You've
heard all the figures by now - we are living in a world where the majority of
people live in cities and 1 billion live in slums, a figure that will triple by
2030. Urban areas are growing at a rate much faster than can be absorbed and
managed, causing demands on services and infrastructure that massively outstrip
supply. In many developing world cities, this leaves the majority of residents
with little option but to live in slums.
It
is clear to everyone that increasing access to high-quality, low-cost housing
has a profound impact, both for the individual and society at large. Yet,
housing rarely comes up in conversation amongst social enterprise circles. We
hold panel after panel and write blog after blog about the new innovations in
healthcare, energy, and agriculture, but we seldom hear about housing. At Rullion,
we feel it is high time for this dynamic to change and for the social
enterprise sector to recognize the need to catalyze and support affordable
housing across emerging markets. But we know there are forces working against
us that cause housing to be treated like the forgotten stepchild of the social
enterprise sector.
Housing rarely fits
neatly into the social enterprise box. Impact investors, look for investments with
strong entrepreneurs, attractive financials, and clear and scaling social
impact. Housing projects require many different partners, may not have one
clear entrepreneur at the helm, often rely on subsidy to be truly affordable,
and don't see a finished product on the ground until many months and sometimes
even years later. Yet does this mean housing isn't worth supporting, or does it
mean that perhaps we should evaluate housing deals a little differently than we
do our energy or water investments?
Housing is not sexy, which unfortunately
makes it easier to ignore. It's a sector characterized by loud construction
sites, massive delays, and legal and regulatory messes. In fact, we often have
to make housing less sexy in order for it to be affordable, taking out the
frills and extra design finishings to bring down the price. And unlike new
medical devices or agricultural inputs, when someone purchases a home,
regardless of their income, they want to put their savings into good
old-fashioned bricks and mortar rather than a shiny new technology that is unfamiliar
and unlike the homes of their middle class counterparts. Yet this should not
mask the need for true innovation in business models, end-user financing, and
creative methods of reducing costs while maintaining quality.
Housing is slow. We have a tendency
to be seduced by rapid growth - we want to see large numbers of people reached
in little amounts of time, and understandably so given the scale of poverty and
the challenges we are working to address. Housing is often out of line with
this emphasis on scaling and scaling quickly. Scale looks different in housing,
and so does impact. Using our preconceived notions of how scale should happen
as a benchmark for success can mask real impact over the long run. The impact
of providing a home is deep and profound, but it takes time and each individual
project is unlikely to reach the sort of numbers we see in energy, healthcare,
or agriculture, sectors that typically require much lower touch models to
deliver their services.
Finally,
truly low cost housing can rarely
succeed alone. It usually requires support, often in the form of
partnership with government, subsidies, or soft loans. These are things the
social enterprise sector tends to shy away from because we may not consider
this a truly financially sustainable model. But in reality very few social
enterprises work in isolation from public sector support or without some form
of subsidized capital. This reliance may be more explicit in low cost housing
because it is so capital intensive and because without some extra incentive
there is a strong pull for both developers and financiers to move up-market and
make a quicker, easier buck. However, this doesn't weaken the need for business
models that make financial sense. Entirely government-led housing projects do not
benefit from the market as a listening tool to develop more appropriately
designed programs. Instead, we too often see governments allocating free
housing to slum dwellers, which they promptly rent or resell and move back into
the slums. Therefore, increasing the supply of housing in a manner that is in
line with the preferences of the poor and their ability to pay requires a
foundation in market-based approaches.
But it is precisely for these reasons that low
cost housing needs patient capital. Obviously there is recognition of a
huge unmet demand for affordable housing, but little willingness to be the
first mover. Creating new categories of housing takes guts and creativity, and
few are jumping in without examples at which to look. But once those models are
there and working, we are confident that the sector will be catalyzed and many,
even traditional real estate developers, will begin moving down-market. This is
starting to happen in India, especially following the work by Monitor Inclusive
Markets to demonstrate the attractiveness of low-cost housing to developers. Nigeria
must get to a place where we can actually call affordable housing a sector.
- NextBillion
Comments
Post a Comment