Providing Affordable Housing in Cities

By Atulya Mittal

With respect to housing for the poor, what are should be the objectives of government? What are the apparent of objectives of government? If there is a gap, how will it be reconciled?

Housing for the poor is an acute problem that we will face in the upcoming decades due to urbanization. The problem consists of providing affordable housing for people in cities, where huge demand combined with supply constraints usually results in high land prices and consequently high home prices. Lacking affordable housing, poor people live in poor conditions within cities in favelas and slums. These slums lack sanitation facilities and utilities and are run by slum lords who run a parallel government creating compounding problems related to health as well as law and order. Thus, the objective for government seems simple – provide low cost housing in integrated in existing cities with proper sanitation facilities and utilities.

This simple objective is complicated by a two major factors. Firstly, “government” implies a homogenous machine operating at all levels of the countries systems with aligned objectives. However, in reality the government’s objectives change depending on which part of the political machine is being assessed. The national government, for example, may have an objective of inclusive growth. On the ground, however, local politicians may want to avoid inclusive growth in order to keep their vote banks permanently under their thumb. This is a common problem in redeveloping slums in India that might result in the displacement of people out of particular constituencies and leading to the loss of a local politicians vote bank. Leaders who want to make cities more inclusive have to realize this problem and find a workaround, otherwise their best intentions and objectives will be fouled by people who have a shorter term view but a enough clout to stop them.

Market forces create a second complication. In a free market economy, it seems incongruous to provide an area of land for low cost housing surrounded by multi-million dollar houses and apartment buildings. The land could be better used to provide housing aligned with the market with increases in taxes and collections for the government without disrupting free market forces.

These two complications can be resolved if the government’s shifts its objective and views the problem from a different perspective. The problem of a lack of low cost housing is a symptom of a greater problem of inadequate supply of connectivity and infrastructure. Slums shoot up because cities are not expanding fast enough to accommodate all members of society. The lack of low cost housing is a problem of high cost land. Improved connectivity through roads, rail and other urban transport solutions would unlock larger parcels of land, which could be incorporated into the city. The result would be falling land prices, falling home prices and the availability of affordable homes. To an urban dweller, the actual distance in miles is irrelevant. What is relevant is how long it takes him to get to his place of work, his customers or his friends. By adopting the objective of growing cities faster, the government will automatically provide enough space for market-driven affordable housing.

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3 thoughts on “Providing Affordable Housing in Cities

  1. Atulya makes a great point about the problem of low cost housing being a symptom of a greater infrastructure problem. The paternalistic approach adopted by many believes that the solution to slums is building government housing, providing land grants, or a myriad of other public and private solutions. We first need to understand why the slums exist. Are people living in the slums because they were forced out of other metropolitan housing when pricing rose? Did they move to an urban center for a better life?

    I agree that the infrastructure connecting rural areas to urban centers would help keep some of the slum residents from ever moving into such an area. But, I think there are many different factors that need to be addressed inside a slum; potable water, schools and crime are some of the biggest. All three of these factors require different solutions. In order to build the proper infrastructure for electricity and plumbing, the government would need to buy land, which can prove to be difficult when they do not know who the actual owner is because residents have been squatting on the land for so long. I actually think schools are one of the best ways to transform a slum. They provide stability for the neighborhood’s youngest residents. And police will not want to enter a slum until some degree of civility has taken over.

    While I largely agree with Atulya about building better roads and trains to rural communities, allowing people to commute, I think governments first need to understand what the actual needs of the slum dwellers are and what they feel the best solutions would be.

  2. This entry has hit extremely well on what can sometimes be the elephant in the room when discussing slums: should low income citizens live amidst wealthier neighborhoods? This is key in solving the slum dilemma many economic hubs face in emerging markets, but which ironically also hold lessons for more established cities.

    Though slums are indeed an aesthetic blight, create governance issues (slumlords, voting constituencies) and offer unsanitary living conditions, they also address a fundamental ingredient for economic hubs: a large, accessible pool of affordable labour. This pool of labour will both feed the companies headquartered in such hubs, but also the services for higher income groups. Dharavi in Bombay or Tondo in Manila are a key driver behind the availability of drivers, cooks, maids, nannies and the like. But slums are not the only option for keeping that pool available. Zurich has followed Attulya’s conclusion and offers affordable, reliable and very speedy public transport. Dubendorf, close to a military base, is a separate city but only 11 minutes away by high speed local train from Zurich’s center, and thus home to many lower income constituents – civil servants, nurses etc. London (up to the 1980s or so – the waiting list is now at 360,000 applicants) and Singapore (especially as it developed in the 1970s) built affordable housing in various parts of the city. This avoids the creations of ghettos, and keeps the labour force extremely close to where it will be needed. There are obviously limits to whether this can truly create integration – just ask the residents of low income housing in Chelsea, where surrounding houses fetch millions of dollars.

    Paris, on the other hand, highlights the risk of treating government as a single entity – an issue not just in emerging markets. The French government has a target for affordable housing for each city, yet many city mayors drag their feet, and more often than not, ignore theses targets. Despite available funding – 8 billion euros for the country – only 8000 units were constructed in Paris in 2012. Paris remains a two-tier city – the inner 20 “arrondissements”, with their beautiful old buildings, superior public service and home to the vast majority of wealthy individuals. The “banlieue”, closer to “the projects” than suburbia, is mostly filled with low or mid income housing, and its segregated design has merely fueled racial and religious tensions in France, and led to a dual society in terms of education and employment opportunities, and thus socio-economic mobility.

    So what to make of the final recommendation – focus on in-city affordable housing, or on fast, affordable public transport? I would suggest that the solution depends very often on what the private sector is most interested in -something the government can facilitate through PPPs. In the case of Dharavi, the land was so valuable that focusing on in-city affordable housing makes sense – it can be achieved at a limited cost to the government. For a city like Manila, the real estate zoning commission is famously corrupt, so most affordable housing contracts have been riddled with bribery, sub-par work and interminable delays. The bidding out of highways, executed by the cleaner department of public works and highways, on which low cost buses can ferry low income workers, has proven much more effective.

    Imperfect solutions but practical ones – probably what poor, overflowing cities need the most.

  3. By Anonymous

    I could not agree more with the diagnosis in this post, but I strongly disagree with the proposed solution. “Providing Affordable Housing in Cities” identifies the inadequate provision of affordable housing as a central problem resulting from mass urbanization. This, in turn, gives rise to slums with poor sanitation, poor health, and poor governance. In response, the call is for “improved connectivity” through mass transit to “unlock larger parcels of land” and drive down real estate prices to promote affordability.

    Another point of view is that this proposal would foster urban sprawl and promote economic (and, mostly likely) racial segregation. The post argues that it is “incongruous” to have “low cost housing surrounded by multi-million dollar houses.” I fundamentally disagree. Mixed-income housing—within the same neighborhood, block, or even building—is a successful recipe for vibrant, healthy communities. Relegating poor people (who are often people of color) to the outskirts of urban areas is a recipe for entrenched poverty and social dislocation.

    I also disagree with this post’s position on the role of government. It is suggested that in a “free market economy,” it would be inappropriate for the government to provide affordable housing. Yet the call is for massive governmental investment in infrastructure to, in turn, shape the provision of housing. While I share the author’s worries about poor governmental planning and corruption, it also believe that it is possible for government to further the call for “market-driven” affordable housing. Strategies like inclusionary zoning and tax credits for private developers who produce low-income housing are effective ways to use the power of government regulation and incentives to harness the power of the private market to create more affordable homes and vibrant neighborhoods and cities, which is a win for everyone.

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