un-habitat - affordable land and housing in latin america and the caribbean

7/31/2019 UN-HABITAT - Affordable Land and Housing in Latin America and the Caribbean

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LATINAMERICA AND

THE CARIBBEAN

AFFORDABLELANDAND HOUSINGIN


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Copyright United Nations Human Settlements Programme(UN-HABIA), 2011

An electronic version o this publication is available or download rom the UN-HABIA web-site athttp://www.unhabitat.org

A ght vd

United Nations Human Settlements Programme (UN-HABIA)P.O. Box 30030, GPO Nairobi 00100, Kenyael: +254 20 762 3120Fax: +254 20 762 3477

Web: www.unhabitat.org

DisclAimer

Te designations employed and the presentation o the material in this report do not imply the expressiono any opinion whatsoever on the part o the United Nations Secretariat concerning the legal status oany country, territory, city or area or o its authorities, or concerning the delimitation o its rontiers orboundaries.

Reerence to names o frms and commercial products and processes does not imply their endorsement bythe United Nations, and a ailure to mention a particular frm, commercial product or process is not a signo disapproval.

Excerpts rom the text may be reproduced without authorization, on condition that the source is indicated.

HS Number: HS/109/11EISBN Number (Series): 978-92-1-131938-5ISBN Number (Volume): 978-92-1-132235-4

Design and Layout: Gideon Mureithi/UNON

Printing: UNON, Publishing Services Section, Nairobi,ISO 14001:2004-certifed.


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AFFORDABLE LANDAND HOUSING IN LATIN AMERICAAND THE CARIBBEAN

Volume 1


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ii

Volume 1: Latin America and the Caribbean

Volume 2: Asia

Volume 3: Africa

Volume 4: Europe and North America

ADEQUATE HOUSING SERIES

In the vast majority o countries access to aordable land and housing is a critical contemporarychallenge. While in dierent countries and regions the specicities o the challenge vary, theuniversal truism is that it is becoming increasing dicult or the vast majority o urban residents toobtain and retain adequate and aordable land and housing.

Te rst our volumes in the Adequate Housing Series canvas the state o aordable land andhousing in our regions acing major aordability diculties: Latin America and the Caribbean,

Asia, Arica, and Europe and North America (member countries o the United Nations EconomicCommission or Europe).

Each volume rstly explores the major trends in housing conditions, availability, quality andtenure modalities. Following this, each volume analyses housing policy responses to addressgrowing aordability problems and the improvement o substandard housing conditions. Lastly,key recommendations or local, national and international policy initiatives that can increase theprovision o aordable housing in the respective regions is provided.

Tis fagship series is coordinated and produced by the Housing Policy Section o UN-HABIAand to date the ollowing volumes have been published:

ACKNOWLEDGEMENTS

Principal Authors: Brendan McBride and Matthew French

eam Leader: Claudio Acioly Jr.

Project eam: Liliana Contreras, Yolanda Sanchez, Cecilia

Martinez, Rasmus Precht, Erik VittrupContributors: Claudio Acioly Jr.,Mohamed El Siou, Christophe Lalande, and Koen Steemers

and Te University o Cambridge, and Nigel Browne and the Institute orHousing and Urban Development Studies (IHS).

Programme Assistant: Helen Musoke

Financial Support: Governments o Belgium, Italy and Te Netherlands, as part o their overallcontribution to the Global Campaign or Secure enure

English Editors: Roman Rollnik and Matthew French


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iiiAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

FOREWORD

Te rst our volumes in the Adequate Housingseries respond to the urgent need or a globalassessment o the state o land and housing.

While countless studies, research projects, andreports have been undertaken on individualhousing needs, projects, and programmes,no contemporary studies have compared andcontrasted housing conditions, policies, andapproaches on a regional or global scale.

Tis series lls this gap. Te our volumes ocuson the land and housing situation in our regionsacing considerable challenges and aordabilityproblems: Latin America and the Caribbean,

Asia, Arica, and Europe and North America.Tey present a comparative documentation othe historical trajectory, major contemporarytrends, and best practices in land and housingprovision in each region.

Although the size and overall characteristics othe housing sector does vary markedly across

these regions, and indeed their countries,common to all is the act that obtaining andretaining housing that is adequate and aordableis a serious problem or a large proportion o thepopulation.

Unortunately housing aordability remainsa challenge and it is worsening due to, amongother actors, the economic eects o the globalnancial crisis and the increasing severity odisasters and conficts, which both place an

additional strain on already stretched land andhousing resources. Tis series and its messagesand recommendations are thereore timely.

Tese regional studies represent a signicantstep orward in investigating the state o theglobal housing challenge. A detailed examinationand comparison o, as well as critical refectionon access to housing at the local, national andregional levels is the rst and important step

towards designing policies to improve access toaordable housing opportunities and to bringsolutions to scale. Tis will help in preventingcity expansion on the basis o inormal landdevelopment and inormal housing supply. Teour volumes represent a signicant body oresearch, documentation, and critical review thatI believe will be o value to those involved in thehousing sector.

Dr. Joan Clos

Under-Secretary-General o the United NationsandExecutive Director, UN-HABIA


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vvAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

7.2 CURRENT ROLES OF GOVERNMENTS IN LAND ISSUESRELATING TO HOUSING 44

7.3 THE POTENTIAL ROLES OF GOVERNMENT VIS--VIS LAND PROVISION 447.4 MECHANISMS FOR EXPANDING ACCESS TO LAND FOR LOW-INCOME

HOUSEHOLDS: COUNTRY EXAMPLES 45

7.5 IMPROVING SECURITY OF TENURE 47

7.6 PROGRAMS AND POLICIES TO IMPROVE TENURE SECURITY 48

8 THE ROLE OF SUBSIDIES IN HOUSING PROVISION 53

8.1 COUNTRY EXAMPLES OF HOUSING SUBSIDY PROGRAMS 54

8.2 LOCALLY-BASED MODELS FOR HOUSING CREATION: THE ROLE OF NGOS 58

9 SETTLEMENT UPGRADING 63

9.1 BACKGROUND ON SLUMS IN THE REGION 64

9.2 RECOGNITION OF THE NEED FOR SETTLEMENT UPGRADING 66

9.3 INTEGRATED UPGRADING APPROACHES 66

9.4 PARTICIPATION AS A KEY ELEMENT 67

9.5 SOCIALLY-ORIENTED UPGRADING INITIATIVES 69

9.6 THE SYNERGY OF SETTLEMENT UPGRADING WITH ENVIRONMENTAL

IMPROVEMENTS 699.7 INTEGRATING SETTLEMENTS INTO THE URBAN FABRIC 70

9.8 CONTRIBUTIONS OF RESIDENTS 70

9.9 ONGOING CHALLENGES 71

10 CONCLUSIONS, NOTABLE TRENDS, AND RECOMMENDATIONS 73

10.1 RECOGNIZING AND UNDERSTANDING INFORMAL HOUSING AND LANDMECHANISMS 74

10.2 SCALING SETTLEMENT UPGRADING BUT REMAINING GUIDED BY

THE NEEDS OF RESIDENTS 74

10.3 IMPROVING ACCESS TO AFFORDABLE LAND 75

10.4 MAXIMIZING THE USE OF SUBSIDIES TO MICRO-TARGET RESPONSES

TO HOUSING CHALLENGES 75

10.5 EXPANDING THE REACH OF HOUSING FINANCE MECHANISMS 75

10.6 NEW APPROACHES TO DEALING WITH THE DEMANDS OF URBANIZATION 76

11 REFERENCES 79


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vi ExECUTIVE SUMMARy

EXECUTIVESUMMARY

Tis study examines trends in aordable housing

and land provision in Latin America and theCaribbean (LAC). It urther represents some othe approaches taken by governments, NGOs,and communities to meet the challenges oproviding housing or low-income segmentso society. Te Latin American and Caribbeanregion is a key setting or the consideration ohousing and land issues, owing in part to thecontrasts and disparities that characterize thisregion o over hal a billion inhabitants. Latin

America presents a particularly acute case study

in the struggle with issues o urbanization: in000, 75.5 per cent o the Latin American andCaribbean region lived in cities; in 00 thisproportion is projected to grow to 84.6 per cent.1

Te numerous ways that the governments,institutions, and populations o the region havedealt or not dealt with issues o housing andland in a context o increasing urbanization canoer lessons about how to approach this crucialissue in the 1st century.

Te United Nations Human SettlementsProgramme (UN-HABIA) and othermultilateral organizations have ocused on thenecessity to redouble eorts at local, national,and international levels to provide decent andaordable shelter or all. Recognition has grownthat the pursuit o comprehensive housinggoals demands comprehensive responses thatgo beyond the concerns and devices o any oneparticular sector. Tis applies equally to three o

the main shelter trends o this era: addressinginerior living conditions and poor housingquality across the region, eliminating housingcategorized as slums and preventing its utureappearance, and encouraging the developmento market-based approaches to the creation oaordable, quality shelter opportunities. Tesetrends will only result in providing housing orall citizens i they address issues o aordabilityand accessibility or low-income households.

Tis study ocuses on programs, policies, andstrategies that have developed in responseto these challenges; endeavouring to make

housing and land more accessible, aordable,

and adequate or households with limitedresources. Since the variety o innovations inthe housing and land sectors greatly eclipsesthe scope o this report, it selectively highlightsprograms and policies that are representativeo larger movements and promising in theirnumerical results and scale. Tese movementsare representative o the multiple actors involvedin housing responses NGOs, residents,community organizations, nancial institutionsand governments and emblematic o the wide

range o housing responses that can be ound inthe region. Te majority o the material has beengathered through secondary sources, includinggovernment documents, policy papers, academicanalyses, and program evaluations, augmented ina ew instances by the authors interviews withpractitioners.

Improvements can be seen in a number oareas, but crucial issues remain on the road toproviding quality housing or all Latin American

and Caribbean households. Tese include highland prices, general aordability concerns orhouseholds, evolving but nevertheless pervasiveinormal land acquisition strategies, and stillalarming numbers o households who live insubstandard conditions or simply cannot accessa home o their own.

Latin America has been the source o amultiplicity o responses to housing and landissues over the last several decades. When we look

at recent innovations, we see that the region hascontinued to utilize tactics rom the past, in somecases resulting in success and in others repeatedmistakes. It has also exhibited a willingness tochange course and adjust approaches that wereproductive but imperect, as in the recent case oChiles reinvention o its subsidy system. Actorslike Mexico and Brazil, among others, havetaken on challenges that bridge sectors andacknowledge the primacy o addressing the needso lower-income groups. Brazil has embraced

tactics such as direct unding o communitygroups that were born out o popularmovements and could have impressive results in


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viiAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

localizing and ne tuning government responses

to housing challenges. Participatory tactics inother realms, such as settlement upgrading,show us how resident participation can beparamount in gearing programs to the needs ousers and ensuring the ongoing sustainabilityo projects ater outside organizations depart.Housing programs that distribute subsidies usinglocalized strategies similarly open up a space orstrengthening the important role o communitygroups, NGOs, and local governments inhousing provision.

Te importance o improving access to aordableand secure land has come into ocus or manygovernments and institutions across the region,

with increasing recognition that residential landuse one o the most costly inputs to housing plays a major role in shaping LAC cities.Historically, government inaction vis--vis thequestion o land has resulted in low-incomehouseholds gaining access to aordable land byany means necessary and easible. Inormal land

submarkets have played a major role in meeting awidespread demand or access to aordable land,but sometimes at a high cost to households andsociety.

Government should not be at the steeringwheel to secure or apportion land, but shouldhold the road map to expand aordable landpurchase options and to encourage the use oland or aordable housing. Successul strategiesto improve the land sector and access to

aordable and secure land have included titleregularization, municipal land banking, landvalue recapture and the improvement o thequality and accessibility o cadastral inormation.

Housing micronance is increasingly ndinga role in the toolbox o incremental housingbuilders, largely because it ts their improvementstrategies and matches their nancial abilities.Housing micronance institutions (MFIs) maybecome bigger players in the housing sector, ithe demand or housing micronance is as greatas estimated; and i MFIs step up their eorts tobroaden the reach o this housing nance tool.

Housing nance, or its part, has shown promise

or moving down market, but urther movementwill hinge on the aordability o loans, thedevelopment o institutional practices andproducts that attract lower-income borrowers,and the availability o capital to continue growingthe sector.

All o these approaches show most success whenthey t the needs o particular housing users incertain locations; a strategy that is successuland appropriate in one locale could ail and be

completely inappropriate in another. For thisreason, this study concludes that a continuumo housing responses must be utilized in theLAC housing sector to be able to address theenormous variety o housing challenges oundthroughout the region. Inormation is crucialto maintaining the relevance o the responseso the housing sector: accurate, up-to-date, andnuanced housing decit measurements andunderstanding the workings o inormal housingand land mechanisms, or example, inorm the

understanding o where resources need to bededicated and how strategies need to be modiedor reinvented. As the world moves into the rsturban millennium, the housing strategies thatemerge rom Latin America and the Caribbeanare likely to remain in the global spotlightas innovative approaches or improving theaordability and adequacy o housing or low-income households.

1. UN-HABIA, 005a


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viii KEy MESSAGES

Latin America andthe Caribbean(LAC) is themost urbaniseddeveloping regionin the world. Thisurbanisation hasplaced immensepressure on theprovision and costo urban land andhousing

Latin America and the Caribbean is a highly urban region with75.5 per cent o Latin Americans currently living in cities. By 2030this proportion is projected to grow to 84.6 per cent, a similar

level as Western Europe and North America. These trends havecreated enormous housing demand in Latin American cities thatormal housing supply has simply not been able to meet. Havinglargely completed its transition rom a rural to an urban region,LAC demonstrates the various ways governments, institutions,and populations have dealt or not dealt with issues o housingand land in a context o sustained urbanisation; This experienceoers important lessons or Asia and Arica as these regions arecurrently undergoing similar urban growth patterns.

Housing

aordability isa critical issuein LAC countriesdue to growinginequalities, a lacko exible fnanceand the high costo key inputs tohousing

The aordability o housing or households is a pervasive and

increasing problem throughout Latin America. It is not thathousehold incomes are universally too low, but rather thathousing is too expensive due to the high cost o key inputs.For example, in Panama, 34 per cent o households in urbanareas earn less than USD 300 per month, not enough to ualiyor ormal housing nancing to purchase a basic nished unit.Likewise, the monthly mortgage repayment or the most basichousing unit (40 suare meters on a 100 suare meter plot)represents 104 per cent o the average monthly income inBolivia, and 164 per cent in Suriname. The high price o housingrelative to income represents a major bottleneck to the acuisitiono housing built by the ormal sector. As a result, householdsare priced out o this sector and seek housing through inormalchannels.

The region hasbeen the sourceo a multiplicityo responses tohousing and landissues over the lastseveral decades

In many ways Latin America was the birthplace o ideas regardingthe validity o sel-help housing approaches common to theurban poor. The barriadas o Peru and the avlas o Brazilhighlighted the positive benets and opportunities o land andhousing provision directed by the poor themselves to addressingthe housing challenge at scale. These experiences and lessonswere detailed in several studies, most notably those o John FC Turner, and greatly shaped housing policy and discourse rom

the 1960s onwards. Prior to the sel-help movement, large-scale,multi-story government-directed housing was undertaken in manyLAC countries, or example Venezuela, Argentina, Meico andChile, yet this approach was oten poorly targeted, expensive,and inecient. Other more recent responses have ocused onsuch approaches as housing subsidies, (Chile), direct unding ocommunity groups (Brazil), and citywide inormal settlementupgrading which is presently practiced to varying degrees in allcountries in the region.

KEY MESSAGES


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iAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

The majorityo householdsin LAC addresstheir housingneeds outside the

ormal sector andwithout reliance onmechanisms o thegovernment

The production and consumption o housing and land hasprincipally taken place outside ormal markets and withoutgovernment involvement. Inormal housing development istypically incremental, with the occupants acting as the housingdeveloper where they harnesses their labour and nancial

resources to build their housing. In Brazil, or example,inormal submarkets and household sel-help initiatives havebeen estimated to account or approximately three-uarters oall housing production between 1964 and 1986. Similarly, inMeico, rom 1980 to 2003 more than hal constructed housingunits were built by households themselves and less than 20 percent o these were built with ormal nancing; These homesprovided shelter to more than two-thirds o the population.

Un-serviced slumsremain as the criticalchallenge in the

vast majority ocities in LAC, yetgovernments, NGOs,and CBOs in theregion are the mostactive in large-scaleslum upgradingand improvementprogrammes whichare beneftingmillions o

households annually

In 2005 the slum population in the region was estimated at 134million inhabitants, representing nearly one-third o the regionalpopulation. While acknowledging the negative impacts o slums

poor living conditions, insecure tenure, and environmentaland societal externalities, itr alia they are, in act, a housingmodality that provides shelter to millions throughout theLAC region and oers entry into the housing sector or manyhouseholds that otherwise would not have the opportunity.Citywide slum upgrading eorts have been a strong element ohabitat improvement strategies over the last decade in most LACcountries. Recent eorts run parallel to a widespread recognitiono the political, social, and economic costs o ailed policies thatuprooted slums and relocated or eventually displaced residents inthe past. Participation o a wide range o stakeholders, includingslum dwellers themselves, has been mainstreamed as a key

element in upgrading programmes and this has improved projectdesign, implementation, and maintenance as well as augmenteda sense o citizenship and empowerment or previouslymarginalised slum dwellers.

LAC exhibits someo the highest rateso homeownershipin the world,with estimatessuggesting 73 per

cent o householdsown their ownhome

While there is a range o tenure modalities in LAC or examplerenting, sharing, owning, and loaning the most commonis individual homeownership. Homeownership trends in LACcontrast conventional wisdom that posits homeownership is onlyor the wealthy; in some LAC countries the poor report higherlevels o home ownership than even the wealthiest uintile,or example in Bolivia. High homeownership rates in LAC areattributed to the growth o housing nance, particularly ormiddle- and upper-income households; a lack o promotionand support o other tenure types; and the inrastructure andtransport investment that has spread cities and supportedhousing construction, which has been acilitated by governmentslaissez-aire approach to the massive spread o sel-built inormaldevelopment on the periphery o cities which has allowed millionsto become de acto home owners.


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Formal housingfnance mechanismsin LAC are relativelylimited andprincipally serve

upper-incomehouseholds. Thisseverely restrictsopportunities orlower-incomehouseholds toacquire housing

Formal housing nance in LAC is relatively limited, especially orthose in the lower-income strata. Rather, sel-help, householdsavings, community savings tools, sudden windalls, remittancesrom abroad, mutual assistance, revolving unds and housingmicro-loans have been the principal means by which Latin

Americans access a home o their own. Unsurprisingly, then, LatinAmerica constitutes only 1.5 per cent o the global mortgagemarket. Residential debt as a proportion o GDP is low: or Braziland Peru the percentage is only 2 per cent. The highest in theregion is Chile with 12 per cent, which is still remarkably lowerthan in the USA and the UK which stand at over 70 per cent.

Access to aordableand secure landor housing

developmentremains a criticalissue in all LACcountries

Access to well-located, aordable, and regularised and secureland or residential development has been a continual challengein LAC countries. Land costs constitute a large part o the housingstart-up costs o households, and have a big impact on theaordability o housing. Inormal land sub-markets have playeda major role in meeting widespread demand, but sometimesat a high cost to households and society. Governments shouldnot be at the steering wheel to secure or distribute land, butshould hold the road map to expand aordable land purchaseoptions and to encourage the use o land or aordable housing.Successul strategies to improve the land sector have includedtitle regularisation, municipal land banking, land value captureand the improvement o the uality and accessibility o cadastralinormation.

KEy MESSAGES


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iAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

ACRONYMS

CELADE Latin American Centre or Demography

CGAP Consultative Group to Assist the PoorCOFOPRI Commission or the Formalization o Inormal Property (Peru)

ECLAC Economic Commission on Latin America and the Caribbean

FUPROVI The Foundation or Housing Promotion (Costa Rica)

GDP Gross Domestic Product

HMF Housing Micronance

IDB Inter American Development Bank

IFC International Finance Corporation

INEC Nicaraguan Institute o Statistics and Censuses

LAC Latin America and the CaribbeanMFI Micronance Institution

MINVU Ministry o Housing and Urbanism (Chile)

MINURVI Organization o High Ministers o Housing and Urbanization inLatin America and the Caribbean

NGO Non-governmental Organization

PRODEL Foundation or the Promotion o Local Development

SIDA Swedish International Development Agency

UN-HABITAT United Nations Human Settlements Programme

USAID United States Agency or International Development


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ii FIGURES

LIST OF FIGURES

Figure 1: Cuba like much o Latin America has undergone acute urbanizationand created complex scenarios in which to respond to housing.

Santa Clara, Cuba 1Figure 2: Barrios o Caracas, Venezuela 2

Figure 3: A barriada in Lima, Peru 4Figure 4: The inormality o the centrally-located inormal settlement, Villa 31,

sits in stark contrast to the ormal city in Buenos Aires, Argentina 7

Figure 5: Inormal expansion on the steep hills surrounding Tegucigalpa, the capital oHonduras 9

Figure 6: Slum upgrading in Medellin, Colombia 15

Figure 7: Income distribution o housing deciencies 18

Figure 8: Like many other Latin American cities, adeuate housing is particularlyunaordable or many households in Panama City, Panama, due a lack oavailable housing nance 23

Figure 9: A lack o fexible and available housing nance orces many households todevelop their housing with personal savings over many decades. BuenosAires, Argentina 27

Figure 10: Residential debt as a % o GDP 28

Figure 11: Neighbourhoods like this working class neighbourhood in northern Mexicohave grown largely as a result o INFONAVIT, which constitutes over halo the mortgage market in Mexico 29

Figure 12: Housing is the largest investment made by most amilies around theworld, and households in Latin America are no exception, as seen in Rio deJaneiro 35

Figure 13: Housing micronance can serve as a tool to accelerate the incrementalhousing process or build new, as in the case o this property in the stateo Tampaulipas, Mexico 37

Figure 14: Comparison o unrenovated and renovated houses o a similar type on thesame street in a small town in El Salvador. The house at the bottom wasimproved with unds rom abroad. Migrant remittances play a strong rolein housing improvements and construction in many locales in El Salvador,and nancial institutions have increasingly developed nance products

geared toward the housing needs and capacities o Salvadorans abroad andtheir amilies back at home 40

Figure 15: A barriada in Lima, Peru 43

Figure 16: Land development enterprises have grown to ll a demand or low-costland in El Salvador, as in the case o this land-parceling enterprise on theoutskirts o the city o Metapn 46

Figure 17: Governments across the region are making eorts to upgrade cadastresystems and bring cadastre inormation to a level that more accuratelydescribes the reality on the ground. Santa Teresa, Brazil 49

Figure 18: In part due to low population and urbanisation growth, and the role o

housing cooperatives, Uruguay's housing decit is small compared to itsLatin American neighbours. Colonia del Sacramento, Uruguay 51


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iiiAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

Figure 19: High density social housing, Medellin, Colombia 53

Figure 20: NGO and community organisation involvement is crucial to incorporateparticipatory tactics that enable users to cater projects or their specicneeds and contexts, such as this participatory design exercise in Brazil 60

Figure 21: Adobe housing is used throught Lartin America, Guatemala 61

Figure 22: The combination o individual and collective improvements means thateven the poor amilies who may not be able to ualiy or a housing loanstill participate in and benet rom community-wide inrastructureimprovements. Medellin, Colombia 63

Figure 23: Proportion o slum households in LAC by number o shelter deprivations 64

Figure 24: Favela da Mangueira in Rio de Janeiro, beore and ater the Favela BairroProgramme 65

Figure 25: The Urban Development Enterprise (EDU) o Medelln, Colombia assistedhouseholds to resettle and consolidate their settlement along the pollutedJuan de Bobo stream, combining goals o environmental improvement,land regularization, and community participation 66

Figure 26: The provision o new aordable housing and the improvement o existingdecient housing is an issue that reuires attention throughoutLatin America. Barrio San Jorge, Argentina 73

Figure 27: Time and resources thus need to be invested in the investigation o othertenure types and how to utilize current stock to maximize housingopportunities or low-income Latin Americans. Lima, Peru 76

Figure 28: Fragile timber housing extending o the water at Novos Alagados,Todos osSantos Bay, Salvador 79


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iv

LIST OF TABLES

Table 1. Rates o homeownership in selected Latin American countries 10

Table 2. Comparison o reported homeownership amongst lowest and highestincome uintiles in selected countries 11

Table 3. Percentage o poor households in select cities with registered title 12

Table 4. House price-to income ratio in selected Peruvian cities 24

Table 5. Subsidy program coverage across countries 55

LIST OF BOXES

Box 1. Housing decits: a refection o the blockages to housing production 16

Box 2. Chile: a new approach to dening housing decits 19

Box 3. INFONAVIT worker contributions labouring to extend thereach o housing nance 30

Box 4. Programa Vivienda en Lote Familiar 31

Box 5. Explaining the limited role o housing nance or low-income households:a brie review 32

Box 6. Mutualista Pichincha in Ecuador: an example o the transnational housingloan model 39

Box 7. History snapshot: Lima, Peru 45

Box 8. Roadblocks to regularization 47

Box 9. The Foundation or the Promotion o Low- Cost Housing: Costa Rica 56

Box 10. Uruguayan Cooperative Housing Movement 57

Box 11. Indispensable conditions or converting upgrading initiatives into asustainable citywide strategy 68

TABLES AND BOxES


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vAFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

Photo UN-HABITAT/Matthew French


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PART ONE


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1AFFORDABLE LAND AND HOUSING IN ASIA 1

1PART one

INTRODUCTION

Figure 1: Cuba like much o Latin America has undergone acuteurbanization and created complex scenarios in which to respond to

housing.Santa Clara, CubaPhoto UN-HABITAT/Claudio Acioly

AFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN


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2

1. INTRODUCTION

Te Latin American and Caribbean region isa unique landscape or the consideration ohousing and land issues, owing in part to thecontrasts and disparities that characterize thisregion o over hal a billion inhabitants.1 It is aregion exhibiting rapid levels o industrialization,but where the great majority o the population

works in the inormal sector. It is a place wherewealth is concentrated and gross domesticproducts (GDPs) are rising, but large segmentso the populations live in relative or extremepoverty.

It is a geography where political and culturalhistory is strongly rooted in its rural heartlands,but exhibits the highest rates o urbanization inthe developing world. Whereas urban areas inLatin America were once conceived as reugesrom extreme poverty and shelter deprivationrelative to rural areas, greater numbers o thepoor now live in cities than rural areas, and urbanareas in the Caribbean have higher proportionso poverty than rural areas.

Tese contrasts give the experiences o LatinAmerica a complexity that can help to inormresponses to housing issues in other parts o thedeveloping world that may be experiencing similartrends and contrasts. Latin America presents a

particularly acute case study in the struggle withissues o urbanization: in 000 75.5 per cent othe Latin American and Caribbean region livedin cities; in 00 this proportion is projected togrow to 84.6 per cent. Te numerous ways thatthe governments and populations o the regionhave dealt - or not dealt - with issues o housingand land in a context o increasing urbanizationcan oer lessons about how to approach thiscrucial issue o the 1st century.

UN-HABIA and other multilateralorganizations have ocused on the necessityto redouble eorts at local, national, andinternational levels to provide decent andaordable shelter or all. Recognition has grownthat the pursuit o comprehensive housing goals

demands comprehensive responses that go beyondthe concerns and devices o any one particularsector. Tis applies equally to three o the mainshelter trends o this era: addressing ineriorliving conditions and poor housing quality acrossthe region, eliminating housing categorized asslums and preventing its uture appearance, andencouraging the development o market-basedapproaches to the creation o aordable, qualityshelter opportunities. Tese trends will onlyresult in providing housing or all citizens i theyemphasize housing approaches that address issueso aordability and accessibility or low-incomehouseholds.

Figure 2: Barrios o Caracas, Venezuala.Photo UN-HABITAT/Claudio Acioly

PART ONE


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3AFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

Tis report will ocus on programs, policies,and strategies that have developed to makehousing and land more accessible, aordable,and adequate or households with limitedresources. It will serve as a orum to identiysome o the most salient housing and land issuesin Latin America and the Caribbean and todiscuss approaches that have shown success inresponding to aordable housing challenges inthe region. Te majority o the material has beengathered through secondary sources, includinggovernment documents, policy papers, academicanalyses, and program evaluations, augmentedby in a ew instances interviews by the authorsinterviews with practitioners.

Te current story o housing and land or lower-

income segments o the population will largelybe told through a recounting o examples roma range o countries. Tis study does not claimto cover the majority o the approaches that haveemerged to address housing and land issues in theregion. Te variety o innovations in the housingand land sectors greatly eclipses the scope o thisstudy. Rather, this study selectively highlightsprograms and policies that are representative olarger movements, promising in their numericalresults and scale, representative o the multipleactors involved in housing responses - NGOs,residents, community organizations, nancialinstitutions and governments and emblematico the wide range o housing responses that canbe ound in the region.

Te scope o the paper includes examples oaordable housing innovations rom the public,private and NGO sectors, as well as instances

where these sectors have collaborated to producehousing solutions. Examples will include eorts

o both local and international organizations andagencies. Te objective is to exhibit some breadtho experience o the region, while acknowledgingmuch remains to be written, to capture thevariety o housing approaches ound in Latin

America and the Caribbean.

1.1 STRUCTURE AND CONTENTOF THE STUDy

Te rst section o the paper will provide a

brie snapshot o policy trends since the middleo the 0th century. It then sets the stage or adiscussion o policy responses by proling the

state o housing in Latin America as expressedin current land tenure choices, measurementso housing decits, and housing price to incomeratios. Tese sections use such housing measuresto sketch a picture o the current health o thehousing sector in the region and in speciccountries, and use particular examples toillustrate some o the shortcomings o currentmeasurements in gauging the state o the housing

sector. Tereater it presents a brie discussion othe current state and evolution o the housingnance system in the selected countries and whatsocioeconomic segments o the population areable to access ormal housing nance.

Subsequently the study addresses a relativelyrecent and growing trend in the region, sheltermicronance. Te latter hal o the study ocuseson the program and policy approaches that havebeen developed to improve access to housing and

land or low-income households in the region.Te question o access to land one o the majorinputs to housing and a huge determinant ohow the housing sector unctions will betreated rom the perspective o both policy andpractice. Also presented will be examples o howsubsidies have been used to address the creationo new housing and promote the improvement othe existing housing stock. Te report then entersa discussion o current measures to upgradeinormal settlements, a phenomenon that has

reached a signicant scale and magnitude inpractically all countries in the region. Tepaper will end by analyzing the current trends

THE MAJORITYOF HOUSEHOLDSIN MOST LATIN

AMERICANCOUNTRIES

ADDRESSED THEIRHOUSING NEEDS

OUTSIDE OF FORMALMARKETS AND WITHOUTRELIANCE ON MECHANISMS

OF THE STATE.


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4 PART ONE

in aordable housing based on the examplespresented. Tis will inorm a nal discussion othe directions that aordable housing could takein the selected countries and the lessons thatthese examples provide or aordable housingprovision in other developing countries.

1.2 A BRIEF HISTORICALSNAP SHOT OF POLICyTRENDS SINCE THE 1950S

From the 1950s through the ollowing two decades,the construction o public rental or or-sale housing

was one o the dominant modes o provision oso-called social housing, resulting in over 100,000dwellings over two decades.4 Apartment block-

style dwellings were infuenced by principles o LeCorbusier, o the separation o uses, social housingbuilt to a high-density in comparison with low-rise settlements that provided shelter to most low-income households at the time.

Despite loty ambitions, units were not alwaysaordable to the poor, however, resulting insolutions that did not reach their target, and thesubsidies spent in building and maintaining suchprograms taxed national budgets and threatened

the sustainability o the multiamily public housingapproach.5 Furthermore, high rise dwellings werelargely out o synch with the typical housing strategyemployed by low-income households: gradual,progressive building o low-rise homes. Inormal,

progressively built settlements were largely seen ina negative light and oten ell victim to clearanceor relocation, sometimes to make way or high-risecomplexes.6

Public housing complexes like their cousins in the

United States and parts o Europe - largely becamea burden on the state. When they were successul,budget limitations restricted the amount o publichousing to be built and ailed to meet the demandor housing among low-income households.7 InBrazil, or example, the main popular housingentity constructed less than 0,000 units between1946 and 1964.8

Starting in the sixties, the visibility and legitimacyo incremental solutions to housing issues increased

with seminal writings like JFC urners Freedomto Build, which proled the manner in whichhouseholds strive to resolve their own housingneeds using sel-help approaches without relianceon ormal institutions.9 As incremental housingstrategies came to be seen as an eective tool orcreating housing, governments in the seventiesand eighties ormulated policies and programs toenhance these eorts, regularizing and improvinginormal settlements, installing services, andproviding serviced land to low-income households,

at times providing core housing units.10

Pioneered in Peru in the 1960s, sites and servicesschemes represented an acknowledgement o theimportance o incremental approaches and served as

Figure 3: A barriada in Lima, PeruPhoto UN-HABITAT/Claudio Acioly


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ormal channels to addressing low-income housingneeds.11 Sites and services schemes were aulted,however, or a lack o aordability and poor cost-recovery, as vehicles or patronage, and or poortargeting in some cases.1 Te National HousingBank in Brazil, or example, made nearly ve millionloans rom 1964 to 1986, but only 0 per cent othese were directed toward households below 5minimum salaries. Furthermore, these schemes wereoten inconveniently located on urban peripheriesand their boilerplate designs did not always matchthe needs o the poor. Tey also ound competitionin grassroots movements that enabled urban dwellersto access land by occupation and invasion and thencollectively demand basic services.1

Te 1980s into the 1990s witnessed governments

stepping back signicantly rom their previousrole as direct providers o housing to low-incomehouseholds. Te rise o the enabling approachsparked this movement, shiting the role ogovernment to that o acilitator. Rather thanproviding housing, land or services directly, itocused on the responsibility o government tocreate the legal, political and regulatory conditionsthat would, it posited, enable households toaddress their housing needs through the market.

In line with other movements towardprivatization o governmental unctions, theenabling approach relied heavily on the privatesector as provider o housing options or thepopulace. As they moved away rom directprovision, governments in Latin America inparticular experimented with granting subsidiesto low-income households to enable them toaccess privately-produced housing.14

Te most well-known and praised example o

this occurred in Chile, and its policy descendantscontinue to be utilized in subsidy programsacross Latin America, including in Costa Ricaand Colombia.15 In a dierent approach, Mexicoand other countries subsidized interest rates onmortgages issued rom government-run pensionunds to allow households employed in theormal sector to purchase privately constructedhousing. While the enabling approach may haveimproved eciency and access in some instances,it did not achieve equity o opportunities, with

ormal market mechanisms remaining out o thereach o most low-income households.16

Approaches during the nineties and the rstpart o the 1st century have incorporated someo these strategies, like certain aspects o theenabling approach; while largely discardedothers, such as the direct provision o housingby government. Current approaches will bediscussed in the body o this report, but it isimportant to briefy acknowledge some o thechanges in the way that housing and land issuesare verbalized by housing policy makers andpractitioners as the eld moves orward into the1st century.

In large, the language to describe shelterinterventions has shited to an increased emphasison the right o the poor to the city, rather than onthe more restricted right to housing, according to

a recent meeting o Latin American ministries ohousing.17 Examples o this include Brazil, wherethe Statute o Cities arms the social unctiono urban land and enables municipalities to playa role in ensuring that urban land resources areused to meet social needs.18

Tis expanded emphasis on the right o thepopulace to a uller enjoyment o the socialbenets o the city augments the Brazilianconstitutions recognition o the right o citizens

to adequate housing. Brazils Ministry o Citiesgives institutional orm to integrated visionso urban redevelopment and the right to thecity, moving away rom a sectoral approach toaddressing the needs o the city. Established in001, the Ministry brings together housing,environmental concerns, transportation andland use under a single roo to approach urbanredevelopment in an integrated manner.19

In Argentina, the national housing policy

promotes an integrated notion o livingenvironment above an isolated concept ohousing as habitat.0 Infuenced by the input oa network o grassroots housing organizations,Ecuador recently incorporated explicit languageunderlining citizens right to adequate housingand right to secure and healthy habitat withoutregard to their social and economic situation intoits new constitution. Articles 0 and 1 o theconstitution go urther to assert that:

People have a right to the ull enjoyment o thecity and its public spaces, under principles osustainability, social justice, respect or dierent


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6 PART ONE

urban cultures and balance between the urbanand the rural. Te exercise o the right to thecity is based in its democratic management,in the social and environmental unction oproperty and o the city, and in the ull exerciseo citizenship.1

A recent analysis pointed out that the inclusion othe right to housing and the city in the constitutionprovides grounds or demanding these rights intheir absence. Mexicos 006 housing law alsoemphasizes the importance o addressing both thehabitat and housing needs o low-income households,and recognizes the signicance o households owneorts in producing housing solutions incrementallyunder the rubric o social production o habitat.Tis shit in language comes in a country that hasone o the oldest constitutional recognitions o theright to housing in Latin America, codied in itsconstitution o 1917.

Troughout these decades, as governmentprograms evolved and policy dialogues tookon new directions, the reality on the groundremained, in many ways, consistent: the majorityo households in most Latin American countries

addressed their housing needs outside o ormalmarkets and without reliance on mechanisms othe state. Te amount o housing produced byinormal mechanisms is dicult to gauge giventhat most measures o housing production aregeared toward ormal sector housing.

Te data that are available, both historically andin the present, indicate that inormal housingproduction has played a strong i not dominantrole in addressing the needs o lower-incomehouseholds. In Brazil, or example, inormalsubmarkets and household sel-help initiativeshave been estimated to account or approximatelythree-quarters o the housing construction rom1964 to 1986.4 In Mexico, between 1980 and00 more than hal o constructed housing units

were built by households themselves, and lessthan 0 per cent o these were built with ormalnancing. Tese homes provided shelter to morethan two-thirds o the countrys population. In004 the number o new houses classied undersocial production o housing had grown smaller,but still represented more than a third o newdwellings.5

PART ONE ENDNOTES

1. ECLAC, 007; Ortiz and Zrate, 006; INFONAVI, 009;CONAVI, 009

. UN-Habitat, 006. UN-Habitat, 005a4. CGAP, n.d.5. Fay, 0056. CGAP, n.d.7. Gilbert, 0048. Morais, 0079. urner, 1976; urner and Fichter, 197

10. Fay, 005; CGAP, n.d.11. Rioro, 19961. CGAP, n.d.1. ECLAC, 000

14. Gilbert, 00415. Gonzales Arrieta, 199816. CGAP, n.d.17. UN-Habitat, 00018. Fernandes, 00119. Magalhes and Cid Blanco, 0070. Fidel, n.d.1. Ecuador, 008. COHRE, 008. CIDOC and SHF, 0064. Morais, 0075. CIDOC and SHF, 006


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Figure 4: The inormality o the centrally-located inormal settlement, Villa 31, sits in stark contrast to theormal city in Buenos Aires, Argentina. Photo UN-HABITAT/ Matthew French


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88

This studyslctivlyhighlights

prgramsad plicisthat ar

rprstativ largr

mvmts.

PART TwO


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2PART TWo

LAND TENURECHOICES

Figure 5: Inormal expansion on the steep hills surroundingTegucigalpa, the capital o Honduras.

Photo UN-HABITAT/ Matthew French



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10 PART TwO

2. LAND TENURE CHOICES

Whereas homeownership and rental are seen as thetwo main tenure choices in the developed world,in Latin America a number o shelter choices

make up what is best described as a continuumo tenure types.1 Tis continuum includes butis not limited to shelter that is rented, shared,loaned, and owned by the occupants. Ownershipitsel is sometimes more nominal than it is legallyenorceable, as the security o tenure runs a rangerom legally codied to highly precarious, withgreat variation according to context.

2.1 HOMEOwNERSHIP TRENDS

Latin America exhibits some o the highestrecorded rates o home ownership in the world;

with estimates that 7 per cent o householdsown their home. Tis exceeds the rate o 67per cent homeownership the United States, acountry with a well-developed real estate marketand a housing mortgage nance system withbroad reach.

In many developed countries, it is taken asconventional wisdom that higher-incomeamilies are more likely to own their homes,

and lower-income amilies are more likely torent their accommodations. Tis contrasts withLatin America, where in most cases the poor areas likely as households with greater resources tooccupy the category o homeowners. In severalLatin American countries the poor report homeownership at higher rates than even the wealthiestincome quintile (see Figure 1). In Bolivia, orexample, the lowest-income households reporthomeownership at a much higher rate than thehighest income quintile.4

Tere are a number o reasons thathomeownership is the predominant tenure type

throughout Latin America. From a structuralperspective, the growth o housing nance inthe region has increased opportunities or homepurchase, particularly or middle- and upper-income groups.5 Te extension o inrastructureand transport networks to outlying urban areashas also been cited as a actor enabling the low-rise expansion o Latin American cities.6 Froma policy point o view, ew governments in theregion have promoted, acilitated, or undedthe prolieration o other tenure types, inparticular rental housing.7 Governments havecontributed to the rise in homeownership bydirectly constructing owner-occupied housing,backing policies or practices to incentivize homeconstruction, and, in some cases, taking a laissez-aire or conciliatory approach to the massivespread o inormal housing at the edges o cities.

Perhaps most poignantly, the growth inhomeownership has come rom a groundswello inormal housing construction by low-incomehouseholds across the region. Low-incomehouseholds throughout Latin America havepursued inormal strategies o constructing theirown homes, changing the ace o communitiesacross Latin America. In the absence o ormalmechanisms serving their housing needs, low-income households have been abetted byinormal markets that have largely lled the void.

2.2 OwNING A HOME:IN NAME OR IN LAw?

In contrast with many developed countries where homeownership typically means possessiono veriable legal rights to the property inLatin America the category o homeownershipitsel is not monolithic. Te denition o

homeownership is complicated by a wide rangeo types o tenure control, including a highdegree o inormality o tenure across the region.8

Bolivia 67% 001

Chile 6% 00

Costa Rica 65% 000

Mexico 84% 1999

Panama 79% 000Venezuela 78% 001

Table 1. Rates o homeownership in selected Latin American countries

Surc: (Un-Habitat, 2005a)


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High rates o inormal land tenure are explainedin part by the strategies that many households and especially lower-income households pursueto gain access to land, including land invasions,inormal land subdivisions, inormal transers,and provisional occupation o land owned byother parties. Tese strategies are united by theact that they do not oer easy means to gainingveriable legal ownership o property a dynamicthat will be discussed in the ollowing section.

Data available on ownership status o land andhousing oten comes rom national censusesthat rely on data reported by the householdsthemselves.9 Tis casts doubt on whetherhouseholds categorized as owners actually havelegal title to the property or the category o

homeownership actually translates into oneo a range o provisional types o ownershipthat all short o ull registered title. In somecommunities, such as in avelas in Brazil,denition o ownership is largely conditioned byperceptions o security and control o the parcel,not by the registration o the plot per se.10

Across the economic spectrum, it has beenestimated that more than a third o Latin

American households described as homeowners

may have tenure that alls short o ull legaltitle.11 Inormal housing is estimated toconstitute anywhere between 5 and 50 per cento the urban housing stock in Latin America.1Concentrations o inormality range rom 10per cent in Buenos Aires, Argentina to hal oall dwellings in the metropolitan areas o Quito,Ecuador and Caracas, Venezuela.1 Statistics

rom metropolitan areas in Mexico, El Salvador,Honduras, and Panamapoint to the low rate oactual ormal ownership amongst low-incomehouseholds (able ).14

I owning a home is taken to mean possessing aull legal title, juxtaposing high rates o nominalhomeownership with high rates o inormaltenure seems to reveal a certain paradox: a

large percentage o those who are categorizedas homeowners may have control o their landtenure that is at best provisional and at worstprecarious. Tis brings into question what itmeans to say that such a large percentage o Latin

Americans and Caribbeans are homeowners.Further research is necessary to gain a betterunderstanding o the range o tenure types that

THE EXTENSION OFINFRASTRUCTUREAND TRANSPORTNETWORKS TOOUTLYING URBAN

AREAS HAS ALSOBEEN CITED AS A

FACTOR ENABLING THELOW-RISE EXPANSION OF LATINAMERICAN CITIES.

Table 2. Comparison o reported homeownership amongst lowest and highest income uintiles

Lowest quintile Highest quintile

Bolivia 86 64

Chile 7 71

Colombia 6 61

Costa Rica 74 80

Dominican Republic 77 6

Guyana 68 64

Paraguay 86 77Surc: Authrs labrati with data rm IDB, 2008


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12

have arisen, how they impact homeownershipas a phenomenon, what rightully deneshomeownership, and how mechanisms can bedeveloped to improve security o tenure andaord protections to households across the

homeownership continuum.

2.3 OTHER TyPES OF TENURE

wenty-one per cent o Latin Americanhouseholds are estimated to rent a dwelling.15Rental rates vary widely across the region andcan exhibit great dierences between dierentlocales in a given country. Te types o dwellingsoccupied by renters also show great variety,ranging rom rented homes to multiamily

buildings, luxury rental apartments, tenement-style buildings, and single rooms rented out inamily homes. A small proportion o householdsacross the region estimated at six per cent livein less-mentioned tenure arrangements such assharing o housing amongst relatives and lenthomes that are occupied by a non-owner at nocharge. In some locales, such tenure arrangementsare more common than renting.16

Higher concentrations o rental activity can oten

be ound in cities and more densely populatedareas. Megacities in South America like LaPaz, Bolivia, Bogot, Colombia, and MexicoCity, Mexico all have higher rates o rentalhousing and lower rates o homeownership whencompared to national urban averages.17 Tesedynamics may be explained by relatively highercosts that make it more dicult or householdsto purchase homes or acquire aordable land orsel-construction.

Certain larger cities have also shown patterns odensication in city centres that can avour theprolieration o multiamily rental housing, as in

the case o So Paulo, Brazil and Lima, Peru.18Rental markets may be stronger in locales whereproperty rule-o-law is enorced, since this couldmake land invasions, occupations, and inormalhousing practices less tenable and thus encourage

renting as an alternative.

As has already been stated, rental housing hasnot been emphasized as a strategy by most Latin

American governments. Te absence o policiesor practices promoting rental housing has beencited by many scholars as a major gap in theprovision o aordable housing in the region,especially as we consider that rental housing hasplayed a major role in addressing the housingneeds o the poor in other regions o the world.19

One exception to this is Colombia, wherethe Congress instituted a law to promoteinvestment in local rental markets by revisingrental procedures and regulations and providingincentives or investment in rental housing.0

Te existence o aordable rental housingcould expand the range o options available tolow-income households, and could move thehousing sector closer to the integrated approachto addressing low-income housing that has beenadvocated by some policymakers and academics.1Rental housing diversies the housing supply,oers fexibility, and does not necessarilypenalize transience as much as homeownership.It can also serve as a temporary stepping-stoneto other tenure orms. Conversely, althoughhomeownership is widely believed to be thepreerence o poor households in Latin America,this belie is only minimally substantiated bythe literature. Tis leads us to question whetherlow-income households pursue homeownershipbecause it is their preerence or because they viewit as the only option available to them.

Honduras, Metro Tegucigalpa 65%

Panama, Metro Panama City 64%

El Salvador, Metro San Salvador 55%

Mexico, 31 cities 48%

Surc: Fay, 2005, with data rm Wrld Bak, 2002 ad Ruggri Ladrchi, 2005. nt: Mic data is rm 2003;Ctral Amrica data rm 2001

Table 3. Percentage o poor households in select cities with registered title

PART TwO


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1. Morais, 007. Fay, 005. ACS, 0064. IDB, 0085. UN-Habitat, 005a6. Gilbert, 19967. Gilbert, 1996p; Morais, 007; Fay, 0058. Morais, 0079. Morais, 00710. LandLines, 00711. Fay, 0051. Fay, 005; ROLAC, 006

PART TWO ENDNOTES

1. Fay, 005; ECLAC, 000; Clichevsk cited in ECLAC14. Fay, 00515. Fay, 00516. Harms, 199717. Gilbert, 199618. Harms, 199719. UN-Habitat, 005a; Morais, 007; Gilbert, 19960. Fay, 0051. Keivani and Werna, 001; Morais, 007; Gilbert, 1996. Fay, 005


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1414

Th LatiAmricahusigdfcit is th

surcs data mst

rqutlycitd t idicat th

gravity ad scp th husig prblmi Lati Amrica.

PART THREE


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3PART THRee

HOUSING DEFICITS:DEFINING THE NEED

Figure 6: Slum upgrading in Medellin, Colombia.Photo UN-HABITAT



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16 PART THREE

3. HOUSING DEFICITS:DEFINING THE NEED

Te Latin American housing decit is one o thesources o data most requently cited to indicate

the gravity and scope o the housing problemin Latin America. From country to country, thehousing decit is invoked variously as explanation,accusation, justication, and call to action orhousing policy reorms and new approaches.Grasping the extent and type o housing issuesas expressed in decit measurements is essentialto the task o understanding how to grapple withhousing and land issues acing the region.

Te denition o the term housing decit is

ar rom monolithic, but the term is generallyunderstood to mean the unaddressed need orhousing in a given locale. Decits are usuallysegmented into categories o quantitative andqualitative. Te quantitative decit is takento mean the number o households that lackhousing, due to, or example, overcrowding or

doubling up o households. Qualitative decitsare based on the number o households whosedwellings display qualitative deciencies, such asa dirt foor, a lack o basic sewage disposal, or aprecarious location.

Regional estimates give a broad sense o thescope o the housing decit, but their reliabilityis conditioned by the quality o the data thatthey draw rom constituent countries. Te lastcomprehensive assessment o the region wascarried out by the Economic Commission onLatin America and the Caribbean (ECLAC) in000, utilizing data primarily rom the nineties.Tis last regional analysis ound that over 51million households lived in decient housingconditions, with 61 per cent represented by the

qualitative decit and 9 per cent by quantitativedeciencies.1

More recent projections give an updated senseo where the regional decit may stand, butare only partially supported by updated censusdata. According to estimates by the ECLAC, the

> Box 1: Housing defcits: a reection o the blockages to housing production

Housing decits are not just a number or anacademic abstraction, but are a refection othe range o orces in the market and societythat complicate the provision o housing orall citizens. A dearth o rental options, recentmigration to an urban area, or a lack oaordable land can mean that households resortto building provisional, sometimes ualitativelydecient dwellings that are borne o immediatenecessity and turn into a permanent ad-hocsolutions. As sel-built settlements develop,they inreuently have access to technicalassistance, sometimes resulting in dwellings thatare built poorly. In the absence o appropriate

housing nance mechanisms, amilies buildwith materials that have been saved up overtime, compromising the integrity o the houserom the moment it is built. In other cases,older settlements suer rom a lack o access tocapital to make improvements to houses thatare not uninhabitable, but may become so withcontinued inattention.

The explanations or uantitative housingdecits can ll volumes. On the supply side,developers and construction rms must be ableto depend on a demand in the market, be able

to construct homes with a reasonable amounto time and without undue bureaucracy, andhave access to nancing to carry out their

projects. On the demand side, or households topurchase they must have capital, or incomes andmechanisms that allow them to access capital.Despite improvements to the economies oLatin American countries over the last decade,poverty is still a primary actor limiting theacuisition power o households. This underlinesthe importance o housing nance aordableto low-income households and the availabilityo other devices such as micronance. Inpractice, however, appropriate housing nancemechanisms are inreuently available with theappropriate conditions or terms to enable lower-income households to purchase a built home.

The unavailability o credit or large segments othe population means an inability to purchasehousing built in the ormal sector, or access tocredit to build on ones own. Rising land costsexacerbate this issue, making it dicult or lower-income amilies to aord a plot o land on whichto construct their own house and thus reducedoubling up o amilies. Although progress hasmade, all o these issues are complicated by alack o will, expertise, or targeted policies on thepart o some local and national governments toassist the population in meeting their housingneeds or providing or basic inrastructure.

Surcs: Un-Habitat, 2008, Un-Habitat, 2006, FJP,

2005, MInVU, 2004


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current housing decit in Latin America and theCaribbean stands between 4 and 51 millionunits in a region that is estimated to grow to 160million households by decades end. At its 16thassembly in October 007, the Organization oHigh Ministers o Housing and Urbanization inLatin America and the Caribbean (MINURVI)indicated a higher level o quantitative andqualitative deprivation in the region, estimatingthat 40 per cent o households in Latin

America either lived in dwellings that requiredimprovements ( per cent) or were living inovercrowded conditions or otherwise lacked ahome o their own (18 per cent).

Unortunately, the quality o housing decitdata varies greatly rom country to country, andgeneralized regional estimates are made basedon this same data oten rom censuses carriedout in 000 or earlier. Data on quantitative andqualitative housing decits are not uniormlycollected and not uniormly measured,sometimes out o date, and the broad strokeso their numbers can sometimes be misleadingin understanding the contours o the housingsituation o Latin American countries. A classicexample can be seen in the determinants o thequalitative decit, which vary sometimes broadlyrom country to country where in one countrya dirt foor or a straw roo represents a decit, orexample, in another country it is not recorded atall.

A paucity o exact data on housing conditionson a large scale makes dicult the denitiono exactly how many households live in homescharacterized as qualitatively decient.4 Tis isnot a problem restricted to Latin America inmore advanced economies, or example, theUnited States, the census also lacks a standardizedsystem or assessing gradations o housing quality.Furthermore, statistics on the number o amilies

without adequate housing in the most vulnerableincome groups have been acknowledged tobe low, given the likelihood o undercountingsuch populations due to the precariousness andtransience o their living situations.5

3.1 INDIVIDUAL COUNTRyDEFICITS

Individual country data give us some sense o thespecic contours o the decit in dierent locales:

Brazil presents some o the most recent andconsidered data on the housing decit. TeBrazilian housing decit was estimated in 005to be 7.9 million dwellings, or the equivalento nearly 15 per cent o the stock o housing inthe country.6 As a highly urbanized nation, it isnot surprising that 81 per cent o this decit isound in cities.7 Te greatest share o the overalldecit (71 per cent) is split almost equallybetween the densely populated Southeast regionand the Northeast, where the rural qualitativehousing decit is largely concentrated. Tedecit nationwide is, in sheer numbers, primarilyattributed to quantitative deciencies, with theserepresenting almost 80 per cent o the entirehousing decit. When we look more closely,the causes o the decit vary widely betweenurban and rural areas. In rural areas qualitativedeciencies represented the principal cause othe decit, with the equivalent o 57 per cent oamilies living in conditions deemed precarious,

with most o the remaining decit owing toovercrowding. Deciencies deemed quantitative overcrowding (60 per cent) and excessive rentpayment (9 per cent) made up the brunt othe decit in urban areas.

Peru: Data rom the 005 Census reports thatthere are about 00,000 more households inPeru than there are dwellings, representing, insimple terms, the quantitative decit. Analysis odata rom 004 indicates that over one million

households may live in overcrowded conditions,dened as more than amily members perroom.7 Conthe and Garcia analyzed the 005

DEFICIENCIESIN HOUSING ASREFLECTED IN THEqUANTITATIVE ANDqUALITATIVE DEFICITS

ARE TYPICALLYDISPROPORTIONATELY

CONCENTRATED IN LOWEST-INCOME GROUPS.


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18 PART THREE

Peruvian Population and Housing Census todetermine the number o dwellings displayingprecarious qualitative characteristics or lackingminimum living standards. Precarious conditions

were dened as walls or roo made o straw, palmleaves, or rush mat and foors marked as other,

with these categories describing 1.7 per cent oall dwellings in Peru, or over 800,000 dwellings.Minimum living standards were dened ashouseholds who were not on the electrical grid,did not have piped water, or lack basic sewagedisposal, a group that comprised .9 per cento all dwellings nationwide, or over 1,800,000.Te number o dwellings making up the decit between those that do not exist and those thatpersist in substandard conditions is muchhigher than the dierence between the numbero households and the number o houses in thecountry. How much higher is unclear, sincethere is likely overlap in the categories exhibitingqualitative deciencies. Based on these gures,the decit could reach over one million, andperhaps as high as two million, equivalent to 15per cent and 0 per cent o all households.

Nicaragua: Frequent mention is made oNicaraguas housing decit o 400,000 to 500,000in the national media, but the provenance o

this number is not entirely clear. Te InstitutoNicaragense de Estadsticas y Censos (INEC)carried out a census in 005, providing dataon overcrowding, access to basic services, anddwellings deemed precarious. Six per cent oNicaraguas population (59,17 households),according to the Census, lives in dwellingscategorically deemed precarious.8 Five per cent

(50,999 households) live in households thatare characterized by the presence o more thanone household (amily) in a single dwelling conservatively meaning that 5,500 householdsare without a house o their own. Tirteenper cent o households did not have a roomdedicated to sleeping, making it likely that somepercentage o these 10,77 lived in conditions oovercrowding. With regard to basic services, thirtyper cent o the population were not connectedto the electrical grid (97,41 households),and two-thirds o the rural population did nothave electricity. Nineteen per cent depended ona river or other source or water, representing185,88 households. Fiteen per cent lack basicsanitary disposal acilities, representing 150,66households.9 Since categories o deciency arelikely to overlap, the available data ound bythis study does not permit an estimate o thetotal number o households that would becorrespond to the particular types o qualitativeor quantitative decit.

Chile organized dwellings into categories oacceptable, repairable and irreparable based ona matrix o data gathered during a 00 census.(See Box ) According to this classicationsystem, 79 per cent o dwellings were determinedto be acceptable, 17 per cent repairable and 4per cent irreparable.10 Te irreparable dwellingsrepresented about 155,000 dwellings, in other

words, the qualitative housing decit requiringreplacement. Using the same census data, thestudy ound that about 41,000 households wereallegados, or households that lived in precariousconditions on the urban ringe. Furthermore,

Figure 7. Income distribution o housing defciencies

Surc: Authrs labrati with data rm (IDB, 2008)


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the study determined that about 5,000 amilyunits lived in conditions o overcrowding o morethan one amily in a single dwelling. Crossingthis data with census data on the socioeconomicstatus o these amilies, the study concludedthat approximately 145,000 o these amilies

were in a position to be nancially independent,introducing a need or the construction odwellings to satisy this demand. Te interestingaspect o this data point is that it attempts toestablish what percentage o those who are

overcrowded may be in such conditions dueto lack o nancial independence and whatpercentage nd themselves in such a situationdue to a deciency o housing options.

El Salvador is an example o a country whererural housing deciencies present a starkerpicture than those ound in urban areas. Seventy-two per cent o the Salvadoran housing decit,as measured both quantitatively and qualitatively,is ound in the rural zones o the country.Tough, these represent a smaller proportiono the population than urban areas.11 Higherproportions o houses without access to sewage

or piped water, and those with dirt foors areconcentrated in rural areas with higher poverty.1Elevated housing decits in rural areas couldbe tied to more dicult economic conditionsin rural areas, where 4 per cent o amilies areclassied as poor as compared to thirty-one percent o urban households.1

3.2 INCOME ATTRIBUTES OFHOUSING DEFICITS

Deciencies in housing as refected in thequantitative and qualitative decits aretypically disproportionately concentrated inthe lowest-income groups. Low incomes limitthe housing options o lower-income amilies,perhaps making it unsurprising that the poorare disproportionately ound living in decienthousing conditions. In the case oBrazil, ninetyper cent o amilies living in decient situationsmake less than three minimum wages.14 Tisdisproportionate socio economic pattern repeatsitsel in every region o the country, in areas bothrural and urban. Likewise, over 70 per cent othe housing decit in El Salvador ell into the

> Box 2: Chile: a new approach to defning housing defcits

Some o the most comprehensive and recentinormation about the housing decits o a LatinAmerican country can be ound in Chile, wherethe Ministry o Housing and Urbanism (MINVU)

carried out an extensive analysis based on datarom the nations 2002 census. The result o thehousing decit study is a document that providesdetailed data about the state o housing andintroduces new perspectives on how to assessand understand a housing decit.

The study used a methodology proposed byCELADE in 1996, segmenting the housing stockinto three categories o acceptable, repairableand unacceptable. This assessment was basedon a matrix that took into considerationsubcategories o housing type, an index o

the type and conditions o the roo, walls, andfoor, and the type o sanitary acilities oundin the dwelling. Dwellings that were deemedacceptable in all three subcategories wereobviously graded as acceptable. According tothe matrix, dwellings that exhibited a reparabledeciency in type o materials degraded adobewalls, a breglass tile foor or a breglass sheetroo, or instance were deemed repairable,even i the sanitary acilities were considered

decient. Cases that exhibited an unacceptablehousing condition roo or walls made odiscarded materials, or instance, or a dirtfoor were deemed irreparable. Even in thecase o working sanitary acilities, dwellingstypes dened as unacceptable categories oprovisional housing typologies were likewisecategorized as unacceptable.

One o the novel aspects o this methodology isits recognition that a ualitative deciency in ahouse does not mean that the dwelling, a priori,represents a permanent deciency in the housingstock o the country. Houses exhibiting certainualitative deciencies are dened, within certainparameters, to be recoverable, or repairable.Other houses exhibiting more severe deciencies

(or combinations o deciencies) are categorizedas in need o replacement. Put dierently, itrecognizes the potential to rehabilitate suchdwellings, not just the necessity to replace them.This methodology serves to answer the criticismthat housing decit pronouncements areused as uncontemplated justications or newconstruction.

Surcs: MInVU, 2004


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20 PART THREE

two lowest income strata.15 Regional data romthe Inter American Development Bank conrmsthese national trends. Data segmented by incomegroup shows that housing quality deciencies areconcentrated in lower-income groups across theregion.16 In Bolivia, or example, only per cento households in the three lowest income decileshave a nished foor, as compared to 69 per centon average in the next our deciles, and 90 percent in the top three income deciles. In Panama,the lowest-income groups have basic sanitation inonly 0 per cent o cases, as compared to 54 percent in middle-income households and 88 percent in the three top income deciles.

Figure 7 shows the distribution by income decilesin Mexico and Peru o two housing quality

indicators, type o foor and adequate occupancy.As we descend the income scale, we see thathigher proportions o lower-income householdsexhibit these two deciencies. Furthermore,high national averages o households with basicservices can mask the act that high proportionso low-income households suer rom housingdeciencies, as in the case o Mexico, where89 per cent o the households nationally have anished foor, but only 5 per cent o the lowest-income households have this amenity.17

Tese concentrations underline the importanceo having data that claries the socioeconomiccharacteristics o households suering romdeciencies as much as the characteristics othe housing itsel. Te existence o micro-dataon the particular regional patterns and thesocioeconomic spread o the housing decits,

1. CGAP, n.d.. Fay, 005. CGAP, n.d.4. Gilbert, 0045. Morais, 0076. urner, 1976; urner and Fichter, 1977. Fay, 005; CGAP, n.d.8. Rioro, 1996

9. CGAP, n.d.10. ECLAC, 00011. Gilbert, 004

PART THREE ENDNOTES

or instance, can contribute to more nuancedresponses to the housing needs o these subgroups.

Data rom CEPAL give us some sense o howqualitative decits have evolved over time, withthe coverage o some basic services improving

over time and others worsening. Electric networkcoverage has shown the most improvement,expanding to include 86 per cent o thepopulation o selected Latin American countriesin 006 compared to 78 per cent in 1990 and80 per cent in 1995. In 1990, 48 per cent o thepopulation had access to basic sanitation, but theregion dipped down to 45 per cent coverage in1995 beore rising again to 48 per cent in 006.

As commented earlier, measurement o regional

progress in addressing both quantitative andqualitative housing decits is made dicult,however, by a lack o contemporaneous and unieddata across countries. Although progress has beenmade by ROLAC and CELADE in promotingmore standardized and contemporaneousmethods o decit measurement, there is stilla need or housing decit numbers that arestandardized across countries, detailed enoughto provide micro-data on housing needs, andrequent enough to provide data that is accurate

and useul. Tis is undamental or eectivepolicy responses. More standardized, detailed,and organized data would give a better view as tothe progress has been made in addressing decitsand a better oundation in understanding howto structure ongoing responses to housing needsacross the region.

1. Gonzales Arrieta, 19981. CGAP, n.d.14. UN-Habitat, 00015. Fernandes, 00116. Magalhes and Cid Blanco, 00717. Fidel, n.d.18. Ecuador, 00819. COHRE, 008

0. CIDOC and SHF, 0061. Morais, 007. CIDOC and SHF, 006


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Photo UN-HABITAT/Matthew French


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2222

Th rlativcst husigt icmca vary

widly withicutris

dpdig thrag supply rmal sctrhusig, th pric lad, th cst cstructimatrials, ad thlvl pvrty.

PART SIx


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23AFFORDABLE LAND AND HOUSING IN ASIA 23AFFORDABLE LAND AND HOUSING IN LATIN AMERICA AND THE CARIBBEAN

4PART FoUR

HOUSE-PRICE-TO-INCOME RATIO

Figure 8: Like many other Latin American cities, adequate housingis particularly unaordable or many households with unstable or

inormal employment in Panama City, Panama, due a lack o accessto housing fnance. Photo UN-HABITAT/Matthew French


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24

earning less than three minimum wages(US$7 monthly); an economic groupthat represented approximately orty percent o newly ormed households.4

Similar trends apply in Colombia, where

about orty per cent o households earnless than two minimum wages (USD 50monthly), putting loans to purchase nishedhousing out o their reach.

In Panama, 4 per cent o householdsin urban areas earn less than USD 00 amonth, not enough to qualiy or ormalnancing to purchase a basic nished unit.

Analyses o the housing sector in El Salvador

in 00 shows as much as 70 per cent o theSalvadoran population could not purchasehouses worth more than ten thousand USdollars and the prices o so-called socialhousing reach as high as USD 15,000.

One analysis ound that the monthlymortgage payment or the most basichousing unit (40 square meters on a 100square meter lot) would represent 40 percent o the average monthly income o a

low-income household inColombia

, 49 percent inVenezuela, 104 per cent in Bolivia,and 164 per cent in Suriname. Low-incomehouseholds represent between 60 and 80 percent o the population in these countries.5

Te relative cost o housing to income can varywidely within countries depending on the rangeo supply o ormal sector housing, the priceo land, the cost o construction materials, andthe level o poverty. able 4 shows how widelyhousing price-to-income ratios can vary withinone country, Peru, rom .9 up to 0. Te lattergure, rom the region o Hunuco, Peru, isstunning: on average housing prices represent

4. HOUSE-PRICE-TOINCOME RATIO

Te house-price-to-income ratio is oten used asa measure o the aordability o housing or low-

income households as well as the general healtho the housing sector. When reerring to housingaordability, house-price-to-income ratio istypically dened as the ratio o the medianprice o a dwelling unit to the median annualhousehold income.1 It is important to note thatthis is typically the price o a house produced bythe ormal sector, since the secondary real estatemarket in most Latin American countries is airlylimited. Tus the housing price indicated inhouse-price-to-income ratios leans more towardthe price o a newly constructed home.

Housing costs relative to income in the developingworld are much higher than in the global North.In Latin America housing-price-to-income ratiosrun close to six to one, compared to about our toone or developed countries. Latin America stillares better in this measure than lower-incomecountries in Asia and Arica, where housingprices can be ten times average income.

4.1 COUNTRy ExAMPLES OFHOUSING-PRICE-TO-INCOMERATIO

Individual country examples show that thehousing-price-to-income ration can weighmost heavily on the poorest households, as lowincomes reduce eective demand and nanceoptions as currently structured do not usuallybridge the gap:

One report estimated that a nished housein a developer-built neighbourhood inMexico was inaccessible or households

Surc: (UIP, 2008)

Table4. House price-to income ratio in selected Peruvian cities

PART FOUR

Cajamarca .9

Iquitos 5.6

Huaras 6.7

Lima 8.7

Huanuco 0


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thirty times the average income. Tis mismatchbetween the price o supply and the paymentcapacity o consumers could be explained by the78 per cent poverty rate in this region.6 In urbanareas where other, non-housing household costsare relatively high such as the megacities oLima, Peru and So Paulo, Brazil incomes maynot go as ar,7 meaning that in practical termsless income may be let or housing purposes. Teadded weight o the relatively high cost o livingin such areas is not refected in the housing-price-to-income ratio. I it were, the price-to-incomeratio could be more extreme in such locales.

Te high ratio in Latin America is explained bya number o actors, including high land costs,construction material costs (especially when

imported), and persistently depressed incomegrowth in many locales. Te prices o inputs tohousing can play a big part in driving up prices,making house-price-to-income ratios highlycontext specic, even within a given country. In

Colombia, or example, land costs can representrom about a quarter o the price o a housetargeted toward low-income households in

Antoquia up to nearly hal o the cost o a newsocial housing unit in the capital, Bogot.8

4.2 THE IMPACT OF HIGH PRICE-TO-INCOME RATIOS

Te high price o housing relative to incomerepresents a major bottleneck to the acquisitiono housing built by the ormal sector orhouseholds in countries across Latin America,especially in countries or region where incomesare relatively low, like Bolivia, Peru, and Haiti.

A lack o ormal housing aordability translatesinto limited access to ormal housing options.

Households that are priced out o ormal marketstypically seek opportunities to address their needsin inormal markets, with sometimes negativeresults described in more detail in subsequentsections.

1. UN-Habitat, 005a

. CIDOC and SHF, 006. UN-Habitat, 005a4. Reports rom Mexico, Colombia, and El Salvador cited in UN-

Habitat, 005a

PART FOUR ENDNOTES5. Ferguson, 1999

6. Hunuco, 0087. Satterthwaite, 008. Cern, 199


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PART FIVE

un-habitat - affordable land and housing in latin america and the caribbean

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