The United Nations estimates that by 2030, nearly 60 percent of the 8.3 billion people will live in cities.
Almost 1,400 cities around the world are home to more than 500,000 people.
Cities can connect people with opportunity, create innovation, and foster growth, but they require urban planning, infrastructure, transportation, and housing.
Providing people with access to adequate and affordable housing is one of the goals of the Sustainable Development Goals. Goal 11 focuses on making cities sustainable.
When a family invests in a good home, it improves their living conditions and increases their interest in the community. A home is also an asset for your old age and your children’s future.
Because construction creates jobs and economic growth, investing in housing also fosters shared prosperity.
However, population growth and urbanization, particularly in Africa and Asia, are putting pressure on housing delivery systems, which are often informal or dependent on the state. By 2030, more than 50 percent of Africa’s population will live in cities.
When formal housing is not available, informal housing quickly fills the gap, proliferating slums and creating new development challenges.
Although developing countries have made great strides in improving housing and housing finance frameworks, large gaps in access to affordable housing remain. Many IDA countries need to develop mortgage solutions, including for low-income households who often work in the informal sector.
By 2030, 3 billion people will need new housing. Can we achieve this goal?Here are three reasons why.
1. Annual investment in new housing is only 0.7% of global GDP.
According to United Nations population data, 300 million new homes will be needed by 2030, or about 21 million new homes per year.
It costs about US$25,000 to build new decent housing with durable materials and the necessary public connections and services, which translates to US$525 billion annually.
A more concrete way to understand the scale of this investment is to look at it in terms of GDP.
According to the IMF, global GDP in 2015 was just over US$73 trillion. This means that the world needs to invest around 0.7% of its annual GDP in housing construction to reach its housing targets.
2. Housing becomes more affordable as poverty decreases and incomes increase.
Poverty levels are a quarter of what they were in 1990, with 9.6% of the world’s population living below the poverty line.
Today, if your household income is $10 per day, the loan amount would be up to $15,000 (assuming a 15-year loan at 5% for two people with an income of 40% of the income applied to the service loan). This is certainly enough to build a decent house. If fiscal capacity allows, this could be supplemented by a combination of land allocation and prudent subsidies targeted at the poorest, with a robust financial inclusion program.
3. India sets ‘Housing for All’ target for 2022
India faces one of its toughest housing challenges yet takes an uncompromising and ambitious approach. The country has set its own goal of achieving housing for all by 2022.
India’s low-income housing finance projects require lenders to innovate. The World Bank Group is working with governments and national housing banks to expand access to financing for people who work in the informal sector or who do not have formal property ownership but have some form of property rights that can be used as collateral. Lenders are using new technology to better serve their borrowers, and developers are considering new construction models to reduce costs. But ultimately, it is the prospect of serving a huge untapped market that is driving innovation in the private sector.
What works in India has great potential to work in Bangladesh, Indonesia, the Philippines, and many other African countries where it is still difficult to reconcile informal income with formal financing.
If the goal is possible, the question is how.
An efficient and inclusive financial system, a stable macroeconomy, access to long-term finance and strong land rights are all prerequisites for creating the right conditions for housing finance.
However, building housing and infrastructure also requires huge, long-term investments that cannot be borne by governments alone.
The World Bank Group helps countries address housing issues by investing in construction, building materials, and private housing development, as well as improving urban planning, building regulations, and access to land, investing in anti-poverty infrastructure and slum upgrading, and strengthening housing rental markets.
The 7th World Housing Finance Conference, which opened today, is focused on finding solutions to make housing more affordable, including mobilizing private sector financing to meet housing needs.
The world’s housing needs may be daunting, but if we work together and innovate, the goal of #Housing4All is achievable.
