Affordable Housing for All — In Our Lifetime
In the coming decade, the affordable housing market could grow to more than a trillion U.S. dollars if families simply double the current level of annual consumption of housing products and services. This is a conservative estimate based on the current gap between need and supply, and the increasing migrations to cities' urban slums.
In the process of unleashing this significant market opportunity, hundreds of millions of people would have access to dignified homes, healthier places to raise their families, and more valuable assets that they could leverage to transform and improve their lives.
Unfortunately, we will not accomplish this unless we stop thinking one business deal, one company, one client at a time. We need to build a new affordable housing ecosystem, one with the capacity to continue to ramp up the processes and systemic changes needed for the housing industry to offer appropriate products for low-income populations, for enough financing to become available, and for the right standards and quality to be in place and incentivized to enable a billion of the world's population to participate in the housing market as full economic citizens.
During the last five years, the global Ashoka community and its partners have been building the basis for this transformation in the affordable housing sector. The journey started with a handful of private companies, financial institutions, and citizen sector organizations in India, Brazil, and Colombia. We recognized that if they collaborated, they could accelerate the emergence of a vibrant and sustainable market for new homes and incremental housing.
In order to fix broken affordable housing value chains, each player needed to move from a mindset where they were competing for a limited "wallet share," to one in which multiple players–each with different assets to make the wallet actually expand in size–came together in significant and increasing numbers to:
- overcome major obstacles (such as land rights or insufficient capital for mortgages)
- co-create innovative solutions (such as bundling financial literacy and self-building technical assistance with new housing microcredit loans), and
- enable millions of new clients to have the capacity to act in the formal market as empowered consumers of affordable housing products and services.
Many players in the formal housing industry know that clients need the combination of all these services to satisfy their housing needs. But these services–separately or combined–do not exist for most BOP clients, even for the large proportion of them that have the savings and regular, if undocumented, incomes to be able to repay a housing loan. For the most part, the housing industry has failed to serve these clients—either because their needs are invisible to them or because companies have not figured out how to successfully market housing products to BoP populations.
Meanwhile, governments, multi- and bi-lateral development organizations, and private philanthropy continue their work, apart from business and market forces, even knowing that with the relatively small amounts of money they have to spend on affordable housing, it would take more than a hundred years to address the existing housing deficit at their current pace.
Citizen sector organizations play the role of advocates for housing rights and enable communities to organize around their common and individual needs. But their resources are also very limited, and rarely do they reach a scale that is consistent with the extent of housing needs.
While all these different stakeholders continue to fail to solve the problem in significant or strategic ways, low-income families continue to self-build and self-finance often sub-standard homes, at a significant cost and physical risk to themselves and their neighbors. Housing value chains are indeed broken.
What Breaks This Cycle of Failure?
Most of the basic technology and know-how to serve these clients already exists. The challenge is to mobilize all these stakeholders around a vision of "collaborative entrepreneurship" within the industry and across sectors. Through its Housing for All initiative, Ashoka accomplishes this by building a common vision for the development of the affordable housing industry: one centered on a new interpretation of client needs and resources, and their inclusion in various value-added steps along the affordable housing value chain.
Operationalizing this vision is about the building a "hybrid value chain" where corporations and citizen sector organizations (and local governments) collaborate to develop the market and build an ecosystem where a new type of affordable housing industry is possible and profitable.
Ashoka's Housing for All work is anchored on trust-based relationships that BoP populations have with citizen sector organizationsthat have a long-term and extensive presence in the community–be they an NGO working for years with families on maternal health, or on financial education, microcredit programs, or small business development. Thus, they can play useful roles to help BoP potential consumers increase their tangible assets and savings, and validate their informal wages as regular and sufficient to qualify for housing credit or loans–an often long, costly, and unsuccessful process when undertaken by banks.
This story has been republished with permission from NextBillion.