Tag Archives: affordable housing

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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Secession: the key to more affordable housing in cities?

By Judy Park, Analyst

Panelists at The Atlantic’s CityLab 2014 conference, held this past September, proposed the idea of home rule – or even more radically, city secession – as a potential solution for increasing affordable housing in cities.

aff housing solution home ruleClick ­­­­­­­­­here for the full article.

During the event, Vishaan Chakrabarti of SHoP Architects and Ben Hecht of Living Cities argued that state and national governance often restricts the ability of cities to produce more affordable housing. The solution, they claim, is to emancipate these cities and allow them to subsidize as they please:

“Subsidize the supply, subsidize the demand: We know how to do all of those. We just don’t have the will to do those things,” said Living Cities CEO Ben Hecht. “Singapore and Hong Kong are willing to do those things.”

The thought that cities would be more effective if left to their own devices is not new. In a time where urbanization is widening the physical and sociopolitical discrepancy between the city and its surroundings, and where cities are increasingly outpacing the GDP of entire countries, it makes some sense.

But good governance is tricky and inevitably context-specific. Home rule could be exactly what that blue bastion in a sea of red needs to build more affordable housing. Unconstrained by state and national regulations, a city could more easily raise and borrow money from their tax base and capital markets. It could vote to direct more money to affordable housing needs.

In other instances, however, the state’s ability to override local priorities and decisions is important and beneficial for affordable housing, as in the case of Massachusetts’ Chapter 40B, a statute that allows an affordable housing developer to obtain state zoning overrides for building in municipalities that fail to meet their 10% affordable housing requirement.

Further, in choosing Singapore and Hong Kong as their poster-children, the panelists seem to imply that the production of mass public housing indicates success: in Singapore, 82% of citizens live in flats built by the government (via the Housing Development Board, or HDB), and in Hong Kong, this figure is slightly less than half.

But all is not well, especially in Hong Kong, which still suffers from a high shortage of public housing and recently won its fourth successive crown for having the most unaffordable housing in the world. Supply may be high, but demand is even higher. Those who are able to qualify for a government flat typically wait three years or more. In the meantime, many residents have no choice but to live in grossly overcrowded units, which have been referred to as cages, that average around 40 square feet. Such housing may technically qualify as “affordable,” but it is certainly not suitable.

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Soaring, high-density public housing in Hong Kong.

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Society for Community Organization, a local advocacy group, documents the conditions in the cage homes of Hong Kong. Photo by Benny Lam, for the Society for Community Organization.

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Indonesia photo-share: self-help housing in Depok

By: Duong Huynh, Project Manager

As part of the housing sector mission to Indonesia, I joined another colleague Matt Nohn, whose work focuses on incremental housing, and a team of staff from Indonesian Ministry of Housing to visit Depok. After a 1+ hour drive through some peaceful Indonesian peri-urban farm land, we landed in Depok to begin our tour of a few of the city’s self-help housing project.

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Self-help housing belonging to a family of one working mom and three daughters.

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Photo Report: Three Days in Ulaanbaatar

By: Anya Brickman Raredon

AHI has been working with the World Bank and Municipality of Ulaanbaatar, Mongolia to develop an affordable housing strategy for the rapidly growing city.  In late-August, David Smith, our CEO and Founder, and I took a three-and-a-half day trip to present the results.  Fortunately we got a little bit of time away from our meetings to see the city and visit a ger area neighborhood – their term for the informal settlements. What follows is a bit of a photo tour with some interspersed musings.

Located in a high valley at the intersection of two rivers, Ulaanbaatar has some of the worst air pollution in the world, in part due to coal heating in the winters. According to the city masterplan, both rivers have protected buffer zones along their banks, although new apartment construction is edging very close on the south side of the valley.  10534525_10100612341304914_7619381653213947338_n936681_10100612341349824_5668957290735238999_n

Downtown Ulaanbaatar is a striking collection of soviet style apartment blocks, yurts, and modern glass towers all sitting right next to each other. There’s even an amusement park in the middle of downtown.10569050_10100606082482644_1606306620005765474_n                 10593150_10100612341424674_2564284688276477326_n  10629839_10100612341629264_7146385909691851264_n                  10474839_10100606076444744_4868540471071979280_n  10610547_10100612341150224_5811294750562497487_n

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South Korea: Finally shifting away from a centuries-old housing system

by Judy Park, Analyst

South Korea’s primary housing system, called jeonse (or “key money”), dates back to their Joseon Dynasty. That is, back when the denizens of this humble country looked like this:

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King Sejong is not amused.

Jeonse is one of only two systems of its kind in the world (the other being rahn in Iran), where renting out a modest two-bedroom unit entails the lump sum possession of hundreds of thousands of dollars.

The process goes thus: tenants provide landlords with this hefty deposit to lease a unit for two years. The deposit is calculated as a certain percentage (typically 40-60% in Korea, 20% in Iran) of the value of the unit. The landlord can then invest these funds (e.g. in other properties, businesses, or at the bank) until the end of the two-year contract, when they must return the full sum to the tenant. The unit acts as collateral in the event that the landlord can’t or won’t pay it back. Estimates show that about a tenth don’t.

If interest rates are high, jeonse is good deal for landlords – it’s basically an interest-free loan. If they’ve got the cash, it’s a good deal for tenants – they can live in a unit rent-free and continue to save up money.

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An average, middle-class apartment in Seoul. Source: HanCinema

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An average, middle-class apartment in Seoul. Source: HanCinema

But getting the cash is no easy feat. The typical deposit is a casual $200,000, taking the average household five years and boatloads of fiscal restraint to save up. Despite this, it seems that much of the nation’s families are up for the challenge, as more than 60% of rental units are currently held under the jeonse system. Thus, jeonse units constitute the main source of affordable housing for low and middle income families in the country.

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Connecting the dots : Urban Resilience and Affordable housing

 By Eman Lasheen, Harvard Graduate School of Design.

Affordable housing has always been looked upon as a supplementary service provided for a certain population. It is generally defined as housing that is appropriate for the needs of a range of very low to moderate income households and priced so that these households are also able to meet other basic living costs such as food, clothing, transport, medical care and education. As a rule of thumb, housing is usually considered affordable if it costs less than 30 percent of gross household income 1. The core value of investing in the provision of affordable housing is usually related to meeting a growing demand in the fastest, most efficient and inexpensive form, to alleviate socioeconomic burdens. Despite the importance of this highly materialistic perspective, it strikes me as quite lacking to account for higher, more complex interactions at the urban level, where positive impacts of affordability are manifested most profoundly. The connection between the availability of well designed affordable housing and the level of urban resilience is highlighted dramatically during times of crisis or unexpected change. The fact that people would find decent shelters during disasters or sudden shocks is not the only aspect of connection. It is the understanding of how urban communities are able to prioritize, plan and move forward that makes affordable housing a crucial aspect of urban resilience.

One major problem with resilience as an evolving field of research is the ambiguity around its components and intentions. Rooted in ecological sciences, the term has gained a lot of prominence within many other disciplines including engineering, social sciences and urbanism. It has been adapted within each of these disciplines to inform about a certain form of interaction. It remains however confusing to a great extent when it comes to urban sciences, where question such as : “resilience of what ? to what ” becomes a great source of trouble to practitioners and decision makers alike.

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How do the Olympics affect affordable housing?

By: Judy Park, Analyst

Mega-events such as the Olympics are not just time-honored international sports competitions. They are some of the truly global stages in the world today, with billions of viewers and dollars involved.

Eager for the international prestige and economic multipliers that come with such an event, countries often spend a fortune just to vie for the chance to host. Once they win the bid, a massive construction and redevelopment agenda kicks into high gear: monumental stadiums, transportation networks, airports, athlete housing, luxury hotels, and revamped tourist attractions. While this city-wide facelift generates benefits for the economy and tourism, it also threatens the livelihoods of urban residents already suffering from poverty and marginalization. The rapid pace of development often results in forceful “beautification” programs, soaring housing values, and a lack of due process in relocation efforts.

Brazil, the envied host of this summer’s World Cup and the 2016 Olympics, is a ready example of this phenomenon. The country has already channeled $4 billion into preparing its cities for the limelight. However, in the process, the government has already displaced 19,000 families from Rio de Janeiro’s well-known favelas, attracting calls of “social cleansing” in the process. Although city officials claim that they have faithfully adhered to established expropriation guidelines, residents say otherwise. In addition, it is often the case that even when better physical housing might be offered, residents do not want to move away from the social and economic networks they have built over their lifetime.

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Interestingly, Brazil’s oft-decried favelas are also being touted as cheap accommodation for World Cup attendees and an opportunity to experience the “real Rio de Janeiro” through “one of the city’s most fascinating and vibrant communities.”

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Theresa Williams, director of Catalytic Communities, notes the dissonance between these two images of the favelas:

“[In the runup to the World Cup] international media are presenting Rio’s favelas either as violent no-go areas or cheap places for tourists to stay. They can’t be both, so which is it?” says Williamson. Rio’s favelas could not only offer a model amid the growing need for affordable housing worldwide but enhance a city already famed for its natural beauty with 600 unique communities with distinct cultures, she says. (Link)

(By the way, we at AHI agree that the urban slum is where the solution to global affordable housing crises begins.)

The negative impact of mega-events on local communities is not new. A study by the Centre on Housing Rights and Evictions (COHRE) highlights the consequences of Olympic events on housing in six cities over the past two decades:

  • 1988, Seoul: 720,000 people evicted from 48,000 buildings, where 90% of those evicted did not receive replacement housing and most were forced out using violent methods.
  • 1992, Barcelona: Houses prices rose by 250%, making housing unaffordable to many residents and forcing them to leave the city.
  • 1996, Atlanta: Country’s oldest public housing complex, Techwood Homes, redeveloped as the first mixed income HOPE VI community, but net loss of 800 public housing units and minimal relocation assistance during redevelopment. 9000 arrest citations given to homeless people in 1995-1996 as part of city-wide “clean-up.”
  • 2000, Sydney: Real estate speculation led to eviction of residents. Gentrification accelerated and number of homeless tripled over five years.
  • 2004, Athens: Games were used as pretext for displacing Roma communities. 2,700 Roma were forcibly evicted.
  • 2008, Beijing: 1.5 million people displaced over a period of 8 years.

In order to mitigate the costs of any future mega-events, COHRE lays out some “best practices” for bidding and preparing for the Olympics, including: regulating the involvement of the private sector, local community participation in decision-making, public commitments to housing preservation, protection protocols for minorities and the homeless, housing rights legislation, housing-positive regeneration strategies, strong community activism, and the post-Olympics use of venues for social housing.  A good example of the last point occurred in 2012, when it was announced that nearly half of London’s Olympic village would be transformed into affordable rental units to ease the city’s housing shortage.

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What do you think about the impact of mega-events on housing? What should be done to address this issue? Please let us know in the comments below!

Image Sources 

  1. http://www.dailymail.co.uk/sport/worldcup2014/article-2611094/More-World-Cup-concerns-Brazil-Rio-favela-riots-break-just-50-days-tournament-kick-offs.html
  2. http://metro.co.uk/2012/04/23/how-the-build-up-to-the-world-cup-and-olympics-is-affecting-rios-favelas-406668/
  3. http://www.thenation.com/blog/179077/brazils-world-cup-gentrification-through-barrel-gun
  4. http://favelaexperience.com/#rio-de-janeiro-apartment-rentals
  5. http://inhabitat.com/londons-2012-olympic-village-to-be-transformed-into-affordable-housing-units/