TOD & Affordable HousingPotential to Combine Objectives

Dao Harrison

Senior Housing Specialist

Sustainability, Urban, Resilience & Rural (SURR) GP

KEY MESSAGES

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1. TOD + Affordable Housing: Blending Objectives

2. Key Outcomes: Unlocking Land Value + Build an Inclusive TOD

HOUSING SECTOR TRENDS IN MUMBAI METROPOLITAN

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Index 2009 2014 2016

Land Price 2000 6500 6500

Income index

2005=100

170 330 402

I Rate (%) 9.5 10.25 8.5

Unsold units 59,040 116,872 258,796

Annual Sales 57,966 35,083 50,456

Mos.

Inventory

14 45 63

Trends in Mumbai Metropolitan Region (MMR)

Source: Liases Floras 2017

Land Price Tripled in Price while Inventory-on-hand at 5 Years Stock Level

KEY SUPPLY SIDE CONSTRAINTS FOR AFFORDABLE HOUSING

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• Access to affordable land: Speculative and

hoarding of land common

• Land acquisition - time consuming and

expensive process

• Slow construction approval permitting

• Debt financing and/or Equity funding are

expensive

➢ Housing categorized as infrastructure

expected to ease debt financing cost …

though likely only for larger developers

Leading developers such as Tata Housing, Mahindra Lifespace, etc. are going down market

New breed developers such as VBHC are also entering segment

• AH Supply requires different model

o Volume game w/ shorter cycle time

o Construction process needs to be

automated and cost-efficient

• Thinner margin, eased by faster

absorption rate if done right

• Cheap un-developed land requiring higher

cost of infrastructure development

➢ AH Business Model Still Emerging as

market acceptance varies depending

greatly on location

Unique Challenges: Affordable HousingCommon Challenges

CURRENT DEVELOPMENT TREND:

LEAPFROGGING TO ACCOMMODATE HIGH COST OF LAND

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Lack of land within city limits have pushed developers to develop

projects in sub-optimal locations for low-income segments

Sub-optimal locations lack access to employment opportunities and

access to basic services and social connectivity

Source: Jones Lang La Salle

NO SUPPORT INFRASTRUCTURE AND LACK OF CONNECTIVITY

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Project in Karjat: Sheltrex

HOMES BUILT FAR AWAY FROM CITY CENTERS CAN LEAD TO HIGH

VACANCY RATE & ABANDONMENT

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Source: MPWH Evaluasi Unit

Source: https://www.bloomberg.com/news/articles/2013-05-21/mexico-s-400-000-abandoned-homes-draw-venture-capital

Indonesia Subsidy Projects Built Far Away

With High Vacancy Rate

36%

64%

KPR SUBSIDY QUALITY RESULTS

Vacant Units Inhabited Units

Sample size: 14,393

FACTORS AFFECT HOUSING AFFORDABILITY ACROSS THE

HOUSING VALUE CHAIN

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• Land Acquisition

• Permits and Approvals

• Rental Rates

• Amenities Costs

• Down payments

• Availability of Mortgages

• Interest Rates and loan periods

• Household savings

Land Acquisition Construction

CostsEnd User Finance

Occupational Costs

• Infrastructure

• Building Materials

• Labor Costs

• Financing Costs

• Offtake Risks

NATIONAL LEVEL REGULATIONS AND POLICIES

TOD policies can address challenges here

AFFORDABLE HOUSING STRATEGIES ENABLED BY TRANSIT

Core City Districts

• Highly valued land

• Affordable housing difficult and

expensive to build

Urban Fringe/Inner Suburban

• Medium-high land values

• Affordable housing can be

paired with market-rate

developments next to stations

Suburban Transit Stations

• Lower land values, but newly

accessible land

• Large amounts of affordable

housing can be created as part

of TOD districts at these

stations

MUTP3 LOAN PROGRAM: VIRAR-PANVEL CORRIDOR STATION

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Existing conditions of Virar-Panvel rail corridor

POTENTIAL DEVELOPMENT AREAS AROUND VIRAR-PANVEL

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Nilaje: Existing areas of development and open land

Taloja: development not currently

connected well to station

Bhiwandi Road

Taloja

Nilaje

Nighu/Narivali

Tambode

Nighu/Narivali: Vacant

land available for large-

scale comprehensive

TOD implementation

Bhiwandi: areas of

ongoing development and

available land

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Not Leveraging TOD for

Affordable Housing Development

=Loss Opportunity

KEY MESSAGES

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1. Why TOD + Affordable Housing: Blending Objectives

2. Key Outcomes: Unlocking Land Value + Build an Inclusive TOD

TOD CAN CAPTURE VALUE & PROVIDE AFFORDABLE HOUSING

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Station

Within 500m-2km:

Coordinated

development plan

with funded

infrastructure

Affordable housing can

be developed in these

areas, partially cross-

subsidized by profits at

immediate station

Within 500m: core

station area with

highest densities and

land value

Land Value Capture

through FSI premiums,

etc. to fund infrastructure

and social housing

Cross

subsidies

LVC provide funds to invest

in infrastructure & housing in

extended TOD station area

Extended TOD station area:

ridership for rapid transit

services + customers for

commercial facilities around

station

Extended TOD Station Area

• Transit-oriented districts can be excellent places

for affordable housing

• Leverage available public land to create housing

(Singapore example: right)

• Slums/informal housing areas are inherently

transit-oriented. Upgrading opportunities and

insertion of new social amenities can enhance

connectivity to new stations

• Over time, land readjustment that increases FSI

around stations can be considered

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TRANSIT OPENS NEW LAND FOR ACCESSIBLE HOUSING

TWO COMPLEMENTARY APPROACHES FOR AFFORDABLE HOUSING

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Preservation

• There are multiple, appropriate preservation opportunities

• There is high potential for displacement of existing renters, so a wide range of rental arrangements must be available

Production

• There are multiple opportunity sites for new development

• Redevelopment of underutilized sites,

• Vacant lots,

• Joint public/private development

Most TOD strategies focus on production of new housing

• Public land dedication and write-downs

• Joint public-private developments

• Land banking

• Land readjustment

Image Source: Yeowatzup. Public Housing & MRT, Commonwealth, Singapore. Photograph. Flickr. April 3, 2009. Accessed November 14, 2016. https://www.flickr.com/photos/yeowatzup/3410344505/sizes/l.

Public housing in

Singapore

Housing Production: TOD with public land acquisition can be used for affordable housing

Source: Kazucko Ochizuco, TTILIT

Reserved land(future budget for project)

ExchangeReduction

Before

After

Project cost for land readjustment

(development of land, public facility)

Income from sales of

reserved land

Public budget

Public Facility(Road, Park, etc.)

Housing Production: Land readjustment (Town Planning Scheme) as prerequisite

Inclusionary zoning

Incentive-based zoning (FSI)

Image Source: EMBARQ Brasil. DOTS Cidades - Manual de Desenvolvimento Urbano Orientado ao Transporte Sustentável. November 2014. Accessed August 23, 2016. http://wricidades.org/research/publication/dots-cidades-manual-de-desenvolvimento-urbano-orientado-ao-transporte.

Housing Production: Link Affordable Housing Production to Market-Rate Development

Fast-track permitting

Fee-waivers, reductions

and deferrals

Regulatory

accommodation for

small sites

Allow for and promote

incremental housing

Council flats in the

United Kingdom.

Image Source: Slum Dwellers International. Kenya Affordable Housing. Photograph. Flickr. August 14, 2013. Accessed November 14, 2016. https://www.flickr.com/photos/sdinet/9510269550/sizes/o/.

Affordable housing in Kenya

Housing Production: Reduce building costs with coordinated TOD planning

1. Protect against immediate renter displacement

2. Homeownership assistance (housing demand)

3. Preserve existing subsidized housing and low-cost rental housing

Housing Preservation Strategies and Tools

INCLUSIVE TOD = SOLUTION TO BROADER AFFORDABILITY DEFINITION (H+T)

22Source: TOD 201

Inclusive TOD: Address Gentrification and Displacement

Chinatown, Kuala

Lumpur, Malaysia

Inclusive TOD: Local Economic Development at Corridors

Denver/Boulder

Accommodating existing informal

sector workers, such as food

hawkers, is a way to provide safer

locations where needed services

and job opportunities are available.

One such example of this are the

neighborhood hawker centers in

Singapore.

Image Source: Tiberbiu Ana. Hawker Center. Photograph. Flickr. May 5, 2012. Access

November 11, 2016. https://www.flickr.com/photos/txberiu/7144522029/sizes/l.

Inclusive TOD: Job Creation Opportunities

A hawker center

in Singapore

HOUSING OPTIONS SUPPORT A HEALTHY ECONOMY

High-value added /

innovation economy(e.g. technology & financial services)

Middle class professional

& manufacturing business

LIG / EWS labourers and

support staff(e.g. cleaners, drivers, cooks,

labourers, construction workers, etc.)

Market provides ample

choice in housing at a

variety of locations

Market provides

sufficient housing choice

at accessible locations

Lack of housing options,

with substandard

dwellings and/or

inaccessible locations

Even technology-focused economies are sustained by large

populations of laborers and support staff, and they need housing

options that are affordable and accessible

Current Status

INCLUSIVE TOD IS FAR MORE POWERFUL THAN TOD

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Source: TOD 201

OPPORTUNITY FOR CHENNAI: TOD + AFFORDABLE HOUSING?