The KPDA Bulletin - January to July 2020 Issue

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J A N U A R Y T O J U L Y 2 0 2 0Rent controls offer the potential toprotect tenants, but must also take care not torestrict the future supply of properties to rent byunfairly disadvantaging landlords.- Mixed-use development and inclusionary zoning, to ensureneighbourhoods have a mix of income levels and proximity tojobs and services.- Taxation solutions, such astaxing the underlying value of land rather than the value of theproperty on it, and imposing a tax on vacant land or properties.Supply-Side Challenge 3: Securing FinanceWhile some investors are starting to see affordable housing as alow-risk addition to their portfolio – as demand from keyworkers in public services is likely to remain strong throughrecessions – the private sector naturally focuses on market ratehousing, where returns are expected to be higher.The various options for funding the development of affordablehouses include:- Government provision of tax incentives, grants or exemptionsforprivate developers to develop certain types of property ordevelop indesignated areas.- Government-guaranteed bonds providing cheap, long-termfinance to community-based organizations to develop andmanage affordable housing.- Employing investment models such as microfinance, real estateinvestment trusts (REITs), impact investing and Islamic finance.Supply-Side Challenge 4: Design and ConstructionWhile land is often the biggest cost in developing housing,construction costs are not far behind – and sometimes evengreater. It is important to look into how housing can be mademore affordable by bringing these costs down. Approachesinclude:- Minimizing bureaucracy, as the fees and costs of complyingwithcomplicated building codes can add significantly to project cost.There is potential for technology to provide solutions here.- Emerging constructiontechnologies such as 3D printing,robotbricklayers, self-drivingbulldozers – and solutions relatedto the internet of things (IoT) andartificial intelligence (AI) thatcould bring down operational andmaintenance costs.- Alternative constructionmaterials such as fly ash, cementcoatedexpanded polystyrene panels,glass fibre-reinforced gypsum,cross-laminated timber andcompressed earth blocks.- Public-private partnerships ontraining to address skillsshortages in the constructionsector.Demand-Side ChallengesShould strategies try to makehousing affordable for everyone,or target assistance at certainsections of the population? Andhow should targeted populationsbe defined: by income level, age,number of children oremployment as key workers?These form some of thechallenges on the demand side ofaffordable housing, including:Different forms of tenure, goingbeyond a binary choice betweenrental and home-ownership, canoffer more options to cityresidents struggling to afford ahouse. They include build-to-rent,sharedownership and shared equityownership.
J A N U A R Y T O J U L Y 2 0 2 0Rent controls offer the potential toprotect tenants, but must also take care not torestrict the future supply of properties to rent byunfairly disadvantaging landlords.Rent controls offer the potential to protect tenants, but mustalso take care not to restrict the future supply of properties torent by unfairly disadvantaging landlords.- Non-profit organizations such ascommunity land trusts, housingcooperatives and microfinanceinstitutions have a critical role inbridging the gap betweengovernments and the privatesector to improve theaffordability of housing, as well asworking with individuals to helpthem understand their optionsand make informed decisions.Demand-side interventions need to guard against the risk ofhelping in the short term but not the long term.Mechanisms to keep units affordable on resale include subsidyrecapture and subsidyretention.RecommendationsEffective strategies need to address both supply and demandside challenges. Recommendations for the three maininterdependent actors include:- City governments have to define their long-term plans forincreasingthe supply of affordable housing, balancing the need to minimizeurban sprawl with the limits of the viability of building denserand taller. They need to address political considerations thatcould hold back the development of new affordable housing,ensure that housing developments have adequateinfrastructure, explore ways to improve the situations of thoseliving in informal housing, and create a strong regulatoryenabling environment for the private and non-profit sectors- Private-sector players need to keep abreast of emergingsolutions in construction techniques and materials, work withgovernments to ensure an adequate flow of skilled labour, andconsider new solutions in financing and innovative tenuremodels..This article is an extract from areport by the World EconomicForum published in June 2019 onMaking Affordable Housing aReality in Cities. You may accessthe full report using the linkhttp://www3.weforum.org/docs/WEF_Making_Affordable_Housing_A_Reality_In_Cities_report.pdfThe World Economic Forum is theInternational Organization forPublic-Private Cooperation.The Forum engages the foremostpolitical, business, cultural andother leaders of society to shapeglobal, regional and industryagendas.It was established in 1971 as a notfor-profitfoundation and isheadquartered in Geneva,Switzerland. It is independent,impartial and not tied to any specialinterests.The Forum strives in all its efforts todemonstrate entrepreneurship inthe global public interest whileupholding the highest standards ofgovernance. Moral and intellectualintegrity is at the heart ofeverything it does.Visit https://www.weforum.org/
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The KPDA Bulletin - January to July 2020 Issue

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