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How to house the urban poor

How to house the urban poor

Housing for the urban poor—the mantra for a round of back patting for the politician, raised eyebrows for the bureaucrat, and eternal hope for the poor! How tenable is this laudable goal? Unfortunately, urban housing is trapped in the gridlock of outdated policy prescriptions and bureaucracy. Successive governments have taken up housing as a priority welfare activity, built a large number of houses, and allotted them to the urban poor. Most such units are heavily subsidized, with the remaining cost shared between a bank and the beneficiary.

Housing policies need to meet our broader economic objectives, and ensure regulated urban development. How do we help our fast-growing cities, already constrained by lack of basic civic infrastructure, to cope with the massive, unregulated influx from rural areas, without appearing unsympathetic? Ultimately, poverty elimination and other goals will be achieved only if the city is on a vibrant growth trajectory.

Any urban housing policy should prioritize that category of urban poor who are essential foot soldiers in the urban growth engine. Else, it will only serve as one of the many ill-directed incentives, which end up promoting indiscriminate migration.

Instead of transferring ownership to the inhabitant, we need a new paradigm: building an adequate stock of housing and creating a market in rented housing for the poor. A database of beneficiaries can be prepared and they can be allotted rent vouchers. These can be allotted for one year, and then renewed, thus keeping a check on fraudulent practices such as sales and sub-leases. As an incentive, the house can be finally transferred to the tenant after a period of responsible habitation, under certain conditions. This arrangement will legalize the reality of sales and rental transactions of the houses allotted to the urban poor.

The rents will seldom be an additional burden on the poor, as they already pay Rs500-1,000 as monthly rent for squatter huts in slums, without access to basic civic facilities. In contrast, residents of such colonies won’t suffer from the problem of uncertainty in tenure, and will have access to all basic civic facilities. In any case, all government housing schemes now have a significant bank loan share, which the beneficiary has to repay in monthly instalments. Rental vouchers would only substitute this with the rent.

We should encourage public private partnerships to help us leverage private resources. Given the huge demand for lower income housing and the plethora of long-tenure financing options, these ventures offer vast potential for real estate developers.

Build-operate-transfer contracts of 15-20 years can be an attractive proposition, and they can collect predetermined rents. The rental subsidy from the government can be directly transferred to the developers. This would also ensure better targeting of the subsidies.

Further, instead of single-size homogeneous units, the private builder can be allowed to introduce small variations in size and amenities. They can also cross-subsidize such poor housing with bigger houses by going in for newer township development around the cities. The government can help in the acquisition of some part of the land. This would also ensure a more balanced expansion of the city.

During the issuing of vouchers, the beneficiary should be able to choose between private and government housing units. While government should provide only the basic subsidy, the beneficiary should be free to occupy a larger house by paying the differential. Smaller houses can get higher subsidy. All this will lead to healthy competition among private builders and ensure quality in construction and maintenance.

The vouchers will also help make use of scarce subsidy resources more efficiently. Instead of spending upfront for construction, resources would be drawn down over a longer time frame. This will help cover more beneficiaries than is possible by constructing houses and directly transferring ownership.

By permitting beneficiaries to choose their housing locations and categories, rent vouchers will make the housing programme for the urban poor more demand- driven. An efficient system should be able to self-select its target beneficiaries, and screen out the ineligible. The available pool of these houses would be liquid, as the houses vacated by families that rise up the economic ladder will be thrown open for others. A periodical analysis of the occupancy and demand would easily help plan further construction of such houses, thereby ensuring that those migrating into the cities would not have to wait long before being allotted a house.

Gulzar Natarajan is a civil servant. These are his personal views. Comments are welcome at theirview@livemint.com

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