UNITED NATIONS - A new report by the United Nations Human Settlements
Programme (UN-HABITAT) warns that governments will have to take the lead in
building some 96,150 housing units per day if the world hopes to avert a massive
urban crisis in the near future.
Titled "Financing Urban Shelter", the report explores the challenges
of urban development within the broader context of the Millennium Development
Goals (MDGs), which include achieving a significant improvement in the lives
of at least 100 million slum dwellers by 2020.
Almost half of the world's six billion people already live in cities.
Of these, it is estimated that about a third live in slums.
"The housing crisis is already with us," the report notes.
"The large-scale evictions from urban areas of Zimbabwe, Mumbai, India,
or Malawi are all part of a larger problem of financing urban shelter."
Anna Tibaijuka, UN-HABITAT's executive director, said that by recent estimates,
more than two billion people would be added to the number of city dwellers in
developing countries by 2030. To meet the needs of that additional population,
some 35 million new housing units would have to be built every year for the
next 25 years.
Tibaijuka highlighted the current contradiction of "affordable shelter
that is inadequate and adequate shelter that is unaffordable", adding that
state-subsidised conventional housing was the solution to prevent the creation
of new slums.
But unless adequate financial resources are invested in the development
of urban shelter and services, including clean water and sanitation, billions
of people will be trapped in poverty, deplorable housing conditions, poor health
and low productivity, making today's enormous slum challenge even greater.
She said that one of the key challenges in meeting the MDG on slums "is
mobilising the financial resources necessary for both slum upgrading and slum
prevention by supplying new housing affordable to lower income groups on a large
scale". Those efforts would also bring into focus the importance of urban
planning, which is lagging behind in many parts of the world.
The report also highlights the strengths and limitations of current trends
in conventional mortgage financing. While such financing has been expanding
for the past decade and is increasingly available in many countries, only middle-
and higher-income households have access to it, while the poor are generally
UN-HABITAT stresses that it is in the interests of governments to extend mortgage
markets down the income scale, as home ownership is beneficial economically,
socially and politically.
"If you cannot provide housing for the relatively better off, you can
definitely not serve the poor," Tibaijuka told reporters.
The majority of urban poor households can only afford to build their homes
in stages, as financial resources became available, she said. In response, shelter
microfinance institutions and community-based funding initiatives have emerged
in recent decades.
The report concluded that short-term small loans of one to eight years in amounts
from 500 to 5,000 dollars were more useful for incremental building than the
longer-term large loans favoured by the mortgage markets.
It is also important to increase the number of lenders in the housing microfinance
sector. Guarantees are an important mechanism for broadening the appeal of microfinance
institutions to lenders and addressing the current problem of capital shortage,
the report said.
Naison Mutizwa-Mangiza, head of UN-HABITAT's Policy Analysis and Dialogue Branch
and an author of the report, said that the challenge of credit lay in the fact
that the cost of a typical house was between 2.5 and six times the average annual
salary, a ratio that rose to about 10 times in developing countries.
The report analysed such trends as interest-rate subsidies, conventional mortgages,
secondary mortgages and a growing diversity of mortgage providers. Among the
main challenges, especially in developing and countries with economies in transition,
were low levels of domestic savings, both private and public. One of the report's
conclusions related to the need for accelerated employment and income generation,
Mutizwa-Mangiza said, noting a widening gap between incomes and housing prices
in many countries, which resulted in the inability of young first-time buyers
to purchase homes.
From 1997 to 2004, housing prices had grown by 112 percent in Australia, for
example, 139 percent in the United Kingdom, and 227 percent in South Africa.
This calls for a shift of the public sector away from direct housing construction
towards assistance for home ownership through direct subsidies, he said.
About 70 percent of housing investment in developing countries takes place
through incremental building, which of course, is not acceptable to conventional
mortgage financing institutions. To address that need, shelter microfinance
had emerged in recent years, but its scale is still small in many countries.
There is also an emerging preference of lending to women.
Tibaijuka stressed that without massive investment -- definitely involving
governments -- adequate shelter would not emerge on its own. Governments needed
to subscribe to the main principle of the UN-HABITAT agenda, "adequate
shelter for all".
While microfinance presented important possibilities, public support and international
cooperation were still needed. In particular, international support was needed
for a global mechanism to assist the poor.
She noted that several programmes of slum upgrading and resettlement of the
urban poor were underway in Brazil, which had some of the best practices in