PUBLIC-PRIVATE PARTNERSHIP DEVELOPMENT PROGRAM

Using Results-Based Financing to Provide Durable Housing Solutions to Refugees and IDPs

Ukraine

Brendan Moroso

August 2015

2

“Theacheforhomelivesinallofus.Thesafeplacewherewecangoasweareandnotbequestioned.”-MayaAngelou

3

TableofContents

TableofContents.....................................................................................................................................3Acknowledgements..................................................................................................................................4ExecutiveSummary..................................................................................................................................5Introduction.............................................................................................................................................7Methodology............................................................................................................................................8PartI:Background....................................................................................................................................9

Housing&PopulationContext.............................................................................................................9InternallyDisplacedPersons..............................................................................................................10CurrentResponses.............................................................................................................................13

AlongtheLineofContact...............................................................................................................13CollectiveCenters...........................................................................................................................14CashforRent..................................................................................................................................15Government...................................................................................................................................15

LookingForward.................................................................................................................................16ResponseBestPractices&LessonsLearned......................................................................................17

PARTII:OpportunitiesforResults-BasedFinancing...............................................................................19Results-BasedFinancing.....................................................................................................................19

Background.....................................................................................................................................19Indicators........................................................................................................................................19UseinHousing................................................................................................................................20PossibleIndicators..........................................................................................................................21

ApplicabilitytoUkrainianContext......................................................................................................23TheNeedtoAct.............................................................................................................................23

InterventionScope.........................................................................................................................23ConstructionandFinancing............................................................................................................23RentalApproach.............................................................................................................................24

Challenges..........................................................................................................................................25OverallChallenges..........................................................................................................................25Ukraine-SpecificChallenges...........................................................................................................26

Summary................................................................................................................................................28Conclusion..............................................................................................................................................29GlossaryofTerms...................................................................................................................................30TableofFigures......................................................................................................................................31OrganizationsInterviewed.....................................................................................................................32References..............................................................................................................................................33

4

AcknowledgementsThisprojectwasmadepossiblebyfundingfromtheU.S.AgencyforInternationalDevelopment,andbyFHI360,theimplementingpartnerfortheUkrainianPublic-PrivatePartnershipDevelopmentProgram(P3DP).IwouldliketothankElinaSarkisovaforhernumerouscontributions,andforherfellowshipthroughoutthisproject;ChrisShugartandMickMullayforinitiatingthisresearch;andthenumerousexpertswhocontributedtheirtimeandthoughtstoassurethebestinformationwentintothisreport.IwouldalsoliketothankSofiaRedfordforhermanyhoursspentdedicatedtothisproject.

5

ExecutiveSummaryForthesecondtimeinthirtyyearsUkrainefindsitselfdealingwithhundredsofthousandsofhercitizens,inarollinginstant,suddenlywithoutahome.WhileacommunistgovernmentwaspreviouslyabletoaddresstheneedsofthoselefthomelessbytheChernobyldisaster,thoseaffectedbythecurrentconflictnowrelyonalimitedgovernment,theinternationalcommunityandthefreemarkettoprovidesolutions.Theproblemisthis:MostInternallyDisplacedPersons(IDPs)havedecidednevertoreturntothehomestheyonceowned.1Manynowliveinovercrowdedrentalaccommodations,paidforwiththedwindlingsavingstheymanagedtobringwiththem.Meanwhile,themostvulnerableliveintwohundredandfiftycollectivecenters,intendedastemporarysolutionsthatarenowbecomingpermanentghettos.2IDPsarelookingforhomesandlivelihoodswithwhichtorestarttheirlivesinthecitiesofwesternUkraine.Thelongertheylook,themoretheylosehope.Ukraine’sconstructionindustryhasthecapacitytobuildaffordablehomesforthesepeople.However,withaneconomywrackedbydouble-digitrecessionandtriple-digitinflation,andbankscollapsingtwo-a-week,thereisnofinancingtoenablethemtodoso.3Whiletheultimatesolutiontomeetthesehousingchallengesiscontrolledinflation,arecoveredeconomyandasuccessfulmortgagemarket,thesearealongwayoff.Inordertopreventagenerationfrombecomingentrenchedinwretchedness,oraddingtothenumberofthosemigratingtotheEuropeanUnionforsalvation,aresponsetomorethanjusttheimmediatecrisisisnecessary.ThatresponseshouldincludeResults-BasedFinancing.Since2010,Results-BasedFinancing(RBF)hasgrowninpopularityasatoolusedbythedevelopmentcommunitytoachievetheoutcomestheywant.Ratherthanfocusingonhowmoneygetsspent,thisnewapproachfocusesonwhatthatmoneyaccomplishes.FromLondontoIndia,theUStoColombia,RBFhasbeenusedtoimprovefailingservices.However,whileithassuccessfullyachievedbetterresultsforcitizensandtheirgovernments,theuseofRBFinaddressingissuesfacedbyrefugees,IDPsandotherconflictaffectedpopulationsisrelativelyuntested.Additionally,mostRBFhastendedtofocusonareassuchas,MaternalHealth,WaterandSanitationHealth(WASH),orHomelessness,withnosignificantpilotsasyetinthehousingsector.However,giventhesuccessesthatRBFprojectshaveexperiencedwithotherpopulationsandinothersectors,itisnecessarytoexplorewhetheraRBFprojectfocusedonhousingdisplacedpeoplescouldprovideuniqueadditionalvaluetotheresponseinUkraine.Despiteanumberofchallengespresent,

1ConsultantInterviews(2015)2UNHCRShelterCluster(2015)3ConsultantInterview(2015)

6

takenasawholeRBFdoesprovideaninnovativealternativewithinthehousingsectorandwilllikelybepartoftheaidagency’stoolkitinyearstocome.RefugeesandIDPsrequiredurablesolutionstothehousingchallengestheyfaceinUkraineandbeyond,andResults-BasedFinancing,whilenotacure-all,representsanewandpowerfultoolintheresponse.

7

IntroductionResults-BasedFinancingprojects,suchasSocialImpactBonds,Pay-For-SuccessorotherResults-Basedmethods,areunitedbytheiruseofafinancingmechanismwhereatleastaportionoffundingistiedtoresults.Theseapproachescanbeuniquelysuitedtofindingdurablesolutionsbecausepaymentsarenotfocusedoninputs,butonoutcomes.Thisallowsthosewhoaremostinformedandmostimpacted,localindividualsandcompanies,tomakeriskandvaluedecisionsabouthowtoachievethoseoutcomes,whichinturngetsmorevaluefrominternationaldonors’preciousfundswhilecatalyzingmarketstoachievethoseresultsinthemostefficientandeconomicwaypossible.Traditionalhousingresponsesarelitteredwithexamplesofinterventionsthatfocusedonproductratherthanprocess,onoutputsratherthanoutcomes.Examplesincludecashpaymentsthatlastedonlyaslongastheoutsideworld’sattention,housingparksbuiltondonatedland,farfromcitiesandjobs,thatwereneveroccupied,andexpensivehousingoptionsthatweredevelopedbutunaffordable,helpingthewell-offbutmissingthetargetedpopulation.Thispaperwilldothefollowing:

● ProvideanindepthexplanationofthehousingsituationasexperiencedbyIDPsinUkraine,uptothesummerof2015.

● OutlinecharacteristicspresentthatwillimpactanRBFproject.● Providesamplepayment-triggeringindicatorstailoredtothehousingmarket.● HighlightsomeofthechallengesandopportunitiesofanRBFhousingproject.

Thegeneralfindings,whilefocusedonthesituationinUkraine,arenotexclusivetothatcontext.TheyprovidenewinformationandlessonsforallsituationswheregovernmentsanddonorsseektobetteraddressthehousingneedsofrefugeesandIDPs.Furthermore,theyalsorepresentahighlevelanalysisoftherolethatResults-BasedFinancingcanplaytobridgethegapbetweenimmediatehumanitarianresponsesandlonger-termdevelopmentresults.

8

MethodologyThefirstdraftofthispaperwasinitiallycompletedinthesummerof2015aspartofaUSAIDprojectfocusedonpublic-privatepartnershipdevelopmentinUkraine.Aspartoftheresearch,interviewswereconductedwith14expertsfromvariousNGOs,governments,andinternationalorganizationsworkingonissuesofUkraineandhousing.Thisdraftincludesarevisedintroductionandconclusion,whichaimtoprovidegreaterdetailonhowResults-BasedFinancinginterventionscanbeappliedtorefugeeandIDPpopulationsinothercontextsoutsideUkraine.Sinceinitialpublication,predictionsaboutthecourseoftheconflicthavethusfarprovedcorrect.AsoftheendofOctober2015,itwasbeingreportedthat“thereseemslittlechancethattheeastmightbere-integratedintotherestofUkrainewithoutachangeofgovernmentinMoscow.Sothechancesarethataso-called‘frozenconflict’maypersist,wherethefightingisatalowlevel,butthethreatofescalationremains.”4Disclaimer:Theviewsexpressedinthisreportarethoseoftheauthor.TheydonotnecessarilyreflectthoseoftheUSGovernmentortheimplementingpartner.

4Burridge(2015)

9

PartI:Background

Housing&PopulationContext Forhistoricalreasonsrelatingtotheimpactofcommunism,Ukraine’shousingmarketisincrediblyunique.InseekingtoexaminetherolethatResults-BasedFinancing(RBF)canplayinprovidingdurablesolutionstothechallengesfacedbyIDPsinthehousingsector,itisfirstnecessarytounderstandthesesingularattributes.ThedissolutionoftheUSSRandtheendofcommunisminUkrainecanstillbefelttodayinmanypartsofUkraine’shousingsector:Lawsfromtheeraofcommunismremainonthebooks;Khrushcheveraapartmentprojects,knowas“Chruschtschowkas”,dominatetheskylineand;accordingtoofficialrecords,nearly95%ofallhomesareowneroccupied,arelicfromthetransitiontoamarketeconomywhenhomeownershipwastransferredfromthegovernmenttotheoccupant.Sinceindependencein1991,thepopulationofUkrainehasdecreasedbyoversixmillionpeople,or12%.5Thisistheresultofbothemigrationanddecliningbirthrates,bothofwhichrevealageneralgloomaboutthecountry’ssituation.6Thisdecreasehasleftasizableportion(3%)ofUkraine’shousingstockunoccupied.However,thisstocktendstobeinruralareaswhereeconomicpovertyhasbeenadvancingatarateof0.5%ayearsinceindependence(seeFigure1below).

PercentageofPopulationinPoverty

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Nationally 27.8 26.4 27.2 27.2 26.6 27.3 27.1 28.1 27.3 27.0

RuralPopulation 29.2 28.7 32.2 34.4 36.7 35.0 35.2 38.4 37.9 38.2

UrbanPopulation 27.1 25.4 24.7 23.6 21.5 23.5 23.2 23.0 22.1 21.5

Figure1:Growingdisparitybetweenurbanandruralwealth.7AsFigure1illustrates,whileruralpopulationsdecline,citiesarerisingascentersofeconomicopportunity.Inthefaceofthiseconomicpull,therehasbeenalargemigrationtocities,andasof2012almost70%ofUkrainiansliveinurbanareas,withnearlyaquarterlivinginthefivelargestcities.8Evenbeforethecurrentconflict,Ukraine’seconomicepicenterhadbeenmovingWest.TheindustriesthatsupportedtheDonbasregionduringthecommunistdays,namelymetallurgyandaerospace,driedupafterthefalloftheUSSR.Decreasingeconomicopportunitiesledpeopletoabandontheregion.

5UNECE(2013)6UNECE(2013)7UNECE(2013)8 UNECE(2013)

10

WhileKyiv'spopulationexpanded,alloftheEast’scitiessawtheirpopulationdecreaseby13%-16%intheperiodafterindependence.9Asmentionedpreviously,officialrecordsshowthat95%ofallhomesareowneroccupied.Thisistheresultoftheendofcommunism,whenresidenceswereprivatizedandbecamethepropertyofthosewhowerelivinginthematthetime.However,thisnumberobscuresthetruth.Whileofficialrecordsstatethatonly3.4%ofhousingiscurrentlyassociatedwithrentalagreements,theinformalrentalmarketisintruthmuchlarger.Expertsestimatethatbetween13%and30%ofUkrainiansarecurrentlyrentingtheirhomes.10Regardlessoftheseunofficialnumbers,forhistoricalreasonstheculturalexpectationinUkraineisthatpeopleowntheirhomesoutright.Renters,iftheyrentforfiveyearsormore,byvirtueofthisfactareconsideredtobevulnerablepopulationsbythegovernment11andentitledtosocialassistanceprograms.However,theseprogramsvastlyunderperform.Therearecurrentlyoveramillionstate-identifiedvulnerablehouseholdsentitledtogovernmenthelp,andtheexpectedwaittimeforassistanceisover100years.12Moreover,Ukraine’shousingstockispastitsprime.42%wasbuiltbefore1960withaplannedlifetimeof25years.Estimatesarethatupto10%ofUkraine’shousingstockisdilapidatedandinneedofrepairorreplacement.13Undertheseconditionsonewouldexpectthattheconstructionindustrywouldbebooming.However,theglobaleconomiccrisisandsubsequenteconomictroubleshavelefttheindustrystrugglingtorespondtoparalyzedfinancialmarkets.Housingoutputisonlyone-thirdoftheregionalnorm.Demandfornew,affordablehousingisextremelystrong,howeverthesupplyisfaroutpacedduetoalackoffinancialtoolstosupportthemarket.Residentialconstructionthereforeisfinancedmostlyfromthepre-constructionsaleofhousingunits,whichmeansthatmostnewconstructionisonlyavailabletowealthycustomerswhocanpaycashupfront,leavingnobeneficialimpactontheoverallmarket.Simplyput,thefinancialmechanismsandstabilitynecessaryforanormalconstructionmarketdon’texist.

InternallyDisplacedPersons FollowingtheoustingofPresidentViktorYanukovychinFebruary2014,fightingbrokeoutintheDonbasregionofeasternUkraine(DonetskandLuhansk)betweenRussiansponsoredarmedgroupsandUkrainiangovernmentforces.This,incombinationwiththeRussianannexationofCrimea,ledtohundredsofthousandsofUkrainiancitizensfleeingtheirhomesinsearchofsafetyandshelter. 9UNECE(2013)10Amman(2015)11UNECE(2013)12UNECE(2013)13UNECE(2013)

11

Ofthe5.2millionpeopleimpactedbythecrisis,approximately1.4millionhaveregisteredasinternallydisplacedpersons(IDPs)withtheMinistryofSocialPolicyasofJune2015.14However,evidencefromlocalauthoritiesandNon-GovernmentalOrganizations(NGOs)suggestthatthesenumberspaintanincompletepictureoftheactualsituation,withsomeestimatesindicatingthatthereareasmanyas1.8millionIDPs.15TheUNHCR’sShelterClusterhastargeted473,000peopleforhousingassistance,forwhichitestimates82millionUSDwillbeneeded.16Untilnowtheprimaryfocusofassistancehasbeentoprovideemergencyrelief,intheformofsupplies,cashassistance,andcollectivecenterswherepeoplecanseekrefuge.However,withthecrisisenteringits18thmonth,groupsinvolvedwiththeresponsearestartingtothinkaboutinfrastructureandwhatshouldbedonetoaddresstheevolvingneedsofIDPsandsocietyinthelongterm.DiscussionshavealreadybegunattheNGOlevelwithregardstocontingencyplansandacomprehensivestrategy,buttheywillrequireagovernmentresponseinordertobedeemedeffectiveoverthemediumandlongterm. Moreover,notwoIDPshavethesamesearchfor“adequatehousing”-thecurrentacceptedtermputforwardtoreplace“shelter.”17However,therearesomebroadcategoriesthathighlightcommoncircumstances.Thesedistinctionsshowhowdifferentinterventionscanbeexpectedtoimpactthesedifferentcategoriesofindividuals(Figure2).

Population Characteristics Comments

IDP Displacedfromplaceoforigin

Mayhaveexperiencedmultipledisplacements.

Conflict-AffectedPopulation

Non-displaced,dwellingdamaged

Addressingshelterneedsmayreducelikelihoodofadditionaldisplacements.

HostCommunity Non-displaced,dwellingnotdamaged

AccordingtolocalcontextthelivingconditionsofhostcommunitiessimilartoIDPs

Returnees(sustainablereturn)

Formerlydisplaced,dwellinguncertain

Returnprocessmayinducedirectexpenditure(repairsifhouseisdamaged)

“Commuters” Frequentdisplacementbetweenseveraldwellings

Populationcommutingacrossthecontactlinemightneed.temporarybaseinsteadofdurablesolution

Figure2:Tableofdifferentpopulationsrelatedtodisplacedpersons.18

14UNHRCShelterCluster(2015)15MistoReformandConsultantInterviews(2015)16UkraineHumanitarianCountryTeam(2015) 17InternalDisplacementMonitoringCentre(2015)18UNHCRShelterCluster(2015)

12

Figure3:MapshowingtheUNHCR’sdataonIDPsinUkraineasofJune8,2015.19

Figure3showsthatthegreatmajorityofIDPs(77%)areregisteredinthefivemosteasternoblastsofDonetsk,Luhansk,Kharkiv,ZaporizhzhiaandDnipropetrovsk.ThoseregisteredinDonetskandLuhansk,whileofficiallyregisteredasIDPs,mayalsofallintooneoftheothercategoriesoutlinedabove.Leavingthosetworegionsout,theprimarydestinationforIDPsareKharkivandthecapital,Kyiv.ArecentREACHreportintothedispositionofIDPspresentedthefollowinginformation:

● 60%ofIDPsliveinrentedapartmentsorhousings,4/5thswithoutaformalcontract.● 70%ofIDPsreportrentsbelowUAH2000,or$80permonth,farbelowmarketvalue.Thisisdue

totheirrentalofsummerhomes,ruralunitsorsharedapartments.● 20%ofIDPsarehostedbyfamilyorfriends● 80%leftbehindowner-occupiedapartments,nowworthmuchless.

Inthemeantime,90%ofallIDPsarestayinginurbanprivateaccommodation.Thishasleadtoagrowingconcernofthependulumeffect-IDPsexperiencinganincreasedriskofevictionastheconflictdragsonandtheirpersonalresourcesrunout,leavingthemnooptionbuttoreturntocollectivecentersortheirhomesintheconflictzone.Inafewshortmonths,theconflicthaserasedamillionjobs,wipedaway

19UNHCRShelterCluster(2015)

13

personalsavingsandobliteratedproperty-storedvalueformostIDPs.ForthesereasonsitisunlikelythatacessationofhostilitieswillendtheplightofUkraine’sIDPs.CurrentResponsesItisinthecontextoftheabovecircumstancesthatthecurrentresponseistakingplace.Aspreviouslymentionedthatresponsehas,untilnow,mainlyfocusedonemergencymeasures.AlongtheLineofContactAhandfulofinternationalaidagencies,coordinatedbytheUNHCR’sShelterandNon-FoodItemsCluster,havebeenworkingtirelesslytoprovideameliorativemeasurestoallwhoseaccesstoshelterhasbeenimpactedbytheconflict.

Figure4:Donbasresidentialstructure,partlydamagedbyshelling.ImagecourtesyofKyivPost.

Alongthelineofcontactthismeansprovidingmaterialresources,specificallyplasticsheeting,toenablelightandmediumrepairstodamagedhouses,withtheaimofkeepingconflict-affectedpopulationsintheirhomes.Thosewhosehomeshavebeenirreparablydamagedareoccasionallyabletousethehomesofneighborswhohavechosentomoveawayfromfromthelineofcontactbutareinterestedinhavingsomeonetakecareoftheirhomeintheirabsence.20

20ConsultantInterview(2015)

14

Inplaceswheretheravagesoftheconflictseemtohavepassed,NGOsareprovidingmorepermanentmaterialresources-cement,brick,corrugatedroofingpanels,andwood.Withthesesuppliespeopleareabletomakepermanentrepairstotheirhomes.OneNGOreportsthat,ofthenearlythousandhomestheyhaveprovidedwithsuppliesforrepairs,onlysixhavebeenre-damagedbyshelling.21Findingablebodiedpeopletocarryoutrepairs,eveninareaswheretheconflictisdeemedtohavepassed,hasprovendifficult.Forthisreason,afocusofthecurrentresponsehasincludedacashforworkprogramtoenabletheelderlyanddisabledtopayforthelabornecessarytocarryoutrepairs.22CollectiveCentersForthosewhohavemovedfurtherfromthelineofcontact,thereareanumberofinterventionscurrentlybeingprovidedbythegovernmentandinternationalNGOcommunity.Forthemostvulnerablepopulations,andthosecomingdirectlyfromtheconflictarea,collectivecentershavebeensetuptoprovidethemostbasiclevelofshelter.Thesecentersareofteninruralorremoteareasandwerere-purposedfromtheirprevioususeassummercamps,sanatoriums,orsimilargovernmentbuildings.Researchshowsthatapproximately10%ofallIDPsarecurrentlyhousedincollectivecenters.23Thesebuildingswerenotintendedorideallydesignedforuseasyearroundhomes.Manyweresummercampsandthereforenotinsulatedorheatedforwinteruse.Nearlyallrequiretheuseofsharedsleepingquartersandbathroomfacilities.Mostsignificantly,manyarelocatedfarawayfromcitiesandtheemploymentprospectsavailablethere.Thisleavestheirinhabitantsunabletofindworkorresumeanormallife.Instead,theyarealmostentirelydependentonaid.Thissituationcausesnegativepsychologicaleffects,inadditiontothosealreadysustainedintheconflictzone.AnMSNAstudyhasshownthatcomparedwithIDPsinothershelterarrangements,thoseincollectivecentersreporthigherconcernsintermsoffoodandhealth,andofchildrenshowingsignsofstress.24AstheNGOMistoReformreports:

IDPslivingtogetherinlargegroupsinplaceslikehostels,sanatoriums,summercamps,etc.foraperiodoflongerthan3monthsresultinpersonalitydecaybecauseofthelossofmotivationtolookforjobs,housinganddecentliving.ObservingsuchcompactsettlementsinKyivfor4monthsduringNovember2014toApril2015indicatedchangesintheprioritiesofIDPs,whohadbeenconstantlytakencareofbyvolunteers.WhereasinNovember,201486%ofsurveyedIDPsputfindingjobsasatoppriority,byApril2015

21ConsultantInterview(2015)22ConsultantInterviewsandUNHCRShelterCluster(2015)23UNCHRShelterCluster(2015)24 UkraineNGOForum(2015)

15

thetopprioritygotswitchedtohumanitarianaidavailabilityandonly14%ofthesurveyedIDPswerebotheredbylookingforjobs.

Theysummarizetheirreportsayingthatlivingincollectivecenters,“reducessocialstatusofanIDPanddoesn’tcorrespondtotherightofdignifiedliving.”Forthisreason,combinedwiththelossofeconomicopportunitiesbylivingfarfromcitycenters,nearlyallthosewhocan,whetherthroughfinancialorsocialcapital(i.e.spendingsavingsorstayingwithrelativesorfriends),seeksomeothershelter-ratherthanliveinthecollectivecenters.CashforRentAsmentionedpreviously,anestimated90%ofallIDPsaretryingtoaddresstheirneedforadequatehousingwithmarketbasedsolutions.Somearelivingwithfamilyorfriends,manyarepoolingtheirsavingstorentapartmentsinconjunctionwithotherIDPfamilies,andsomeareabletorentapartmentsontheirown.ItisestimatedthatcurrentlyhalfofallIDPsaresearchingforaccommodation,addinggreatlytothedemandsideofthehousingsituationinUkraine’sbiggercities.25Forthisreason,CashforRentinterventionshavebeenimplementedtoassistIPDsinfindingnewhomes.TheShelterClusterhasoverseenthisprocessand,asofthebeginningofJune,2015,hadprovidedcashtobetween20,000and50,000households,orroughly5%ofIDPs,withtheaimofsecuringaccesstoadequateshelterfor6-12months.TheIDPstargetedthroughthisprogramwerethosewho,whileofsomemeans,possessedinsufficientfinancialresourcestorentaplaceontheirown.26Fortunately,becauseofthepreviousemigrationfromUkraine,themassivemigrationflowsfollowingtheconflictintheDonetskandLuganskOblastshavebeenrelativelyeasytoaddressinthehousingsector.NGOemployeesreportfeelingastonished“thatthehugenumberofIDPswouldhavenobiggerimpactonsocietyandhousingconditionsinUkraine.”27

GovernmentInadditiontotheaidbeingprovidedbyinternationalNGOs,thegovernmentofUkrainehassoughttoassistIDPsinmeetingtheirneedforadequatehousing.Whilegovernmenthousingprogramsarenotanoptionduetotheone-hundredyearwaittime,thegovernmenthasvoted,underResolution505,toprovideseveralmonths’worthofunconditionalcashtransferstoIDPs,whichmanyusetopartiallymeettheirneeds,includingthatofhousing.TheresponsibilityofthegovernmenttoprovideadequatehousingsolutionsforIDPsissomewhatovershadowedbythelargerneedtoimprovethehousingsectorforallmiddleandlowerincomeindividuals.

25UNHCRShelterCluster(2015)26UNHCRShelterCluster(2015)27ConsultantInterviewsandAmman(2015)

16

Currently,theUkrainianfederalgovernmentwantstoincentivizetheconstructionofaffordablehousingforlowincomefamilies.Itisinterestedinusingitsbulkpurchasingpositiontoprovideincentivesforcompaniestoundertakenewhousingconstructionandcompleteunfinishedprojects,whichwillthenbetransferredtoqualifyingcitizens.ArecentagreementwiththegovernmentofChinasoughttoprovidedUSD15BilliontoUkrainefortheconstructionofaffordablesocialhousing,howeveritcamewiththecaveatthataChinesecompanymustused,perhapsmitigatingsomeofthepotentialbenefits.28Additionally,thefederalgovernmentisalsoopentousingalternativemechanismssuchaspublic-privatepartnershipstoaddtothestockofsocialhousing.ThispossibilityhasbeenexploredindetailandaidedbyUSAID’sP3DP.29Somemunicipalities,suchasKyiv,haveindividuallyattemptedtoaddresstheneedforaffordablehousing.Theyhaveinitiatedanumberofhousingregenerationprogramsontheirownoverthelastfifteenyears.Oneprojectbegunin2008inKyivledtoa60%profitforinvestorscausinginterestinfutureprojects.However,thesewereallsocialhousingprograms,andnotspecificallyaimedatIDPs.30 LookingForward DespitethesigningoftheMinskIIProtocolinFebruary2015,whichwasaimedatresolvingthecrisis,nopoliticalsolutiontothecrisishasoccurred.Whileopinionsaremixed,itseemsunlikelythatanyagreedsettlementtothecrisiswilloccurintheneartomediumterm.Despitethis,evidenceseemstoindicatethatdirectkineticrelationsbetweenthebelligerentsarecurrentlyatanebb.NGOshavereportedthat,whileirregularshellingisaconstantconcern,directcombatislimited.Whetherthisisalullbetweenbloodybattlesortheestablishmentofanewnormalbetweenentrenchedsidesremainstobeseen.Inanyevent,thecrisisisbeginningtodemonstrateallthecharacteristicsofaprotractedIDPevent.DatashowsthatthenumberofpeopleregisteringasIDPsisstillincreasingonanongoingbasis,reflectingthedeterioratingsituationintheconflictareas.Additionally,movementbetweenUkraineandtheNon-GovernmentControlledAreas(NGCA)hasbecomeincreasinglyrestricted.Thereareadecreasednumberofoperatingcheckpoints,causinglongwaitstocross.Additionally,thede-factogovernmentoftheDonbasregionhasstoppedtheoperationsofinternationalNGOsinareasitcontrols.AnumberofsurveyshavelookedatthefutureintentionsofUkraine’sIDPsinanattempttoprovidemoreinformationtoshapefuturestrategyanddecisionmaking.Ingeneral,between70%and93%ofall

28PressserviceoftheVicePrimeMinisterofUkraine(2015)29Amman(2015)30Amman(2015)

17

IDPssurveyedhavereportedanintentiontomaketheirrelocationpermanent.Onaverageonly10%to15%havestatedanintentiontoreturnhomeoncetheconflictends.31ThereasonsfortheseanswerslikelyhingeonthehistoricaleconomicdeclineofEasternUkraine,andthesubsequentphysicalandeconomicdevastation.Forthosethathavefoundnewjobs,networksandopportunities,thereseemsfewcompellingreasonstoreturn.Withinthosewhodon’tintendtoreturn,thereisastrongpreferencetointegrateintourbanareassuchasKharkivandKyiv.Tellingly,arecentInternationalLaborOrganizationsurveyasked,“Ifweweretoprovideahousefreeofcharge,ajobandutilitiesinaruralarea,wouldyoumovethere?”Thevastmajorityrespondedinthenegative,indicatinganoverwhelmingpreferencefortheurbanareasovertheruralones.32ResponseBestPractices&LessonsLearnedInbeginningtothinkabouthowtoaddressthesituation,itisimportanttoincorporaterecentadvancesandbestpracticesregardingIDPsinurbansettings,givenUkrainianIDPspreferenceforurbansolutions.ThecrisisinUkraineis,inmanyrespects,pastthehumanitariancrisisstage.Itisnolonger“aboutsavinglives,”totheextentthatthismeanspreventingcivilianfatalities.Ithasreachedthepointwheredevelopmentactorsneedtostartlookingatmediumandlongtermsolutions.Inthisregarditisnowabout“savinglives”bysavinglivelihoodsandgettingpeople’slivesbackontrack.IndoingthisitisworthkeepingUSAID’sshelterequationinmind:S>4W+Rorstatedotherwise,shelterismorethanfourwallsandaroof.AsIOMfurtherillustrates,“DurableSolutionsarealwaysmulti-sectoralsolutions.”AnysuccessfulinterventiontoprovideadequatehousingtoIDPswillthereforehavetobepartofalarger,contextuallyappropriate,responsethatincludesothersectors.Manybestpractices,suchasrecognizinginformaltenancy,areofalegalnatureandcanonlybecarriedoutbythegovernment,withtheencouragementandsupportofotheractors.Howeverothertactics,suchasincreasingknowledgesharingandhavinggreatercooperationamongstinternationalNGOs,areprudentforallactors.Specificbestpracticesforcreatingdurableandsustainablehousingsolutionsinclude:

● TargetinggeneralsocialissuesthatwillaidIDPswithoutsinglingthemout.● TreatinghousingofIDPsasadevelopmentissuethatfocuses,notontheIDP,butonbroader

developmentplansthataddressstructuralissues,includingchallengesfacedbytheurbanpoor.● Focusmoreonrentinterventions,ratherthanownershipinterventions.● Addressdeeperproblemsrelatedtoaffordabilityofhousingstock.

31ConsultantInterview(2015)32ConsultantInterview(2015)

18

● ViewhousingasaprocessratherthanaproductInlookingatwhatspecificactorsinUkrainehavelearnedfromtheirhousinginterventionsthusfarthereareanumberoflessonstobetakenaway.

● Mosthaveemphasizedtheneedtoactsoonerratherthanlater,citingthegrowingdemoralizationofIDPsandtheunlikelinessthatthefactsonthegroundwillchangedramatically.

● Mosthavepointedoutthelackofcompleteinformationinmakingdecisionsandatendencyto“waitandsee”ifthingswillchange,withthisstrategysofarhavinggoneunrewarded.

● Mosthavehighlightedthatthehumanitariancommunityfindsitselfilladjustedtoprovideanythingmoresignificantthanshorttermassistance,whichdoesnotresolveunderlyingproblems.

● Manyhavehighlightedthetrickyissueoflandanditslegalandculturalimplications.● Manyhavetalkedaboutthelackofgoodfundingmechanisms,suchasmortgages.● Manyhavementionedthatthegovernmentisnotdoingenoughandneedstobepushedtodo

more.TherealityisthatmosthumanitarianagenciescannotprovidepermanentadequatehousingonalargescaletomeeteveryIDPs’need.TheUNHCRShelterCluster’sTechnicalWorkingGrouponPermanentShelterSolutionsandLinkagetoRecoveryhassofarbeenunabletomakemeasureableprogressonitsgoalofaiding70,000householdswithpermanentshelter.Whiletheworkinggrouphasplayedanimportantroleinshiftingthefocustowardslong-termresults,historicalissuesoflandtenure,security,andbureaucraticintransigenceareslowingthedeploymentofanydurablesolution.

19

PARTII:OpportunitiesforResults-BasedFinancing

Results-BasedFinancing

Background Results-BasedFinancingreferstoanyfinancingmechanismwhereatleastaportionoffundingistiedtoresults.Generallyspeaking,inaResults-Basedcontract,an“outcomepayer”(afoundation,internationaldonor,orgovernment)conditionsthepaymentofmoney(typicallyagrant)toaserviceprovider(anNGO,privatecompany,orgovernmentalbody)ontheachievementofpre-agreedsocialoutcomes.AvarietyofactorsuseResults-BasedFinancingtopayforoutcomes.Inparticular,governmentsindevelopingcountriesandinternationaldonorsareincreasinglymakinguseofRBF. TherearemanypotentialbenefitsofResults-BasedFinancing,includingmoreflexiblefundingandimproveddeliveryofservices.Moreover,ithasthepotentialtobringinnewplayers(i.e.privateinvestors)andmotivatemarketsthroughtheuseofaSocialImpactBond,inwhichimpactinvestorsfinancetheinitialcostofoperationsonprojecttheydeemwillseeasocialandmonetaryreturnontheirinvestment.

IndicatorsThekey“trick”toanRBFprojectisdefiningclearandapplicableindicatorsthatallowforallpartiesinvolvedtounderstandwhatisexpected,andwhetheroutcomesarebeingmet.Outcomemetricsshould:

● Bestronglylinkedtothechangebeingincentivized.● Provideanincentivetofocusonsustainablesuccessforthetargetpopulation.● Minimizethepotentialforperverseincentivesand‘gaming’thesystem.

AsexplainedbytheorganizationSocialFinanceinawhitepaperonanRBFinLondon:

“Whendesigningoutcomemetrics,simplicity,easeandcostofaccuratemeasurementsarekeyconsiderations.Theobjectivemeasurementandinternalmonitoringrequiredforoutcomemetricsisnotwithoutcost.Additionalcomplexitycanreducetransparencyandincreasethepotentialfor‘gaming.’Whendesigningoutcomemetrics,theaimistoidentifythesmallestnumberthatincentivizestherightbehavior.”33

Idealindicatorsgenerallyhavethefollowingtwelvecharacteristics(figure5).

Objective Clear,well-defined,preciseandunambiguous,simpletounderstand

Measurable Abletobequantifiedeasily

33SocialFinance(2012)

20

Verifiable Abletobeverifiedbyanimpartialthirdparty

Economical Relativelyinexpensivetocollect

Standardized Abletobeusedagainelsewhereandprovideaclearpictureforcomparison

Flexible Canaccommodatecontinuousimprovementsand“stretch”toapplytodifferentplaces

Predictive Abletobeextrapolatedfromtopredictoutcomesinsimilarsituations

Effective Provideagoodtoolforpolicymaking

Relevant Directlyrelatedtothedesiredoutcomesoftheproject

Representative Representtheresultswithoutneglectingmajorpoints

Interrelated Interconnectedtoprovideaholisticpicture

Sustainable Abletobesampledfrequently,regardlessofexternalcapacityorfundingsupport

Figure5:Characteristicsofgoodindicators.34

UseinHousingTheuseofRBFinthehousingsectoriscompletelynewanduntested.ItisnecessarythereforetoconsiderwhetherResults-BasedFinancingprovidesneworuniquetoolstotheinternationalNGOcommunitytocarryouthousinginterventions.Eitherway,itsnewnessmeansthereisanincreasedriskassociatedwithaninitialproject.GiventhisriskitmightseemlikeanRBFhousingprojectisnotadesirableoption,however,theoppositeisinfactthecase.UsingRBFtocarryoutahousingprojectisaveryattractiveoption,evenwiththeincreasedrisksforaninitialproject.ThisisbecauseinternationalNGOsanddonorshaveexperiencednumerouschallengesandfailureswithtraditionalhousinginterventionsandanewmethodologyhasagreaterchanceofsucceeding.Forexample,theInternationalRed-Crossrecentlyreceivedscathingpublicityforhavingreceived500millionUSDforitshousingprograminHaiti,andonlyconstructingsixhouses.35Withdifficultiessuchasthoseexperiencedonthisproject,itisnaturalthattheseorganizationsshouldbegintolookforalternativemodels,andshifttheirfocusfromspendingoninputsandbegintoinsteadspendonoutcomes.AfundamentalaspectofRBF,anongoingprocessorrelationshipthatcanbeimprovedthroughincentivesthatemphasizeoutcomesratherthanoutputs,isalreadyapartofthehousingsector.Forthis

34AdaptedfromTheWorldBankGroup’sIndictors-WorldBankGroup(2007)35Propublica(2015)

21

reason,RBFisasuitabletoolthattheinternationalNGOcommunityshouldhoneforuseinfuturehousinginterventions.PossibleIndicatorsSinceanRBFhousingprojecthasneverbeenundertakenbefore,itisimpossibletoborrowindicatorsfrompreviousprojects.However,similarprojectsundertakentoaddresshomelessnessprovidepotentialindicatorsforthiscontext,andthereareclassicindicatorsthatmostRBFprojectsutilize.Additionally,thereareahandfulofindicatorsthatrefertothephysicalcharacteristicsofthepropertythatmustbeincorporatedtoensuredecenthousingstandardsthatconformtoacountry’slawsandinternationallyagreednorms.Beyondthese,whichdon’tmeasureoutcomesbutarenecessaryforlegalreasons,anidealinterventionisonethatdoesn’ttakeanoverlysectoralapproachbutinsteadstrivestobeapartofan“overarchingreintegrationapproach”.Forthisreason,manypotentialindicatorsshouldonlytangentiallytouchuponhousing.Additionally,whileIDPsareusedintheexamplesbelow,theycouldjustaseasilyapplytorefugeesorotherpopulations.Possibleindicatorsinclude:

• Percentageoftargetpopulationinthehousingsolutionislessthanfiftypercent.o ThispreventsthehousingsolutionfrombeingoverIDPcentric.Itpreventsillwilltoward

theIDPcommunityandensuresadegreeofintegration.Additionally,itmeansthatutilitiesandservicesprovidedbythemunicipalitymustcatertotheneedsofthelocalpopulationandavoidsthetemptationtomarginalizethecommunity.

• Percentageofunitsoccupiedinthehousingsolutionbythehouseholdprescribedinwritingisgreaterthanseventypercent.

o Thishelpsavoidsthepossibilityofattemptstogamethesystembyensuringthatthoselistedontheleaseortripartiteagreementareactuallyinhabitingtheunit.

• Percentageofthetargetpopulationinthehousingsolutioncurrentontheirpaymentsisgreaterthaneightypercent.

o Thisensuresthatsolutionismoredurablethantemporary,byshowingthatIDPsinthesolutionareabletoaffordit.

• Percentageofincomethatthetargetpopulationinthehousingsolutionsspendsonhousingislessthanthirtypercentperhousehold.

o Thisalongwiththeaboveindicator,helpstoensurethedurabilityofthesolution.• Percentageofturnoverinthehousingsolutionislessthanfiftypercentperannum.

o Ensuresadegreeofstability,ashighturnovercouldbeanindicatorofunderlyingissues.• PercentageofthetargetpopulationusingthehousingsolutionformorethanXnumberofyears.

o Thiswiththeaboveindicatorhelpstoestablishlongevityandstability.• Percentageofhouseholdsofthetargetpopulationinthehousingsolutionwithatleastone

membercurrentlyemployedisgreaterthanseventy-fivepercent.o Thisensuresthatthecurrentgenerationisachievinglivelihoodsandisintegratinginits

newlocation.Unfortunately,thisindicatorisdifficulttomeasuregiventhechallengesofdefiningemployment.

22

• Percentageofchildrenofthetargetpopulationinthehousingsolutionenrolledinongoingschoolinginaschoolsystemrankedinthetoptwo-thirdsnationallyisgreaterthanseventy-fivepercent.

o Thisensuresthatnextgenerationisengagedintheprocessofintegration,withareasonableeducation,creatingalongtermdurablesolution.

• Percentageoftargetpopulationhouseholdsreportingpersonalsavingsgreaterthan$100USDequivalentisgreaterthanfiftypercent.

o Thismeasureshouseholdresilience,andabilitytoweatherunanticipatedfinancialdifficulty.

• Ratioofvisitstotheemergencyroomoverelectivehospitaladmissionsintargetpopulationshowscontinualimprovementovertime.

o Thismeasuresthehealthinessofhousehold,andoftenshowscostsavingforlocalmunicipalitiesinsingle-payerhealthcaresystems.

• Ratioofacrimoniousinteractionswiththecriminaljusticesystemtocontrolgrouporovertime.o Thismeasuresmanythingsandshowstheprogresstowarddurablesolutions.Itcanalso

highlightmunicipalsavings.Giventhebroadnumberofactorsaffectingthisindicator,itisdifficulttoincludesincenoonegroupcanberesponsibleforimpactingit.

• Percentageoftargetpopulationregisteredtovoteand/orhavingvotedinpastlocalelectionisgreaterthanXpercent.

o Thismeasuresthetargetpopulation’sroleindecisionmaking,andlevelofintegration.• Percentagechangeinsalepriceofhousingunitsinhousingsolutionovertime.

o Thismeasuresthevaluethatthosewhoareparticipatingintheprogramreceiveovertime.

• Percentageofpropertiesmeetingorexceedingstandardsoutlinedbynationalhousinglawisonehundredpercent.

Theseindicatorscanbemeasuredattheindividuallevel,oratthecohort-widelevel.Moreover,eachindicatorcanbemanipulatednumericallytoprovideoptimizedoutcomesdependingonwhichlevelistargeted.Giventhesevariables,itisclearthattherearealotofoptionsathandtohelpproperlytargetaninterventiontowardstheresultsdesired.Itshouldalsobenotedthatthislistisbynomeansanexhaustiveone.Addingevenmoreflexibilityisthetimelinebywhichtheseindicatorsaresampledandpaymentsaremade.Forexample,paymentsareoftenmadeonceayearoverthecourseoffiveortenyears.Thislimitstheneedtosampletheindicatorstoamanageablefrequencybutalsoallowsforthenormalfinancialfunctioningoftheorganizationsinvolved.Lastly,whileitisnecessarytotiesomeindicatorstotriggerpayments,thatdoesnotnecessarilylimittheabilitytomeasureotherindicators.Thismightbedonetogetalargerpictureoftheimpactoftheintervention,comparegivenindicatorswiththoseusedelsewhere,orexperimentwithindicatorsforpotentialfutureprojects.

23

ApplicabilitytoUkrainianContext

TheNeedtoActThebenefitstothegovernmentofhavingalong-termandsustainableresponsetotheIDPhousingsituationaresignificant.Thelackofadequatehousinghasbeentiedtoavastnumberofsocialills,andcanhaveexpensivelongtermpsychologicaleffectsonitscitizens.Moreover,foracountrysuchasUkraine,whichhasanestablishedhistoryofemigration,therearenowoveramillionmoreofitscitizenswithadditionalreasonstoleavethecountry.AlreadylocalNGOsarereportingincreasedasylumandresidentpermitrequeststotheembassiesofEuropeanUnioncountriesinKyiv.Giventhesefacts,aswellasotherslaidoutpreviously,thereisaclearbenefitinactingtointroducesomesortofhousingrelatedintervention.

InterventionScopeThenextquestionthatmustbeexaminedistowhatdegreethespecificonthegroundsituationinUkraineoffersfertilesoiltotrythefirsteverRBFhousingintervention.First,thereisaclearpopulationforanintervention.ThesituationinUkrainehasadefinedpopulation(IDPs)whoseoutcomescanbemeasuredascomparedtovaryingcontrolgroups,suchasunregisteredIDPs,hostcommunities,andhistoricalIDPs(fromtheChernobyldisaster).Second,thereareanumberofclearlocationswhereaninterventioncanbeundertaken.InKharkivregion,thecityofKharkivremainsthetopdestinationfornewIDPs,with180,000IDPsofficiallyregisteredthere,andasmanyashalfamillioninfactlivingthere.Additionally,KyivhasalsobeenapreferredchoiceforIDPs.Thesetwocitiesprovideideallocationsforanintervention.ConstructionandFinancingAspreviouslymentioned,thegovernmentofChinahassoughttoprovidedUSD15BilliontoUkrainefortheconstructionofaffordablesocialhousing.36WhilethisloanmayormaynotbetheprogramnecessarytomeetUkraine’ssocialhousingneeds,giventheconditionsattached,itdoeshighlightthefactthattheproblemofsocialhousinginUkraineisaproblemoffinancing.Whilemuchofthedevelopedworldhasasoundfinancialandbankingsystemthatitcanrelyontoprovidecredit,Ukrainedoesnot.Withnearlyfiftybanksgoingbankruptinthepastsixmonths,interestratesat40%andunstableratesofinflation,thetypicaltoolsforplacinglowincomehouseholdsonthepathtohomeownershipthroughmortgagesandthelikearenotoptions.37Withoutthesefinancial

36PressserviceoftheVicePrimeMinisterofUkraine(2015)37ConsultantInterview(2015)

24

incentivesandtools,theconstructionindustryhasverylittlereasontobuildhousingstocktargetedtothesecategories.TheidealsolutiontothissituationisfortheeconomyofUkrainetorecover,inflationtoreturnahealthyrate,andasoundmortgagesystemtobeestablished.However,thisisobviouslymanyyears,ifnotdecades,away.Fortunately,withtherightfinancialtoolsintermsofResults-Basedfinancing,incentivescanbecreatedtoengagefinancialmarketsandtheconstructionindustryinbuildingaffordablehousing.AninternationaldonorsuchasGermany’sGesellschaftfürInternationaleZusammenarbeit(GIZ),America’sUSAgencyforInternationalDevelopment(USAID),orevenChina,couldprovidetheprospectofanimprovedreturn,enticingactorstobuildorinvestinsocialhousingthatcouldbeaffordabletorentorbuyforlowerincomecustomers.Tosummarize,Ukrainehasconstructioncompanieswithexpertiseabletocarryoutsuccessfulconstructionprojects.Whileproperfinancingtoolsarelacking,thisisthefaultthatRBFisaimingtoaddress.Ifhandledcorrectly,ahousingprojectcouldkickstartthelivesofallinvolvedintheprocess,creatingjobs,demonstratingsuccessfulfinancingstructures,andprovidinghope.RentalApproachUnderthecircumstances,astronginterventionwouldlikelyfocusonconstructingnewsocialhousingunitsforrent.Anecdotaldatashowsthat,whilealmosteveryIDPwouldliketosomedayowntheirhome(forhistoricalandculturalreasons),todaytheyaremorelikelytolookforrentaloptions-perhapswaitingfortheconflicttoendandtheirhomeintheDonbasregiontoregainsomeofitslostvaluesothatitmightbeusedtoestablishvalueinaloanordownpayment.Thisfollowsestablishedhistoricalpatterns–whendisplacedpopulationsfirstrelocate,they,forreadilyapparentreasons,looktotherentalmarket,ratherthanthepropertymarket,toaddresstheirhousingneeds.DatafromasurveydonebytheNGOMistoReformindicatedthat,“86.9%[ofIDPs]canaffordmonthlypaymentofUAH3,000toUAH5,000,9.4%canaffordUAH5000toUAH10000.”38Whilethisisnotasufficientamounttobeabletoaccessthemortgagemarketsastheycurrentlyexist,itisenoughtobeabletoaffordrentalpricesonsocialhousingunits.Aspreviouslystated,thereiscurrentlyadeficitinaffordablehousingtorent.Accordingtosources,ingovernmentcontrolledareasthemainshelterrelatedissuereportedperhouseholdbyIDPsisthelackofresourcestorenthousing(55%).Keyinformantsalsoreportthatinsomeareasthereisinsufficienthousingavailableforrent(12%).Eightpercentreportedproblemswithlandlord/riskofeviction.39Constructingnewunitsforrent,thatareattheaffordableendofthemarket,addressestheseissues.

38MistoReform(2015).UAHisthesymboltorepresentUkraine’scurrency,theUkrainianhryvnia. 39MistoReform(2015)

25

AnRBFprojectaimedatincreasingthesupplyofaffordablehousing,especiallyforIDPs,wouldaccomplishanumberofobjectives.ItbooststheincentivesforhousingsupplytomeetdemandwhilemakingIDPsmoreattractivetenants,whileavoidingthepitfallofplacingIDPsinhousingthattheyareunabletosustainablyafford,asacreditguarantee-basedinterventionmight.Becauseitisamarketbasedinterventionitincentives“realistichousingconstruction,”meaningcompanieswillbuildbasedontheirinternalanalysisofthelikelihoodofoveralllong-termprofitability–withRBFoutcomepaymentsfactoredin-andnotjustbuildtomeetthepotentiallydistortingimmediatedesireofinternationaldonors.ChallengesIthasbeenshownabovethatthesituationinUkraineprovidesanumberofcircumstancesthatmakeitidealforanIDPhousingintervention.Ithasadefinedtargetpopulationandlocation,withstrongcontrolgroupsforcomparison.Thereisaclearmethodology,constructingnewsocialhousingunitsandrentingthem,withactorsabletocarryitout.Thereisobviousdemandforwhatsuchaninterventionwouldprovide,andevidencethatitwouldaddresstheneedsofthoseittargets.Lastly,thereissufficientinformationregardingtheindicatorstobeusedinsuchanintervention.However,despitethesepositiveconditions,therearenonethelessanumberofchallenges,bothingeneral,andspecifictotheUkrainiancontext,thatareworthtakingnoteof.OverallChallengesInallhousinginterventionstherearenumerouschallenges.Somechallengesareverysituationspecific,withtheirrootsinthecultural,legalandhistoricalnarrativeofthelocationwheretheinterventiontakesplace.Otherschallengesarebroader,tendingtoshowupinnumerousinterventions.RBFtoolsareabletoaddresssomeofthesechallenges,andareunabletoaddressothers.

● Land–Whatgovernmentshavetooffertohousinginterventionsisgenerallyadonationofland.However,governmentshesitatetodonatevaluablelandindesirablelocationssuchascitycenters,preferringtosellthislandtodevelopersforaprofit.ThismeansthatNGOsareoftendonatedlandthatisfarfromjobsandservices,andhousinginterventionsbasedintheselocationsfailtoreachtheirdesiredoutcome.Thishasbeenseenrepeatedlyinhousinginterventionsaroundtheworld.Bynotnecessarilyrelyingonthedonationofland,RBFavoidsthisissue,andeveninlocationswherelandisdonated,ifitissoremoteastonotallowforthenecessaryoutcomes,RBFprojectshaveanincentivenottomakeuseofit.

● Expertise-Inmostpost-crisissituationstherearenolargescaleprovidersofpermanent

housing.NotmanyprofessionalNGOsbuildhousingasaprogramandwhentheydo,itfrequentlydoesnotwork.BecauseNGOsarenotconstructioncompaniesorreal-estatedevelopers,theycan’tadequatelyaddressrisksinthehousingmarket.Yetitcanoftenbethecasethatdonorshavegiventhemmoneythatmustbespentforthepurposesofhousing.RBFaddressesthischallengebymovingthesedecisions,andtheattachedrisk,fromtheNGOtothe

26

constructioncompanythatisbetterabletoassessthem.ItisthisissuethataRBFprojectbestaddresses.

● Financing–Housinginterventionsrequirelotsofupfrontfinancinginordertobecarriedout.In

thecaseofRBF,thiscansometimesmeanrelyingontheSocialImpactBond(SIB)asthemechanismbywhichthatfinancingissecured.Thisbondreliesonprivatesectorinvestorstofinancetheupfrontcostofaproject,whichtheyrecoupwithprofitiftheprojectsuccessfullymeetsitstargetindicators.However,thereistheriskthat,despitetheopportunitytoturnaprofit,duringuncertaintimesinvestorsmightbeshyabouttakingtheriskfinancinganything.Incasessuchastheseitcanbedifficulttosecurethenecessaryfinancingforasuccessfulintervention.

● Corruption–Inanyintervention,housingorotherwise,corruptioncanbeaseriouschallenge.It

createssignificantadditionalcostsanduncertaintiesthroughouttheprocess.Thisisaburdenforallactors.RBFinsomewaysaddressesthisbecauseitmustbefactoredintocalculationsofthosecompaniesororganizationswhoarelookingatwhethertheywillbeabletoturnaprofitunderagivensetofparameters.However,itwouldobviouslybeidealifcorruptionwerenotanissue.

● Sectoralization–Inallhousinginterventionsthereisariskofprovidingaroofbutfailingto

providesomethingelse,whichultimatelydoomstheproject,becausethatwasn’tpartofthehousingsector’sresponsibilities.Morethanwhatisprovidedasastructure,thepathtorecoveryisbasedonalotofotherfactors,ofwhichhousingisjustone.“Peoplecan’teattheirhouse,”40RBFbringsthisintofocus,however,itcanalsomakehousingamoreriskysectortocarryoutaninterventionin,dependingwhatotherfactorsmightbeatplay.

Ukraine-SpecificChallenges

● Land-WithinUkraine,governmentlandhasalreadybeendonated,whichaninternationaldonorusedtomakean“IDPcamp”outofshippingcontainers.However,localactorsreportthattherehavebeendifficultiesfillingtheseshelters.41Asmentionedabove,RBFprovidessomerelieffromthischallenge,lettingprivatecompaniesdecideifalocationwillbeabletoproducethedesiredoutcomesandbeprofitableornot.

● Expertise–Ukrainehas,untilrecently,largelybeenconsideredamiddleincomenationthat

doesnotrequiretheattentionofinternationalaidorganizations.WhiletheU.S.PeaceCorpsandUSAIDhaveputeffortintohelpingitdevelopinstitutionsfollowingitsindependencefromtheSovietUnion,mostaidagencieshavebeenmoreoccupiedinAfricaandtheMiddle-East.This

40ConsultantInterview(2015)41ConsultantInterviews(2015)

27

meansthatmanymajoractorslacktheexpertisetocarryoutaninterventionappropriatetothelocalcontext.42

● CultureofOwnership-Thechallengewithconstructingnewsocialhousingunitstorentisthat,

whileUkrainehasthenativeconstructionexpertisenecessaryforsuchaproject,itislessclearthatthecapacityexiststoprofitablymanagethoseproperties.Ingeneral,constructioncompaniesarenotexpertswhenitcomestomanaginglongtermfinancialrelationshipswiththeirclients.Formostdevelopersitiseasierforthemtosellapartmentsandcompletethetransactionratherthanhaveanongoingrelationshipwiththecustomer.

42ConsultantInterview(2015)

28

SummaryForthesecondtimeinthirtyyears,hundredsofthousandsofUkrainianssuddenlyfindthemselvesinthedesperatesearchforsomewheretheycancallhome.TheviolenceandinsecuritythathasdescendeduponCrimeaandtheDonbasregionhasdrivenasmanyas1.8millionpeoplefromthehomesandlivestheyknew.Mostofthosewhohaveleft,especiallytheyoungergenerations,willneverreturn.43Thesituationislookingincreasinglyentrenched,witheverworseningconditionsforthosestillinhabitingconflictareas.Collectivecenters,setupatthestartofthecrisis,areatriskofturningfromemergencyway-stationsintopermanentghettos,devoidofopportunitiesandwitheverlowermorale.TheestimatedsixtotwelvemonthsofassistancethatthegovernmentandinternationalNGOsareplanningtoprovidetotargetedIDPslooksinsufficientincomparisontothelikelydurationandoutcomeoftheconflict.Itisdifficulttooverstatetheimportanceofhousing.FromtheGreatDepressiontotheGreatRecession,almostallmajorfinancialcrisesofthelastonehundredyearshavesomeoftheirrootsinthehousingmarket.Ukraine’shousingmarketisfrozenintime,burdenedbyitscommunistpastandhobbledbyfinancialdisaster.Itisunabletomeettheneedsofhercitizens.Ifthosesearchingfornewhomesareevertofindthem,“Long-termhousingstrategiesandpolicies,includingfinancialmechanismsthatwouldsupportresidentialconstruction,areneeded.”44Anewfinancialtoolisthebestwaytoaddressthecurrenthousingsituation.WiththenumberofIDPsgrowingweeklyastheconflictdragsonthereisincreasinginterestinfindingaresponsethataddressesmorethanjusttheimmediatecrisis.Ithasbeenobservedrecentlythat“thereseemswillingnessofthedonorcommunitytosupportinitiativestargetingathousingsolutions[sic]forlowincomehouseholdsandIDPsinUkraine.”45Timewillrevealwhenthatsupportactuallyarrives,andwhatformitwilltake.

43ConsultantinterviewsindicatethataveryhighpercentageofIDPshavenointentionofreturninghome,thisisparticularlytrueoftheyoungergeneration.44Amman,(2015)45Amman,(2015)

29

Conclusion Results-BasedFinancinginandofitselfisarelativelynewinnovation,anditsuseinthehousingsectorisuntested.Whilethispresentssignificantrisktoanyonecontemplatingitsuseinthissector,italsopresentsanopportunityforthoseseekingtohaveagroundbreakingimpact.RBFhasthepotentialtoservethissectorasamuchneededlinkbetweenhumanitarianaidanddevelopmentsolutions.BecauseoftheuniquecharacteristicsofRBF,itcanenergizelocalmarketswhileleavingriskassessmentstothosewhoarebestinformedandhavethemostatstake.ThesefeaturesmakeRBFbettersuitedtoprovideabridgeoverthegapbetweenhumanitarianaidanddevelopmentsolutionsthananyoftheotherinterventionscurrentlyavailable.WhileUkrainedoesn’tnecessarilyprovideapicture-perfecttestinggroundforsuchaproject,giventhechallenginglegalframework,culturalnormsanditsperceptionasadevelopedcountry,thecleartargetpopulations,comparisongroups,marketactorsand,mostimportantlyneed,provideauniqueopportunity.ItseemsonlyamatteroftimeuntilRBFisputtoworkinthehousingsector;whileitremainstobeseenwhatcountrythatfirstinterventionwilltakeplacein,thehousingsituationforIDPsinUkraineoffersacompellingcase.ThoughthisdiscussionhasfocusedontheuseofRBFtoprovidehousingsolutionstoIDPs,suchinterventionsareequallysuitabletootherpopulations.Fromrefugeestotheurbanpoor,RBFprojectshavealottoofferthosestrugglingtofindadequateshelter.IthasbeennotedbytheUNspecialRapporteurforIDPsandothersthathousingsolutionswillachievemorewhentheyfocusonlowincomesanddisadvantagedsituations,ratherthansimplyregisteredstatus.46FromGermanytoColombia,theUKtoCambodiamanypopulationsstandtobenefitfromsuchprojects. Likeallinterventions,RBFisnotasilverbullet.Nonetheless,thestrategiesandmethodologyofthisnewapproachprovidevaluabletoolstohelpimprovethelivesofrefugeesandIDPseverywhere.Ultimatelythough,itisstilluptogovernments,communities,companies,NGOsandindividualstoensurethatthesearchforadequatehousingisnotinvain.

46IDMC(2015)

30

GlossaryofTermsAdequateHousing–Alegallysecure,affordable,habitable,accessibleandculturallyadequateabodewithfunctioningservicesthatislocatedsoastoallowaccesstosocialfacilitiesandlivelihoods.Inputs–Thefinancial,humanandmaterialresourcesusedinadevelopmentintervention.Outcome–Thelikelyorachievedshort-termandmedium-termeffectsofanintervention’soutputs.Outputs–Theproducts,capitalgoodsandserviceswhichresultfromadevelopmentintervention;mayalsoincludechangesresultingfromtheinterventionwhicharerelevanttotheachievementofoutcomes.Results-BasedFinancing–Anyinterventionwherefinancialorotherincentivesareprovidedfortheachievement,andverificationof,predefinedoutcomes.Shelter–Theminimumrequiredcovered-livingspacenecessarytopreventdeathfromexposure.Generallytreatedindisasterinterventionsas3.5squaremetersper-person,coveredbyplasticsheeting.SocialImpactBond–Abondwherebyinvestorsprovideexternalfinancingandpaymentismadeupontheachievementofpreviouslyspecifiedoutcomes.

31

TableofFiguresFIGURE1:GROWINGDISPARITYBETWEENURBANANDRURALWEALTH......................................................................9FIGURE2:TABLEOFDIFFERENTPOPULATIONSRELATEDTODISPLACEDPERSONS........................................................11FIGURE3:MAPSHOWINGTHEUNHCR’SDATAONIDPSINUKRAINEASOFJUNE8,2015.........................................12FIGURE4:DONBASRESIDENTIALSTRUCTURE,PARTLYDAMAGEDBYSHELLING...........................................................13FIGURE5:CHARACTERISTICSOFGOODINDICATORS..............................................................................................20

32

OrganizationsInterviewed

1. PeopleinNeed(PIN)-August3,2015

2. NorwegianRefugeeCouncil(NRC)-August4,2015

3. UnitedStatesDepartmentofState-August4,2015

4. AdventistDevelopmentandReliefAgency(ADRA)-August5,2015

5. UkrainianRedCrossSociety-August8,2015

6. FHI360-August11,2015

7. InternationalOrganizationforMigration(IOM)-August11,2015

8. SocialPartnership-August12,2015

9. UnitedNationsHighCommissionerforRefugees(UNHCR)-August14,2015

10. MistoReform-August18,2015

11. InterAction-August20,2015

12. GermanCorporationforInternationalCooperation(GIZ)-August20,2015

13. UnitedNationsDevelopmentProgram(UNDP)-August21,2015

14. InternalDisplacementMonitoringCenter(IDMC)-August25,2014

33

ReferencesAmman,Wolfgang(2015).FacilitatingPrivateSectorParticipationinDeliveryofHumanitarianAidandInfrastructureRehabilitationintheHousingSector–LayingtheFoundationforPPPs.PreparedforFHI360,USAIDPublic-PrivatePartnershipDevelopmentProgram.http://ppp-ukraine.org/wp-content/uploads/2015/08/FHI-360-report-PPP-Housing-UA-150728_Eng.pdfBekeshkina,IrynaandPiotrKazmierkiewicz(2012).MakingUkrainianCivilSocietyMatter:EnablingUkrainianNGOstoabsorbinternationalassistance.Areviewofcapacitygapsandneedsforinstitutionalsupport.Warsaw,Poland:InstituteofPublicAffairs.http://www.isp.org.pl/uploads/pdf/1965036503.pdfBurridge,Tom(2015October23).UkraineConflict:GunsFallSilentbutCrisisRemains.BBC.http://www.bbc.com/news/world-europe-34606598DeutscheGesellschaftfürZusammenarbeite(GIZ),UkraineCountryOfficeWebsite.(2015).https://www.giz.de/en/worldwide/302.htmlFerris,Elizabeth,SuleimanMamutov,KaterynaMorozandOlenaVynogradova(2015).OfftoaShakyStart:UkrainianGovernmentResponsestoInternallyDisplacedPersons.Washington,DC:BrookingsInstitution.http://www.brookings.edu/~/media/research/files/reports/2015/05/ukraine-internal-displacement/ukrainian-govt-responses-to-internal-displacement-may-2015.pdfGreaterLondonAuthority(Jan2012).SocialImpactBondforRoughSleepersReport.https://www.london.gov.uk/sites/default/files/Rough%20Sleeping%20SIB%20Report%20-%2020%20January%202012.PDFGrittner,Amanda(2013).Results-BasedFinancing:EvidencefromPerformance-BasedFinancingintheHealthSector.http://www.oecd.org/dac/peer-reviews/Results-based-financing.pdfHabitatforHumanity(2011).GlobalHousingIndicators:EvidenceforAction.http://www.habitat.org/sites/default/files/gov_global_housing_indicators.pdfHumanitarianCountryTeam(2014).2015HumanitarianNeedsOverview:Ukraine.https://www.humanitarianresponse.info/en/operations/ukraine/document/ukraine-humanitarian-needs-overview-hno-2015InternalDisplacementMonitoringCentre(IDMC)(2015).HomeSweetHome:HousingPracticesandToolsthatSupportDurableSolutionsforUrbanIDPs.Geneva,Switzerland:IDMCandNorwegianRefugeeCouncil(NRC).http://www.internal-displacement.org/assets/publications/2015/20150325-global-home-sweet-home/20150325-global-home-sweet-home-en-full-report.pdf

34

InternalDisplacementMonitoringCentre(IDMC)(2015August).UkraineIDPFiguresAnalysis.http://www.internal-displacement.org/europe-the-caucasus-and-central-asia/ukraine/figures-analysisKyivPost(2015March8).UkraineToday:DonbasResidentsstruggletorebuildhomesdestroyedinviolence.http://www.kyivpost.com/content/ukraine/ukraine-today-donbas-residents-struggle-to-rebuild-homes-destroyed-in-violence-382911.htmlMaRSCentreforImpactInvestingandSocialFinanceUK(2014).HousingFirstSocialImpactBondFeasibilityStudy.http://www.marsdd.com/wp-content/uploads/2014/10/Housing-First-Social-Impact-Bond-Feasibility-Study-2014.pdfMetropolitanKingCounty(2011).CountywidePlanningPoliciesBenchmarkProgramAffordableHousingIndicators.http://your.kingcounty.gov/budget/benchmrk/bench98/acrobat/chapter3.pdfMistoReform(2015August11).InformationalNote(Unpublished).MessagetoAuthor;Email.OfficeoftheHighCommissionerforHumanRights(2002).TheRighttoAdequateHousingToolkit.http://www.ohchr.org/EN/Issues/Housing/toolkit/Pages/RighttoAdequateHousingToolkit.aspxOrganizationforEconomicCo-operationandDevelopment(2010).GlossaryofKeyTermsinEvaluationandResults-BasedManagement.http://www.oecd.org/dac/2754804.pdf PressserviceoftheVicePrimeMinisterofUkraine(MinRegion)(2015March26).TheChinesecompanyCITICConstructionCo.LtdwillimplementamajorconstructionprojectinUkraine.http://www.minregion.gov.ua/news/kitay-pidtverdiv-investiciyi-v-rozmiri-15-milyardiv-dolariv-v-rozvitok-budivelnogo-rinku-ukrayini--478024/Propublica(2015June3).HowTheRedCrossRaisedHalfaBillionDollarsforHaitiandBuiltSixHomeshttps://www.propublica.org/article/how-the-red-cross-raised-half-a-billion-dollars-for-haiti-and-built-6-homesREACH(2015).PreliminaryFindingsfromtheShelter/NFIAssessment.http://www.sheltercluster.org/sites/default/files/docs/ukraine_shelter_pilot_assessment_luhansk_findings.pdfSocialFinance(2012January20).ASocialImpactBondforEntrenchedRoughSleepers:OutlineBusinessCase.https://www.london.gov.uk/sites/default/files/Rough%20Sleeping%20SIB%20Report%20-%2020%20January%202012.PDF

35

SocialImpactBondTechnicalAssistanceLab(SibLab)(June2013).SocialImpactBonds:AGuideforStateandLocalGovernments.http://siblab.hks.harvard.edu/files/siblab/files/social-impact-bonds-a-guide-for-state-and-local-governments.pdfTheSphereProject(2015).MinimumStandardsinShelter,SettlementandNon-fooditems.http://www.spherehandbook.org/en/how-to-use-this-chapter-2/UkraineHumanitarianCountryTeam(HCT)(2015February).HumanitarianResponsePlan(Revised).https://www.humanitarianresponse.info/system/files/documents/files/UKRAINE_HRP_2015FINAL(1).pdfUkraineNGOForum(2015March1).UkraineMulti-SectorNeedsAssessment(MSNA)Report.http://acaps.org/img/documents/u-ukraine-multi-sector-needs-assessment-report-30-mar-2015.pdfUnitedNationsEconomicCommissionforEurope(UNECE)(2013).CountryProfileonHousingandLandManagement:Ukraine.NY,NYandGeneva,Switzerland:UnitedNations.http://www.unece.org/fileadmin/DAM/hlm/documents/Publications/CP_Ukraine_ECE.HPB.176.en.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),GlobalShelterCluster(2015).MoreThanJustaRoof.http://www.sheltercluster.org/morethanjustaroofUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015).UkraineShelterClusterStrategy.http://sheltercluster.org/sites/default/files/docs/shelter_nfi_cluster_strategy_final_june2015_eng_0.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2014December).UkraineFactsheetDecember2014.http://www.sheltercluster.org/sites/default/files/docs/2014-12-29_shelter_nfi_cluster_factsheet.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015April).UkraineFactsheetApril2015.http://www.sheltercluster.org/sites/default/files/docs/factsheet_april_2015_final.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015May).UkraineFactsheetMay2015.http://www.sheltercluster.org/sites/default/files/docs/factsheet_may_2015_eng_final.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015June).UkraineFactsheetJune2015.http://www.sheltercluster.org/sites/default/files/docs/factsheet_june_2015_final_eng_0.pdf

36

UnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015July).UkraineFactsheetJuly2015.http://www.sheltercluster.org/sites/default/files/docs/factsheet_july_2015_final_eng.pdfUnitedNationalHighCommissionerforRefugees(UNHCR),UkraineGlobalShelterCluster(2015).TechnicalWorkingGroup(TWIG)onShelterandNon-FoodItems(NFIs)inUkraine.http://www.sheltercluster.org/working-group/technical-working-groups-ukraineUnitedStatesAgencyforInternationalDevelopment(USAID)OfficeofForeignDisasterAssistance(OFDA)(2015).ShelterandSettlements.http://www.interaction.org/training/usaid-ofda-shelter-settlements-training-courseWorldBankGroup(2015June).Public-PrivatePartnerships(PPP):HowcanPPPshelpdeliverbetterservices.https://www.coursera.org/course/effectivepppWorldBankGroup(2007January).CityIndicators:NowtoNanjing.https://openknowledge.worldbank.org/bitstream/handle/10986/6892/wps4114.pdf?sequence=1