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Affordable Housing in Cities: The Need of the Hour!

Article · December 2008

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Ramakrishna Nallathiga
National Institute of Construction Management and Research
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 ICFAI Reader
December 2008 (p 21-24)

Affordable Housing in Cities: The need of the hour!

Ramakrishna Nallathiga
Knowledge Manager
Centre for Good Governance
Dr MCR HRD IAP Campus
Road No. 25, Jubilee Hills
Hyderabad – 500 033 (AP)
e-mail: [email protected]
Abstract:
With the rapid urbanization that is sweeping the country for the last more than a decade,
the challenge of providing shelter has become much more acute than before. The
shortage of housing has now taken different dimension with the inadequate supply of
housing for even low and middle class income groups. In this context, the provision of
affordable housing is gaining importance in order to ensure that it does not become a
luxury good. Ensuring the supply of affordable housing would require a multi-pronged
strategy that balances various forces and that involves various actors – planners, local
government, private sector, financial institutions, NGOs and professional bodies.

Urbanisation has been sweeping across the globe and is becoming increasingly the force
behind the economic and social organization of the world. Not surprisingly, it is now
estimated that for the first time in history, more people will begin to live in cities than in
villages in the year 2008. According to the State of World Population Report 2007, the
world's urban population is 3.3 billion out of a total world population of 6.6 billion. If the
current trend continues, the number of urban dwellers will reach almost 5 billion by 2030.

India, like almost all parts of the world, has also been witnessing this rapid change. In
India the urban population is expected to become 576 million in 2030 from the current
328 million. With this India is poised for a greater change in its population landscape and
the signs of it are already being witnessed across the country. The country was hitherto
known as the place where millions of people living (more than 3/4th of the total
population) in the country side, as it underwent a relatively slow change in this rural-
urban population structure for a very long period.

However, there has been a transformation in the nature, extent and pace of economic
activity that in turn affected the urban –rural composition. There has been a resurgence of
confidence in the economy after adopting liberalization policies and the urban areas
increasingly began to become key centres of economic growth, activity and expansion.
While urbanization was expected to grippen Indian society sooner or later, it is the
preparedness and consequences that keep intriguing the policy makers on meeting with
challenges of infrastructure, including housing.

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 ICFAI Reader
December 2008 (p 21-24)

While much of the middle class and rich have been able to turn the economic ride into
possession of several assets, including plush houses, villas, posh flats and bungalows, the
same has not been the case of poor. The housing boom started that started with
unsaturated demand for basic dwelling unit moved towards high demand segment where
real estate and property were playing a major role in the growth of industry. The bottom
level of population remained the same, or even worsened their position with a decline in
the areas over a period of time.

With rapid urbanisation, one of the biggest challenges that the country faces is providing
affordable housing to citydwellers, especially to the poor. The lack of proper and
adequate housing forces many of the inhabitants to live in slums and squatted settlements.
The appalling condition of urban slums, which lack the benefits of proper housing and
hygiene, is therefore a major challenge that the Indian cities face now. In India alone,
about 100 million persons live in slums and slum-like conditions. These numbers are
expected to touch 200 million by 2020.

Housing is integral to the well-being of a family, as it defines individual, social, health

and living conditions of the members. Much of the slums are left without adequate basic
facilities such as piped water, sanitation, energy, schools, health, and so on. In the
absence of good housing conditions, the members become deprived of all the facilities
over a period of time and their contribution to economy also goes down with the lack of
right skill set. Therefore, the neglect of good housing may affect both the city and its
inhabitants, which hold an important key to the long term economic growth and
competitiveness of the city.

According to a Planning Commission Report, the housing shortage in urban areas has
been estimated at about 24.7 million units at the end of the 10th Five-Year Plan (2006-07)
and it would increase to 26.5 million by 2012. Ninety-nine per cent of this pertained to
the economically weaker sections (EWS) and low income groups (LIG) which contributes
to squatting and slum formation. Therefore, urban housing sector is particularly facing
challenges with regard to affordable shelter, growth of slums and gaps in provision of
basic services. Given this background, the importance of ensuring the provision of
affordable housing has been rising.

Affordable housing refers to a dwelling where the total housing costs are affordable to
those living in that housing unit. It is primarily used in the West to denote how the house
prices are related to the incomes so as to serve as a measure the affordability. In the
United States and Canada, a commonly accepted guideline for housing affordability is a
housing cost that does not exceed 30% of a household's gross income. Housing costs
considered in this guideline generally include taxes and insurance for owners, and usually
include utility costs. When the monthly carrying costs of a home exceed 30–35% of
household income, then the housing is considered unaffordable for that household.

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 ICFAI Reader
December 2008 (p 21-24)

An important determinant of house price is the market conditions i.e., demand and supply
for housing units. Because of the gap between supply and demand, the most "affordable"
places are where there is the least demand relative to supply e.g., in places far off from
city, which have high transport costs unless mass urban transport exists at low price. City
centres and near suburbs are the places where the supply of housing is less than the
demand, and here the low- and moderate-income households often struggle to obtain
housing that is affordable. In these locations, rising land values often outpace rising
incomes. Such housing markets often have a limited supply of residential land, or a
number of local government regulations on development that make it difficult or costly to
increase housing supply at rents affordable to consumers at income ranges below the local
average.

Given the fact that housing prices are determined in market conditions that may not
always work in the favour of low and middle income groups, and particularly against the
economically weaker sections like the urban poor living in slums and squatted
settlements, it becomes imperative to come up with government policies and programmes
that may either cater to the needs of the poor or make arrangements that ensure it. The
following are some such interventions that help the urban poor and low and middle
income groups in finding affordable housing in cities.

Create adequate housing stock for Low Income Group and Economically Weaker
Section
The Government needs to ensure that there is an addition of housing stock meant for LIG
and EWS sections through building housing units for the employees who join the service
(employee housing), constructing housing units under the various central and stage
government housing schemes for the urban poor (e.g., as under Valmiki Ambedkar Awas
Yojana), and constructing housing units with the support of donor, multilateral and
bilateral agencies.

Make it mandatory by law that in every township and layout, whether Government or
Private, a minimum percentage shall be for EWS/ LIG.
There is a need for adequate EWS/LIG pockets or colonies on serviced land spread across
the cities and especially near employment centres where people can live at affordable
costs rather than squatting on vacant lands. Such housing pockets could be developed by
government bodies under the Jawaharlal Nehru National Urban Renewal Mission
(JNNURM) or the Integrated Housing and Slum Development Program (IHSDP). This
will ensure that provision of housing and basic services for the urban poor has been
integrated into the objectives of the Jawaharlal Nehru Urban Renewal Mission
(JNNURM).

Provide housing units and/ or land for housing by using Land as resource.
In several cities, the government or its bodies hold a good amount of land kept for various
purposes. Such land can be used for providing housing to the EWS/LIG population. If
such land is in city centre that is very costly to the urban poor or exists in very small
plots/units, the advantage of the same can be leveraged for procuring land which is
affordable by either selling the land and using proceeds for the new scheme or land

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 ICFAI Reader
December 2008 (p 21-24)

swapping can be done to pool adequate land for the urban poor in the designated area.
Also, transferable development rights may be used to provide housing units/ land in the
areas where the supply is envisaged.

Deregulate Housing Sector and encourage competition and public private
partnership.
Private developers, colonisers and co-operative societies should be encouraged further
with tax benefits and other incentives to make housing available to the economically poor
at nominal rates. Joint sector projects between governments and the private sector such as
the Bengal Ambuja Housing Project, are a few important steps which are already in place.
Also, builders can be encouraged to provide housing to the EWS/ LIG population by
giving by means of higher development density e.g., Floor Space Index, for such
buildings.

Build partnerships with NGOs and civil society organizations to promote housing for
urban poor
Government bodies should also seek support from NGOs and other civil society
organisations in planning houses for the poor in terms of design and facilities. They can
ensure the involvement of the urban poor in housing and resettlement efforts so that the
plan is developed by those who have to be settled and relocated. NGOs can also play an
important role in loan recovery by encouraging and facilitating slum communities to save
part of their earnings in recurring deposits and by making microfinance available to them.
Facilitating such regular savings helps the more vulnerable families to benefit from such
housing schemes.

Rationalize Development Control Regulations and streamline approval procedures.
Too much of regulation of housing development can hamper the housing supply. The
building certificate and permission process needs simplification by reducing the
unnecessary stumbling blocks such as NOCs required from different offices for a Housing
Project. Single Window System may be followed for streamlining the operations and
approval process.

Proactive urban planning with estimation of poor people, their housing needs and
designating land for them in master plan
It is also important to look for new methods of land use planning and management
factoring in the population growth projections that have provision for estimating the
population of poor. We can nurture more middle-level cities to offload mega-cities to
some extent. These middle-level and smaller cities need development focus, infrastructure
investment and political attention in order to "prepare" them for any such role. In all
these cities, the planning process has to designate land for future population who will be
the poor living in the city.

Encourage Rental Housing and its supply by public/private sector
Rental housing has largely been given aback and even was killed in the process of
assetisation happening in the housing in cities. Housing as a capital asset has attracted
only middle income and high income people spending for plush apartments and large
flats. Promoting rental housing would make the houses available at reasonable costs and
needs to the poor and low income groups. Legislations like Rent Control Act that are
stumbling blocks to the supply of new buildings and premises on rent need to be given

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 ICFAI Reader
December 2008 (p 21-24)

away by amending them appropriately. Rental Housing can be incentivised through levy
of low tax on it as compared to high tax on large dwelling units.

Make inclusive city development and ensure housing for all as policy
Finally, Housing the poor is an urgent and important need for building socially inclusive
cities offering equity of life for all. What we need is accurate planning and mainstreaming
of the urban poor in the economic growth story of our urban areas. Here, special emphasis
needs to be made on mainstreaming the Scheduled Castes/Tribes/Backward Classes /
Minorities and empowering women within the ambit of the urban poor into economic
development. Empowerment needs to happen to the specially vulnerable sections like
disabled, orphans and those undergoing trauma due to varieties of trafficking prevailing
in the cities.

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