RESOLVING PAKISTAN’S HOUSING

Babar Mumtaz

RESOLVING PAKISTAN’S HOUSING

Babar Mumtaz

RESOLVE

1. Settle a contentious matter

2. Find solutions

3. Decide firmly on a course of action

RESOLVING HOUSING

1. Settle a contentious matter– What is housing

– What is the problem

– Why has it not been solved

2. Find solutions– Land

– Houses

– Finance

3. Decide firmly on a course of action– Housing Action Plan

WHAT IS HOUSING

House – A structure/place where a

household lives: 4 walls and a roof

Household – a group of people,

related or not, living in the same housing unit, contributing to, or partaking of, one or more activities (housing, food) that sustain it

Housing –

Noun: A collection of houses: not just the house

Verb: the process of acquiring/accessing housing

– For the individual: • shelter, security, status, access

– For society: • propagation, community, identity

– For the economy: • stimulates demand, savings, multiplier

effects, employment

– For the City: • major purpose and function of city

• primary component of neighbourhood

• gives identity, character

• occupies 30% urban land

• determinant of transport, infrastructure, services

• source of city’s income – directly and indirectly

WHAT IS THE PROBLEM?

• Magnitude• Too many people

• Land• Unavailable• Unaffordable• Unsustainable

• Houses• Unavailable• Unaffordable• Unacceptable

• Finance• Unavailable• Unaffordable• Unsecurable

Present housing shortfall in Pakistan is 10 million units and it is expected to double in coming one decade (including depletion of some of existing housing stock). According to the latest stats, total number of houses built every year in Pakistan is somewhere between 0.15 – 0.2 million, whereas we need 1.0 million new houses annually (0.7 million for population growth and 0.3 million for replacing old houses and to cover the existing shortage).Zameen Blog Feb 2014

WHAT IS THE PROBLEM

Virtually all Housing Discussion makes the following assumptions:• That Housing Need = Housing Shortage, or households - houses. • No mention/use is made of Housing Demand (hidden; suppressed) • That average household size can be used to calculate the numbers of

housing units; that Household size is constant• That all houses with mud walls are inadequate and need replacing• That all “overcrowded” houses need replacing.

• Overcrowding is defined on the basis of figures from other countries • Or by citing UNHabitat 3+/persons per room – but this is not a universal/legal definition• UNHabitat also uses 4+ (Canada has 350,000 such people). • UK: 2+/room excluding children under 10yrs.

• That all “slums” need replacing – UNHabitat: 74% of Pakistani houses• Of the 5 criteria, the lack of 3 (Security, water supply, sanitation) does not mean that

houses need to replaced (the other 2 are standard of construction, overcrowding)

• That projections of past numbers can give future housing production• Affordable Housing: Funds and Finance ≥ the Price of Housing

• Affordable Housing USA, UK, EU: Price of Housing ≥ Funds and Finance

WHAT PROBLEM?

Owner-Occupied Houses as % of Total

WHAT PROBLEM?

Housing Debt as % of GDP

IS THERE A PROBLEM?By Census of Pakistan definition, there can be no “homeless”

IS THERE A PROBLEM?By Census of Pakistan definition, there can be no “homeless”

“According to a survey conducted by Shelter for Homeless People there are around 185,000 homeless people in Lahore. Of these 98 per cent are male while two per cent are female. “Around 18 per cent are children who are vulnerable to sexual abuse,” says Nasrullah Bukhari, chairman of the organisation.” The News on Sunday, June 5, 2016

Same as London. London’s pop is 8 million, Lahore 11 million. So London 2.5%, Lahore 1.5%

IS THERE A PROBLEM?

Yes, There is a problem• Of Housing quantity and quality• Of Land affordability and accessibility• Of Finance availability and Terms and Conditions

But more importantly• There is problem of Market Failure and of• Government Policy

THE HOUSING MARKET

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

PROBLEM

SOCIAL HOUSING

INFLUENCING THE MARKET: HOUSING POLICY

Credit

Poverty

Inco

me $

Housing expenditure $

Affluence

BUY/BUILD

RENT

VULNERABLE GROUPS

Age

Gender

Income

Location

Ethnicity

WHO HOW

HOUSING: THE ORIGINS OF THE PROBLEM

HOUSING Has Not Always Been a Problem

• Until the last Century, Housing was not really a problem – or at least not a social or societal problem

• Housing has become a problem as the mode of production has changed: separating home and work, worker and work place

• Land shifted from community to individual, from place to product

• The rate of growth of population increased, outpacing production

• Increasing concentration of population in cities reducing access to infrastructure

HOUSING: MARKET FAILURE

Why the Market Fails to Supply the Housing Needed

• The Market cherry-picks

• It is in the interest of the Market to ensure demand continues not diminishes

• The Market does not meet demand, it creates demand

• The Market campaigns against Government hand-outs (welfare) for consumers, but continuously seeks them for producers

• Most housing subsidies are designed to go to the producers, not the households

• The Market also keeps wages as low as possible – making it more difficult to access housing

GOVERNMENT IMPACT ON HOUSING

INSTRUMENT HOW

OBJECTIVE ASPECTWHAT

Building, planning

standards

Maximum

House

Affluence

(Housing) finance Access Credit

Construction

standards & costs

Minimum

House

Poverty

Housing legislation Control Rent

Welfare policy Provision Social

Housing

Housing design

(Housing Projects)

Costs Housing

Urban planning Availability Land

Urban development Costs Infrastructure

INFLUENCING THE MARKET

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

PROBLEM

HOUSING POLICY

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

Credit

Poverty

Inco

me

$

Cumulative % of

Population

Affluence

0 10 100

TRANSFERRING HOUSING POLICY

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

Credit

Poverty

Inco

me

$

Cumulative % of

Population

Affluence

0 10 100

TRANSERRING HOUSING POLICY

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

Credit

Poverty

Inco

me

$

Cumulative % of

Population

Affluence

0 10 25 60 100

TRANSFERRING HOUSING POLICY

Credit

Poverty

Inco

me

$

Housing expenditure $

Affluence

BUY/BUILD

RENT

Credit

Poverty

Inco

me

$

Cumulative % of

Population

Affluence

0 10 25 60 100

EXAMPLES OF HOUSING POLICY FOCUS

23

INSTRUMENT OBJECTIVE USA INDIA UKINDO-

NESIAIRAQ

Affluence Maximum House Building & planning

standards

Credit Access (Housing) finance

Poverty Minimum House Construction standards

& costs

Rent Control Housing legislation

Social Housing Provision Welfare policy

Housing Costs Housing design

(Housing Projects)

Land Availability Urban planning

Infrastructure Costs Urban development

HOUSING: GOVERNMENT FAILURE

Why Governments Fail to Supply the Housing Needed

• The Government always has a political agenda

• The Government wants to be seen as being benevolent (giving)

• Governments are paternalistic and patronising – they know what you want

• Everyone expects to be given something for “free” from the Government

• Governments do not want to implement their predecessor’s policies

• The Government is unable to operate at the speed or scale that is needed

• Most Governments can only supply 1/7 to 1/10th of the Total housing

LOW INCOME HOUSING

LOW INCOME DEMOLITION

HOUSING SCHEMES IN LAHORE

Pre 1900

1900-1950

1950-2000

Since 2000

HOUSING: MISSING THE TARGET(Especially for the Poor)

NEEDED PROVIDED

LAND Near, within existing development On the edges

Environmentally sustainable Environmentally hazardous spaces

Not Agriculturally productive Well-drained Prime agricultural land

HOUSES Affordable houses Unaffordable houses

Culturally acceptable houses Culturally alien flats

Community-friendly Anti-Community

FINANCE Accessible, Affordable finance Inaccessible, Unaffordable Finance

Favourable Terms Impossible Terms

INFRASTRUCTURE Efficient infrastructure Wasted Infrastructure

Roads that nurture communities Roads that keep communities apart

PLANNING Vibrant communities Segregated communities

Planned for people Planned for cars

HOUSING: HOW DO THE PEOPLE DO IT?

1. Land where you can. Squat on or buy from an illegal source land that is unattractive and hope to remain long enough to stake a claim, building incrementally. Wait for opportunities to get infrastructure and eventually title.

2. Invest in land and wait. This usually entails buying land on the periphery of the built-up area while it is still cheap. If possible, the household will buy more than one plot – or at least land enough for more than one house. They will wait while the area starts to develop and land prices increase, and this may take 10 to 20 years. At that point, they will sell off half the land (at 3 or 4 times the price) and use the funds to construct their own house.

HOUSING: HOW DO THE PEOPLE DO IT?

3. Invest in land and develop. Similar to the above, but continue “saving/accumulating” funds so that when the time is right, they can build a house, sell that and then build their own house with the profits.

4. Invest in land, borrow and develop. Similar to the above, but use a short-term loan (1 or 2 years), build two flats on half the land. These can then be sold to pay off the loan, and use the profits to build 2 more units, one for their own use and the other to rent out for an income till such time as their own off-spring needs a house.

5. Build on previous investment. Where there is already a house (perhaps built as above), build a second unit above, probably for the next generation.

HOUSING: HOW DO THE PEOPLE DO IT?

6. Partner a Developer. Where there is already a house (or perhaps even just land) go into partnership with a developer who will undertake the construction in return for the land. 6 or 8 units may be constructed, 2 of which are given to the landowner, 2 are sold to recover the costs and the other 2 to 4 are the developer’s profits.

7. Buy from a developer (perhaps of 5 above) using phased payments over a 2-year period. The developer gets interest-free funds to finance the development without tying up any of his own capital. With tax-efficient payments, there may be further savings for all.

RESOLVING HOUSING: IDEAS

MANAGEMENT

• Government should make decisions, Households should take decisions• Keep paperwork simple, reduce Bureaucracy• Establish a corps of Housing facilitators, not teams of Building Inspectors• Specify what cannot be done rather than what must be done• Be Inclusive – engage women• Involve people – ask before task• Increase transparency• Establish Neighbourhood Management Units• Establish Housing Research and Innovation Centres

LAND

• Learn from what people do• Maximise infill, extensions and additions – horizontally and vertically• Increase average/overall density• Tax vacant land at same rate as developed land• Acquire land in exchange for developed land – 25% for purchase; 30% for

common uses; 30% for sale; 15% for low-income• All land records to be publicly accessible

RESOLVING HOUSING: IDEAS

HOUSING FINANCE

• Enable and encourage saving opportunities, Peer-to-Peer lending• Incorporate Islamic finance instruments• Introduce short, sequential loans to support incremental construction and

improvements

ECONOMIC ENTERPRISES

• Facilitate the establishment of neighbourhood economic enterprises• Encourage home-based enterprises• Encourage and facilitate home/kitchen gardening• Encourage re-use and re-cycling

RESOLVING HOUSING: IDEAS

HOUSES

• Simplify Building Bye-Laws, Rules and Regulations• Encourage row and courtyard houses• Encourage “Slow Rise” development• Use many small contractors instead of few large contractors• Standardise building components/elements• Encourage incremental construction – allow early occupation

INFRASTRUCTURE

• Incorporate environmentally sustainable, recycling systems• Minimise vehicular access• Encourage shared/hired transport usage• Create safe and secure pedestrian and cycle pathways• Create neighbourhood schools, play lots and off-street recreation

RESOLVE TO ACT ON HOUSING

What can be done to overcome the housing shortage, especially for those on lower incomes, and provide access to housing for all?

The proposed Action must be:• Feasible – that means socially and politically, as well as financially • Sustainable – that means that they should not be harmful or

destructive to the environment, society or economy• Acceptable – that means that they must be within the social and

cultural norms, mores and behavioural patterns • Affordable – that means both by the players and by society• Scalable – that means that all those targeted can participate• Visible – that means that their impact should be apparent• Demonstrable – that means that they can be easily proved or tested

The key to housing is affordable access to land

RESOLVE TO ACT ON HOUSING

1. Set up Urban Housing Authority (UHA) in each city• [Use drones to] record current extent of development of land and

structures2. Declare 10-year moratorium on all further “Housing Schemes”3. UHA to draw up draft housing programme• Establish current housing shortage “guesstimate”• Estimate approximate number of units that could be

accommodated using infill strategy• Estimate Impact of Katchi Abadi legalisation, densification• Estimate land requirements for future and additional housing• Identify environmentally and otherwise strategic areas as

green/no-development areas4. Establish Housing Facilitation Force (HFF)• Recruit and train HFF to facilitate house construction and housing

area development

RESOLVE TO ACT ON HOUSING

5. Densification and infill strategy• Allow all plots to develop up to 4 stories (with structural

adjustments and compliance) – double average density of cities;• Estimate additional infrastructure needs;• Estimate the Options for and Costs of infrastructure provision • Apportion costs amongst streets/areas to arrive at development

charge/plot/floor6. Legalise all katchi abadis…STRAIGHTAWAY• Record all structures, use Mohalla Bazee* to upgrade layouts• Regularise structures and services• Use NIC cards to record all residents, check for multiple properties• No compensation to land or building owners, residents• Demolish all additional further interventions as they occur

* Community mapping and upgrading

RESOLVE TO ACT ON HOUSING

7. Land Provisioning Strategy• Establish Agency for undertaking DHA-style land acquisition • Allocate 25% land to original landowners after scheme developed• Allocate 30% land for roads, infrastructure and other public uses• Allocate 30% land for sale at market rates – Use income to pay for

development costs• Develop 15% of land for low-income Housing – to be sold at 25%

of market rates

• NIC-verified households may buy as many units as and when they can afford – up to 5 marlas in total. More only if they have sold their land holdings to verified purchasers

• All land trading through “virtual land” parcels • Low-Income households that own land – inherited or acquired

through verified purchase can also sell their land at market rates

RESOLVE TO ACT ON HOUSING

8. Finance for House Construction• Introduce P2P lending instruments for short, sequential loans to

support incremental construction and improvements• Develop a Land-Banking system using cryptography

• Land Agency “acquires” parcels of land and offers them for sale (at 25% market rate of land) in square yard sized pieces

• NIC-verified households may buy as many units as they can afford – up to a total of 5 marlas. They can buy more only if they have sold their current land holdings to other verified purchasers

• Land remains “virtual” until owner is ready to build – selects possible location from those on offer from Land Agency

• Low-Income households that own land – inherited or acquired through verified purchase can also sell their land at market rates