Tag Archives: affordability

What makes housing affordable?

By Lindsey Kreckler, Engagement Strategist

Affordable housing, like so many other things in life, can be very difficult to define, and instead often is determined by normative statements. What constitutes “affordable” housing can vary widely even within a single city, never mind a country or the entire world. Affordable for whom? Affordable where? Many common definitions of affordable housing do not take these differences into account.

The most commonly occurring definition of affordable housing is that used by the United States government, which defines affordable housing as housing and related expenses (mortgages, utility bills, etc.) that do not exceed 30% of a household’s income. If a family’s housing expenses are higher than 30% of their income, they are considered burdened. This standard can generally be applied to households within the United States, and even in comparably developed countries, such as Australia, the United Kingdom, and Canada.

Another recurring definition of affordable housing, one that takes into account the differences between different geographic areas, looks at individual markets. The median multiple system, used in this report from Demographia and recommended by the World Bank and United Nations, determines the price to income ratio of a market by dividing the median house price by median household income. According to this system, a median multiple of 3.0 or less signifies an affordable housing market, while a median multiple of 5.1 or more demonstrates “severely unaffordable” housing. The map here at Numbeo, based on user-reported numbers, shows a similar measure, the Price to Income Ratio, defined as the “ratio of median apartment prices to median familial disposable income, expressed as years of income.” While these data are user-reported and should be taken with a grain of salt, the map provides an interesting visual of how the United States and other developed economies compare to the Global South and similarly developing economies.

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Promoting a Rare Breed: Private Nonprofit Housing Developers in the GCC

This piece was originally published by Jadaliyya, an ezine produced by the Arab Studies Institute. Jadaliyya combines local knowledge, scholarship, and advocacy to better understand the Arab World and to fulfill its dedication to discussing the Arab world on its own terms. The original article can be found here.

           

By Maysa Sabah Shocair, AHI’s Managing Director of the GCC Region

While working as a Project Manager at the Fenway Community Development Corporation (CDC) in Boston and as a Consultant to Phipps Houses in New York City, I experienced firsthand how nonprofit developers can contribute to preserving housing affordability in central locations. Fenway CDC builds and preserves housing and champions local projects that engage the entire Fenway community in protecting the neighborhood’s economic and racial diversity. It has operated since 1973 and has developed nearly six hundred homes, housing approximately 1,500 low and moderate-income [1] residents, including those with special needs. In addition, Fenway CDC has supported residents through offering job placement and career advancement services, building playgrounds, running after-school programs for teens and operating a center for seniors. Similarly, Phipps Houses develops, owns and manages housing in New York City. Since its  founding in 1905, it has developed more than six thousand apartments for low- and moderate-income families, valued at over one billion US dollars. Phipps Houses manages a housing portfolio of nearly ten thousand apartments throughout New York City. In addition, it serves over eleven thousand children, teens, and adults annually through educational, work readiness, and family support programs.

Now that I am working in the Gulf Cooperation Council (GCC) as an affordable housing consultant for several public and private entities, I often wonder: Could private nonprofit housing developers, like the Fenway CDC and Phipps Houses, make an impactful contribution to bridging the supply and demand gap in affordable housing in the GCC for both citizens and non-citizens? Could the experience of other countries with nonprofit housing developers be distilled and adapted to the GCC states?

To answer these questions, I will first discuss the main attributes of nonprofit housing developers, followed by a discussion on the shortage of affordable housing for citizens and non-citizens in the GCC and the resulting need for nonprofit housing developers. I will then recommend strategies to enable the growth of nonprofit housing developers and end with a few concluding remarks. 

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Domed roofs in Haram City


Nonprofits Housing Developers as Mission Entrepreneurial Entities

In its 2010 landmark study Mission Entrepreneurial Entities: Essential Actors in Affordable Housing Delivery, the Affordable Housing Institute (AHI) defined Mission Entrepreneurial Entities (MEEs) as “private nongovernment entities that are in the business of making housing ecosystemic change by doing actual transactions valuable in themselves that also serve as pilots and proof of concept.” MEEs could be Non-Governmental Organizations, Community Development Corporations, or Housing Associations, labels that have sometimes been used interchangeably. The study profiles twenty-three MEEs in the United Kingdom and the United States, where, in both countries, there has been a steady migration from entirely publicly managed and operated systems to hybrid public-private models, with MEEs as key delivery mechanisms.

According to the study, the three main attributes of MEEs are: (i) being mission oriented, since their goal is impact, not just profits; (ii) entrepreneurship, taking risks and persuading established institutions, including governments, to approve proposals, provide capital, etc.; and (iii) self-containment, because sustainable MEEs must make profits and maintain a positive cash flow. However, generated profits are used to further the purposes of the organizations instead of being distributed to managers and shareholders.


MEEs also share the following strengths:

·         Willingness to serve populations that the private for-profit sector cannot or will not serve, including the hardest-to-house residents;

·         Commitment to providing affordable housing to lower income people for the long term;

·         Building strong connections with residents and the communities they serve;

·         Commitment to providing various social services that lower income or special needs residents may require;

·         Potential for accessing affordable land, buildings and funding through governments and philanthropic entities or individuals;

·         Commitment to seeing projects through both during their early and post-delivery phases.

Given the potential of MEEs to serve populations that are not served by private or public housing provision, this essay discusses the potential relevance of this model to the GCC countries. This interrogation is critical at a time during when many GCC countries are facing a shortage of housing for low and moderate income households. It is also a time in which we are witnessing the emergence of institutionalized charitable giving that could be in part harnessed to help with housing provision. These conditions are creating a ripe environment for the growth of nonprofit housing developers, with the much needed support of the public and private sectors.

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What we’re reading: A ‘nationwide gentrification effect’ is segregating us by education

On Friday, The Washington Post highlighted the views of Standford economist Rebecca Diamond, who believes that gentrification is no longer a problem for individual neighborhoods, but for cities as a whole.

As the returns to education have increased, according to Stanford economist Rebecca Diamond, the geographic segregation of the most educated workers has, too — and not by neighborhood, but by entire city.

This effectively means that college graduates in America aren’t simply gaining access to higher wages. They’re gaining access to high-cost cities like New York or San Francisco that offer so much more than good jobs: more restaurants, better schools, less crime, even cleaner air.

…Sure, the San Francisco tech worker has to spend a larger share of his income on rent than a low-skilled worker in Oklahoma City. But all of the added amenities of living in San Francisco outweigh that higher cost.

Read the full article here.

A Typical Home: the Town House – Sai Gon, Vietnam

By: Duong Huynh, Project Manager

Housing is complex. Its stakeholders and creatures are as varied as the skin colors of the human race – developers and financiers, consumers and policy makers. Its value chains are highly intertwined – demand side and supply side, taking us from land obtainment to consumer off-take and move-in. At the core of this complex system lies the key product it helps to produce more of, and in high quality: the home.

So via this post, I hope to inspire my colleagues and myself in understanding the typologies of homes all over the world in closer detail. For this first venture, I chose Sai Gon, Vietnam; otherwise known as Ho Chi Minh City.

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Sai Gon’s location on the southern tail of Vietnam’s “S” shape

A map of Sai Gon’s districts

A map of Sai Gon’s districts

Typical traffic in Sai Gon during busy hours

Typical traffic in Sai Gon during busy hours

With any emerging markets, growth and architectural landmarks sit alongside dated low-density residential uses.

The glamorous and trendy Sai Gon at night

The glamorous and trendy Sai Gon at night

Low and mid-density uses lie below and alongside the city’s landmark tower

Low and mid-density uses lie below and alongside the city’s landmark tower

Within any nation and economy, many diverse sets of housing typologies exist. Vietnam is no exception.

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Part II: How to build affordable, quality and sustainable housing?

Author: Delphine Sangodeyi, AHI Senior Urban Planning Associate

[Continued from Part 1]

The equation is not simple, and demands a new approach. Expertise, research and knowledge should be invested and there should be high social and environmental impacts as well as an economical gain. Housing quality is not only dependent on construction costs, but also related to the quality of housing conception, to social responsibility and to a new business ethic and mindset. A new business model is required.

      Reaching affordability

The term “affordability” applies not only to building costs but to maintenance costs as well. The recommended percentage of income to be paid for housing is generally capped at 30% of income. Higher mortgage payments impact a family’s ability to afford food, medicine and other necessities of life. Even if a family can afford mortgage payments on a house there may be other impediments to home ownership. These include difficulty in finding appropriate land, cash for a down payment and closing costs in order to keep expenses affordable.

In each country, region and city, the affordable housing market needs to be studied, since it covers various socio-economical categories. In many locations, the population living in poverty and working in the informal sector is still excluded from accessing mortgages through the formal banking system.

      Qualitative architecture, in coherence to local identity

Evans Essienyi in his AHI blog highlighted well the problem of quality of affordable housing in Africa, and that cultural and identity factor were insufficiently taken into account.

Affordable housing is most of the time treated in its most basic form, by constructing standardized block houses or apartments of 45 m² with 2 bedrooms. Compared to the degraded situation of dwellers, these types of constructions could look a fortiori as a situation of progress, but it can’t be seen as a correct solution, in a sustainable vision.

      Promoting mixed neighborhoods

Social and architectural diversity is very important in the construction of cities and neighborhoods. For instance, each affordable housing project can include different types of housing, and affordable for different social categories: from low income households to the middle class.  Less benefit can be made to build very economic housing since the global project is at a financial equilibrium.

      Access to the City

Due to the rising price of land, the tendency is to build affordable housing projects in the far periphery of cities. It implies problems of social exclusion, problem of access to transportation, services, education and employment.

For this reason, any affordable housing project has to be conceived in partnership with local authorities. A good option would be to determine available lands at a discounted price compared to the market, to avoid territorial inequalities. Taking into account the costs for local authorities for trunk infrastructures to cover the growing periphery of cities and megalopolis, road constructions and services, as well as the negative effects of segregated urbanization and high environmental impacts of urban sprawl; instead, participating to develop affordable housing through urban renewal and discounted land price closer to the city centers and employments poles should be regarded as a more sustainable urban strategy.

The international and multidisciplinary perspectives of the Affordable Housing Institute help in developing alternative and concrete solutions for a more sustainable vision of affordable housing.

Part I: Changing the mindset from quantity to quality of affordable housing

Author: Delphine Sangodeyi, AHI Senior Urban Planning Associate

The world is currently witnessing a major change in the economic, social, political and environmental issues relevant to emerging markets and economies. According to recent reports by the United Nations, nearly half the world’s population is already living in cities, while nearly 80% is expected to live in cities and urban sprawls by the year 2030. The economic growth paradigms in these economies are likely to have a major impact on global economic development and future sustainability of the planet.

Most of the time, the question of affordable housing is addressed in a quantitative way: “housing deficit.” The housing deficit is abysmal – with nearly 1 billion of the world’s population living in urban slums. This number is likely to only grow larger as cumulative urban growth across two major continents, Africa and Asia, is expected to double between 2000 and 2030.

In many emerging countries the estimated housing deficit is acute. For example, in Nigeria the housing deficit is 18 million housing units. Demand clearly outstrips supply. The first signs of a real estate bubble burst are showing in many Nigerian cities, such as Abuja.

Under construction and just built apartments, in Abuja, Nigeria, photo: D. Sangodeyi, 2011.

Angola, the “satellite city” of Kilamba–which was supposed to highlight the President’s social housing policy–represents a $3.5 billion development built by a Chinese firm to house about 500,000 people. The apartments in the complex cost between $120,000 and $200,000 according to online advertisements. Today, Kilamba is a ghost town. 

The urgent need for housing and the difficulty for societies to answer to the challenge of “housing for all” impacts the way affordable housing is thought and conceived. The equation is often assumed to be an economical and productive matter: how many homes should or can be built in a year?

Actions have been taken by governments, implying for the private sector to face the issue of “housing for all” by building a certain quantity of homes. Today, we are reaching the point that the question of affordable housing should also be addressed in terms of quality, in a more sustainable and long term vision.

Lagos, Makoko, by Yann Arthus Bertrand (more here)

Lagos, Nigeria: new built social housing. Local government advertizes “pay your tax” to build more affordable housing and infrastructures. Photo: D. Sangodeyi, 2011.

[To be continued in Part 2]