Published on June 9, 2015
- Is the Social Contract for Urban Development with Cities or Housing Suppliers?
- Are Urban Regulations a Central Cause of the Housing Affordability Problem?
- Which Kinds of Urban and Related Financial Regulations Are Essential?
- How Can the Existing Urban Capital Stock Help Address Housing Affordability?
- How Can Subsidies Help?
In the past few years, long after the well-known claim that government support for cities served both as the key explanation for “why poor people stay poor” and as a rationale for limiting such support, sixteen developing countries have mounted multi-billion-dollar urban subsidy programs. Unfortunately, as currently structured, very few of these programs will help address the housing challenges faced by cities. They are deeply flawed even if they come with support from leading think tanks such as the McKinsey Global Institute (2014) and from foreign advisors and investors. They often repeat the now severely criticized approaches pursued by OECD countries in the early post–World War II years, when a similar moment in urban policy arose.
Participants at the Rockefeller Foundation’s Bellagio Conference Center discussed the proposed approaches and concluded that while a new urban policy trajectory is very welcome, the approaches taken too often entail regressive, opaque subsidies that will do little to address either the affordability problems or the slum conditions that usually motivate the public expenditures. The shift toward recognizing the important role housing can play in enhancing urban development makes clear sense in a world that between 1950 and 2030 will see urban population growth more than nine times larger than the increase that took place in the two hundred years before the mid-twentieth century. But the new emphasis on addressing the housing challenge will not create cities that will be, as one observer, Edward Glaeser, put it, man’s greatest invention. In places where many basic services are in short supply and almost all employment is in the informal sector, one does not have to worry about whether these agglomerations will be centers of innovation and creativity. They will not be.
In these densely populated areas, the issue is not how to quickly become “world-class” cities, as some aspire to, but rather how to provide the basic services that are lacking, so that daily life for most of the population does not entail pestilence, crime, and lack of opportunity, as it does now. The issue is how to prevent a continuation of the extremely adverse health conditions and the increasing unemployment and exclusion that limit opportunity. Before ambitious multi-billion-dollar plans are launched, simple efforts to address fundamental flaws should first be undertaken.
Nor are these problems new ones. Engels’s (1844) contention that living conditions in England during the Industrial Revolution were equivalent to “social murder” was not an exaggeration. His study—which is now regarded as one of the first detailed statistical analyses of urban family life—showed that urban child mortality rates were a multiple of those in the countryside. But neither is his description an exaggeration today. According to the African Population and Health Research Center (2000), infant health conditions in slums are not only more 8
dire than those in the countryside, they are also considerably worse than those in nearby neighborhoods that are not slums. In such a context, the idea of building industrial-scale new housing on the outskirts of cities, or of developing totally new cities with extraordinarily expensive infrastructure, is ridiculous. Indeed, it rings of Percy Bysshe Shelley’s poem “Ozymandias,” in which a “traveller from an antique land” says:
“Two vast and trunkless legs of stone Stand in the desert. Near them, on the sand, Half sunk, a shattered visage lies, whose frown And wrinkled lip, and sneer of cold command Tell that its sculptor well those passions read
. . . on the pedestal these words appear:
‘My name is Ozymandias, king of kings: Look on my works, ye mighty, and despair!’ Nothing beside remains. Round the decay Of that colossal wreck, boundless and bare The lone and level sands stretch far away.”
In other words, to place these new programs within the perspective of Shelley’s traveller, they will do nothing to prevent the urban disease vectors that plague many cities in lower-income countries. In fact, a more likely result will be the creation of colossal wrecks that stand as mute testimony to misdirected adventures.
Without change, millions of children will die from lack of access to basic services such as sanitation—which in sub-Saharan Africa has failed to improve over the past 20 years, despite a 50 percent increase in per capita income. Nor are such consequences the only problem. In order for populations to “catch up” with the income levels of developed economies, countries must urbanize. If cities offer pestilence and congestion rather than Jane Jacobs’s “ballet” of the streets, the engine of growth will have been undercut. There will be a dimming of prospects for development, particularly in cities that harbor more sickness and offer less hope.
Expenditures on isolated, expensive enclaves such as the nearly $4 billion Chinese investment in a new city twenty miles outside of the capital of Angola will do little to boost Luanda’s ability to serve as a platform for inclusive growth. The oil revenues of poor countries should not serve as collateral for such expensive investments as they did in this case. Nor should the public interest research arm of one the world’s leading consulting firms, McKinsey (2014), glibly recommend relying upon long-dismissed approaches such as production of large-scale housing developments. This approach was a component of the outdated notion that the house was a “machine for living,” which, if acted upon, would have seen the destruction of most of central Paris.
In sum, the current approaches to addressing the housing challenge will result in little being done to confront basic urban problems. They will also result in large-scale unproductive public expenditures that will for many years scar the landscape rather than enhance living conditions. And while cities in middle- and 9
higher-income countries do not face such extreme dystopias, and in many cases have improved the effectiveness of their assistance, they too will continue to face daunting housing affordability problems already endemic in New York, London, Paris, and elsewhere.
The present monograph summarizes discussions engaged in by twenty-four people who came together at the Rockefeller Foundation’s Bellagio Center. The participants were from thirteen countries and three multilateral financial institutions. All are involved in studying and implementing new approaches to urbanization. The discussions are a first attempt to focus on extraordinary changes in the evolving policy perspective on housing challenges. As a result, they are by no means a definitive analysis of this complex question. But they are a beginning, and they suggest that the problems are real and growing.
Rather than attempting to describe the problems associated with so many highly idiosyncratic programs in many different contexts, we distil a series of questions—five of them—that policymakers can reflect upon as they develop plans for affordable housing. In a sense, the questions respond to one raised by a participant: How should a public servant respond when asked by political decision makers to build 300,000 new housing units? While we do not provide simple answers, our discussion offers a list of some of the most important elements of decision making that should be taken into account when planning affordable housing. Our questions are meant to help identify why housing challenges arise, so that public servants who implement policies can avoid the syndrome raised in Thomas Pynchon’s well-known aphorism: “If they can get you asking the wrong questions, they don’t have to worry about answers.” The participants believe that addressing these questions will both reduce the likelihood that new, misdirected programs will be undertaken and ensure that more constructive ways of addressing the urban challenge will be developed.
The discussions also led to a conjecture about the urbanization process in lower-income countries, and particularly those of sub-Saharan Africa, that, while not backed by evidence, may help identify early warning signs of disturbing trends. Africa’s urbanization appears to be unique in many respects. For instance, it appears to be the locus of most of what Watson (2013) has described as fantasies about how cities are developed and contribute to inclusive growth.
We conclude with a number of recommendations about how this discussion might be carried forward, so that the urbanization policies under way in so many countries might be reconsidered. The perspective of our recommendations is similar to that of one of the foremost observers of housing policy, the late John Quigley, who suggested (2007) that it is impossible to understand housing policy without historical context. He argued that if housing policy in the United States were being designed on a blank slate it would take a very different, much more effective, form. 10
Quigley’s argument is relevant when one considers the billions of dollars now being spent to address the housing affordability challenge. Unfortunately, rarely are these expenditures structured in a way that will result in either improvement in housing affordability or more inclusive cities. While the aspiration of creating an efficient, transparent, well-targeted assistance scheme may be too ambitious, it is important to recognize that even within our more limited perspective, in many places significant levels of government expenditure are being wasted on regressive, opaque housing projects. Indeed, these cures may be worse than the disease.