Housed in hope: Developers, NGOs, govt must work together to catalyse Covid-19 recovery through housing sector

February 17, 2021 4:45 AM

According to the Cornerstone of Recovery report released by Habitat for Humanity’s Terwilliger Center for Innovation in Shelter in 11 emerging market economies with an average GDP contribution of 13.1%, the housing sector is roughly on a par with other key sectors like manufacturing.

For a year now, Covid-19 has forced us to literally stand apart from one another. In 2021, it’s time to stand together, and take this opportunity to build sustainable housing and resilient economies.For a year now, Covid-19 has forced us to literally stand apart from one another. In 2021, it’s time to stand together, and take this opportunity to build sustainable housing and resilient economies.

By Dhaval Monani

The huge economic contraction caused by Covid-19 has hit emerging market economies hard, and that is where housing, and housing developers, can play a key role in recovery. Housing is an economic sector with strong multiplier effects on both employment and consumption. According to the Cornerstone of Recovery report released by Habitat for Humanity’s Terwilliger Center for Innovation in Shelter in 11 emerging market economies with an average GDP contribution of 13.1%, the housing sector is roughly on a par with other key sectors like manufacturing. This figure is also almost certainly an underestimate, as there is a lack of robust data on the overall contribution of the housing sector to GDP.

The economic multiplier effects of housing are strongest in the middle- and lower-income parts of the market, where capital constraints are more prevalent. As such, if we can implement economic recovery programmes with housing investments that improve living conditions for those at the bottom of the housing pyramid, we can achieve both economic rejuvenation and sustainable improvements in people’s health through better housing. The house is a foundational aspect of a family’s wellbeing and allows for anchoring of gains in health, education, livelihoods and more.

However, we know from experience that including housing investment in economic stimulus or recovery plans is not enough. The development landscape is strewn with failed attempts at improving low-income housing, where powerful developer lobbies captured the lion’s share of housing investments, and those who stood to benefit the most—the lowest income home builders and renters—pushed to the sidelines.

For housing investment to truly be a cornerstone of post-Covid-19 economic recovery, it must target those most in need of housing transformation: low-income families, the incremental homebuilders who more often than not save a little, then build a little, adding to their homes as finances allow, in response to the changing needs of their families.

So how do we make this happen? There are three parties that, if they work together, can create transformative change in low-income housing: developers, governments and NGOs.

Developers have typically looked at the risk-return calculus of high-volume, low-cost-per-unit housing developments in emerging market economies, and have shied away. Given the right conditions though, developers can and do engage with the low-cost housing segment.

In Rajkot, the fourth largest city of Gujarat, low-cost housing developer Ashray Housing pioneered small standalone units that were affordable to the lowest income bracket of the country’s aspiring middle class (earning $135-355 per month). From this solid base, families can then build incrementally, up and out as more funds become available and their needs evolve.

Demand for low-cost housing is so great that meeting it is an impossible task for any level of government to successfully tackle alone. Developers can be incentivised to move into this market by the scale of demand, but they also need an enabling policy environment. Governments have a number of policy levers, such as the ways in which subsidies are distributed, and control over land use, which they can use to lower the risk to developers and encourage them to engage with the bottom of the housing pyramid.

Where do NGOs fit into this picture? There are many NGO-led housing initiatives, but these can never be taken to scale through the efforts of an NGO alone. What the NGO sector has is a deep understanding, directly informed by grassroots communities, about what is needed. Without their perspective, the nuance and diversity of the low-income housing sector cannot be made visible, making it impossible to develop successful solutions. Moreover, the NGO sector can use its voice to advocate and lobby for the needs of low-income families. NGOs can get the data we need, and funding NGO-led housing data initiatives would help the private sector assess the risk of entry in new markets.

For a year now, Covid-19 has forced us to literally stand apart from one another. In 2021, it’s time to stand together, and take this opportunity to build sustainable housing and resilient economies.

The author is founder & MD, First Home Realty Solutions Pvt Ltd

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