban households can’t access affordable and secure accommodation. These gaps in affordable housing are forecast to grow by more than 30 percent to 1.6 billion people by 2025, according to the consulting firm McKinsey & Company.

The World Resources Institute released a report today with recommendations aimed at addressing needs of the urban housing crisis in the “global South.” The authors of the “Towards a More Equal City” report argue that the private sector has failed in recent decades to build cities with a balance of upscale and affordable housing, leaving much of the burden of ensuring adequate housing for the poor on the shoulders of policymakers.

The three solutions the report prescribes: Upgrading informal settlements where they are, promoting rental housing and converting underutilized urban land to affordable housing.

While some progress is being made, the pace of urbanization has outstripped policymaking. The proportion of the urban population in the developing world living in informal housing decreased between 1990 and 2014, yet the overall number of people taking residence in slums rose by 28 percent in the same timeframe. The problem is expected to balloon in Asia and Africa, where 90 percent of overall urban growth will occur by 2050, according to the United Nations.

The problem has reached a “crisis” level that begs for creative responses that recognize each city’s unique characteristics, according to Robin King, director of urban development at WRI Ross Center for Sustainable Cities and the lead author on the report.

The report urges cities to take the lead in addressing gaps in urban housing. Local policymakers will be better equipped to individualize the solutions, tap into local expertise and potentially do it at a fast pace. The three solutions the report prescribes include upgrading informal settlements where they are, promoting rental housing and converting underutilized urban land to affordable housing.

“Cities are able to make decisions for themselves faster than trying to find solutions at a national and international level,” said King. “If this problem were to be dealt with at an international scale, there might not be the resources, the speed and the ability to tap into all of the knowledge that is available at the local level.”

The report emphasizes the need to expand rental capacity in cities, both in terms of space available and institutional mechanisms to facilitate access. In many urban areas today, renting lower income units can be risky for both landlords and tenants, which leads to fewer rental options. Landlords risk housing tenants who fail to pay rent, damage property or are difficult to evict. Tenants face issues including insecurity about long-term housing, unwarranted eviction and exploitation.

Cities can provide landlords with contract templates so that rental terms are clearly laid out and both parties have legal documents to reference in a dispute. In places where legal recourse isn't available, prohibitively expensive or slow, alternative dispute resolution methods can be used. This includes the creation of arbitration entities that provide services including legal counsel, property inspection and eviction. The Rental Housing Tribunal in South Africa and the Center of Arbitration and Conciliation of the Bogotá Chamber of Commerce in Colombia are examples of alternative dispute resolution methods.         

Governments can also restructure tax codes to incentivize renting, lower registration costs for rental agreements and provide service tax exemptions for low income rentals.

WRI recommends additional government policies to incentivize construction of affordable housing. These include taxing underutilized or vacant land to encourage the development of affordable housing; changing zoning regulations so that developers are required to keep a proportion of their units for lower income residents and encouraging housing density such that the costs of infrastructure are shared among a larger net of residents and businesses.  

Community land trusts are another option. Land is purchased with some sort of endowment and then retained for community use. Community ownership gives the trust leverage to require affordable housing. Funds for purchasing the land can come from community groups, philanthropists or the government. The María Auxiliadora Community in Bolivia, for example, houses for over 400 families on land that cannot be sold for profit. But this solution is often not possible in inner cities, where land is more expensive.

Some cities have relocated slum areas to cheaper real estate on the outskirts of the city, in hopes of providing an alternative to congested informal housing in city centers. But this can separate residents from economic opportunities in the heart of the city and increase transportation costs.

An assessment of the Iniciamos Tu Casa program in Mexico, which provided poor residents with housing outside the city, found that many participants abandoned their houses within the year after the program started, suggesting communities prioritize access to services over better housing conditions. WRI argues that upgrading informal settlements in their existing location, with their participation, is a more effective method than relocation.

WRI points to a number of successful programs in cities around the world that can serve as starting points for policy makers dealing with urban congestion. The Quinta Monroy public housing project in Chile, for example, uses a “half a good house” approach: A government-contracted firm builds the basic infrastructure of a home that the family can upgrade over time. The Baan Mankong program in Thailand provides government infrastructure subsidies and soft housing and land loans to communities, with upgrading and land tenure options.

WRI argues that effective housing upgrades come from community participation, which means that public and private authorities must be open to including non-experts in the process. This could include participatory budgeting, in which community members help to make decisions on a public budget, or the use of shared data. Shack/Slum Dwellers International, a network of community-based organizations, has led community mapping projects in informal communities in the developing world, which can help to integrate existing settlement boundaries, transport routes and water sources into planning.

“We cannot solve this problem unless government and people’s resources work together. Upgrading informal settlements, through participation, is the way to do that,” said Diana Mitlin, managing director of the Global Development Institute at the University of Manchester.

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About the author

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    Sara Jerving

    Sara Jerving is Devex's East Africa Correspondent based in Nairobi. She is a reporter and producer, whose work has appeared in The Wall Street Journal, the Los Angeles Times, Vice News, Bloomberg Businessweek, The Nation magazine, among others. Sara holds a master's degree in business and economic reporting from Columbia University Graduate School of Journalism where she was a Lorana Sullivan fellow.