Can we create affordable housing in the world's fastest-growing cities?

A photograph of a slum settlement like Korail by the waterfront at Gulshan area in Dhaka, Bangladesh.
Image: Andrew Biraj/ Reuters

Ira Peppercorn ’85 served as deputy federal housing commissioner under President Bill Clinton and has worked on poverty and housing in dozens of countries as president of Ira Peppercorn International, an international development consulting firm whose clients have included the United Nations, World Bank, IFC, American Red Cross, and USAID. He is also a photographer and has documented the lives of poor and remote communities around the world. He talked with Yale Insights about the challenges of affordable housing in the developing world, and contributed a selection of his photos.

Q. What are the key challenges to creating affordable housing in developing countries?
The biggest challenge is that cities are growing, but in an unplanned way and in a way that creates unsafe conditions for many. The growth is steady, but steady built on steady winds up being exponential. People come for work. They know somebody in the city—a relative or friend. Often, the opportunities they find are informal. In many cases, the cities aren't ready for them. The planning systems are out of date. The building codes don't work. Basic services aren't there. The conditions can be awful—overcrowded and polluted.

As an example, Dakha, Bangladesh, is already one of the most densely populated cities in the world. Yet people keep coming, so it’s also one of the fastest growing. The newly arrived end up in informal settlements like Korail, which is a very, very dense community with housing that is not safe. These are basic structures made from wood or sheet metal walls with a corrugated tin roof. Rarely will you have an indoor toilet or running water. Cooking is done on polluting cook stoves. Floors might be cement; more likely they are dirt.

At the same time, walking through Korail you see fruit stands, barber stalls, cell phone stores. There are people fixing shoes. There are women on the ground sorting rice. The level of activity, commerce, and community is something that most Americans would find surprising.

Clearly, we want the residents of these communities to have better lives, but that doesn’t mean that everything about a slum is terrible and bad and slums should be eradicated. There is a lot of commercial activity. People are working. Kids are playing in the streets. Sometimes the best options are small improvements that let the residents live more safely while staying in or near their neighborhood.

Q. What is a slum?
The indicators of a slum include inadequate access to safe water or sanitation, overcrowding, poor structural quality of dwellings—whether because of the materials or the location—and insecurity of tenure. These are baselines to improve on. Adequate access to water does not have to mean running water in the house; it might mean you can pump drinkable water nearby. Similarly, access to sanitation doesn't mean that you have a flush toilet. There isn’t a universally accepted number for any of these indicators, but when I was at the World Bank working on an analysis of basic services in urban Kenya, we counted adequate sanitation as a communal toilet shared by less than 20 people for purposes of defining what is a slum. That is not necessarily the right number, simply an indicator to show how people are living.

The ability to turn on a tap and get a glass of clean water, the ability to close the door to a bathroom that’s in your own home—those are luxuries in a lot of places. I think most people don’t understand that.

Q. What do you get by creating a more precise definition of a slum?
Without a definition, there isn’t any way into the problem. Frustration leads to calls to eliminate slums. Often when slums are knocked down, the people who used to live there are pushed further to the periphery of the city, farther away from jobs, transportation, and services.

When you have a precise definition and data about a specific community you can say, okay, the problem in this case is access to water. There are small-scale water purification systems that can be put in people’s houses. Somewhere else the issue is sanitation. There are companies that build sanitary facilities that not only provide a safe place to use a bathroom but also treat the waste. When you have a specific definition, you can find ways to intervene that match the particular challenge.

That isn’t to say it is easy, because the scale of the problem is tremendous. In Kenya we found that over 60% of the urban population live in slums.

On the other hand, there’s value to each bit of progress. I was in Uganda at a community meeting where residents were so proud because the community meeting room was on the second floor of a building where the first floor had indoor toilets for the neighborhood. They were so proud and so happy. It was going to take at least five years to pay off the construction costs, but it was a real step up. Not just in sanitation but safety. Women particularly told me how unsafe it felt to go at night to a side street or a field to find somewhere to use the bathroom and how this building changed their lives.

Q. Are there examples of countries or cities that have responded well?
The best solutions have involved members of the community. The Akiba Mashinani Trust in Kenya works with slum residents to rebuild their informal dwellings into livable, expandable housing. They use savings plans, training, and community involvement in designing new housing. Beyond that, what makes this work is being very reasonable about expectations. People get a safe, durable, affordable dwelling, but it is small to start. They keep costs down through designs that use shared walls and some communal spaces. It works with the way people are already living, but doing it in a smarter way. The residents are trained in building techniques so that they can add rooms as they are able, allowing another family member to come or a subunit for rental income.

Thailand funds an organization called the Community Organizations Development Institute (CODI). It does many of the same things, including organizing groups within informal settlements, savings clubs, and collaboration with experts to design improvements for the community. There are also systems that allow for communal landownership and support for building collective housing. It involves a long-term commitment of time, people, and money from all partners, but it has had good results.

Q. Are there effective policy and regulatory fixes?
One of the best things that can be done, both at the local and national levels, is a survey of the current conditions. Gathering accurate data will do a world of good. Again, when officials have detailed information, when they are not just saying there is an affordable housing crisis, they can start finding specific solutions.

They can also ask why it is happening. For instance, in a lot of countries formerly under British rule, their zoning and planning system come straight from the post-World War II British building code. What made sense in 1940s London doesn’t necessarily make sense in urban Africa or Asia today.

When building codes don’t fit the local realities, people will ignore them. You wind up with informal building upon informal building. The city knows it’s happening but doesn’t have the capacity to address the situation, so they ignore it and it keeps getting worse. Planning, zoning, permit approval, and inspections are all open to corruption; if the regulations aren’t tied to the way people are actually living, there’s even less chance for success.

But if problems are identified, they can be fixed. Over five years, the government of Rwanda made a very concerted effort to streamline their land registration process. When people can access land more easily, with more certainty, and at a lower cost, that reduces the overall costs of housing.

If you notice, I am not saying that governments should go build housing or pay the private sector to do it. Time and again governments jump to solving affordability problems by increasing the housing supply, but often that new supply is not affordable and the systems causing the problems are not addressed. Sometimes much more can be accomplished by freeing up urban land or by streamlining regulations.

Q. What’s wrong with solving the problem by building housing?
Affordable housing is a very a complex problem that requires multiple solutions. If people tell you that there is one solution, run. They are going to tell you to build massive amounts of inexpensive housing so that low-income people can afford to buy. I can tell you from example after example after example, the proposed numbers look great, but over time, many of these neighborhoods turn into slums.

Governments need to look not just at the supply side, but also on the demand side of housing. The most important thing is to understand the constituency. Understand what people earn, how they earn it, and what they can afford. Manage to the way people are currently living.

How much are people paying a month for rent? If my family is earning the equivalent of $60 a month, which globally isn’t even the poorest of the poor, I can afford $20 a month for housing. Show me decent new housing that can be supported by $20 a month. Even if the government gives away the land, pays for the infrastructure, and sells the new units at cost, poor people still can't afford it. It’s typically people in the 70th, 80th, 90th income percentile who can.

Even if the government increases the subsidies to allow lower-incomes to get into the new housing, there are long-term costs. The government and the families moving in have got to understand what it takes to be there over time. Too often, they don’t.

What if, instead of subsidizing new buildings, the public sector helped with improved access to clean water and sanitary facilities, maybe a safer cook stove, while a family rents a unit owned by somebody in the neighborhood? That’s helping them get a better life—it's not everything but it's an incremental step. And it's a better step than trying to force them into an ownership situation that they are not going to be able to afford in the long run.

Q. Some problems persist because there isn’t sufficient funding dedicated to fixing it. Is that the case with affordable housing?
The answer will depend on the specific situation, but typically if you just throw money at the problem, you subsidize inefficiency. You subsidize a system that isn’t working well. You can put money in with no benefit or even a negative impact.

I would start by looking at solutions that involve no cash outlay but address problems for people that build housing, landlords, or consumers. How much does it change things if you cut the time to get a construction permit from a year to three months? What if you allow greater density in the urban core?

One of the best things cities can do it is to look at the causes of illegal building and how to change the incentives. For instance, it’s quite common in developing countries to see buildings that are seven eighths complete. It’s not that owners all ran out of money; it’s that once the building is completed they have to get an occupancy permit, which means it goes on the tax rolls.

Owners often go through a number of the steps legally. They own the land. They get the construction permit. But they are not going to get the occupancy permit because then they are going to be regulated and they are going to have to pay taxes.

What if you created a system where buildings that are safe, demonstrated through inspection, and renting to people at a defined level of affordability receive ten years of tax exemption? What does that get you? You get a degree of control. You get lower-income people living in a property that you know is safe. Ultimately, you get those buildings on the tax rolls.

If you only take the stick approach, threatening fines or jail, threatening to kick the residents out, what's going to happen? I can guarantee you there won’t be the resources for effective enforcement and the inspectors will be open to corruption and bribery. So figure out why people aren't coming under the legal system, give them a way to join, and give them something for it. Maybe you add a component where buildings that can safely expand can get loans or grants to do so as long as they continue renting to lower income families. Maybe buildings that don’t meet safety requirements can access support to get up to code. Sure, these things create a need for additional monitoring but every program will have a problem or two or five. With affordable housing, you wind up seeing there’s not one thing that will solve the problem. Progress comes from incremental steps.

[This article has been reproduced with permission from Qn, a publication of the Yale School of Management http://qn.som.yale.edu]