Deficits of formal urban land management and informal responses under rapid urban growth, an international perspective.

Note: This article is specifically about African cities but has interesting observations relevant to Thailand.

The central premise of this article is that informality is a response to poor public policy. In the case of Africa, urban land management was practical to European colonialisation, ‘centered on peripheral ports, with access routes to exploitable resources and later to environments deemed suitable for European settlement’. Because this system was not endogenous, post colonial African cities are ‘exploding cities in unexploding economies’. The residual policies, land use controls, regulations, and high standards have led to a slow pace of development and unaffordable housing.

The author lays out three types of urban land markets:

1. formal/official statutory
2. customary/indigenous, and
3. informal/unauthorized or non-statutory.

On can’t develop a piece of land unless his/her rights on that land are legally specified and protected. However, legalisation of ownership is time consuming, complex, cumbersome and expensive for two reasons: one is that mapping, title registration, surveying, etc. setups are poorly developed and the other is because it is within the interests of some individuals to reinforce the inefficiency of the status-quo. As a result “the ‘informality’ of urban land markets…is as much a commentary on the ineffectiveness of existing official land tenure and regulatory arrangements as it is on their growing irrelevance.”

( I think this is really interesting because it has implications for policy development: if you find informal systems, try to figure out which policy they are responding to!)

The author doesn’t exclude completely the need for public intervention in informal land systems. She says while informal markets are good at provision of low-income housing, one must overcome the externalities of development like: water pollution, sanitation/public health hazards, traffic congestion, encroachment of public/open space, etc. in severely dense and chaotic informal subdivisions. Question: how is this accounted for in the Baan Mankong program?

I don’t want to write an essay here so there are three other interesting things to note:

One is the emergence of SCRs(Substandard Commercial Residential Subdivisions) which are illegal commercial supplies of urban land which imitate formal urban layouts and provide rudimentary services like water, electricity, etc. These SCRs are officially permitted and have financial linkages to urban administration. While they provide low service levels, they are also incrementally phased and built as the income of the residents increases. “As observed in SCRs, developers proceed according to the occupation-building-servicing-planning sequence, a reverse of the formal procedure.”

Another interesting thing is an example from Egypt where another author (Zaghloul) identifies 3 phases of informal settlement growth (he says that slums in the same city of different characteristics are generally closer or further along the same chain of growth): starting, boom, and saturation stages. He says the city can intervene before the boom and provide infrastructure or buy land that will later be used for school, public spaces, or other services.

Finally, a quote which I think is super interesting on the merits and demerits of informal land systems: “Informal urbanization not only poses a major threat for the depletion of agricultural land, but also creates a substandard urban product that is plagued with environmental and social problem. Nevertheless, informal urbanization has exhibited singular merits: it responds to the shelter needs of, what the author calls the forgotten segment of the housing demand; it meets the demand of  expectations and affordability of many segments of the population; operated in a market context and manipulates existing market forces and avoids the market distortions of public subsidies and direct supply. The challenge for public policy, therefore is to transform the informal urbanization product into a decent urban space and to utilize the informal development process to respond to the needs of many segments of the population.”

Don’t know about this for sure but maybe the Baan Mankong urbanization product isn’t under enough scrutiny? There’s a lot going on in this article so it’s worth a read especially if you’re doing your dissertation on Africa. Also… SUPER IMPORTANT is that this article talks about policy in a very spatial way. There is section called “Impact of informal urbanization on the Cairo Urban Region space structure” that blows my mind in that it’s exactly how I have trouble thinking/writing but I feel like it’s the kind of thinking/writing that Camillo is trying to get us to do.

Financing City Building: The Bangkok Case (D. Webster)

Webster, Douglas. ‘Financing City-Building: The Bangkok Case’, April 2000. (http://iis-db.stanford.edu/pubs/11894/Webster.pdf) Accessed 10 January 2010

ABSTRACT

Bangkok ir typical of a class of cities in East Asia characterized by: diffuse ans poorly coordinated institutional responsibility for urban management, ineffective land use planning, limited local government powers and limited revenues and financial resources to cope with growth. Bangkok Metropolitan Administration’s (BMA) current population is 8 millions. Until the crisis of 1997 the city’s economy grew rapidly at an annualized rate of 17.2%. City’s economy began growing again in 1999. It is a middle income city.

The starting premises of the paer are: Network infrastructure is the prime driver shaping development in middle income mega-cities in East Asia, basic urban infrastructure and services should be put in place before urban areas are built-up, capital for city-building is typically scarce and should be allocated to highest priority urban infrastructure, it is desirable and appropriate to borrow for infrastructure but borrowing should reflect future ability to repay debt, a portion of the land value increases generated by public improvement should be captured by the public sector and good governance should incorporate equity, competitiveness and sustainability concerns as reflected in local preferences.

Typically no corporate entity is responsible for the planning and management in urban areas. There is little coordination and lack of communication between providers of city infrastructure and city services. The new population growth, investment and physical development is occuring outside the core city’s boundaries. There is a problem of asymmetry between technological and institutional development. Often the most inefficient systems are those that have existed as institutions for the longest period of time.

A few agencies have attempted to estimate future demands for capital to finance city-building processes through public infrastructure. With increasing decentralization, much of this is likely to be the responsibility of local government. BMA benefits, at present, from low population growth but the suburban provinces are growing faster.

City-building is primarly associated with three processes:

1. Building at the fringe of the city on green field on relatively low-density rural sites. This type of development can engender the lowest capital investment costs and permit the creation of efficient land use/activity patterns compared with already built-up areas.

2. Redevelopment of existing urban areas which does not require significant investment in capital facilities. Particular concern is large-scalerestructuring or development whether driven by public or private initiatives.

3. Infilling, because arterial roads are scarce, large undeveloped lots often exist in interstices between corridors. On the periphery, the private sector tends to develop property holdings along major infrastructure networks. In built-up areas, the city building process associated with smaller parcels of land and is manifest through in-filling, demolishing and rebuilding, and upgrading or reusing existing structures.

It is critical that networks are property planned. This is especially importatn where land use planning processes are very weak. In many East Asian cities the approach to city-building that prevails could be described as ¡infrastructure follows’ rathes than ‘infrastructure leads’. Infrastructure-led development can only be realized if horizontal coordination exists among service providers at the local (micro) urban area scale.

Literature in uban finance can be categorized in:

1. Analysis and recomendations on fiscal relationships. Important issues associated with decentralization include efficiency, equity, transparency, accountability and impact on macroeconomic policy.

2. Innovative urban financing mechanisms like concessions, privatisation of state, regional and local government enterprises and public-private partnerships to finance catalytic projects. It was seen as a panacea for mobilising capital to meet the investment needs of Asian cities but many sectors are unattractive for innovative finance. Private sector capital tends to be more interested in large cities.

3. Sectorial analysis is an important area for further development. Urban infrastructure is delivered and operated by sector-related agencies.

4. Financial management from local urban government. Smaller East Asian cities have limited capacity for financial planning. Analysis and recommentations from perspective of cities as evolving, interactive systems, requiring horizontally-coordinated city-building processes, appear to be in short supply.

BMA controls less than 10% of public facility/infrastructure investment within its territory. The efficiency of tax/user charge collection is very low and all expenditure comes from current revenues. It means that capital projects are often incrementally built. For example, a road may be constructed at the rate of only few kilometers each year. State enterprises deliver most public utility services in Bangkok and the precentage of expenditure on social services was declining until the onset of the economic crisis. International lenders as the Asian Development Bank (ADB), the World Bank and the Japan Bank for International Cooperation play a major role financing major urban infrastructure in Bangkok. The Bangkok Transit System (BTS) is a major achievement for BMA because its significant contribution in shaping the city improving the quality of life and because it illustrates the BMA’s potential financial leverage. Private developers essentialy dictate the urban development. No mechanism exists to plan subdivisions so the building process often results in superblocks with inaccessible ‘blind land’ in the interior.

No one seems to be in charge of the city. No one is coordinating capital investment to major networks that shape and ultimately constitute the skeleton of the Bangkok organism. Given these conditions it is amazing that Bangkok works as well as it does.

What is needed?

1. Privatise the key state enterprises serving the city.

2. BMA should fully participate in the land subdivision approval process to avoid superblock dynamics.

3. Land readjustment processes need to be implemented on a pilot basis redesignatind some land for key public uses.

4. BMA’s monthly meeting with stakeholders should be formalized to include investment needed to realize strategic objectives.

5. Minimize the need for borrowing the BMA should maximise local revenues through the effective implementation of user fees for services and through effective property taxation.

6. Future revenue streams should be forecast based on two or three scenarios.

7. Continue to explore and take advantage of innovative financing techniques like privatisation and public-private partnerships.

8. Initial planning is not detailed enough and has not involved stakeholders. They frequently cause delays in project implementation.

Lessons:

1. Emphasize coverage at appropriate unit cost, utilizing appropriate technology rather than at unit costs based on technologies which result in considerably less coverage.

2. In planning and budgeting capital facilities, develop some type of mechanism to prioritise and allocate capital. A coordinating body that has political power from citizens and national government is needed for the metropolitan area as a whole, to ensure that the highest priority capital needs attract investment.

3. Buy rights-of-way ahead of time. Land purchase could be used proactively to raise revenues and shape economically strategic areas.

4. Land readjustment needed to shape local areas on the urban fringe.

5. Local government should participate fully in the local subdivision processes, emphasising infrastructure networks.

6. Demand side management. If the demand for new infrastructure in some urban sectors can be slowed, capital can be reallocated.

7. Emphasise economic forecasting, revenue forecasting and the wise use of credit. Future revenue to repay loans used for capital spending on coty-building is basically the product of the existence of instruments to raise revenues, the willingness of urban residents to pay for city-building and public services and future urban household income corresponds with the competitiveness of the city.

8. Use decentralization processes to integrate city-building processes. Decentralization is good news in terms of allocating capital more rationally at the city level. The challenge will be to link private suppliers to guidance and regulatory mechanisms of local governments.

9. Institution-building.

Bangkok will require very large amounts of money to meet their backlog, current and future needs. Privatization of key utilities could result in efficiency gains and ‘user pays’ principles should be implemented. Other infrastructure will require direct government expenditure so responsible borrowing will be needed.

ACTORS

BMA, ADB, World Bank, Japan Bank for International Cooperation

Housing, the state and the market in Thailand: Enabling and enriching the private sector

Yap Kioe Sheng

Journal of Housing and the Built Environment 17: 33-47,2002.

Housing is not viewed as a high priority on the political agenda in Thailand.  The exception being between 1970’s and 1980’s  when NHA built low cost rental apartments.  During this period the government facilitated private sector housing development by allowing them to build at a low cost and intervened to keep interest rates low to encourage more people to buy property.

The lack of integrated housing policies by successive governments produced mixed results in terms of adequate housing for low income groups.  The paper focuses on the Bangkok Metropolitan Region (BMR) as this  is the largest and economically vital area in Thailand.

Bangkok Metropolitan Region is comprised of the Bangkok Metropolitan Area (BMA) and five provinces, Nakhon Pathom, Nonthaburi, Pathum Thani, Samut Prakan and Samut Sakhon.  The population of the area varies due to the overspill from BMA into surrounding provinces which are highly urbanised and rural areas.  Furthermore many of the residents of BMR officially live in other regions as they have not transferred their housing registration to BMK.  From 1980 to 2000 the population growth has been estimated at 3 million, starting at 7 million in 1980 to 10 million in 2000.

There has been a steady increase of housing units in the BMR, from 1980 0.97 million units to 2.65 units by 2000.  The paper describes 3 main stages of housing production in BMR over a 2 decade period.

1 From 1980 to  1985 – Slow growth in housing stock averaging 3% per annum. This equates to an increase of 29,357 units

2 From 1986 to 1996 – Rapid growth in housing stock averaging 10.6% per annum. This equates to an increase of 120,978 units

3 From 1997 to 2000 – Slow growth due to financial crisis in 1997 averaging 2.3% per annum. This equates to an increase of 83,893        units.

There were a total of 1,677,864 by the end of 2000.  The housing stock tripled over the 20 year period and the population grew by 40% for the same period.  This boom mirrored the economy of Thailand which began in 1986 through until 1997.

The figures for housing production do not include that of informal housing sector.  In 1985 1020 slums and squatter settlements were recorded and the estimated population was around 1.2 million.  These figures have remained fairly constant over time unlike the formal sector. It has been said that the increase in low cost housing production is responsible for reducing the number of slum dwellers.

There was an increase in evictions during the period of economic boom as a result of increased land prices and the demand for land, however firm conclusions cannot be drawn as to whether slum dwellers moved into other informal settlements or onto the formal sector. The effect of the financial crisis of 1997 was of increased urban poverty; many people who became unemployed moved into slum areas, however there are no surveys giving concrete figures for this.

The increase in private sector developer- built housing resulted in a decline in the number of self-built housing in the formal and informal sectors.

In comparison to the housing production by private developers, the state produced very little housing (NHA),  it was given that the state was not required to intervene in housing production as sufficient housing was being provided by the private sector.

The National Housing Authority

The Housing Bureau and the Housing Division (Public Welfare Department), the Community Improvement Office and the Government Housing Bank were responsible for housing up until 1973,  during this period there were very limited housing policies in place.  From 1973 following a period of shortage in housing the above state agencies and the development portion of the Government Housing Bank merged to form the National Housing Authority of  Thailand (NHA).

Responsibilites included:-

Building homes for people

Conducting urban community development to clear slums and resettle those affected from clearing process

Providing dwellings and estates for rent, sale and hire-purchase and management of these properties as well as subsidies to tenants and buyers.

1973 saw the end of  a long period of  military dictatorship.  Successive governments were more liberal and  focused on the social welfare of the population.  Although established under the military regime the NHA carried out most of its planning after the rule ended. This was cut short by a military coup in 1976 and saw a period of military-bureaucratic rule until 1987.

NHA – plans

1974-1983 – plan to construct 170,000 housing units, dependant on govt subsidies.  Plan was cancelled in1978 after 36,868 units were built due to the financial burden on the government.

1976 – 1980 – revised plan reduced target units to 120,000, this was also cancelled  due to reliance on state subsidy

1979-1982 – Accelerated plan, replaced the previous and (influenced by World Bank) focused on improvement of 26,000 slum dwellings and development of 14,400 plots in 2 sites- and – service schemes.

1982-1986 – 5 year plan – could not be realised

1984-1986 – 3 year plan replaced the previous.

Each plan failed due to the lack of funding required or through being rejected by the government.  By the mid 80’s all the NHA direct construction plans were abandoned in favour of slum improvement sites-and-services schemes.

Collaboration with private developers started the construction of middle-income housing construction, the profits were to be used to support low-income housing.

3 main problems faced by the NHA

– Ineffectiveness of  its policy of direct construction – units were small and only accomodated 10% of the 1 million slum dwellers. Many disliked the units despite the inner city location and heavily subsidised rents. Many sold their occupancy rights and returned to slums

– Inability to improve slums and squatter areas – many slums and squatter settlements were located on private land and therefore it was impossible for NHA to implement upgrading programmes on this land.

– Difficulty in securing adequate land – complicated anti-corruption state regulations made it a very arduous process and difficult to compete with private sector for land..

The Government Housing Bank

Established in 1953, given status of state enterprise.  Inexperience led to bad loans and a crisis in the early 80’s.

1982 – the bank was reorganised by the Ministry of Finance, although the bank remained a state enterprise it was able to operate on a commercial basis.  The GHB was able to offer reduced interest rates and force commercial banks to lower their home mortgage loans, creating improved housing affordability in the country.  Demand increased, which in turn allowed private sector developers to produce lower-cost housing and an increase in the development of the housing sector.

The Private Sector

6 Periods of Private Sector  housing development

1957 – 1967 – land developers divided and developed vacant plots and then sold onto middle-income families

1967 -1973 – Housing project developers.  Projects became popular due to availabilty of loans and good economy.  3 types of housing developers; land development companies, professional housing developers, building contractors.

1973-1976 – Decline in housing development.  Governement issued Land Subdivision Act to control developers but standards were high and developers were discouraged from taking on projects. Oil crisis further discouraged developers, house prices plummeted

1976-1979 – Housing development projects increased again

1980-1982 – second oil crisis, increase in interest rates saw decline in housing demand and therefore in  development

Mid 1980’s saw an increasing middle class, the demand for housing grew once again. GHB was able to provide loans to homebuyers and private developers to support the demand.

Developers, politicians and bankers

As the ease with which developers could access loans increased, the number of loans increased and the government urged banks to be more selective in giving out loans for housing development.  However many government ministers were closely connected to commercial banks and the real estate sector and relied on them for financial support and so the ministers were not heavily enforcing strict control.

The repayment of the loans was dependent on the properties being sold and so the real estate developers and commercial banks agreed on a package deal to provide low interest loans to customers purchasing one of their own financed properties. Some banks had their own real estate departments and so they were able to control the entire process from build to sale.  Despite government intervening with stricter controls, the banks were able to continue dealings through their own established finance companies which were not as heavily monitored.

Throughout the early 90’s the demand for housing was kept artificially high, many purchases were speculative.  It was not a sign that people were moving out of slums and into formal housing as first thought.

By the middle of the 90’s there was an apparent oversupply of housing.  GHB found 350,000 vacant housing units in BMR many low cost condominiums.  Many developers were unable to sell their units and so defaulted on their loan repayments.

Urban Community Development Office

Economic growth may have seen many people enter the formal housing market but the financial crisis led many into urban poverty.

In 1992 the government  approved the Urban Poor Development Project with a budget of 50million USD.  The NHA issued a regulation for the establishment of the UCDO to implement the project under its jurisdiction.

The UCDO’s objective “is to strengthen, through credit provision, the capacity of slum dwellers and the urban poor to obtain increased and secure income and appropriate housing with secure rights and an improved environment.

1999 the UCDO and the Rural Development Fund merged to form the Community Organisation Development Institute (CODI).

 

Actors: The State, Private sector developers, National Housing Authority (NHA), Government Housing Bank (GHB),  Bangkok International Banking Facility (BIBF), Bangkok Land, The Ministry of Finance, Bank of Thailand, New Aspiration Party (NAP), Financial Institutions Development Fund (FIDF), Urban Committee Development Office (UCDO), , Housing Policy Sub-committee of the National Economic and Social Development Board, Rural Development fund, Community Organisation Development Insitute (CODI)

Key Words: Developers, housing, policy, poverty, public sector, Thailand, finance, government

Self-help Housing in Bangkok (2009)

Sheng, Yap Kioe & Koen de Wandeler. ‘Self-Help Housing in Bangkok’, in Habitat International, 2009, pp. 1-10.

A very good article, with current information and objective analysis of the Baan Mankong programme.

• Bangkok Metropolitan Region (BMR) population of 10 million inhabitants.
• Statistical level of urbanisation in Thailand (below Asian average) does not reflect the real situation, as 1) much of urbanisation in Thailand and Bangkok is occurring outside municipal boundaries and the concerned population is counted as rural, 2) there is considerable seasonal/daily migration, 3) many ‘permanent’ migrants maintain their registration in their villages and are administratively not counted as Bangkok residents.
• There are close links between the informal and formal sectors in Bangkok; cheap food, transport and housing provided by the informal sector is a supplier of labour, goods and services to the formal sector.
• Thai culture plays a key part in agreement for housing on private land, both from the landowner and residents perspective.  Society tries to accommodate the poor, at least as long as vested interests are not threatened.
• Thus, informal settlements in Bangkok are somewhat different from those in other cities, as they are scattered all over the city, usually on relatively small plots of land, in between other land uses, aver. size is 200 houses.
• Most settlements in Bangkok meet all 5 criteria that define a slum: insecure residential status, poor structural quality of housing, inadequate access to safe water, sanitation and other infrastructure, and overcrowding (UN-Habitat, 2003)
• Temporary self-built structures are unauthorized from a regulatory perspective
• Due to informal nature of settlement, the authorities are not inclined to provide basic infrastructure (except for electricity)
• Residents make informal arrangements for the supply of water, access to public roads etc.
• Many settlements are  on SRT, PAT, RID land, they are considered squatters as these lands are intended for infrastructure development, maintenance works and emergency access
• Slums often develop on land which is being held for speculation
• Important to note that not all residents of slums are poor, and that some poor live in formal and informal rental housing
• The rental market has happened for the following reasons: 1)Rapid economic development had limited suitable sites for self-builds, 2) Many families lots their savings in the 1997 crash, 3) Many urban poor are temporary or migrant residents, preferring to rent accommodation
• Renters are often the poorest of the poor and the most vulnerable.  Improvement programmes are not always in the best interest of these groups as their rent often increases with improvements. They are sometimes excluded too, as they are seen as a burden to the group (savings clubs etc).

• ….. blah blah blah  lots more about government interventions, non-government assistance, the private sector, UCDO and CODI, Baan Mankong, and Effectiveness, Inclusiveness and Sustainability

Conclusions

• Baan Mankong has been effective in improving land tenure security and the housing conditions of urban poor communities, but there are limitations to it’s effectiveness, inclusiveness and sustainability.
• It’s best suited to those households who need a bit of financial and technical support to gain access to landownership or long-term leases.
• There are urban poor households who cannot afford or do not want to become land and house owners or who need to develop their housing incrementally.
• Also doesn’t catter for the new low-income households in search of housing.
• This emphasises that Thailand urgently needs a national housing policy that sets as its goal adequate housing for all (and in particular the very poor), covering legal, financial, institutional and political means.
• The above is becoming characteristic in newly industrialized cities.
• In the case of Thailand, social welfare policies have not been successful, because society expects people to be self-reliant or to rely on family and the community.
• Slum dwellers do not ask for charity, but insist on their rights.  The provision of access to affordable land and housing addresses the most critical ussue for the urban poor:  Their marginal position in urban society.  What the poor demand is recognition that despite their poverty, they, their jobs and their settlements are integral parts of the city.
• The right to adequate housing for all urban poor through their self-help or otherwise requires structural changes in the distribution of wealth and property.

Urban Renewal and Slum Rehabilitation: A Sectoral Agenda within ADB’s Strategy 2020

This is a presentation that was given to the Transport and Urban Development division of the Asian Development Bank (ADB). It outlines a revised Urban Sector Strategy(USS):

• Based on the previous Urban Sector Strategy
• research is not done independently but always in alignment with lending
• focus on multi-city projects; cities consider development strategies in relation to linkages with other cities including knowledge sharing among municipalities.
• more attention to the role of the private sector
• more attention to disaster prevention and emergency
• National government assumes the role of connecting municipalities with the private sector (i.e. via land provision)
• capacity building, especially at a local government level
• redevelopment includes slum upgrading, local economic revitalisation, heritage conservation
• urban transportation management

Their approach is summed up as follows:

1. inclusive growth
2. environmentally sustainable growth
3. regional integration

And is realized through:

• infrastructure
• environment & living cities
• regional cooperation and integration
• financial sector redevelopment
• and education

The Changing Urban System in a Fast Growing City and Economy: The Case of Bangkok and Thailand

Note: This article was written in 1996 and talks about rapid urban growth. It also outlines issues, opportunities, and solutions which may be outdated. However, it could give an overview of the current issues in Bangkok.

Benefits to rapid urban growth in Bangkok:

Economic

• income & employment opportunities
• produces 50% of national GDP
• highest GDP per capita in Thailand
• 2.3% higher household income than Thailand as a whole
• lowest incidence of poverty in Thailand (3.41% vs. 23.67%)
• locus of industrialisation for the whole country
• urban issues shouldn’t be solved by restraining growth, but rather through urban management

Social

• 12% vs. 1.2% access to piped water
• 7.0 vs. 1.2 telephones per 1000 people (must be VERY different with cell phones today)
• 12,800 vs. 2,302 cubic cm of water per 1000 people
• 2.12 vs. 0.38 hospital beds per 1000 people

Cultural

• Center of arts & knowledge
• leisure & entertainment

Costs of rapid urban growth:

Transportation

• too many cars; city is gridlocked
• lack of efficient public transport
• neglect and violation of traffic laws

Air & Water Quality

• cars/traffic/factories = lead/carbon monoxide/sulphur dioxide pollution
• polluted canals & waterways
• dependence on underground water leading to soil subsidence. Sinking land put a burden on flood systems which are becoming more expensive and complicated

Land Use Problems

• located on a paddy field which is not suitable land for industrial or residential development
• no land use planning (the first city plan was produced in 1992)
• insufficient infrastructure for the scale of development

Possible responses to rapid urban growth:

• increased road capacity
• improved mass transit
• improved traffic control
• control of volume of traffic
• lead-free gasoline
• control on emissions
• wastewater treatment
• solid waste management
• institution of a polycentric land-use plan (in the works)

ACTORS: Bangkok Mass Transit Authority (BMTA),  Bangkok Metropolitan Region Development Committee (BMRDC), Metropolitan Water Works Authority, National Environmental Board, Japanese International Cooperation Agency (JICA)

Housing the Urban Poor in West Malaysia

This article is about the current housing situation in West Malaysia and how the  government can use policy to allow the private sector to better serve the need for low-income housing.

 

A colonialist background is touched on: that the housing conditions of the poor have been understood through a Western aesthetic ideal of disorder or untidiness. The author call for a need to stress the real deficits of low income housing: correlation between bad housing and disease, delinquency, and other personal and community disorders. The author writes that there a barrier to the understanding of the importance of housing. The chicken and egg situation is that some believe increased income will lead to improved housing (in which case there should be a focus on economic development) and others believe that improved housing will lead to increased income (in which case a tenet of economic development should be improved housing). The benefits of good housing are outlined as: pride of possession, social utility, and political stability.

 

He stresses this last one as important motivation for government to be involved in supply of low-income housing however in the past, they have not had the resources to supply housing to the poor at the scale needed to meet demand. As is the pitfall of the approach above (that increased income = better housing), the governments of Asia have pushed a rural-urban migration to pull people into the work force but have not supplied adequate housing in cities to meet the migrant demands creating a massive housing shortage in cities.

 

The author then outlines the gap between household costs and the cost of housing, and talks about three different groups of households and how they may lack access to the housing market: Household with a low monthly income which need to remain the responsibility of the government, those with a household income high enough to have access to the private sector market but still needing loans to do so. And he says there is a “grey zone” of housing: Those who “cannot afford homes on the open market and yet are ineligible for public housing”.  For this grey zone, the government needs to incentivize the private sector to build cheaper so as to meet their demand by:

• Reducing land costs: by acquiring and assembling land for low income housing and offering subsidized selling or leasing prices
• Reducing costs of building materials: by investing in research into local materials and building technologies to make use of abundant, available resources.
• Reducing labour costs: by investing in training facilities for workers and subsidizing skilled workers to shift some of the labour burden to the public sector.
• and reducing building and planning regulations: in order to shift away from middle-class values of British colonialists and institute more realistic standards for new building.

Finally, the author advocates setting up funding institutions with lower interest rates and longer repayment  times in order to reach those needing credit but unable to attain it through the current institutions.

 

Critique: The concern still remains that housing stock built and sold at a cheaper price will meet not meet the needs of the people in the “Grey zone” but will be bought up by those with a slightly higher income who could already have accessed the formal market. Also, there remains under what conditions the poorest people will receive housing. If they are wards of the state, how will they access this subsidized housing market outside of the private sector?

One more interesting thing that was mentioned but wasn’t explored too much is that the government freezes out small scale, informal construction companies which have a lot of experience, resources, and knowledge in housing the poor. I think these construction companies are a very important asset to low-income housing.

Note: This case isn’t current (1977) and it is at times specific to Malaysia.

ACTORS: Private sector, public sector, People’s Action Party (Singapore), Cheras (Kuala Lumpur), State Economic Development Corporations (SEDC)(Malaysia), Housing Developers Association (HDA).