Sadna Samaranayake

Affordable Housing for All Series: In the Race for Affordable Housing, Who Has the Head Start?

Editor’s Note: NextBillion has launched month-long series on Housing for All in partnership with Ashoka. This special series coincides with two upcoming Ashoka publications on best strategies to achieve Housing for All, Ashoka’s initiatives using its Hybrid Value Chain framework to leverage changes in the affordable housing sector in Brazil, Colombia and India. Please follow the series HERE and Join the discussion with your thoughts and insights.

In the race for affordable housing for all, is there a clear leader? Is government the biggest player in BoP affordable housing? Are NGOs? Private construction companies? The answer might surprise you.

Far ahead of the pack in resources mobilized, progress made and sheer numbers of BoP housing solutions implemented…are the BoP households themselves.

Largely invisible to the public or private sectors, piecing together cash informally (both income and for purchases), this citizen sector relies on itself to build basic shelters and then, little by little, improve them as they can. Over 70 percent of all affordable housing worldwide is built this way, referred to as “self-building,” “incremental construction,””progressive housing,” or “home improvements.” Costing anywhere from a few hundred US dollars to roughly US$7,500, housing upgrades take place over years or even decades (as families with only sporadic, tiny savings to buy building materials endure years before completing a project).[1]

Homeless families roaming busy streets or seeking shelter in tents may get noticed by local government agencies or charities, and if lucky, a few are helped to live in a subsidized shelter. But for the millions of families who find a plot of land (not theirs) and put up four walls and a ramshackle roof, the options for improving their homes are few, outside what they can cobble together from meager savings and the skills of their own hands.

The terms that describe this process often resonate with middle income households, who also make “home improvements” and even “do-it-yourself remodeling” at times. But the difference is vast. For affordable housing, these terms mean the difference between children crawling on dirt or raw concrete floors endangering their health, having a toilet instead of a hole in the ground, a roof that doesn’t blow away or cause an indoor flood in a storm, walls that are not mold-ridden, or a window for light and ventilation. For the BoP, home improvements are not going from plain to middle-class comfort or even luxury. They mean getting to what the rest of us consider as basic health, hygiene and secure shelter standards.

A Head Start with Handicaps

BoP communities addressing their own housing needs in these ways would seem like good news – and it could be, if incremental home improvements were not the inefficient, protracted and financially wasteful experience it is for the majority of BoP households. Citizens’ initiatives to self-build give them a head start, but not without handicaps:

1. Incremental home Improvement is often inefficient and costly. Imagine paying for the cement, sand and concrete blocks or bricks required to build a room, one bag or a few cubic feet at a time. Imagine those things lying outside on the ground for months (or years) until enough materials accumulate to finally build. Imagine buying so little at a time that no retailer delivers them, and no experienced expert can come to help plan and build properly. The only alternative is to find financing for the entire improvement; imagine if that loan is at 30 percent interest, or higher, especially if the source is a local moneylender. Add up the higher per unit costs of buying in small quantities, transportation of purchases, loss through theft or exposure to weather, or buying the wrong materials and needing to replace them with others. In the end, what most consider “cheap” housing for the poor often costs more than if a home improvement loan financed the project with technical assistance and wholesale or bulk prices for materials and labor.

2. Incremental home improvement is often unsafe. While the sheer quantity of housing solutions implemented this way is astounding, the same is not true of their quality. Unskilled and often unsafe self-construction practices result in structural additions to already crowded and precariously built slums. If located in earthquake or flood zones, informal construction often means loss of life and serious injuries. As engineer and earthquake resistant building expert Elizabeth Hausler says, “Earthquakes do not kill people. Poorly built houses do.”

3. Incremental home improvement does not solve infrastructure deficiencies. Self-construction does not address – and in fact often compounds– the absence of urban planning and public services. Zoning ambiguities, high density, unpaved roads, few sidewalks, no adequate sewage systems, lack of access in each home of potable water or electricity – none of these are addressed by self-built home improvements. Still off the formal grid for retailers and government, these “improved” houses exist in neighborhoods with little public transportation, fire or law enforcement, poor or distant schools or clinics or places for children to play for the growing community. Their real estate value is not enhanced, even if their home is.

4. Incremental Home Improvement does not create a tangible asset families can leverage to climb out of poverty and slums. Even for households who manage to save and invest in good home improvements, if they do not have clear title to their land, or if they paid cash for all and still have no records of steady income or responsible repayment of loans to establish credit worthiness – all that labor, time and money has NOT built collateral for banks or financial institutions.

5. Incremental Home Improvement results in keeping this potential BoP market invisible: to retailers, architects, master contractors, building materials suppliers and related product or service distributors. Few market studies accurately inform realtors or developers how many households now actively spend on improving their homes, where there are, how much materials they consume, and what the potential value of this market could mean if the financing, technical assistance and urban infrastructure were integrated into citizens’ self-building practices.

To complicate matters further, most of the organized activity around affordable housing, whether it is led by private companies or local governments, tends to overlook these traditional self-construction practices. Instead the preferred means of addressing affordable housing is to attempt to offer contractor built new home developments to BoP households. Unfortunately, there is not enough viable land in urban areas or income/financing among BoP households for new home construction to be the solution that addresses the housing needs of the masses.

The above is part one of a two-part post exploring home improvements that advance affordable housing. In part two, I’ll share strategies learned from housing contexts around the world on how to leverage the energy of self-building, overcoming the obstacles outlined here in ways that create robust markets and good homes at the BoP.

[1] Habitat for Humanity, 2011. Structuring robust stakeholder partnerships linking donors, investors, technical providers and microfinance institution, Presented at Housing Finance for the BOP Conference. Miami, 28-29, June 2011.

Base of the Pyramid, housing