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Why is Housing Unaffordable in Pakistani Cities?
271 Plays3 years ago
I talk to Fizzah Sajjad about why affordable housing in Pakistani cities remains an elusive policy dream. We talk about the reasons why there is so much unmet demand for housing, about the harms of speculative investment in housing, and how the Naya Pakistan Housing Program falls short of its objectives. Fizzah also draws on her comparative expertise to bring in lessons that Pakistan can learn from other countries.
Fizzah Sajjad is a PhD Candidate in Human Geography and Urban Studies at the London School of Economics, where she's currently doing research on speculative practices in real estate. FIzzah is an MIT-trained urban planner, and has been working in this space for almost ten years both as a researcher and a practitioner.
Some links to what we talked about:
- The official website of the Naya Pakistan Housing Program.
- Fizzah references this UCLG report on Rethinking Housing Policies when discussing housing policy lessons from other countries.
- The Invisible Cities blog on Tanqeed that Fizzah used to work on. She references this post by Smita Rawoot in particular.
Fizzah's recommendation:
- A free online course by Gautam Bahn: ‘Housing Justice: A View from Indian Cities’
Recommended
Transcript
Introduction to Unpacking Us Podcast
00:00:03
Speaker
Welcome to Unpacking Us, a podcast where we unpack the deepest questions faced by Pakistani society, politics, and the economy. I'm your host, Asad Lyaka.
Historical Context of Housing in Pakistan
00:00:20
Speaker
It was the late 1960s when Futo popularized the slogan of Roti Kablamakan, food, clothing, shelter, which in some ways placed affordable housing near the center of the national policy narrative. More than 50 years have passed since then, and the problem of adequate and affordable housing has gotten much, much worse in Pakistani cities.
00:00:46
Speaker
Despite the fact that since 1970, Pakistan's GDP per capita in US dollars and accounting for inflation has almost tripled. Living standards have increased across the income distribution, but we haven't seen the same kind of improvement in housing for low-income people in our cities.
Current Housing Crisis Analysis
00:01:07
Speaker
Part of the problem is demographics.
00:01:10
Speaker
We have experienced what can only be described as a population explosion, and we have seen rates of urbanization that are unprecedented in human history. But that's not the whole story. It's not simply that land is scarce, that we have more people, and that more of them live in cities. Because at the same time, housing for the elite has flourished.
Guest Introduction: Fiza Sajjad
00:01:35
Speaker
To help us unpack why there is a lack of adequate and affordable housing in Pakistani cities, we have with us Fiza Sajjad, who's a PhD candidate in human geography and urban studies at the London School of Economics, where she's currently doing research on speculative practices in real estate. Fiza is an MIT-trained urban planner, and she has been working in this space for almost 10 years, both as a researcher and a practitioner.
00:02:03
Speaker
My thinking on this problem has been heavily shaped by her work, and I'm very excited to have her on Unpacking Us today. Fiza, welcome to the show. Thank you so much for having
Understanding Unmet Housing Demand
00:02:13
Speaker
me here. So I want to start off our conversation on the urban housing shortage today with the basics. We frequently hear about the housing shortage in terms of what's called the unmet demand for housing.
00:02:25
Speaker
Now, before we talk about how much shortage there is or the reasons behind the shortage, can you start off by helping us unpack what it means conceptually to have an unmet demand for housing? So an unmet demand for housing can mean several things, right? And like you said, it's actually more than just a shortage of housing, for instance. So at its very basic core level, I would say that an unmet demand for housing exists if you
00:02:52
Speaker
would like to be able to buy or to rent a house, but you can't afford to do so. And you're priced out of the market, let's say, and end up being homeless. And so in that case, your demand remains unmet. And that's actually not very common in Pakistan. I mean, of course, there's demolitions that are being carried out by our government itself, which isn't helping. But that's one kind of form in which
00:03:18
Speaker
you can have demand that remains unmet. But you can also have unmet demand if you have access to shelter or do housing. But you just like to be able to move out for a variety of reasons, right? So you may just want to move out because the house is overcrowded, or it's congested, or the space itself is substandard, or you lack connection to services in the neighborhood. Or maybe you just want to move out altogether. But you may be living with a joint family. And for all these, you know,
00:03:48
Speaker
for this desire to move out, but you may not be able to afford to do so. But at the same time, affordability isn't the only reason people's demand remains unmet,
Challenges in Housing Demand Estimation
00:03:58
Speaker
right? So for example, in a city, you may have affordable housing on the peripheries of the city, but it may be really far from places of work. So then again, you can't really move to those places realistically. So your demand remains unmet.
00:04:13
Speaker
But unmet demand can also mean that you have a house and you are not interested in moving out of it, but you just have an unmet demand for improved housing. So you may just want to make physical improvements to your house, but you may like to add rooms, but you can't. So that's largely how I think about demand that remains unmet at the moment in the market.
00:04:38
Speaker
So there's various kinds of unmet demand that you're saying there's people already living in inadequate houses or people living with too many people or people who are living not at the right place. So they could be at the periphery of a city. So you mentioned that the data on this is kind of sparse and we don't really have good estimates. But if I push you to think about the best estimates we have, what would you say is kind of the extent of the unmet demand for housing in urban areas?
00:05:05
Speaker
Yeah, so this is really a great question. And to be honest, I wish I had a better response for this. But I think, you know, typically
00:05:13
Speaker
When we think about unmet demand in policy circles, we typically go to this number of the 10 million housing short. Where does that number come from? That's exactly what I was going to say, right? That the 10 million number is constantly kind of floated around. And there's also this other number, which is that there's a demand for 350 to 400,000 units every year that remains unmet.
00:05:36
Speaker
And this number, it's really, you know, I'm assuming that this number has been calculated by looking at the difference between population growth and available housing units over a period of time, annual depletion of existing stock, also looking at annual housing supply shortage. But there is no detailed methodology for the calculation of this figure that's available, right? So at best, this is an estimate. And we don't know really where this number has come from. And we need to be able to understand the source and the calculations behind this 10 million figure.
00:06:05
Speaker
so that the solutions that we're proposing are more appropriate to the problem at hand. And we need more disaggregated data estimates of shortages by income. But at the same time, we also have to think about the fact that simply looking at shortages doesn't help us understand where overcrowding is an issue or where housing improvements may be needed or whether there's an oversupply of certain forms of housing in the market.
00:06:30
Speaker
So I think it's really critical to get a sense of what the nature and demand of supply
Urbanization's Impact on Housing
00:06:35
Speaker
is. So your question was more about what are the best estimates that we have. And to be honest, I think that there has to be more work done on this. I think the census data last year that was released, there was some more additional data on housing stock itself.
00:06:52
Speaker
And so that could be looked at, I think, PSLM data. PIDE has, again, tried to look at the deficit and the quality of homes and access to amenities. Homelessness, let's say, is one way of assessing unmet demand, right? So if you look at census data, for example, the homeless population in Pakistan is quite low. It's about 38,000 people, which must be an underestimate, in my opinion. With 38,000 across the whole country.
00:07:16
Speaker
across the whole country and it's down from about 144,000 in 1998, right? So I don't know what happened where this has to be an underestimation, right? I mean, they can't be 38,000, but what I guess what I'll give them is that
00:07:32
Speaker
homelessness isn't as pervasive in Pakistan as it is in a lot of other contexts, right? Sure. So that's one thing, right? But there just remains a lot more to be done, right? So I think there are some primary data sets that could be relied on to get some sense of what this unmet demand looks like. But there's a lot more to be done. And it's interesting because you see in a number of other countries,
00:07:57
Speaker
There are actually all these market surveys also done to get a sense of at what price points can the market intervene, what does demand look like. It's also important to get a sense of, especially where are people living, what are the kind of issues that they're facing in different parts of the city as well, and to use that to then intervene accordingly.
00:08:22
Speaker
So yeah, I'm sorry, I wish I had a better response to what the best estimate is, but really, I think there's a lot more that has to be done on this run.
00:08:31
Speaker
So I want to take your advice on trying to dig deeper into these demand and supply issues and trying to kind of start understanding the broad reasons for why there is this unmet demand for housing in urban areas. So if I think of this conceptually, as an economist, I think of like, well, an unmet demand must mean that there is high demand and the reasons why there's high demand and the reasons why there is low supply or kind of inadequate supply or misdirected supply.
00:09:00
Speaker
So if we start thinking about why there is high demand, the two kind of obvious aspects that pop up are high population growth and high kind of rural to urban migration.
Disparity in Housing Supply
00:09:15
Speaker
So if you look at our population growth rates from the 60s, from the late 60s, our population is almost quadrupled from 60 million to
00:09:24
Speaker
you know, somewhere between 220 and 235 million now. And, you know, by estimates, by World Bank estimates, it's going to be somewhere between 270 and 300 million in 2050. Now,
00:09:37
Speaker
If you think about the composition of this population across rural and urban areas, we've also had very, very high rates of urbanization. So in 2017, we had 10 cities with a population of more than 1 million and 99 cities with more than a population of 100,000 people.
00:09:58
Speaker
And that's that's almost double from from the previous census. So we've had we've had crazy rates of urbanization. And, you know, this is concentrated also in these larger urban centers like Peshawar and Lahore. But if you were to think of other places in the world where urbanization has happened at such a rate,
00:10:16
Speaker
you might have expected that the market would respond to this in some way and that you would see a lot of kind of adequate housing in these large urban cities. So in many ways, our cities have kind of failed to respond to urbanization and we can talk later about whether it's the government's fault or it's the market's fault.
00:10:37
Speaker
or what that means. But if you were to think of why it is that the market has kind of failed to respond to this high increase in demand, what would be your response? So I guess we'd have to think about what we mean here by supply and by demand, right? Because if we think about it, there is actually ample supply for housing at the upper end of the income segment, right? So therefore, so there is
00:11:07
Speaker
I always call it an oversupply, just because the urban unit, for instance, also estimated that 60% of housing in Punjab, for instance, lies vacant, right? So there's actually a lot of supply to meet a smaller chunk of that demand, right? And there's demand, of course, that's the reason why they're building, but the demand is basically this demand rests with high-income groups and investors at the moment. So they're more and more,
00:11:37
Speaker
gated communities that are coming up for the elite and for middle classes, and anyone in any city, any major city in Pakistan is bound to run into a number of housing society ads that are kind of everywhere. I guess that's part of my question, right? Why is it that there are so many people who need housing?
00:11:55
Speaker
sure not all of them can afford it but there must be many people who can you know if given the right tools they would be able to approach kind of being able to afford housing but all we see is this kind of a lead housing yeah and i guess i'm going to this question of why this is when i guess i want to also acknowledge that day.
00:12:17
Speaker
There have been some small shifts in the market that we've seen. So for example, so there's obviously a difference between the kind of housing that the formal housing market is supplying and what the, let's say, informal housing market is supplying as well. But even within the formal housing market, you see that developers are offering smaller housing units. So there is five, three, seven Mala houses that are being offered.
00:12:42
Speaker
These are primarily on the peripheries of cities. And this trend didn't exist as much as 10 years ago. So plot sizes have gotten smaller in some ways to try to cater to growing demand for more relatively lower cost housing. But the problem again here is even if that's addressing a portion of the demand, that still leaves a lot of people out. And just the size of the unit doesn't always mean that it's affordable either.
00:13:12
Speaker
But I wanted to acknowledge that there are small shifts that we're seeing in the markets, or the market is trying to adapt in some ways
Speculation in Real Estate Market
00:13:21
Speaker
to that. And I also meant that there's a lot of informal subdivision of land. So there's smaller plots that if somebody owned a piece of land, let's say they're just carving that out. So plotting, cutting, cutting, they're selling it on to people coming from different places. So then that has its own set of challenges. So there's some kind of action that's happening.
00:13:41
Speaker
But then the question still remains, right? Whatever is happening is still not adequate to address the kind of growing demand that exists at the moment. And I think really, one can say that there are a number of kind of technical reasons for that as well, right? So you could potentially say that there are a lot of bottlenecks
00:14:02
Speaker
to build housing at a larger scale for lower to middle income groups. It may just be that existing bylaws have very high standards, or land costs in cities are very high so it isn't possible to do so, or maybe that is difficult to find financing for schemes themselves. But primarily based on my experience of conversations with different developers, and they're very honest about this, they generally say that it's just
00:14:31
Speaker
not profitable for them to try to address the demand that exists on the lower end of the spectrum. They could use that same plan to try to target higher income groups, let's say. And so a lot of them are like, why would I, as a commercial entity, try to curtail my profits? And so at the end of the day, I think that's one of the biggest reasons why supply isn't increasing in line with the actual demand that exists.
00:14:59
Speaker
I also want to touch on something that I know that you're doing research on, which is the role of speculation. And I know that you've been having some conversations with some players in the real estate market. Can you tell me more about what we mean by speculation and how it's affecting the housing market?
00:15:17
Speaker
Yeah, absolutely. So I guess what I've found is that my definition of speculation typically differs from a lot of other people's as well. But the way that I understand speculation is that you are investing in land and housing, not for immediate use, but essentially to be able to sell at a later point to make a profit on that. So your primary purpose
00:15:43
Speaker
in my opinion, it's not to build a house, but it's just to kind of use it for a range of other things, right? So you may sell it to, in some ways like a store of wealth rather than, or a commodity rather than an actual use for housing. So, you know, speculation is extremely widespread in the Pakistani context now, right? What we see is anyone who wants to make any kind of money or wants to save,
00:16:11
Speaker
real estate seems to offer the best option. And we've seen this trend increase more and more since 2001, right? When there were more remittances coming in after 9-11, interestingly, because people outside were a bit hesitant to keep their money abroad and started sending their money back in. And there's been this kind of boom in the real estate sector. So, I mean, I can talk about various aspects of it, but what we're seeing now is that
00:16:41
Speaker
land and the way that land is conceptualized has transformed over a period of time. So land itself is first and foremost, from what I'm seeing, conceived of as a commodity. And so it's conceived of as something that you invest in at various stages of the development of a housing project, rather than developing a project itself and selling it to the end users themselves. So there are a lot of kind of
00:17:10
Speaker
the other actors that are invested in this process that are driving up land costs and are driving up housing costs for people who are eventually going to come and live in these units. So based on initial conversations, and I've been trying to ask this for a couple of years, is how many times, for example, does a piece of land exchange hands before getting to the end user?
Naya Pakistan Housing Scheme
00:17:37
Speaker
And the answer typically is something like six to seven times. And this may just be the official transfers that take place. But sometimes files are, they're open files. And so in that sense, they're not even registered anywhere because people are trying to in some ways avoid paying taxes. So that every time that land exchanges hands, and typically the price goes up with each kind of purchase.
00:18:03
Speaker
And there's a recent study actually, some researchers looked at barrier down and they looked at just the
00:18:09
Speaker
The way that speculation is taking place there are the number of times land exchanges hands and the techniques that are employed by developers to increase land values block by block. Ultimately, you know, these end up increasing land costs for the end consumer, which is what we're most interested in. So what I'm hearing from you is that there is kind of enough of a, if not
00:18:33
Speaker
kind of direct causal evidence, there is enough of a sense that it's speculation that leads to an increase in housing prices. Now, given that, that is, you know, goes directly contrary to the government's goal here, or at least government stated goal here, in trying to keep housing affordable for those who cannot afford it right now.
00:18:55
Speaker
What are the kinds of things that the government can do to kind of rein in speculation in some way? And again, is it the government's job to do so in your view? Yeah, I think the government definitely has a role to play in trying to rein in speculation. And there seems to be a little more acknowledgement of this also more recently. They've tried to increase tax rates, for example, in terms of
00:19:22
Speaker
selling a plot later on after buying it and the number of years that you can kind of hold on to it.
00:19:29
Speaker
There are a number of ways, and I guess you have to increase, maybe impose a non-utilization fee on vacant lots. And this is something that the LDA, for example, has already done in some places. But it's such a nominal amount that it doesn't really kind of hinder any investment in speculation. But I guess I'll just come back to a larger question. Should the government play a role in regulating
00:19:57
Speaker
real estate sector and thinking about speculations. The sector is completely unregulated at the moment, although there are people who would disagree with this. And there is a lot of pushback from developers themselves, right? So I was just having a conversation with someone recently who said that, you know, he was in a room with a number of big developers and this question, as part of a housing committee, and there was this question of
00:20:23
Speaker
Are we going to try to introduce some form of ways to regulate this industry? There's a big push from big developers saying, you know, there's no way like we're going to let this happen. And the industry just needs to kind of continue the way it is. So there has to be some kind of willingness to do this. And because the state itself is complicit in a lot of speculation itself, I think that drive doesn't necessarily exist in the same form at the moment. So I want to move on now to
00:20:52
Speaker
the government's role in kind of more directly meeting this unmet demand for housing, right? So we had this program from the recently ousted PTI government called the Nayapakistan Housing Scheme, which is something that we heard a lot about
00:21:08
Speaker
but we saw very little in terms of action. So can you walk us through what was the vision of the scheme and how it aimed to achieve this vision? Yeah, absolutely. So the Neha Pakistan housing program, like you said, was introduced by the PTI government. This was introduced about four years ago in October 2018. And broadly, it promised to facilitate the construction of 5 million homes in the next five years.
00:21:34
Speaker
And the idea was that the majority of these new homes would be built for or would address the needs of low and low to middle income groups who have the highest kind of demand for housing in both urban and in rural areas. So since this announcement, there have actually been a number of different proposals and models that have been floated around as falling under the umbrella of the program. And frankly, it's quite difficult to keep track of what's been happening.
00:22:01
Speaker
But I'd say the program has attempted to achieve its targets through two key mechanisms on the supply side and one kind of mechanism on the demand side. So on the supply side, one way in which it's tried to encourage greater supply of particularly affordable housing.
00:22:22
Speaker
is by attempting to facilitate the private sector. And it calls this on its website as like the real game changer. So the idea is to try to get the private sector to build more on private land by kind of streamlining approval processes for developers. Getting approvals from regulatory authorities is one of the biggest challenges that developers face. So it could take like two years, three years, because
00:22:47
Speaker
there's just a lot of bureaucracy involved in this and also obviously a lot of kind of you know cash that's being transferred under the table. So that's one issue that they said we're going to try to address. They also have offered to coordinate with different government entities for infrastructure provision, provide tax and regulatory incentives. So you know we can talk a little about the construction package that also sought to do that but then also
00:23:14
Speaker
you know, for a period of time said that anyone can invest in land and their source of income won't be asked. But the idea here is also that they would, the government would connect the developer to end users and buyers that they have registered under this program. Those people who have access to finance and may be eligible for a one time subsidy of a house. So one idea is to work with
00:23:37
Speaker
to facilitate the private sector to build more housing. The other idea is to work to facilitate development authorities and entities in urban areas and provincial governments in peri-urban areas to build more housing on government land.
00:23:53
Speaker
And in return for which NAFTA, which is the Neapolitan Housing Development Authority, which is responsible for looking after this program, will then also offer them tax rebates and help with coordination and connect them to end users just as they want on private projects. So these are kind of two ways on the supply side that they're aiming to encourage both the private sector and development authorities to build more affordable units.
00:24:19
Speaker
On the demand side, what they've tried to do is they've tried to enhance access to housing finance, one by trying to support stronger foreclosure laws, but then also setting mandatory targets for housing and construction loans for commercial banks. And then what they've done is they've introduced tier-based interest rate subsidies under the Meerabakhsan Meeraghar program. So there are four tiers here. So 0 and 1 are at the lower end, and 2 and 3, you can get loans for up to $6 million and $10 million.
00:24:50
Speaker
so relatively more middle income households for tiers two and three. And borrowers can borrow for up to 3% to 9% interest for the first 10 years, after which these rates adjust to market rates. They've also, as part of this, introduced a down payment subsidy for eligible borrowers. And they're trying to work with banks on mechanisms to verify informal incomes. So in a nutshell, I guess the goal
00:25:16
Speaker
has been that they're going to facilitate the construction of these 5 million homes through the private sector and through development authorities and provincial entities through a range of incentives and connections with end user and then also enhance buying power of potential customers through subsidized access to housing finance and kind of trying to address concerns shared by the banking sector. So in some ways, you know, they're trying to create an enabling environment for housing construction. So this is the larger kind of
00:25:46
Speaker
program, we think about what have they achieved right now, where four years into the program. And there's been, of course, a lot of political instability. So let's keep that in mind. But over this period, if we think about what has the Nia Pakistan program achieved. So firstly, if we look at it again on the numbers of housing units built. And as per the Nia Pakistan housing program website I checked again yesterday,
00:26:14
Speaker
There are about 22,000 housing units that have been completed. And 18,000 of these are built through a Huvit Foundation and about 3,500 through the Workers Welfare Fund.
00:26:28
Speaker
So this is the Ahuwa Foundation housing scheme, not the Nia Pakistan housing scheme. Yeah, so what Ahuwa does is basically it gives out small loans to people who already have a piece of land. So I think from last time I spoke to them, it was about five lakh rupees.
00:26:48
Speaker
So if you already have a piece of land and you want to build on it, or you just need a little bit extra cash to complete it, Akhavat is providing loans of this size, and it got money from the Ministry of Housing for this purpose, I think around 2019. So at that time, it wasn't part of the nearby housing program, the Ministry of Housing was involved. But the government did give Akhavat money to do this, because before that, they would give out loans for like up to 50,000 rupees, right? So the nature of loans is very different.
00:27:17
Speaker
But the housing, again, like the connection to the program is a little bit tenuous. And even though, let's say the workers welfare fund projects that are now kind of listed under the nearby housing authorities completed projects. These have also been initiated as early as 2011, you know, like
00:27:40
Speaker
So these are actually older projects that may have just been completed in recent years in terms of their physical construction. But again, they didn't come up during the past four years. This is a longer kind of timeline in mind. So those are all the units that have been completed. So what you're telling us is there were about 18,000 housing units that can be attributed to a previous program.
00:28:07
Speaker
by the housing ministry through a Huvat, and then the rest were initiated before the Nea Pakistan Housing Scheme started. So in effect, the Nea Pakistan Housing Scheme has built zero additional housing that can be attributed to this scheme.
00:28:21
Speaker
In effect, you could say that neither the federal government nor the provincial initiatives that have been taken have built any unit so far. I guess what I would credit them for to some degree is that they've tried to facilitate approvals for developers and streamline those processes. Although based on conversations with developers, the response is still kind of mixed on how much that's helped or hasn't helped.
00:28:45
Speaker
But let's look at what's happening on the demand side, right? So there's a lot of kind of noise around this target of 5% lending for housing and construction. And banks have been lending a lot more towards this end, since this mandatory target was introduced in July 2020. And the Meera Baksan Meera Ghal program was introduced in December 2020.
00:29:15
Speaker
But again, you know, just I'm reading through those kind of posts on these targets. It doesn't this doesn't necessarily mean that the extra amount of money that's been given out has been given out for.
00:29:30
Speaker
for the Mira Pakistan Mira Ghar program. The housing and construction loans could be used for anything, any kind of construction project. It could be used for real estate investment trusts. And so we don't really know necessarily where that money is going. And based on certain World Bank documents, also progress on the Mira Pakistan Mira Ghar scheme has been somewhat new to it.
00:29:54
Speaker
Then I was trying to see, you know, I mean, like between December 2020, when the program was introduced, and let's say June 2022, so a year and a half, the amount of loans given out just for house building, if we just focus in on that, to consumers, not to bank employees, have increased by about 133%. So that's a really big jump. But what's the base here, if it's really low based? Right.
00:30:20
Speaker
And the base is actually quite low and the thing is that the state bank used to release these quarterly reports looking at the amount of loans, the number of borrowers, kind of distribution by banks up till 2019 and then just stop doing that. So we still don't have a sense of who is being given these additional loans. How many borrowers are there each month and what
00:30:42
Speaker
I'm trying to find any kind of hints to get a sense of who are these loans being offered to, because if they're being offered to a small number of borrowers, maybe they're not even falling under the Meerakhar Meerapakistan program. And these are just well-to-do people who are looking for housing finance.
Global Housing Market Comparisons
00:31:01
Speaker
So what we can tell so far is that
00:31:04
Speaker
As per some World Bank documentation through some of their projects, what one can see is that most of these loans at the moment are being offered. Most of the Mira Pakistan Mira Ghar program, and we don't know how many of these there are exactly, but they're being offered to tier two and tier three borrowers. And these are people, so tier two are basically people
00:31:27
Speaker
who may be building a house up to five Merlas, and they can borrow up to six million rupees from the bank. And tier three is up to 10 Merlas or a flat up to 2,000 square feet. And that's up to 10 million. And so these are the middle income group segments that are benefiting from this program. There are no tier zero and one from what I understand. There's just one other thing that I wanted to point out with the program.
00:31:56
Speaker
And it's that, you know, the construction program was introduced after COVID hit under NAFTA's umbrella where essentially a lot of
00:32:08
Speaker
Tax incentives and regulatory incentives are given to developers. And like I said earlier, that people weren't asked about their source of income before investing in real estate. So a lot of black money is set to happen into real estate. And land prices actually skyrocketed after this amnesty scheme, so to speak, was introduced. So there are kind of contradictory trends happening at the same time. There are contradictory initiatives that are being taken at the same time.
00:32:37
Speaker
So on the one hand, cost of construction, the cost of land has gone up significantly after the introduction of the construction project, construction program. Sorry, the yeah, the basically the after the introducing of the construction package. But then also, you're trying, you know, the government is trying to facilitate the building of more affordable housing. So these are, you know, they don't they don't line up together.
00:33:06
Speaker
And there, of course, remains a lot more to be done over here. But this is, I mean, the government in some ways set itself up for failure by thinking, coming up with this 5 million term, right? And it also lacks, suggests some lack of imagination of what the problem is if we're just thinking about housing units and nothing about improvement at the moment. So I don't want to be disparaging, but
00:33:27
Speaker
The numbers that you've described to me are, as you said, a tiny proportion of the 5 million target. And it seems that a lot of what's being built or a lot of the financing that's been provided is not being targeted in the right way. And this may not be the intention of the designers of this policy, but that very much seems to be what ends up happening.
00:33:51
Speaker
And again, I don't want to be disparaging because these are very hard policies to design and these are very kind of hard problems to solve. And I guess this may be kind of an opportunity for us to pivot a little bit. We've been talking about Pakistan solely, but urban housing shortages are a global phenomenon. Are comparable countries faring better or is this problem kind of truly global?
00:34:17
Speaker
nearly all countries around the world are facing some form of challenge around housing. And I would say that's not just housing shortages, but cities are dealing with challenges around service provision in underserved, neglected neighborhoods. They're dealing with challenges around improvement or upgrading of existing housing stock. They're looking at challenges around growing segregation and inequality.
00:34:41
Speaker
And what's interesting is that although globally we're seeing cities trying to deal with growing housing shortages, paradoxically they're also seeing an oversupply of high-end housing units for those who don't have an immediate demand for housing. So there's something structural at play here. I've been reading about this in Rwanda, in Tanzania, in Kenya, in Angola, in different cities in India.
00:35:09
Speaker
London, again, even European cities, where you have a lot of vacancies despite housing shortages.
00:35:18
Speaker
We have to keep kind of thinking about why this kind of oversupply exists to really get to the heart of what the challenge over here is. And maybe that's a debate about whether housing should be seen as a right or a commodity. But there is a puzzle here, right, in terms of whether the demand is emanating from low to middle groups. But housing continues to cater to those at the top in a number of countries around the world. Is there anything that we can learn from other countries or other policies that have been tried in other countries?
00:35:48
Speaker
On the one hand, there's a sense of what we shouldn't do. But then there's also the question of what can we do based on experiences from different places. And again, here, I think the Latin American context offers many lessons. But there are also, of course, a number of lessons to be learned globally from the African continent and East Asia and South Asia itself.
Housing as a Right vs. Commodity
00:36:08
Speaker
In 2019, the United Cities and local government
00:36:13
Speaker
Local governments, this is a new theology which is a global network of cities and local regional metropolitan governments and their associates published this really great report on rethinking housing policies and it has a very detailed section on policy experiments and the promotion of adequate housing in different parts of the world offering examples of what has and hasn't worked.
00:36:35
Speaker
And they talk about experiences with upgrading, which was once something that we used to talk about at least more. But again, we don't really focus on that as much anymore. But then also thinking about how to better serve underserved neighborhoods, thinking about subsidized rental programs, introducing housing policies that are supported by city plans and different planning instruments, also thinking about including the right to housing in a country's constitution itself.
00:37:04
Speaker
And what I find useful is South Africa's example is quite interesting as well because their government introduced a state subsidized housing program that very successfully delivered over three million housing units since like the mid 90s. But at the same time, housing backlogs continue to rise.
00:37:29
Speaker
So over the past kind of decade, there's been a shift in policy to try from building these units in greenfield sites to providing service sites or upgrading existing settlements. And a number of households have actually benefited from this problem, from this kind of assistance, right? And then in Mexico itself, the government there built a number of housing units, again, on the peripheries of their cities and what they found
00:37:55
Speaker
was that they had to deal with this issue of abandoned housing because the houses weren't adequate. They weren't well connected. So again, that's something to think about. Building houses in many cases turns out to be a bad policy. Depending on where you're building it and what your assumptions are about the people who will come and live in it, right? So housing isn't just something that's to be seen in isolation. It has to be connected to transport and to land use and to employment. So all of those things have to kind of go
00:38:22
Speaker
hand in hand. So there are a lot of examples I think that we could look at. Mexico also has like a one room policy where you can get financed to build one additional room if that's what you're looking for. There are assisted self-help built housing programs. And we used to run this blog called invisible cities on 10 key sometime back and we had someone because I think, you know, we
00:38:48
Speaker
It's more rare to find examples of when things have gone right rather than when things have gone wrong. And so we reached out to someone, her name is Smitha Rohut, she had worked in Pune earlier. And I was like, we had once talked about this successful upgrading program in Pune. And I was like, why don't you write about what
00:39:09
Speaker
went right over there. And let's try to focus some more energies on examples that we can also learn from in that sense. And she actually wrote about this program that was introduced by the Pune Municipal Corporation together with this NGO that aimed to provide housing, like upgraded housing for several informal settlements in the city. And the key thing that they kind of focused on was that they
00:39:38
Speaker
tried to support existing livelihoods. They made sure that they didn't displace people who, you know, that they were trying to help, that the community itself was involved in that process. So yeah, so I mean, I think, you know, we can talk endlessly about the kind of successful examples or examples that haven't worked, but there's definitely much to be learned. And someone the other day was also saying, you know, maybe
00:40:02
Speaker
European cities also offer a lot of lessons in terms of rent control or just thinking about housing in a kind of different way. So yeah, there's a lot to learn for sure. So I want to touch on something that you brought up, which is this difference between thinking about housing as a right or thinking about housing as a commodity.
00:40:25
Speaker
How would, like, if, let's say, we were to start thinking of housing as a right, how would that practically change how any of the actors play a role? I think there would have to be, and I've been hearing Araf Hassan Saab speak about this, there would have to be some form of massive land reform that went with it, right? So if housing is seen as a right, then that means that it is
00:40:54
Speaker
that basically everyone is entitled to have an adequate viable kind of house to live in. And then there would have to be ways to figure out, I think, one, how that kind of target could be met, where the government needed to intervene, what could be done by the private sector. I mean, I've been, you know, listen a lot to,
00:41:21
Speaker
I'll talk a little bit more about him as well, who's a scholar in research in India. And he says there are particular points in the market where the private sector can intervene on their particular points where it can't. And a lot of housing is actually built by people themselves. And so you have to kind of think about the right mix and what can work in conjunction with one another.
00:41:44
Speaker
housing primarily as a commodity, which means that first and foremost, it's kind of seen as an investable asset. I think that's going to have to change, right? So we're going to have to curb the way that speculation happens at the moment. And that's a really challenging task in some ways, right? How do you prevent that from happening? Because a lot of times these days people compare the land market to like the stock market, right? And that's the way that,
00:42:12
Speaker
plots of lands or files exchanged hands. So I think there has to be some kind of limitation to that model of development.
00:42:20
Speaker
Would you talk earlier about how it's really hard to make any of that happen? That there is this profit motive and how do you convince someone not to invest in land if that's the best investment they can make? And how do you convince a developer to not build for the rich if that's the most profitable thing? So that's the one difficulty I have when thinking about
00:42:44
Speaker
thinking of housing as a right, which is, sure, you and I could think of housing as a right and the government could decree that it's a right. But what would that practically change? I think, yeah, you're totally right. I think these are really challenging kind of issues to look at. I think if housing is seen as a right, there are some instances, for example, where the government
00:43:08
Speaker
in Islamabad and Karachi in particular recently has come in and has just demolished people's houses saying that, you know, they were living there illegally or whatever reasoning that they want. And if there is a right to housing that, you know, that people feel that people are entitled to in some ways, and that can be used to essentially also be used as kind of an advocacy to say that now it's the government's responsibility
00:43:37
Speaker
to provide people with housing. Providing potentially lower income groups with housing is not something of the private sector, as we've seen, repeatedly despite wanting to wish it otherwise is going to do. And so it could be used in that sense as well. There is use for it.
00:43:59
Speaker
I think, but you're right. I don't blame people for investing in land because that's the best way that you can actually make sure that your money doesn't devalue, particularly given where the dollar is going. I think I've been struggling with a lot of these challenges also, but I think
00:44:23
Speaker
There have to be mechanisms in place to regulate the industry and curtail the way that land investments do happen. There has to be some thought around that to be able to have a more equitable housing market in the long run.
00:44:41
Speaker
And I take the point that this is at least partly a failure of imagination in that, you know, for instance, in the US, it's very hard to think of health care as a right, because it's very hard to get health care if you can't afford it. Whereas in other countries that are much poorer than the US, you know, you can easily think of health care as a right. And you can get housing and you can get health care, sorry, funded by the government.
00:45:07
Speaker
And so at least partly this is a failure of imagination in that we could conceive of a different world in which that could happen. Yeah, because I mean, at the end of the day, I mean, land should either be of super productive purposes, like
00:45:26
Speaker
agriculture or use for housing or to use it for industry. But I think if we're just using it to create value, which is a lot of times quite artificial, that ends up distorting the way that the market functions. And yeah, I guess that there have to be some kind of ways to make sure that
00:45:49
Speaker
Yeah, I mean, you know, the other markets that aren't allowed to function as free markets, right, you can't buy and sell kidneys, for instance, legally. And so again, you know, if we could imagine a world in which you're not allowed to buy and sell land that is supposed to be for housing, that's just simply illegal. I'm not sure that's a good idea. But I'm saying that, you know, there is a radically different way of looking at the world than the way the world exists right now.
Future Directions and Interventions
00:46:18
Speaker
Yeah. And it has to be, it will have to be some form of a radical shift, right? Because the long-term costs of the kind of model that we've decided to go with are quite high. So, you know, the cities are just sprawling further and further out. We're losing agricultural land. All this money isn't going into anything productive at all. Commuting costs are increasing. It's just not feasible in the long run.
00:46:42
Speaker
So there has to be some rethinking around the way that we're currently imagining the way that housing and urban development is taking place more generally. So what are some big picture takeaways from this conversation in terms of how to understand this problem better and how to start approaching solutions? For me, the key thing that I would also want to take away from this is that there isn't any one single intervention that can address
00:47:11
Speaker
overall housing demand at the moment. So we have to explore a variety of mechanisms that include incremental housing models that attempt to understand the differences in housing preferences and costs between rural urban areas, that focus on removing housing bottlenecks, thinking about regulating the sector. So there's a variety of mechanisms in place, and we have to, I think, think about housing not in isolation, but in a more integrated kind of manner.
00:47:41
Speaker
And also, you know, critically, and we've been touching upon this repeatedly, is that, you know, land politics remains so intertwined with the way that politics also takes place here. And state actors themselves are quite involved in this process. So, I don't know, I just kept going back to your initial kind of question of, you know, why are housing shortages so persistent in the case, in Pakistan's case?
00:48:08
Speaker
And I think it's essentially because the system, and I don't know, I keep going back to this Dutch researcher, van der Linden, who wrote in 1994. And what he wrote, I feel, still rings true two decades on, and I feel like I keep repeating this, but he said that the way, there have been multiple times when the government has vocally said that it wants to focus on housing,
00:48:35
Speaker
But it hasn't been able to do so because the existing system continues to kind of further the interests of landowners and dealers and developers and investors and speculators across political divides, right? And so the burden on the state to provide low-cost housing is quite limited and demands from the state are seen in a lot of cases as favors rather than as rights.
00:48:58
Speaker
So yeah, I find it quite depressing actually that this was written in 1994 and we're in 2022 and much of what he said before, I think still holds true.
Conclusion and Audience Engagement
00:49:11
Speaker
So Fiza, I usually end by asking guests for any recommendations for listeners who want to learn more about what we talked about. So any recommendations for people who want to learn more about the housing crisis?
00:49:25
Speaker
Yeah, so my key recommendation is that everybody take this course that's on housing justice by Gautam Bahn and Swastik Harish. It's available for free on Coursera.
00:49:40
Speaker
And it's an excellent course. It's very easy to kind of look through their videos, see what they're saying and their readings and exercises there as well. And it's really for anyone interested in issues of housing, whether you're a policymaker or a student. And I myself have learned a lot by just going through the different lectures that they have. I mean, yeah, it really breaks down issues quite well.
00:50:10
Speaker
I'd highly recommend that. Fiza, thank you so much for being here. This has been enlightening for me, and I'm sure for many of those who are listening. I'm really excited to see what you find in your research on the deep underlying causes of speculation. And once you're done, we can have you back here to tell us all about it. Thank you so much for having me again. This has been great. A lot more to think about.
00:50:56
Speaker
You can find some links to what we talked about in this episode and to the recommendations made by our guest today in the show notes of this episode or on unpackingus.com. Don't forget to subscribe on YouTube, Spotify, or wherever you're listening to this episode. Also, I'd love to hear what you like and don't like about the show and if you have any ideas for future episodes. You can email me at asad at unpackingus.com.
00:51:24
Speaker
I can't promise to respond to every email, but I do promise to read and think about every email. Thank you for listening.