Affordable

 &  Pro-­‐Poor  Housing.  

Impera8ve  For  Pakistan’s  Progress  
A  Presenta*on    at  SBP  by;  
M.  Abrar  Ameen  
March  25th,  2013.  
 Dedica*on  
•  This   presenta*on   is   dedicated   to   Dr.   Parveen  
Rehman,   the   Director   of   Orangi   Project,   who  
selflessly   served   the   poor;   but   was   murdered  
two   weeks   back   by   forces   opposed   to,   and  
threatened   by   the   idea   of   a   Progressive  
Pakistan.  
 Preamble  
•  The  housing  shorLall  in  Pakistan  has  assumed  alarming  
propor*ons.   But   the   sector   that   has   remained   largely  
ignored   by   all   commercial   banks,   and   most   of   DFIs   is  
the  low  income  segment.  
•  Owning  a  house  not  only  brings  stability  to  the  lives  of  
people,   but   is   the   most   prominent   source   of   crea*on  
of   na*onal   wealth.   We   need   to   adopt   radical,   out   of  
the   box   solu*ons   to   address   this   issue,   which,   if   leQ  
unaRended,   would   result   in   a   severe   pressure   on   the  
already   crumbling   social   safety   net,   that   Pakistan   has,  
largely   in   the   shape   of   family   (not   governmental)  
support.    
 Introspec*on  
•  Is  housing  a  basic  need,  a  right,  an  en*tlement,  a  public  
good,  or  even,  as  in  the  case  of  home  purchasing,    a  civic  
necessity  ?    
•  Or  is  it  just  another  household-­‐level  consumer  choice,  a  
commodity  or  an  investment  within  the  free  market  
system?    
•  "Housing  Policies  provide  a  remarkable  litmus  test  for  the  
values  of  poli*cians  at  every  level  of  office  and  of  the  
varied  communi*es  that  influence  them.  OQen  this  test  
measures  simply  the  warmth  or  coldness  of  heart  of  the  
more  affluent  and  secure  towards  families  of  a  lower  socio-­‐
economic  status  (John  C.  Bacher  –Keeping  To  The  Marketplace:  The  
Evolu*on  of  Canadian  Housing  Policy-­‐1993)."  
 Context  of  Presenta*on  
•  We  have  been  talking  about  the  issues  for  a  very  long  
*me,  with  liRle  headway  in  coming  up  with  prac*cal  
solu*ons.  
•  Where  solu*ons  have  been  proposed,  or  presented,  
their  adop*on  has  been  hampered  by  either  a  lack  of  
will,  or  lack  of  interest  by  the  banking  community.  
•  Housing  has  been  relegated  to  the  boRom  of  the  
pyramid  of  products,  as  banks,  and  their  Managements  
have  become  comfortable  with,  and  set  their  hearts  on  
inves*ng  in  Government  paper  for  quick  and  steady  
returns.  
 Context  Of  Presenta*on-­‐II  
•  The   problem   is   not   insolvable,   only   the   route   to   the  
solu*on  requires  the  will  to  take  the  first  steps.  
•  Countries   like   India,   China,   Egypt,   Indonesia,   and  
others   had   long   resolved   to   address   the   issue   of  
provision  of  low  cost  housing  for  low  income,  and  poor  
segment  of  their  popula*ons.  
•  They   had   rolled   out   programmes   for   massive   increases  
in   the   housing   stock,   with   Public-­‐Private   partnership,  
with  the  result  that  they  now  have  large  communi*es  
living  in  these  low  cost  houses.  
 Context  of  Presenta*on-­‐III  
•  This  presenta*on  analyses  the  issues,  looks  at  
the   impediments   –   some   of   which   we   have  
not   addressed   out   of   sheer   apathy,   and   then  
proposes   the   solu*ons   to   address   this  
festering   problem,   that   has   remained   on   the  
back  burner  for  too  long.  
•  In  the  words  of  a  Paper  wriRen  by  Mr.Zaigham  
Rizvi,   some   *me   ago,   Pro   Poor   Housing   is   an  
Idea,  whose  Time  Has  Come.  
 The  Issues  
•  Housing   affordability   is   more   than   just   a  
personal   trouble   experienced   by   individual  
households   who   cannot   easily   find   a   place   to  
live.   Lack   of   affordable   housing   is   considered  
by   many   urban   planners   to   have   nega*ve  
effects  on  a  community's  overall  health.  
 The  Issues  -­‐  II  
•  Lack  of  affordable  housing  can  make  low-­‐cost  
labor   more   scarce,   and   increase   demands   on  
transporta*on   systems   (as   workers   travel  
longer  distances  between  jobs  and  affordable  
housing).   Housing   cost   increases   have   been  
linked   to   declines   in   enrollment   at   local  
schools.  
 The  Issues,  &  Effects  
•  A   well   located   dwelling   might   save   significant  
household  travel  costs  and  therefore  improve  
overall   family   economics,   even   if   the   rent   is  
higher  than  a  dwelling  in  a  poorer  loca*on.  
•  A   household's   inhabitants   must   decide  
whether   to   pay   more   for   housing   to   keep  
commu*ng   *me   and   expense   low,   or   to  
accept   a   long   and/or   expensive   commute   in  
order  to  obtain  "beRer"  housing.  
 The  Issues,  Causes  &  Effects  
•  In   a   depressed   or   sparsely   seRled   rural   area,  
for   example,   the   predicted   price   of   the    
median   two-­‐bedroom   apartment   may   be  
quite   easily   affordable   even   to   a   minimum-­‐
wage   worker   –   if   only   any   apartments   had  
ever  been  built  
 The  Issues,  Causes  &  Effects-­‐II  
•  The   availability   of   affordable   housing   in  
proximity   of   mass   transit   and   linked   to   job  
distribu*on,  has  become  severely  imbalanced  
in   this   period   of   rapid   regional   urbaniza*on  
and  growing  density  convergence.  
 The  Issues,  Causes  &  Effects-­‐III  
•  In   addi*on   to   the   distress   it   causes   families  
who   cannot   find   a   place   to   live,   lack   of  
affordable   housing   is   considered   by   many  
urban   planners   to   have   nega*ve   effects   on   a  
community's  overall  health.  
 Issues,  Causes  &  Effects-­‐IV  
•  Affordable  housing  challenges  in  inner  ci*es  
range  from  the  homeless  who  are  forced  to  
live  on  the  street,  to  the  rela*ve  depriva*on  
of  vital  workers  like  police  officers,  
firefighters,  teachers  and  nurses,  who  are  
unable  to  find  affordable  accommoda*on  
near  their  place  of  work.  These  workers  are  
forced  to  live  in  suburbia  commu*ng  up  to  
two  hours  each  way  to  work  
 Issues,  Causes  &  Effects-­‐V  
•  The   market   has   been   unable   to   meet   the  
growing   demand   to   supply   housing   stock   at  
affordable   prices.   Although   demand   for  
affordable  housing,  par*cularly  rental  housing  
that   is   affordable   for   low   and   middle   income  
earners,  has  increased,  the  supply  has  not.  
 The  Issues,  Causes  &  Effects-­‐VI  
•  The  growing  gap  between  rich  and  poor  since  
the  1980s  manifests  itself  in  a  housing  system  
where   public   policy   decisions   privilege   the  
ownership   sector   to   the   disadvantage   of   the  
rental  sector.  
 The  Pakistani  Problem  
•  Currently,   Pakistan   has   an   overall   housing   backlog  
exceeding  6  million  units  with  an  annual  addi*on  of  
300,000   units   –   based   upon   conserva*ve   es*mates  
from  the  Popula*on  Census  of  1998  and  the  Na*onal  
Housing  Policy  of  2001.  Roughly  30-­‐40  percent  of  the  
demand  is  addressed  by  mainstream  developers  who  
cater   to   the   high-­‐end   market.   The   remaining   units  
fall  under  the  category  of  the  low-­‐income  segment.  
 The  Pakistani  Problem-­‐II  
•  The   government   has   made   repeated   aRempts   to  
address   this   segment   through   various   ini*a*ves   –  
seldom  succeeding.    
•  The   current   low   income   housing   deficit   within  
Pakistan  is  3  million  units  with  an  addi*on  of  150,000  
units  per  annum.In  addi*on  to  these  alarming  rates,  
within   the   urban   context,   there   is   a   disturbing  
paRern.  
 The  Pakistani  Problem-­‐III  
•  Of   those   that   do   own   homes,   there   is   a   clear  
paRern   of   construc*ng   addi*onal   rooms   as  
opposed   to   construc*ng   new   homes.   This   leads  
to   an   increase   in   the   density   of   homes,   thus  
further  exacerba*ng  the  housing  problem.    
•  With   most   homes   having   been   constructed   over  
twenty  years  ago  (58  percent),  over  50  percent  of  
the   popula*on   under   the   age   of   25   ,   and   no  
solu*ons   in   sight,   demand   in   the   lower   income  
segments   is   expected   to   explode   in   the   next  
decade.  
 The  Pakistani  Problem-­‐IV  
•    In   order   to   truly   comprehend   this   problem,   one  
must  put  him/herself  in  the  shoes  (or  bare-­‐soles)  of  
the   average   ci*zen   of   Pakistan.   An   individual   is  
earning   between   Rs:   13500   to   18500(   US$   135-­‐185)  
per   month   (working   in   the   public/private   sector   or  
self-­‐employed)   and   is   responsible   for   maintaining  
his/her   nuclear   family   as   well   as   members   of   the  
extended  family.    
 The  Pakistani  Problem-­‐V  
•  The   average   ci*zen   lives   with   a   level   of  
uncertainty   on   a   daily   basis,   and   is   constantly  
faced   with   a   mul*tude   of   poten*al   issues   to  
handle   rela*ng   to   running   of   his/her   household  
and  providing  for  the  family.  
•  For  those  living  in  rental  units  (30  percent  of  the  
popula*on),  their  average  monthly  income  is  Rs:  
16500   (US$   165)   and   their   monthly   saving,   aQer  
all   expenses   rela*ng   to   rent,   food,   u*li*es,  
transporta*on   and   miscellaneous   are   deducted,  
under  ideal  circumstances,  is  Rs:  1500  (US$  15).  
 The  Pakistani  Problem-­‐  VI  
•  With  the  average  person  saving  Rs:  1500  (US$  
15/month)   and   the   average   80   square   yard  
plot  cos*ng  Rs:  700,000  (US$  7,000),  it  would  
take  nearly  forty  years  before  one  could  afford  
such   a   plot.The   result,   is   the   current   housing  
crisis  Pakistan  is  faced  with.  
 The  Impact  of  Non-­‐Affordability  
•  Lack  of  affordable  housing  places  a  par*cular  burden  
on  local  economies.  
•  Individual   consumers   are   faced   with   mortgage  
arrears  and  excessive  debt  and  therefore  cut  back  on  
consump*on.   A   combina*on   of   high   housing   costs  
and   high   debt   levels   contributes   to   a   reduc*on   in  
savings.  
•  These   factors   can   lead   to   decreased   investment   in  
sectors  that  are  essen*al  to  the  long-­‐term  growth  of  
the  economy.  
 Solu*ons  
•  Affordable  housing  needs  can  be  addressed  
through  public  policy  instruments  focussed  
towards  the  demand  side  of  the  market  where  
households  are  assisted  in  reaching  financial  
benchmarks  without  which  housing  is  not  
affordable.    
 Solu*ons-­‐II  
•  This  can  include  approaches  that  simply  
promote  economic  growth  in  general,  in  the  
hope  that  a  stronger  economy,  higher  
employment  rates  and  higher  wages  will  
increase  the  ability  of  households  to  acquire  
housing  at  market  prices.  
 Solu*ons-­‐III  
•  Federal   government   policies   define   banking  
and   mortgage   lending   prac*ces,   tax   and  
regulatory   measures   affec*ng   building  
materials,   professional   prac*ces   (ex.   real  
estate  transac*ons).  The  purchasing  power  of  
individual   households   can   be   enhanced  
through   tax   and   fiscal   policies   that   result   in  
reducing  the  cost  of  mortgages  and  the  cost  of  
borrowing.  
 Solu*ons-­‐IV  
•  P u b l i c   p o l i c i e s   m a y   i n c l u d e   t h e  
implementa*on   of   subsidy   programs   and  
incen*ve  paRerns  for  average  households.  
•    For   the   most   vulnerable   groups,   such   as  
seniors,   single-­‐parent   families,   the   disabled,  
etc.   some   form   of   publicly   funded   allowance  
strategy   can   be   implemented   providing  
individual   households   with   adequate   income  
to  afford  housing.  
 Solu*ons-­‐V  
•  Or   policy   instruments   may   focus   on  
produc*on   strategies   which   facilitate  
increased   produc*on   on   the   supply   side   of  
affordable   housing   which   can   include  
r e f u r b i s h e d   o l d e r   s t o c k   a n d / o r   t h e  
construc*on  of  new  housing  units.  
•  Several   unfinished   apartments   blocks   in  
Karachi  invite  our  aRen*on  in  this  regard.  
 Solu*ons-­‐VI  
•  Currently   some   of   the   policies   that   facilitate  
produc*on   on   the   supply   side   include  
favorable   land   use   policies   such   as  
i n c l u s i o n a r y   z o n i n g ,   r e l a x a * o n   o f  
e n v i r o n m e n t a l   r e g u l a * o n s ,   a n d   t h e  
enforcement   of   affordable   housing   quotas   in  
new  developments.  
 Solu*ons-­‐VII  
•  Zoning   is   a   device   of   land-­‐use   planning   used   by  
local   governments   in   most   developed   countries.  
The   word   is   derived   from   the   prac*ce   of  
designa*ng   permiRed   uses   of   land   based   on  
mapped   zones   which   separate   one   set   of   land  
uses  from  another.    
•  Zoning  may  be  use-­‐based  (regula*ng  the  uses  to  
which   land   may   be   put),   or   it   may   regulate  
building   height,   lot   coverage,   and   similar  
characteris*cs,  or  some  combina*on  of  these  
 Solu*ons-­‐VIII  
•  Challenges   in   providing   affordable   housing   in  
China   through   the   free   market   system   are   similar  
to   difficul*es   in   many   Western   countries.  
Poten*al   purchasers   lack   wealth   to   purchase  
dwelling   units   and   lack   income   to   make   regular  
mortgage  payments.    
•  In   response   China   introduced   the   Housing  
Provident   Fund   (HPF)   program   na*onwide   in  
1995.   It   is   similar   to   housing   fund   programs   in  
other  countries  such  as  Thailand  and  Singapore.  
 Solu*ons-­‐IX  
•  The  Housing  Provident  Fund  (HPF),  provides  a  
mechanism  allowing  poten*al  purchasers  who  
have   an   income   to   save   for   and   eventually  
purchase   a   unit   dwelling   (which   may   be   a  
formerly   public   housing   unit).   The   HPF  
includes   a   subsidized   savings   program   linked  
to  a  re*rement  account,  subsidized  mortgage  
rates  and  price  discounts.  
 Solu*ons-­‐X  
•  In   India,   it   is   es*mated   that   approximately  
32%   of   the   popula*on   was   living   below   the  
poverty  line,  and  there  was  a  huge  demand  for  
affordable   housing.   Some   developers   are  
developing   low   cost   and   affordable   housing  
for  this  popula*on.    
 Solu*ons-­‐XI  
•  The  Government  of  India  has  taken  up  various  
ini*a*ves   for   developing   proper*es   in   low  
cost   and   affordable   segment.   They   have   also  
looked   at   PPP   (not   the   Pakistan   People’s   Party   !,   but  
Public-­‐Private   Partnership)     model   for   development  
of  these  proper*es.  
 Other  Solu*ons  
•  Green  Housing  
•  In  India,  The  Non-­‐Bank  Financial  Ins*tu*on  Housing  
Finance  team  completed  a  
Report  on  Low  Cost  Green  Housing  in  2012.  This  report  
iden*fied  green  technologies  and  materials  suitable  for  
lower  income  households,  the  largest  segment  of  the  
country’s  current  and  future  market  demand.  The  first  
study  of  its  kind  in  India  was  implemented  jointly  with  
the  IFC.    
•  The  same  methodology  can  be  adopted  in  Pakistan.  
 
 Other  Solu*ons-­‐II  
•  Mortgage  Covered  Bond  
•  Mortgage   funding   sources   are   cri*cal   for  
sustainable   market   development.   One   of   the  
key   funding   mechanisms   -­‐   Mortgage   Covered  
Bonds  -­‐  has  a  long  history  in  Europe  and  La*n  
America.  The  mortgage  covered  bond  projects  
in  Morocco,  Brazil,  Central  Europe  and  Central  
Asia  have  done  very  well.  
 Other  Solu*ons-­‐III  
•  Rental  Housing  
•  The  World  Bank  is  now  assis*ng  countries  that  
would   like   to   bring   rental   housing   to   the  
forefront   of   the   housing   agenda   and   to  
provide   guidance   for   policy   makers   whose  
ac*ons  can  have  an  effect  on  where  and  how  
people   live.   The   rental   housing   projects   have  
been   func*oning   successfully,   in   Hai*,   India,  
Mexico,  Eastern  Europe  and  Central  Asia.  
 Other  Solu*ons-­‐  IV  
•  Mortgage   Subsidies   for   Middle-­‐   and   Low-­‐Income  
Popula8on  (as  in  Egypt):  
•  A   loan   of   US$300   million   has   been   granted   to   the   Arab  
Republic   of   Egypt   to   develop   an   Affordable   Mortgage  
Finance   Program.With   strong   partnerships   established  
between  the  World  Bank  and  the  Egyp*an  authori*es,  the  
program   aims   to   achieve   the   objec*ves   to   create   a  
transparent   and   economically   efficient   subsidy   for   the  
broad  low-­‐  and  middle-­‐income  market  and  a  credible  legal  
and   regulatory   framework   for   the   mortgage   finance  
market.  
•  If  the  will  to  emulate  such  models  is  there,  we  can  explore  
similar  programmes  for  Pakistan.  
 Other  Solu*ons-­‐V  
•  Tri-­‐Par*te  Model  of  Developer  Finance.  
•  Changes  in  the  law  to  allow  Banks  to  hold  Consumer  Housing  
Assets  on  their  books.  
•  Changes  in  the  laws  to  allow  Consor*um  Financing  for  large-­‐
scale  Residen*al  Compounds  on  State  released  land  at  Provincial  
Level.  
•  Issuance  of  Housing  Sukuk,  with  par*cipa*on  by  owners  of  
houses  of  large  scale  housing  projects  financed  under  Islamic  
Banking.  
•  Introduc*on  of  New  Construc*on  Technologies  at  Duty  Free  
Import  basis  (  as  done  in  Indonesia  )  
•  Involving  Microfinance  &  SME  Banks  to  provide  funding  to  Low  
Income  borrowers,  by  releasing  Targeted  Funding  through  State  
Bank.  
•                                       Thank  You  Very  Much.