In a research paper for IHC Global, former Principal Specialist in Urban Development and Housing at the Inter American Development Bank (IDB) and IHC Global Technical Advisor Eduardo Rojas examines 50 years of Latin American housing policy, and applies the lessons learned to rapidly urbanizing countries.
The first lesson, based on the review of the data and the literature, shows that not all government interventions work equally. Thus, the type of housing policies and programs also matter. This assertion is supported by the fact that countries with similar levels of development exhibit differences in the quality of housing available to their populations. While it can be expected that the housing situation of a particular country should correspond to its per capita income, this relationship not always holds. In Latin America there are countries with relatively high income per capita that have qualitative or quantitative housing shortages larger than countries with lower per capita incomes. Rojas and Medellin (2011) found that the housing conditions related to the materiality of the houses and access to infrastructure in Costa Rica, Colombia, Honduras, Paraguay, and Uruguay are better than what could be expected given their per capita income. It is also remarkable that Brazil, Argentina, Panama, and Mexico—with relatively high per capita incomes—have higher percentages of dwellings lacking infrastructure than what their income suggests. It can be argued that the housing sector of countries with housing conditions above the prediction line are doing worse than what their income level would suggest and those below are doing better. The study by Cuenin et.al (2012) suggests that housing policies and their impacts on housing affordability play a role in explaining these deviations.
The second lesson from the Latin American experience emerges from the incapacity of most countries to deal with the urban consequences of housing production. The new houses built in Latin America cities either by public housing entities, private developers or incremental builders, are located in poorly served peripheries, the result of their desire to minimize the incidence of the cost of land in total housing costs and the availability of land for greenfield development or invasion (Rojas 2016). In peripheral locations households often lack many of the services required for a good quality of life, particularly in terms of access to employment centres, health and education services, and recreation facilities, which are assets provided by the neighbourhood and the city. A shortage of urban amenities forces households to pay more in transportation, face longer commuting times, and have limited access to essential urban services. Many are abandoning these new houses as the effects of these location-related shortcomings become unbearable. It is estimated that in 2012 nearly 20% of the housing stock in Mexico was underused, remaining empty or under temporary use (CIDOC 2012). Similar figures of underused housing come from Argentina, Chile and Colombia. The main reason for the abandonment of the houses is the lack of the infrastructures and amenities provided by the neighbourhood or the city (Rojas 2016).
Although these lessons in their general formulation may sound fairly obvious, the reading of the available studies on the Latin American experience shows that their negative consequences can be avoided, and the ways to avoid them are not entirely obvious. This conclusion is of great importance for today’s rapidly urbanizing countries like those of South Asia (SA) and Sub-Saharan Africa (SSA) that have an opportunity to achieve better outcomes than Latin America if they take into consideration these lessons. These lessons are also a reminder for Latin American countries that are lagging behind in addressing their housing problems or need to make policy adjustments to mitigate the negative urban consequences of their housing policies.
Isolated low-income housing programs do not work and housing policies must promote the effective functioning of the whole housing sector
Most governments in Latin America initially attempted to solve housing shortages through the direct provision of affordable houses by public entities. To finance the new houses they used resources from a variety of sources: the national budget; allocations from specific sources (for instance a per cent of the gas tax yield in Argentina); or worker´s savings in the social security system. Housing ministries, housing banks, or public housing corporations produced limited quantities of new houses or subsidized mortgages but never attained the scale and sustainability to fully address the housing problem created by rapid urbanization. These public housing entities faced endemic shortages of resources due to competing demands on the public budget and high arrears in their loan portfolios. In the mid-1970s many countries produced serviced lots to accommodate the growing demand for housing by low-income households but beneficiaries of these programs never got support to expand and improve their shelters, preventing these programs from achieving the intended results (Rojas 1995). In most cases public housing entities were inefficient producers of houses or serviced lots and often miss-targeted the allocation of their products due to political pressures that funnelled the new houses to middle-income households affiliated with strong trade unions or working in the civil service. In the majority of cases, low-income households were left to solve their housing problem in the informal sector. The Latin American experience proves that the provision of finished houses and financing by public entities does not satisfy the needs of the growing urban population. There are no reasons to think that SA and SSA countries that are building new houses directly would do better as the volume of new houses thy manage to build is very small in relation to needs a situation that leads the majority of households (over 80 per cent in some cases) to self-build their shelter informally (World Bank 2016, UN Habitat 2014).
This finding confirms one of the assertions of the “enabling markets approach to housing policy” that to effectively reach the poor with good housing, the housing sector of the economy must be capable of satisfying the needs of all social sectors simultaneously, otherwise higher income groups displace lower income households in their access to housing. Recommendations for moving to a well-functioning housing sector were put forward by the World Bank (1993) and several countries in Latin America followed this advice including Colombia, Ecuador, El Salvador, Mexico, Panama, and Uruguay in addition to Chile and Costa Rica, the pioneers. The policy concern shifted from isolated projects serving a specific section of housing demand to a concern for the functioning of the entire housing sector. Governments designed policies and programs that addressed the market and government failures that were preventing households from all income levels to access quality housing. This led countries to adopt a wide array of programs ranging from those based on the most orthodox prescriptions of the enabling markets approach—where governments assist households to access private housing solutions via private financing according to their financial capacities (one-off and up-front subsidies)—to the direct construction of basic expandable houses for the very poor that have no capacity to access privately produced housing. A survey of housing programs by Cuenin et.al (2012) shows that most countries have a combination of ‘demand oriented’ programs that support middle and lower-middle income households in accessing housing supplied and financed by the private sector and ‘supply oriented’ programs that focus on low income households that cannot afford privately produced homes. However, no country in the region managed to address all the issues affecting the entire housing market and many still require programs to address key issues emerging from how urban land markets function and the underdevelopment of housing finance systems. The lesson from the Latin American experience is dual: great progress can be achieved from adhering to the ‘enabling markets approach’ provided that the housing needs of all households are met, but also that significant problems result from not implementing the totality of policies and programs required to make the housing sector work for all households. This is the most probable outcome of single-sided direct government new housing construction programs currently implemented in some SSA countries that are not simultaneously addressing the provision of infrastructure, and reducing the cost of production and financing new houses (World Bank 2016). Another shortcoming of focusing mostly in new house construction is highlighted by Buckey et.al. (2016:128) “…a more effective way to address housing concerns would be to look at the existing housing. Policies that allow the existing stock to be used most efficiently can have far larger effects on supply, and hence on affordability, simply because of the enormous difference in scale between new and existing housing.”
Governments alone cannot solve the problem; it is necessary to mobilize the resources of all social actors
Public housing programs that fully subsidize housing supply proved incapable of achieving the scale required, mostly because they did not mobilize the beneficiaries’ full capacity to contribute to the solution of their housing problem. The policies and programs of the countries that saw the largest reductions in their housing deficits (Chile, Colombia, Costa Rica, Mexico, and Panama) share two key characteristics. Their housing policies and programs addressed the needs not just of low-income households but also of the underserved, non-poor low-income, lower-middle- and middle-income households and assisted them to access private financing for their homes thus engaging their capacity to pay for the solution of their housing problems. The best designed programs mobilized the resources of the beneficiaries in proportion to their capacity to pay through a variety of financial mechanisms including: repayment of mortgage-based loans to purchase finished houses; programmed savings to partially finance the highly subsidized solutions they received from the governments; micro-credit for incremental construction and improvement of houses.
The public resources thus liberated (compared with public programs that subsidize equally housing for all households) allow governments to better serve low-income households facing the most acute difficulties in accessing quality housing. The active participation and resources of all actors—including the capacity of low-income families to self-build their houses and the participation of private capital for financing mortgages for households capable of servicing a debt—expand the volume of resources flowing to the housing sector with direct effects on housing supply. Complementary financial reform policies and programs facilitate the convergence of resources from all actors by promoting long-term savings, the development of private mortgage financing, and micro-credit for home construction and improvements. The development of a strong and sustainable private housing finance system is still a major challenge and critical to mobilizing more private resources to the housing sector. Reducing the significant gap in the reach of private housing financing that exists between even the most advanced countries in Latin American and the United States and some European countries is still a challenge. This underscores the significant difficulties faced by countries in the early stages of developing private housing financing a problem expressed in the very small participation of private sector financing in the housing sectors of most SA and SSA countries (World Bank 2016, UN Habitat 2014).
The best performing countries in Latin America have a diverse set of public programs that complement each other: up-front subsidies assisting low-middle and middle-income households to access mortgages supplied by private banks; direct government provision of highly subsidized basic expandable houses to low-income households that cannot access mortgage financing for a finished house; micro-credit and technical assistance for self-builders to incrementally complete and improve basic homes; and urban upgrading for sub-standard informal settlements. Achieving the right balance of policies and programs is not easy. It took Chile—a leading adopter of the approach—almost ten years to complete the transition from a government-driven housing sector to a more diversified structure with public and private actors cooperating in assisting households with different financial capacities to access good housing and the country still have not dealt effectively with micro-finance and technical assistance for self-builders (Rojas, 2001).
Incremental housing is part of the solution
As stated earlier, between 30 to 60 per cent of the housing stock in Latin American cities is incrementally self-built by low-income households (Rojas 2016). This can reach 80 per cent in several SA and SAA countries (World Bank 2016, HABITAT 2014). Household investment in expanding and improving the quality of materials of their houses, assisted by urban upgrading programs that bring basic infrastructure and services to informal settlements, allow self-built houses over time to attain most of the attributes of a house built by the formal sector, although the process forces families to live for a long time lacking services (Greene and Rojas 2008). The capacity of low-income households to devote resources to expanding or improving their houses cannot be underestimated. Acevedo el.al. (2012:221) reports ratios of family investment in their houses equivalent to 2.9 times the cost of a basic house in incremental housing programs in Chile.
The absence of programs supporting incremental housing construction (but for a few exceptions) is one of the major shortcomings of the Latin American housing experience and a missed opportunity in allowing households to play a larger role in solving their housing problems. Not only households must live for extended periods of time in sub-standard houses but also low quality construction materials and poor building expose the dwellers to significant natural hazards risk including earthquakes, hurricanes and landslides. The fact that most houses are incrementally build and that the incremental construction process can be greatly improved with adequate support including: the provision of expandable core-houses; technical assistance to self-builders; micro-finance for building materials and to contract specialized help; adequate building materials; and security of land tenure (Greene and Rojas 2008) offers SA and SSA countries one of the most significant opportunity to improve the housing conditions of their populations. Micro financing provides households with resources for small, incremental improvement projects without overtaxing their savings and repayment capacity (Ferguson 1999). Furthermore, a large number of municipalities and local nongovernmental organizations are active in providing technical cooperation and assisting homebuilders to more effectively improve their homes (Herzog 2016). Most of these activities are small scale and community-based, two features that pose a challenge for central governments to channel resources and technical support to this form of home construction.
Acevedo et.al. (2012) discuss several successful programs assisting self-builders in Latin America proving that the challenges discussed above can be confronted effectively. Many are decentralized efforts run by municipalities, non-governmental organizations or private sector suppliers of building materials. Examples include programs like: FUNDASAL a Salvadorian foundation that provides technical assistance to low-income families; the ‘Patrimonio Ya” [Today’s Assets] Program financed by CEMEX—Mexico’s largest cement production corporation—to supply materials under a micro-credit scheme that also includes technical assistance managed by the company’s extensive network of retail distributors; and Habitat for Humanity’s support for self-builders accessing micro credits for home improvements in Paraguay. The ‘Piso Firme’ [Solid Ground] program in Mexico, Argentina’s ‘Vivir Mejor’ [Living Better] and Chile’s ‘Fondo Solidario de Vivienda’ [Shared Housing Fund] are examples of programs financed and managed by central governments that support incremental building and improvement of self-built houses. South East Asia offers many examples of government and donor supported programs helping communities to improve their neighbourhoods and households to incrementally build and improve their houses (Boonyabancha and Mitlin 2012). Scaling up these experiences is one of the best investments governments of rapidly urbanising can make to improve housing conditions.
Rental markets play an important role in the housing sector and require development and diversification
Well-functioning housing markets need a sufficient supply of rental properties to satisfy the needs of households that do not need, do not want, or cannot afford to own a house. The distribution of home tenure between ownership and rental varies significantly among countries and between cities within a given country. Variations among countries with similar levels of development can be quite significant: among developed countries the housing stock for rent can represent as much as 55% in Switzerland and as little as 15% in Norway. Similarly in Latin America, 50% of the housing stock is for rent in Bolivia and only 15% in Venezuela (Blanco et.al. 2014). In market economies the distribution between rental and owned houses changes with the economic cycles, the evolution of financial markets and consumer preference. Circa 2010 in developed economies around one third of homes were rented (33% in United States and Canada, 30% in Western Europe) contrasting with Latin America where only one fifth of homes were rented.
Most housing policies in Latin America favour home ownership and some countries over-protect tenants, a problem reported long ago by Gilbert (2003). These policies, together with the reluctance of governments to finance public rental housing due to negative experiences in developed countries, result in underdeveloped rental markets in Latin America. This is a poorly researched area of housing in most of the developing world (Peppercorn and Taffin 2013) however, for what it is known; a few stylized facts can be presented. The formal rental market in Latin America is dominated by individual property owners that own the rental properties as a safe investment that provides a complementary income or as a form of retirement income. There is hardly any commercial residential renting in the region possibly because the risk-return equation is not favourable. In many Latin American countries residential renting is a risky business mostly due to the time consuming and costly process needed for repossessing properties, a product of legislation that over-protects tenants or of slow functioning judiciary systems. There is, however, a very dynamic informal rental market represented by homeowners in informal settlements renting rooms or plots of land. In large cities and in rapidly developing intermediate cities there is high incidence of sub-letting of deteriorated properties to recent migrants and very low-income households unable to find any other type of housing. These forms of rental are almost completely unregulated with many negative consequences for tenants including high rental prices, sub-standard services, and lack of protection from arbitrary eviction.
The rental market is an area of housing policy that Latin America needs to develop further. There is a need to support rental housing to cater to the needs of an estimated one third of the households that at different phases of their family cycle prefer housing rental to ownership. This is an area where SA and SSA countries can do much to improve housing conditions given that rental is a common source of affordable housing for middle- and low-income households in SSA (UN HABITAT and Cities Alliance 2011) and that “…the majority of rental housing in Africa is held by self-help landlords in informal settlements and private subdivisions.” (World Bank 2016:35). This support must also seek to make informal renting by low-income households more efficient and less onerous for the tenants. After reviewing the cases of 13 countries, Peppercorn and Taffin (2013) suggest several areas of improvement to make rental markets more efficient, inclusive and fair, including: landlord-tenant regulations, adjustments to the tax system, simplification of the process by which multifamily properties are registered, and adjustments of the overall system of housing subsidies. Rapidly urbanizing countries of SA and SSA will be wise not to repeat Latin America’s neglect of rental markets.
Coordinating the construction of new houses with the provision of urban services and amenities
Overall, housing policies in Latin America have focused on creating entitlements supporting individual households to access owner-occupied houses under the assumption that this would improve their quality of life. Although quality houses do so in significant dimensions, not all of the housing services required by households are provided by the individual structure of a house. The set of services directly provided by the house—protection from the weather, privacy, access to potable water and sanitation—are only a fraction of the services required by households to live. Households also require: good transportation; healthcare, education, and recreation facilities; community parks and services; citizen safety; and employment opportunities. These are services or resources provided by the neighbourhood or the urban context within which the house is located (Rojas 2016 Table 10:11). In most cases in Latin America these services are not available at the time the new houses are received by users and it is increasingly common that good houses located in underserved subdivisions and neighbourhoods will lie empty, as their occupants cannot satisfy all of their daily needs in these locations.
This is one of the most costly lessons of the Latin American experience with housing: the failure to closely link efforts to improve housing conditions with the provision of city and neighbourhood amenities, services and infrastructure. Rapidly urbanizing countries of SA and SSA would do better to link the production of new houses with the provision of urban amenities breaking away from the traditional sector-focused housing programs and moving instead to a more urban-focused set of policies aimed at improving the living conditions and livelihood of the urban population. For Buckey et.al., (2016:125) “…housing programmes should be part of a broader urban social contract, which should focus on the inclusiveness and social cohesion outcomes to be achieved through access to more affordable housing, rather than myopically on housing production”.
The convergence of the different institutional and financial mechanisms available to provide cities with a good quality of life is a pressing need in most countries of Latin America. The consolidation of institutions and financial mechanisms to produce affordable serviced land for housing is the most immediate priority in SA and SSA as it is still a priority in Latin America. Investment in urban infrastructure and services need to be implemented in synch with residential expansion. This is also the best way to enhance the resilience of new and existing neighbourhoods improving their capacity to made good use of land and other natural resources and to adapt to the negative consequences of climate change. There is no lack of planning and policy tools to ensure the integrated planning and implementation of new housing developments; they just need adequate institutions and human resources to be applied. Rapidly growing cities need to plan their expansion areas with a long-term perspective that will protect the environment and enhance the efficient functioning of the city. Plans can identify the lands needed in the long term to guide the supply of infrastructure and urban services, and local authorities can make provisions for acquiring them in advance (Angel et.al. 2011). Only a handful of cities in Latin America have done so including the well-known cases of Curitiba in Brazil, Medellin in Colombia, and Rosario in Argentina. SA and SSA countries should not make the same mistake and guide long-term urban growth to the most suitable lands acquiring in advance the development rights needed to supply the infrastructures and urban services.
It is also critical for city governments to have the resources to provide urban infrastructure and services. Much progress has been made in the provision of sanitation services with both the consolidation of well-run and well-financed public utilities and the direct government support given to low-income households to ensure they can afford a minimum level of consumption of these services. There are SSA governments using the sale of public and community lands to finance infrastructures thus raising the price of serviced land out of the reach of the majority of households. The provision of healthcare and education is still a challenge for city governments and for relevant central and regional government institutions. Housing policies that contemplate in their budgets funds for the urban investments needed to allow a house to provide all the services required by a household could greatly contribute to the mitigation of these problems. Governments will do well balancing the priorities of building new houses with the need to provide urban amenities in close proximity to the new housing in addition to continuing the efforts to improve the quality of the existing housing stock and the infrastructure and urban services available to these houses. Housing policies and programs should include in their budgets sufficient resources for the provision of the urban infrastructures and amenities required by the beneficiaries. The governance challenge is to ensure that these investments coincide in time and in the territories where they are needed. Highly centralized and sector-focused structures of government are particularly challenged to attain this outcome in cities (OECD 2013). Greater decentralization in the provision of these services must be balanced with promoting more transparent and accountable local governments.
It is cheaper to prepare for rapid urbanisation than retrofitting informal settlements
Lack of access to quality housing produced by the formal sector drove large numbers of households to build their houses in informal settlements that lack basic services. Latin American countries have gained experience in dealing with this problem. After years of allowing informal settlements to grow in the hope that they were a temporary stage in development to be overcome in time by economic development, they changed gears in the mid-1990s and actively implemented upgrading informal settlements programs in order to retrofit them with basic infrastructures and urban services (Brakarz et.al. 2002). However, the Latin American experience shows that retrofitting is always more expensive and socially disruptive than planning and investing ahead of land occupation. Brakarz et.al. (2002) report expenditures of USD$4,000 to 7,000 (1998 USD) per lot to improve informal settlements in projects financed by the Inter-American Development Bank. These amounts represent three times the cost of regular land development figures confirmed by a study by Abiko et.al (2007) that estimates the cost of providing basic infrastructure to informal settlements in Brazilian cities at USD 4,100 per lot compared with the estimated cost of USD 1,700 per lot to provide the same infrastructure in regular land developments.
Increases in per capita income lead to higher demand for housing and urban services, whose supply requires more serviced land, which in turn increases urban land prices. With the exception of short-term and isolated periods of economic crisis, urban land prices tend to increase over time making it unaffordable for large portions of the population. Private developers and government agencies paying more for the land thus make adjustments. Private developers produce houses for higher income households that can afford the higher land prices and public entities build houses in the periphery of cities where land is cheap but more expensive to service (Iracheta and Smolka 2000). A study by Trivelli (2010) documents the systematic displacement of social housing projects to the periphery of the Santiago metropolitan area (Chile) in search for land at prices compatible with the availability of public funds for the highly subsidized government housing programs. Families are forced to live in neighbourhoods with few services and far away from areas of economic and social activity. Similar issues are reported in Mexico where new housing built by the private sector are routinely located in poorly served areas in the periphery of cities (CIDOC 2012).
A more efficient strategy to deal with the growing demand for residential land is in Angel et.al 2011 that recommends preparing land before urbanization pressures materialize. Preparing land with basic infrastructure for orderly occupation is a strategy that can significantly reduce the volume of resources needed to provide good living conditions and basic services. This strategy complements and does not substitute the interventions needed to upgrade informal neighbourhoods and improve self-built houses, which were successfully implemented by most countries in Latin America. The challenge is to increase access to affordably priced land for future neighbourhoods. Basic economic logic indicates that one way of moderating land price increases is for governments to invest in trunk infrastructure to put more land into residential use (Glaeser 2012). However, this strategy requires complementary measures to: reduce land development costs generated by land use and registration regulations (Bouillon et.al. 2012b); prevent inefficient speculative behaviour by landowners; promote public-private cooperation in the development of residential areas; and facilitate the efficient use of underused land in inner cities. These measures can include capital gains taxes, special assessments that capture unearned land price increases to help defray infrastructure costs (Smolka and Iracheta 1999, Sandroni 2011); and other tax measures that enable the government to transfer to landowners the social costs of their decisions like idle-land taxes that can help prevent owners from keeping land off the market for speculative purposes. This is a lesson that SA and SAA countries can benefit from by aggressively pursuing land development programs aimed at housing the new immigrants. Letting informal settlements to proliferate as a ‘de facto’ housing policy would be very costly. Furthermore, upgrading informal settlements when not combined with preventive measures can fuel more uncontrolled informal urbanization by promoting the illegal occupation of land by households in need with the expectation that their informal settlements will in time receive infrastructure and tenure security from the government.
Latin America has some successful experiences in expanding the supply of affordable land. Colombia´s Macro-Proyectos [Large-scale Projects] is a government-sponsored land development scheme involving cross-subsidies from the sale of large-scale lots to commercial developers in order to finance affordable housing by retaining a proportion of the developed land for that purpose. Public-private cooperation is also possible, as successful land readjustment projects in Bogotá and other cities show (Torres and García 2010). Under the right political and institutional conditions, even informal land developers can be induced to cooperate in the construction of better cities, as demonstrated by the ‘Social Urbaniser’ scheme implemented by the municipality of Porto Alegre in Brazil that induced illegal land developers to produce better-quality residential subdivisions (Smolka and Damasio 2005). Another strategy is to put on the market more serviced land in infill areas and other suitable expansion areas. To do this, cities need to establish institutional mechanisms that promote fruitful cooperation among private and public stakeholders in urban land management. As discussed by Garay et al. (2013) and Rojas (2004) public or mixed-capital land development institutions, as well as other forms of strong public-public and public-private partnerships, have had good results. These models should be adapted and incorporated more broadly into the urban land management mechanisms of cities.
The solution to housing problems is mostly a local challenge
Housing policies in most Latin American countries are designed, financed, and implemented by central governments and conceived mostly as a social policy providing support to individual households. In Latin America there are a few large and rich municipalities with active housing programs (Buenos Aires, Sao Paulo, Medellin) but in most of the region only the central government is capable of commanding the volume of resources needed by policies that transfer wealth among different groups in society. However, the urban impacts of these polices are felt locally as most national programs rely on city governments to provide the additional urban services required by the new population placed in their jurisdictions either directly by the central government housing institutions or by private developers responding to central government incentives. Oftentimes, municipalities are eager to approve new housing subdivisions in their territories in the expectation of increased revenues from property taxes and economic development but lack capacity or intention to provide the urban services required by the new subdivisions.
In Latin America, most municipalities rarely have the financial resources needed to supply all of the neighbourhood and urban services required by new developments, or at least to do it in time for the arrival of new populations. The financial weakness of local governments is underscored by Bahl et.al (2013:11) which reports that in the years 2000s and for a sample of 20 developing countries, subnational government expenditures represented 18.8 per cent of total government expenditures, or the equivalent of 5.1 per cent of GDP (compared with 27.8 and 13.9 per cent respectively in a sample of 26 developed countries). The situation in Latin America varies significantly from country to country. In the more decentralized countries (Argentina, Brazil, Colombia, Ecuador) sub-national government expenditure can range from 40 to 50 per cent of total government expenditure. In less decentralized countries (Chile, Peru, Honduras, Costa Rica) it represents less than 20 per cent. Also the assignment of responsibility for urban services and infrastructures can be highly decentralized (Brazil, Colombia, Ecuador) or highly centralized (Chile, Peru, Venezuela). The consequences of these shortcomings are evident in Latin America’s municipalities incapacity to guide urban development according to social and environmental needs and whose long-term consequences are also emphasised for Africa by UN HABITAT (2014:7) that states “Ubiquitous urban poverty and urban slum proliferation, so characteristic of Africa’s large cities, is likely to become an even more widespread phenomenon under current urban development trajectories, especially given the continuing and significant shortfalls in urban institutional capacities.”
Although there still much room for improvement, the Latin American experience suggests that there are gains in transferring the responsibilities for detailed design and implementation of housing and urban development programs to local governments if these responsibilities are accompanied with financing and technical support from the central government. Housing policies designed to ‘build cities’ should include the financial and technical support needed by city governments to provide the services needed by the new housing development. Failure to do so produces negative impacts on quality of life and, in extreme cases, in the abandonment of the new homes, as reported in Mexico and is also becoming a common occurrence in other countries in the region.
This analysis of the Latin American experience—its successes and shortcomings—provides lessons for the design and implementation of housing policies in rapidly urbanising countries. It proves that it is possible to confront the root causes of housing shortages commonly faced by these countries and that lead to high levels of informality in the housing and urban sector. The countries that show the greatest advances managed to expand formal housing production and made them more affordable by promoting private sector participation in the production and financing of new houses. However, the Latin American experience also shows that the private sector based solution does not work for everybody. The housing policy experiences discussed in this paper show that government policies that aim to improve conditions for the poor must focus on expanding the flow of affordable housing to households in all income levels as well as improving the living conditions of existing informal housing and settlements. Achieving this objective requires the mobilization of large volumes of resources that government alone cannot afford. Housing policies must improve the functioning of the entire housing market including the private, public and informal components so that households in all income brackets find a housing solution and can contribute to the production and financing of their homes according to their capacity to pay.
The Latin American experience also highlights the significant problems created by not coordinating urban development with housing development. Housing policies conceived and implemented as social policies directed to individuals or households in need were not capable of ensuring that the residents of the new houses had access to all the services they need from their homes. The lack of coordination in the provision of these services—a combination of sector-based allocation of responsibilities and resources with a fragmented structure of decision-making—led to construction of houses in peripheral locations lacking the neighbourhood and city services that they required. The abandonment of new houses that is growing in many cities of Latin America is a painful remainder of the cost of not caring for the needs of the households in an integrated manner. The lack of widespread and up to scale support for incremental housing construction is another shortcoming of the Latin American approach to housing in the last 50 years. Households’ contributions to housing is a critical component of the long-term solution and it should be tapped in any possible way from the repayment of a mortgage to the sweat equity contribution they can make through self-help or community help efforts.
Improving the quality of housing available to the population is a complex undertaking that requires time, perseverance, the growth of the economy, and political will to implement reforms that are complex and must be comprehensive affecting housing and urban development policies and institutions.