PRESS CONFERENCE BY UNITED NATIONS HUMAN SETTLEMENTS PROGRAMME

PRESS CONFERENCE BY UNITED NATIONS HUMAN SETTLEMENTS PROGRAMME

It was important to address the contradiction of “affordable shelter that is inadequate and adequate shelter that is unaffordable”, Anna Tibaijuka, Executive Director of the United Nations Human Settlements Programme (UN-HABITAT), said at a Headquarters press conference today.

Briefing correspondents during the launch of this year’s report on human settlements, she said that UN-HABITAT promoted slum upgrading to make currently affordable informal shelter adequate, and that subsidized conventional housing was the solution to promote legal housing and make it affordable, thus preventing the formation of new slums.

Entitled “Financing Urban Shelter”, UN-HABITAT’s 2005 report examines the challenges of financing urban shelter development, focusing on the needs of the poor.  It analyses the problem within the overall context of the Millennium Development Goal on slums, which sets the objective of achieving “a significant improvement in the lives of at least 100 million slum dwellers by 2020”.  The report also highlights the strengths and limitations of current trends in conventional mortgage finance.  It further looks at the financing of social and rental housing, especially through subsidies, as well as emerging trends in meeting the specific shelter-finance needs of urban poor households.

Ms. Tibaijuka said that according to recent estimates, more than 2 billion people would be added to the number of urban dwellers in developing countries over the next 25 years.  To meet the needs of that additional population, an average of about 35 million new houses would have to be constructed every year for the next 25 years.  Unless adequate financial resources were invested in the development of urban shelter and services, that population would also be trapped in urban poverty, deplorable housing conditions, poor health and low productivity, making today’s enormous slum challenge even worse.

She said it was clear that one of the key challenges in meeting the Millennium Declaration objective on slums “is mobilizing the financial resources necessary for both slum upgrading and slum prevention by supplying new housing affordable to lower income groups on a large scale”.  Those efforts would also bring into focus the importance of urban planning, which was lagging behind in many parts of the world.

According to the report, mortgage finance has been expanding for the past decade and is increasingly available in many countries.  However, only middle- and higher-income households have access to such finance, while the poor are generally excluded.  The report’s key message is that it is in the interests of governments to extend mortgage markets down the income scale, as home ownership is beneficial economically, socially and politically.

Also highlighted in the report, Ms. Tibaijuka continued, was the continuing and necessary contribution of the public sector towards financing shelter for the urban poor, as many households, even in developed countries, could not afford home ownership or market rents.  In addition, there was a question of middle income people taking shelter meant for the poor.  “If you cannot provide housing for the relatively better off, you can definitely not serve the poor”, she added.

The majority of urban poor households could only afford to build their homes incrementally, in stages, as financial resources became available, she said.  In response to that, shelter microfinance institutions and community funds had emerged in the last decades.  Against that background, the report contained several messages concerning the housing finance needs of the urban poor.  In particular, it concluded that short-term small loans of one to eight years in amounts from $500 to $5,000 were more useful for incremental development than longer-term large loans favoured by the mortgage markets.  It was also important to increase the number of lenders in the housing microfinance sector.  Guarantees were an important mechanism for broadening the appeal of microfinance institutions to lenders and addressing the current problem of capital shortage.  Community-based financing of housing and services had many advantages for low-income and otherwise disempowered households, and cooperative housing could be very helpful.

Presenting some of the report’s key findings, one of its authors, Naison Mutizwa-Mangiza, Chief of UN-HABITAT’s Policy Analysis and Dialogue Branch, said it pointed out future policy directions for financing urban housing and built on the good practices identified.  The challenge of credit lay in the fact that the cost of a typical house was between 2.5 and 6 times the average annual salary, a ratio that rose to about 10 times in developing countries.  The report analysed such trends as interest-rate subsidies, conventional mortgages, secondary mortgages and a growing diversity of mortgage providers.  Among the main challenges, especially in developing and countries with economies in transition, were low levels of domestic savings, both private and public.

One of the report’s conclusions related to the need for accelerated employment and income generation, he said.  It noted a widening gap between incomes and housing prices in many countries, which resulted in the inability of young first-time buyers to purchase homes.  From 1997 to 2004, house prices had grown by 112 per cent in Australia, for example, 139 per cent in the United Kingdom, and 227 per cent in South Africa.

He said the main trends in social housing financing included a shift of the public sector away from direct housing construction and management and a move towards assistance for home ownership through direct demand subsidies.  In developed countries, there was now greater use of housing allowances to assist low-income families to rent affordable accommodations from the private sector or non-profit organizations.  About 70 per cent of housing investment in developing countries took place through incremental building, which of course, was not acceptable to conventional mortgage financing institutions.  To address that need, shelter microfinance had emerged in recent years, but its scale was still small in many countries.  There was also an emerging preference of lending to women.

Responding to a question about government involvement in promoting affordable housing, Ms. Tibaijuka, said that without massive investment -– definitely involving government -– adequate shelter would not emerge on its own.  Governments needed to subscribe to the principles of the UN-HABITAT agenda, “adequate shelter for all”.  While microfinance presented important possibilities, public support and international cooperation were still needed.  In particular, international support was needed for a global mechanism to assist the poor.

Asked about the case of Zimbabwe, she said the UN-HABITAT pilot had been launched there.  The Government had been encouraged to provide plots of land to enable the poor to improve their housing conditions incrementally.  However, if a Government was not committed to that cause, then contradictions arose.

To a question about the situation of urban poor in Brazil, she said several programmes of slum upgrading and resettlement of the urban poor projects were under way there and some of the best practices in that regard were to be found in that country.

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For information media • not an official record