The new political economy of affordable housing finance and urban development

Bruce Ferguson, Peer Smets, David Mason

Enabling paradigm

• Government should shift from production of housing towards enabling housing markets

• Less government• More market

Enabling instruments

• Strengthening of legal property rights• Development of mortage finance• Rationalisation of housing subsidies• Provision of infrastructure• Regulation of land and housing development• Organisation of the building industry• Creation of a national institutional framework

for management of the housing sector

Results

• Emphasis on (relative) better off• Downmarketing not successful• BOP (Base of the Income Pyramid) informal

sector– Often high cost suppliers of housing inputs

Progressive housing

• Labour by family/ small contractors• Insecurity of tenure• Diffirent kinds of building materials• Finance mainly from informal sources

Threats to affordability

• Urban land• Vulnerability to natural disasters and climate

change• Urban sprawl• Poor quality habitat– Housing finance without technical assistance is

potential time bomb• Natural distaster• Violence• Rising energy prices

Encourage BOP products

• First mover advantages• Stakeholder approach• Involve citizens• Local governments shoulkd ensure provision

of serviced land• Technological innovation in low cost housing

Examples of BOP products

• Durable bamboo houses in Nepal (Habitat for Humanity International)

• US$ 2,5000 house, mass production and sold in kits (Idealab)

• Chula stove for indoor cooking (Philips)• Brick making machine (Echale a Tu Casa)

Conclusions

• Enabling markets succeeded in spreading mortgage financing

• Bottom 80% is inadequately served• Mass production housing has become more

complicated • Needed: a continuum of products that add

value while reducing costs reshaping progressive housing and its finance