Report No. 617
Housing Policy Paper
January 28, 1975
Development Economics Department
Not for Public Use
Document of the International Bank for Reconstruction and Development
International Development Association
This report was prepared toir official use only by the Bank Group. It mry not
be published quoted or cited %without Bank Group authorization The Bank Group does
not accept responsibility for the accurac% or completeness of the repx:rt.






TABLE CIC CONTENTS
Summary and Recommendations                                          i
Introduction                                                         1
Chapter I         THE URBAN HOUSING SITUATION IN                     2
DEVELOPING COUNTRIES
Income Levels .............           ,            3
City Characteristics .................4
Housing Policies 5...........
Facing the Housing Situation ..............        6
Chapter II       THE ECONOMICS OF HOUM5ING                           6
Housing in the Urban Economy        .......         8
Housing Costs and Incomes .... o-..o....            8
Housing Markets ... .......... .......   .         15
Chapter III       HOUSING POLICY OPTION4S FOR DEVELOPING            16
COUNTRIES
The Policy Framework    .      .....16
Zoning Regulations ...................            17
Building Standard Controls ................        17
Pricing Policies ........................          18
Land Tenure..................   ......            18
Land Purchase and Development ...........         19
Taxes on Land ...           .      . ......        19
Building Materials .. ... ... ... .                19
Improving Financial Institutions ..........       20
Public Housing .......... . ............ ....      20
Chapter IV       THE LESSONS OF INTERNATIONAL ASSISTANCE            21
A.   The Evolution of International
Assistance          21
B.   The Experience of the Bank Group .....        23
Site and Services Projects ...........       24
Upgrading of Squatter Housing ........       24
Self-help and Mhtual-help ............     25
Direct Construction ..................       27
The Target GrouLps ....................      28
Financial Arrangements for Projects          29
Financial Arrangements for Occupants .    29
Housing Finance.          ..............     29
The Institutional Framework   *.**           30
Monitoring and Evaluation   .........        30
The Impact of Other Bank Lending
on Housing          30



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TABLE OF CONTENTS
Page
Chapter V        DIRECTIONS FOR BANK LENDING FOR                 31
URBAN HOUSING
The Lending Framework .....................    32
Squatter Upgrading and Site and Services
Projects          32
Selective Housing Construction .............    33
Housing  Finance   ... .............. .......... ,  3 35
Coordination of Bank Group Lending for
Housing and Urban Development     36
Annex A
Annex B



SUMMARY AND RC0NMEMDATIONS
The Economics of Housing
i.        By 1980 nearly a fifth of the people in developing countries --
some 550 million -- will live in cities. This number is expected to
increase to nearly 1.2 billion by the year 2000, when more than a quarter
of the population of the developing world will be urban. The task of
accommodating this unprecedented increase in the number of urban dwellers
and improving their living standards poses a major challenge not only for
urban development and housing policies, but for national development in
general.
ii.       Housing is important to development in both economic and welfare
terms. It typically constitutes 15 to 20 percent of household
expenditures.  For all but the wealthy, it is usually the major goal of
family saving efforts. Investment in housing represents up to 20 to 30 per-
cent of fixed capital formation in countries with vigorous housing programs,
and it is increasingly recognized as a profitable investment good, yielding
a flow of income. For some of the self-employed housing is also the place
of work.  In countries with substantial underutilized labor, material and
financial resources, housing can make such resources productive at low
cost. The import content of housing construction is usually relatively
low, so that multiplier linkages tend to be substantial.
iii.      Housing has substantial social benefits, including the welfare
effects of shelter from the elements, sanitation facilities and access to
health and education services. Improved health and education and better
access to income-earning opportunities can lead to higher productivity
and earnings for low income families. It is thus for sound economic
reasons that housing is typically the largest item of household expenditure
after food for poor families, and t,hat they are willing to go to great
lengths to obtain housing at locations with access to employment, even if
this means incurring the risks of illegal "squatting."
iv.       A positive housing policy can thus make a substantial contri-
bution to economic development and social welfare. The relationship of
housing to employment, social services, recreation and other aspects of
urban life is spatially important. Access to employment for severi.l
members of a family is particularly important for the poor, and so is
access to other urban facilities, particularly education. High transport
costs or a long time taken in walking or otherwise travelling to and from
work can negate the advantages of c:heap housing on the outskirts of a
city. Housing policy is therefore a major tool for influencing the
efficiency and equity of urban areas.
v.        The importance of housing stands in contrast to current housing
conditions in most cities of developing countries. A handful of countries
have responded imaginatively to houtsing problems, but in the majority of
conmtries housing conditions are mich worse than they need be.



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vi.       The reasons for bad housing conditions are comsplex, and vary
widely among countries. However, at the risk of ove-rsimplification,
they may be characterized as staemming from a lack of understanding of
the vmderlying problems, and resulting nmsguided po'-icy formulationi.
Many countries have attemprted to provide unrealisti,cill high ltalard
dwellings rather than meet the effective demamd for housing. This has
led to regulations discouraging the production of <appropriabe stan(lard
housing, to the expenditure of limited public resosures on high priced
housing for a small proportion of the population, =d the condoninp or
active encouragement of the removal of' squatter and sijmsilar housing.
vii.      Such policies combined with the 1imited resources available
to meet the investment needs of rapid urban populatti n growth, have
given rise to substantial gaps between housing supply and demand in
most cities of the developing world  In the six cities studied for this
paper (Ahmedabad, Bogota, Hong Kong, Maadras, reud-co City and Nairobi),
from one-third to two-thirds of t,he population  are urv able to afford the
lowest cost hausing presently being produced by the formal sector.
viii.     Potential solutions to housing problems differ greatly among
cities and countries. However, in most countries, the adherence to
unrealistically high standards for new housing construction, and the
refusal to accept existing low quality dwellings even as an interim
solution, is the principal obstacle to better h-ousing. The result zis a
cycle of construction and demolition. The poor, malile to construct or
purchase dwellings of acceptable standard are pushedl to ever more
distant peripheries.
ix.       Although inappropriate housing standards are most important,
other imperfections also affect t:he operation of housing markets. The
supply of urban land and urban services such as water. sewerage and
electricity tends to be constrained and skewed toward upper income
groups. Housing finance institutions are typically undeveloped. This
limits the supply of housing for middle income groups,, and often means
that housing provided for the poor is "raided"' by higher income families.
X.        Income levels, modified by the structure of income distribution,
are the most important determinant; of housing options. They set the limit
on what the poor can afford. But because of spati.al considerations, city
si ze is also very important. Housing must be considered together with
income earning opportunities, and hence in relation to transport costs.
The growth rate of cities affects the rate at which 'land can be serviced.
As the largest cities also tend to be the fastest growing, growth often
exacerbates spatial problems. However, even in relatively small cities
high growth rates pose a difficult challenge to hous:Lr, policy. Finally,
general economic policies, as well as those particularl7y concerned with
housing, play a critical role in deterninring the efficiency of housing
mar'cets.



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xi..      This paper approaches the housing situation from the standpoint
of effective housing demand. The costs of dwelling units of varying
sizes, standards and locations are compared to the ability of low income
groups to pay. It is suggested that housing (including site and services
and other self-help methods of construction) could be provided without
significant subsidy for at least 80 percent of the population of most
cities. It appears that in relatively higher income countries most of
the lowest 20 percent could be reached with a sman measure of subsidy.
In very large, lower income cities it is more difficult for the poorer
segments of the population to be reached. In these instances squatter
area upgrading appears to hold the most promise.
xii.      Though incomes may be increased, and to some degree redistri-
buted, over time, the only way to bring housing within reach of
substantially increased numbers withi.n a relatively short period is to
bring the supply cost down. This can be achieved, in the first instance
and most rapidly, by reducing standards:  permitting and encouraging the
use of lower cost (frequently indigenous) building materials and a lower
quality of finish; providing communal. rather than private plumbing and
sanitary facilities; encouraging or providing higher density construction,
with less land per dwelling unit; and providing less living space per
dwelling unit. Without being carried to extremes, these steps -- singly
or in combination -- can bring the cost of housing down so that a much
higher proportion of the population than currently served can afford
housing with access to employment. Land costs, and the efficiency of
supply of the various eomponents of lhousing, particularly of construction,
also influence the housing the poor c:an afford. Self-help is an obvious
way of bringing down financial costs.. In some situations some comple-
mentary construction is needed to utilize self-help appropriately. Medium
or high rise buildings may sometimes be the most efficient way of reaching
the poor in circumstances in which lamd costs are high, construction costs
are low, such housing is culturally acceptable and the location affords
the poor cheap and ready access to employment.
xiii.     These policies, it should be stressed, are only effective when
coordinated in the context of urban and national development. Exchange,
foreign trade, commercial, labor, monetary, credit and fiscal policies
influence a country's overall competiLtiveness, the flow of private and
public funds to the housing sector and the coordination of the housing
"package." Such policies, as well as zoning and land development policies
more directly affecting housing, also have spatial dimensions influencing
the range of city sizes within each country and the locations of
residences and places of employment iwithin cities. An improvement in
these policies, complementary to more direct measures, can substantially
improve the housing situation.
International and Bank Group Experience
xiv.      Many of the early efforts to provide international assistance
for housing suffered from the same misconceptions about the nature and



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complexity of housing problems that prevented most governments frcm
dealing with them effectively. These efforts did not attempt to provide
large resource transfers. They did not expect to have a substantial
direct effect, but they expected to be seminal, and particularly to have
an impact on the provision of low inceme housing. However, there was a
tendency to underestimate the complexity of the problem, and to see it
in terms of a shortage of housing finance without adequate attention to
the supply of housing of an appropriate standard at appropriate locations.
The financial assistance provided thus often went to lower middle and
middle income groups, rather than to lower incme groups; the bulk of the
population in urban areas was not affected.
xv.       The Bank Group entered this field, in the 1970s, as a latecomer.
It has, as a result, benefited from the experience of others -- both
governments and international agencies. It has from the outset treated
housing problems within the broader framework of urban and national
development problems, and it has proceeded cautiously and pragmatically,
according to a policy of learnirn by doing.
xvi.      Bank Group operations in housing have so far taken the form of
lending for serviced sites, on wihich occupants contribute to the con-
struction of their own homes, and, increasingly, lending for the upgrading
of squatter settlements. In the site and services approach, land plots
are levelled and furnished with access roads, drainage, water, seweirage,
electricity and a variety of otheir individual as well as ccmmunity services.
Particular attention has been paid to locating projects within reach of
major markets and employment opportunities, and to bringing activities and
jobs to the project area.
xvii.     The essence of squatter housing upgrading is to conserve the
existing low-income housing stock, particularly in serviceable, relatively
central locations; and to improve this hoasing by including additioas and
improvements to services and facilities within the entire neighborhood.
This approach, a complement to site and services programs, is seen as an
increasingly important means of providing benefits to low income people
and of maintaining their access in relatively central locations.
xviii.    To date, ten urban deve:Lopment projects involving housing have
been approved in Senegal, Nicaragua, India, Botswana, Jamaica, Tanzania,
Zambia, Indonesia, El Salvador and Korea. These projects (or their
housing components) have been relatively small, entailing loans or credits
of less than $25 million, with some loans being as low as $3 million to
$5 million.
xi.x.     Although self-help and mutual-help methods have been applied
as far as possible in the construction of dwellings and some community
facilities, experience has demonstrated that, for a variety of reasons,
some direct construction is essential and complementary in both approaches.
Self-help is sometimes technically' impossible or economically inefficient.
In some instances, core units may be required to provide shelter from the



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elements -- rain or cold -- while the construction process is completed.
Families whose homes must be removed in the process of upgrading
squatter areas may require that new, relatively high density housing be
constructed for them in the area so that they will not suffer costly
removal to distant sites. Respondinag to the housing prob'lems of the
poor in a variety of circumstances -- to bring standards down and to
obtain accessible locations -- requires a flexible approach and a full
range of lending instrments. It is in this light that future directions
for Bank Group lending are considered.
Recommendations
Xx.       The growing recognition of the importance of urban develop1ent,
and particularly of the need for equitable development, is leading to
increased demands for Bank Group assistance for housing in the context of
urban development. The approach of' "learning by doing" ensures that the
Bank Group will be able to respond adequately to member country urban
development needs in the future. Bank Group assistance for housing is
limited to countries and cities broadly committed to alleviating the
housing conditions of the poor as part of efficient and equitable urban
development. In this context it is recommended that:
a)        Squatter upgrading and siLte and services projects should continue
to be the prime instruments for improving the housing conditions of the
urban poor. Within this framework an open attitude toward housing con-
struction is necessary to ensure efficiency and, in appropriate circumstances9
to facilitate more economic use of land and improve access to income earning
opportunities.
b)        In some cities, the appropriate response to housing for the poor
involves conventional constructicn. This may be in circumstances in which
land cost, construction cost and access to employment make medium to high
rise housing the most efficient and equitable housing solutim for low
income earners, provided such solutions are socially acceptable and part
of a city's overall approach to housing the poor. Lending for
conventional housing would form a small proportion of total lending for
shelter. It is not envisaged that the Bank Group would become involved in
lending for mass housing construction in the foreseeable future.
c)        The Bank Group has a particular role to play in responding to
requests for assistance in building housing finance institutions. Lending
for low income housing project beneficiaries is one avenue, but it is
relatively limited. The Bank GrouLp should continue to provide "seed
capital" for appropriate housing finance institutions with the objective
of promoting bettor housing solutions for all income groups over time.
In addition, it is recommended that "seed capital" should be provided for
mortgage insurance institutions to facilitate lending for housing and
enable lower income groups to be reached.



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xxi.      It is recomended that monitoring, evaluat:ion and research
should continue to be an integraL component of the urban development
program. It is also envisaged that increasing attention be given to
the coordination of the Bank Groiap's lending for urban development to
maximize the benefits of such lending, and to prepare the way for a
larger urban development effort in the future.



INTRO)DUCTION
1.        By 1980 nearly a fifth of the people in developing countries
-- some 550 million -- will live in cities. This number is expected
to increase to nearly 1.2 billion by the year 2000, when more than a
quarter of the population of the developing world is likely to be
urban 1/ (see Table I.1).   Urban development thus poses a major
challenge for the decades ahead.
2.        The Urbanization Sector Teorking Paper (1972) discussed the
Bank Group's role in assisting member countries to meet this challenge
efficiently and equitably.   A large part of Bank Group lending has always
been urban oriented, 2/ and much of it has been concentrated in major
cities.   In recent years, however, the emphasis has shifted from merely
expanding a sector or sectors within urban areas, to "improving the
efficiency of the urban centers both for production and for living." 3/
Projects have provided urban resources such as transport and water
supply in a framework of urban deve:Lopment, with special attention to
the needs of the poor.   A substantial increase in support for urban
development has been proposed. 4/
3.        Housing is important to development in both economic and
welfare terms.   Investment in housing is a significant component of
total investment.   For lower income groups it is the largest item of
household expenditure after food and, for all but the wealthy, it is
usually the major goal of family saving efforts.   In urban areas the
housing package of land, shelter and utilities -- in combination with
access to work and educational and social opportunities -- markedly affects
the productivity of the poor, as well as their welfare.   Its location can
also alter the spatial layout of cities.   Jobs can be made more or less
accessible, traffic can be aggravated or relieved.
4.        The Bank Group has been marginally involved in the provision
of housing for many years in port, mining and land settlement projects.
In such projects, however, housing has not been a central feature, and
it has formed a small proportion of total project expenditures.   The
approval of the first site and services project in June 1972 marked the
Bank Group's entry into assistance for urban housing as the prime
objective.   This approach has reflected the Urbanization Sector Working
Paper's emphasis on "learning through doing."   Substantial experience
has been accumulated in the design of these projects, and in the under-
standing of housing in urban development through research.
1/  Urban areas are defined as locilities with 20,000 or more inhabitants.
2/ IBRD, Urbanization Sector Working Paper, June 1972, p.53.
3/ Ibid, p.35.
1b  IBRD, "Revision of IBRD/IDA Program, FY74-78," June 4, 1974, p.26.



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5.        This paper evaluates the experience oL t he B3ank Group   1 Sni ial
efforts in housing in light of tiLe evolving housing situuatio,n in developing
countries.   It is confined to urban housing, because village housing
prob½mens are miore properly discussed in the context of rural development,
and it places particular emphasis on responding to the housing problems
of the urban poor. Like the urban transportation policy paper, *i/ it
is part of an intensified investigation which is requill:red for a deeper
understanding of urban development as a whole.   It represents a
continuation of efforts to assess the contributions mlade by the Bank
Group and others to improving housing conditions in developing countries.
6.        The central purpose of the paper is to ex2aire tnether, in the
context of iLmDroving the housing situation of the poor, a broadening of
the instrmenerts of lending for housing, in particular to include lending
for construction, is advisable, and second, what other i. easures can be
taken to imrprove the Bank Group's involvement in housing.  T-he
circumstances in which assistaniee for housing is likely to be particufLarly
appropriate are considered.
7.        To answer these questions, it was necessary to assess the
current urban housing situation in. developing countr:ies; analyze the
relation between urban housing and. social and economTnlc developwlent;
evaluate the functioning of urban housing markets with particular concern
for the effects on low incom.e families; and consider current policy
responses to housing problems.   A special study of housing condituions
in six eities (Ahiuedabad, Bogota, Hong Kong, Madras, Mexico City and
Nairobi) was undertaken to provide information about the housing poor
people can afford.  The analysis of the housing situation is presented
in the accompanying "Background Pa:per on Housing."  The first th;ree
sections of the present paper summarize the backgroun.d paper.  The past
role of international assistance in the housing field, with particular
attention to the Bank Grou-p1s experience, is then reviewed.  T'iis paper
concludes with recommendations for directions for Bark Group lending for
housing.
I.   THE URBAN HOUSEiGS2:TUATION IN DEVELOPEG COOTRIES
8.        The houses of the Mediterranean, the flat roofed dwellings of
the Middle East, and the pitched roof, stilt-supported houses of Southeast
Asia are typical of the variety of styles that enrich t:he human heritage
and form an essential part of the "quality of life." *   3ehind this
diversity, however, common uses of 'housing reflect simil'arities in living
arrangements based on family needs for sleeping, eating, child rearing,
leisure and earning a living. The vast majority of city dwellers find
some form of housing, but in most cities it ranges from spacious dwellings
1/  BRD, "The Urban Transport Sector' "Report No. 603 (December 27, 1974).



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for the rich to the miserable hovels of the very poor.  Housing is as
complex as the societies it serves, but several key factors clearly
dominate the housing situation in all cities.
Income Levels
9.        Income is the most important deteminant of housing.  At the
household level, income detemines the housing a family can afford.
In national terms, it reflects a country's capacity for housing its
population at standards which will not distort other investment
allocations.   The distribution of income among households determines
the number of poor families, and the extent of their poverty.  The
spatial distribtation of income aff'ects the housing characteristics of
a city; there are relatively rich. cities in low income countries, and
relatively poor cities in high income countries.
10.       Relatively high income countries (with per capita annual
incomes of more than $450) generally have a vigorous private housing
market, which usually provides serviced housing with security of tenure
for well over half the population.   In addition, some of the countries
in this category have made a substantial contribution to housing lower
income groups through public housing.  Hong Kong and Singapore are
notable in this respect, with some 40 percent of their populations
living in public housing. Many of' these countries have, however, failed
to stimulate private housing for nmiddle and upper income groups and have
almost totally neglected housing f'or the lower income groups.
11.       Middle income developing countries (with per capita annual
incomes between $150 and $450) account for almost half the urban population
of developing countries. They include many large cities, some high income
cities, and half the population inl cities over two million.  Their
housing problems are extremely divrerse.  Some cities, for example Sao
Paulo, have successfully stimulated the private market so that some
80 percent of the popuLation is housed in serviced dwellings.  Other,
less affluent cities have also shown that the private market generally
makes a substantial contribution to housing, but unfortunately, many
of the countries in this category have not pursued policies conducive
to stimulating private housing.  Squatter housing upgrading and site
and services approaches can provide housing for lower income groups,
but many countries have rejected these approaches on the grounds that
they would create or perpetuate the existence of "slums."
12.       The poorest developing countries (with per capita annual incomes
of less than $150) may be conveniently divided into two groups. The
first consists of four large Asian countries: Bangladesh, India, Indonesia
and Pakistan.  They have relatively low rates of growth of urban
population.  However, the size and number of their cities is very large
and so many people need to be housed that the problems seem overwhelming.



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Squatters and slum dwellers in Calcutta (1,720,000), Jakarta (l,125,000)
and Karachi (811,500), for example, outnumber the total populations of
some countries.   The second group consists primarily of the sparsely
populated, less urbanized African states. Even their principal cities
are quite small, generally below .100,000, but their rates of urban
population growtDh are very high.   This growth has rarely been able to
stimulate an adequate government response to housing problems. As a
result, the proportion of the total population living in slums or
uncontrolled settlements is very high. 1/   However, only very limited
new resources can be devoted to improving housing condlitions in these
countries.
City Characteristics
13.       City size is a second major factor in housing.  The largest
cities, notably those with populations above 2 to 3 million, confront
the gravest problems, because it is here that spatial- imbalances in the
location of people and jobs are most severe.   The scarcity of land with
good access to employment opportunities is the central feature of their
housing problem.   This scarcity is often aggravated by large quantitjies
of such land being either kept vacant or devoted to uses which do not
require a central location.   Of course, land is more readily available
on the outskirts of these cities at much lower cost.   However, these
areas are generally not well integrated with the city as a whole.  There
are seldom substantial employment opportunities nearby, infrastructure
provision is inadequate and transport is usually very costly.   In
contrast, in smaller cities, even centrally located land may not be
expensive, and land on the outskirts is usually very cheap. This does
not mean that large cities are uneconomic.   A large range of city
sizes is in practice functional.
14.       The rate of city growth is a third important factor in the
housing situation.   Many cities in developing countries have grown
more rapidly in the last 25 years, than at any previous time in human
history.   Large cities, moreover, are among the fastest growing. Most
have been deficient in housing the poor at standards offering protection
from the elements and sanitation at a cost they can affcrd.   A minimum
1/  Traditional housing "deficit" estimates, which use data on slum and
squatter housing as proxies for inappropriate housing, (see Annex B,
Table 1), tend to overstate the seriousness of the housing problem.
Although sv. -h housing may be illegal3 built from traditional materials,
or both, it is not necessarily of an unacceptably low standard.  Mach
of this housing, in most cities, provides both adequate shelter and
good access to employment. Some is quite substantia:L. The study of
six cities conducted for this paper :uggests (see Table II,1, p.9 )
that, in the lowest income countries, the percentage of urban house-
holds currently unable to afford housing may approach, or even exceed,
tuwothirds. This measure too overstates the problem., Being based on
the cheapest housing currently being produced by the public sector,
it  iplies that the private sector does not produce lower-cost housing,
and that the gap between incomes and housing costs has persisted
for s-omn time,  Research and observation in the sane six cities
and elsew-aere a gg&  ts that in practice the housing situation is
:Žot always css bad as such figures imply.



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of 630 million persons is likely to bie added to the urban populations of
developing countries by the year 2000 (see Table I.1).  Associated
changes in the age structure of populations ensure even more rapid rates of
household formation and increases in the effective demand for housing,
making solutions which meet this demand all the more urgently needed.
These estimates assnume that a rapid acceleration in rural productivity
and living standards will be more than matched by productivity gains
in urban areas, maintaining a relatilrely higher standard of living in
cities and resulting in continuing high rates of migration.
1/
Table 1: ESTIMATED URBAN  POPULATION OF
DEVELOPINOG REGIONS
1960, 1980, AND 2000
Average Annual
Developing Region                                  Growth Rate
1960   1980   2000    1960-1980   1980-2000
Asia                      134    309    647       4.3          3.8
Latin America             69    163    342        4.4          3.8
Africa                     31     77    190        4.7         4.6
Total,Developing Regions 234    549  1,179        4.4          3.9
1/  Localities of 20,000 inhabitamts and over. These figures thus
sometimes exclude municipal umits of less than 20,000 inhabitants
within urban areas. Growth rates are regional averages; those
of principal cities are typically higher than these averages
(see Annex B Table 1).
2/ Excludes People's Republic of China.
Source: United Nations, Growth of the World's Urban and Rural
Pp                    jNew York, 1969).  
Poulation, 1920-2000(ewor,96)
15.       Topography, climate, social structure and other factors also
affect housing, but in a modifying rather than determining manner.
Hilly and marshy land, a site surrounded by mountains or the sea, and
sites susceptible to earthquakes are all relatively difficult to develop.
Housing Policies
16.       The fourth critical variable in housing conditions is housing
policy. Variations in housing conditions among cities of similar rates
of growth, size and income reflect differences in housing policies and
their administration. Many past attempts to deal with housing have



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taken the form of calculations of the investment required to meet the
present and prospective housing "deficit."   This approach is basically
unsound.   Apart from the conceptual difficulties of estimating
"appropriate" housing for a variety of socio-economic conditions, it
suggests that the housing problem is a "bottomless pit."   By ignoring
the potential for incremental improvement through a better use of
existing resources, it has thus encouraged the adoption of counter.-
productive policies.
17.       The most common such policy is a cycle of' demolition and
redevelopment of urban neighborhoods. Refusal to accept existing low
quality housing as at least an intermediate solution to the urban housing
problem is common.  The consequence is a continuous process of construction
of temporary- dwellings which last until the government clears the land for
other purposes or until they are washed away by tropical downpours. Thus,
as the value of land close to the city center increases, squatters are
forced to move toward the expanding periphery away from employment and
other opportunities.
18.       Many governments have insisted on maintaining high standards
which raise the cost of housing and prohibit self-help construction by
low income households. Prohibitive building codes, costly land
acquisition procedures and other barriers prevent the poor from building
permanent legal houses where they can earn a living.   The sentiment
"construct big, beautiful, and forever,"t is not unusual.   The poor, who
are frequently described as "marginal" by those who resent slum and
squatter areas, are thus "marginalized" by policy failure.
Facing the Housing Situation
19.       Interaction of the principal determining factors -- incomes,
city size, the rate of city growth and housing policies -- results in
a wide range of housing conditions. However, income factors are domLnant,
for they determine how much households, cities and countries can afford
to spend on housing. At present, inappropriate policies often limit the
housing available, forcing even middle income, but particularly lower
income, families to live under worse housing conditions than resources
could permit. Given particularly the rapid urban population growth forecast
for the next decades, a more realistic approach to housing problems is needed
if developing countries are to improve their housing situations.
II. THE ECONOMICS OF HOUSING
20.       Housing has multifaceted economic and social characteristics.
It represents some 15 to 20 percent of household expenditures, and it is
the major focus of saving for all buit high income families. It is
increasingly recognized as a profitable investment good, yielding a flow



-7-
of income. For some households, it is also a place of business.
Moreover, it is spatially fixed, making its location relative to jobs,
transport networks and public services as much a part of its essence
as the materials used in its construction.
21.       Investment in housing can have an important impact on income
and employment through the utilization of unemployed or underemployed
workers.  Moreover, the import content of housing construction and of
the manufacture of construction materials is usually relatively low,
and the supply of domestic raw materials for housing is generally
elastic.   Multiplier linkages through the economy can be substantial.
In Korea, for example, approximately 14 additional jobs are created for
every $10,000 spent on the construction of dwelling units.   Housing
construction can form up to 20 to 30 percent of total fixed capital
formation in rapidly growing countries with vigorous housing policies.
22.       Housing is thus a tool for macro-economic development, which
should be viewed as complementary to other sectors.   The emphasis which
should be given to housing development in a national or an urban economy
will depend upon the strength of demand and the elasticity of supply;
that is, the degree to which the particular housing produced can draw on
underutilized resources.
23.       Housing also has social benefits.   An inadequate dwelling,
absence of water and sewerage facilities, or lack of access to income
earning opportunities, contribute to low family incomes, poor health 1/
and a low ability to absorb education.   Well planned housing, on the
other hand, can increase national productivity, economize on urban space
and minimize the cost of urban infrastructure. Improved location of
dwellings in relation to jobs leads to reductions in traffic congestion
and increased household take-home pay by reducing commuting expenses.
24.       Housing as a package of shelter and services must thus also
be viewed in terms of substitution and complementarity. The housing-
transport relationship is an important case in point. In some instances
either instrument may pose a different, but equally acceptable, solution
to a particular problem. In others, they are best applied together.
The relationship between housing and health is more clearly complementary.
In a squatter area, for example, improvement of the house, provision of
wauer supply and sewage disposal and the introduction of health clinics
may seem to be competing for resources, but the realization of benefits
available from a health investment may be dependent upon some
improvements in housing.
25.       Given its costliness and durability, however, there is a limit
to the amount of housing construction a country can afford during any
period of time. The emphasis must therefore be on (i) mobilizing under-
utilized resources; (ii) reducing unit costs by increasing the efficiency
of construction or reducing standards; and (iii) improving the interaction
among housing, land use and transport in integrated urban development.
1/ IBRD, Health Policy Paper, Octobeir 29, 1974.



-8-
Housing in the Urban Economy
26.        Housing has several components.  The usefulness of land depends
upon its location and area;  the services, such as water, sewerage,
electricity and roads, supplied to the plot; and transport available at that
location. Land and the materials;, capital and labor required for construction
all have uses other than for housing, and their coordination on the site
is a substantial problem which few societies have dealt with satisfactorily.
The components together determine the total cost of the dwelling, and
the mix of components may be adjusted to alter the cost per unit. The
result is a wide range of housing types, which emphasize the substitutability
of one component for another.
27.        Location, and hence land is clearly of critical importance to
housing.   A dwelling located far from employment opportunities and
social services is more expensive than an identically priced unit with
better access, because travel costs are part of the cost of living at
that location.   Poor families are quite cognizant of the value of
locations which give access to jobs (including sources of income to
secondary family earners and supplemental incomes to primary earners), and
access to services such as health and education which affect productivity
as well as welfare. It is thus for sound economic reasons that families
are willing to go to great lengths to obtain housing at desirable
locations, even if it means accepting the risks of illegal "squatting."
28.        The reasons for social investment in housing are equally
soundly based. Housing can modify urban form and commrunity development
to improve equity and efficiency. It can take a variety of forms.
Access to income earning opportunities is sometimes best improved by
increasing the low-income housing supply near employment concentrationas;
sometimes it is better to locate industrial and commercial activities
near low-income housing concentrations; sometimes linking existing
residential and employment areas by improved transport, is the best
approach.
Housing Costs and Incomes
29.        To be effective, housing policies and programis have to be
tailored to a country's income level and households' capacity to pay.
Many past housing programs have met with little success because they
have attempted to meet housing "needs" rather than the effective demand
for housing.   In contrast to estimations of need according to arbitrary
standards, effective demand is derived from a household's ability and
willingness to pay for housing.
30e        At present there are wide gaps in most developing countries
between the cost of currently produced housing and the ability of low
income urban families to pay for it.   In the six cities studied for this



- 9 -
paper, the cheapest housing units currently produced by the public sector
ranged from $570 to $3,005 (see Annex B Table 4).  From 35 to 68 percent
of urban residents were unable to afford the full costs of such housing
(see Table II.1). 1/
Table II.1: PERCENT OF HOUSEHOLDS; UNABLE TO AFFORD CHEAPEST
DWELLINGS PRESENTLY AVAILABLE: SELECTED CITIES
(Percent of PopuLlation Not Served)
Mexico City      55
Hong Kong        35
Nairobi          68
Bogota           47
Ahmedabad        64
Madras           63
Source: Annex B Table 4.
A 20 percent reduction in costs would enable the market to reach an
additional 18 percent of households in Madras and roughly 10 percent
in the other cities, but only an extra five percent in Nairobi.   To
reach the bottom 20 percent of households, costs would have to be reduced
by nearly 70 percent in Nairobi, but only 20 percent in Hong Kong and
approximately 50 percent in the other cities.  (See Annex B Table 5 for
the foregoing and for reductions that would be necessary to reach the
bottom 40 percent, 20 percent and 10 percent of households in all the
cities.)
31.        Rising per capita incomes and improvements in their distribution
may in time make this picture less glooiiy.  Time, however, is limited.
For the current generation of urban dwellers, measurable progress requires
a pragmatic approach to attaining lower production costs.   Too often, a
government's legitimate desire for good quality housing for its citizens
engenders a neglect of ways to achieve decent dwellings at lower cost;
however, cost reduction can be achieved, in the first instance and most
simply, by reducing standards. Indigenous materials and traditional
building methods can be substituted for higher cost materials.   A lower
quality of finish can be accepted.   Interior living space can be reduced.
Communal kitchens and sanitary facilities can lower the dwelling cost to
each household.
32.        Substantial savings can also result from reducing the land
area devoted to each dwelling.   This can be achieved by reducing the
1/ These figures assume that poor families will spend 15 percent of their
household budget on accommodation at a real interest rate of 10 percent.



- :10 -
plot size for single family detached and semi-detached houses in site
and services development; by designing houses, such as two-storey
row houses, which share walls on both sides; and/or by constructing
four to six storev walk-up apartment buildings. Land use is thus an
important consideration in the desi gn of housing and residential
areas.  It raises the question of trade-offs between single family
and multi-family structures and between the use of self-help methods
to utilize labor with low opportunity costs and multi-storey formal
construction to utilize land more eefficiently and reduce its weight in
total dwelling costs.  Families usually have at leas t the notional
choice between relatively roomiy and good quality shelter at locations
with poor and costly access to income earning opportunities, and very
cramped living conditions in locations with good access.
33.        The nature of the trade-offs involved and the provision of
alternative housing options for low income families in urban areas of
widely varying characteristics have to be taken into account in housi;ng
decisions.   Data for such decisions are usually not readily available,
and all the options can therefore not be detailed in this paper.  A
limited approach, based on information collected for the six cities
studied, can nevertheless indicate the effects of changes in standards
which can realistically be achieved in housing of varying location and
formal construction content.   This is accomplished by comparing cost
and income data on the assumptions that (i) livable space per household,
(ii) land area per household, (iii) public services levels and
(iv) location can be brought into a realistic relationship with the
income levels of poor households.   The comparisons of dwelling costs
with household incomes in Annex B Tables 6-8 illustrate the range of
housing options potentially available.
34-.       These comparisons take as their point of departure the actual
costs of the cheapest single family and mrulti-family piublic housing units
currently built in the cities studied (see Annex B Table 4).  Hypothetical
reducticns in the costs of these units were calculated on the basis of
the following assumptions: (i) that interior livable space would be
reduced to 20 sq m. per dwelling unit; (ii) that gross lensities would be
increased by associated changes in land use standards (see Annex B Table 7);
(iii) that reductions in the cost of services and construction would
follow three different ser,vice level standards -- individual, shared and
basic (see Annex B Table 6); and (iv) that all costs wouLd be calculated
on the basis of land prices presentl;y prevailing at each location. The
effects of changes in location were examined using land prices at the city
center, at intermediate locations (defined as one-third' the distance from
center to periphery), and at the periphery (see Annex B Table 6).  The
resulting changes in the income groups that might be reached by these
approaches are recorded in Table Ij.''.



- 11 -
Table II.2: HOUSEHOLDS UNABLE TO AFFORD CHEAPEST HOUSING
PRESENTLY AVAILABLE AND WITH ASSUMED COST
REDUCTIONS, 1/ SELECTED CITIES
(Percent of Population Not Served)
Assumed Cost Reductions
Cheapest Dwelling
Presently Available      Space Standard    Space Standard
(From Table II.1)             A                  B
Mexico City             55                       h                  3
Hong Kong               35                      25                 18
Nairobi                 68                      47                 46
Bogota                  47                      11                  8
Ahmedabad               64                      41                 36
Madras                  63                      38                 35
1/ Dwelling unit cost derived from cost of cheapest currently built
public housing, assuming peripheral location, basic services and the
following space standards:
Space Standard A: Single family: 20 sq m. livable space per family,
75 sq m. land (This is the low cost solution in
Bogota and Plmedabad).
Multi-family: 20 sq m. livable space per family, 15
sq m. share of land. (This is the low cost solution
in the other cities).
Space Standard B: Single family: 20 sq m. livable space per family,
40 sq m. land. (This is the low cost solution in
Bogota and Aimedabad).
Multi-family: 20 sq m. livable space per family,
10 sq m. share of land. (This is the low cost
solution in Mexico City, Hong Kong and Madras.
Single family and multi-family are equally low
cost in Nairobi).
Source: Annex B Tables 4, 7.
35.        Administrative and maintenance costs are included for the Hong Kong
examples, which are based on actual, fuLl-cost experience.   Where ownership
is not an option in multi-storey housin,g, the management costs of public
housing may be important.   Therefore, a cost increase of one-third, to
account for these costs, as well as interest during construction and possible
delinquencies or defaults in rental payments, was calculated as a sensitivity
measure (see Table II.3).   Vigorous housing policies may be presumed to
stimulate the efficiency of supply, so that similar cost reductions are
.included in the sensitivity analysis.



_ 12 -
Table II.3:   HOUSEHOLDS UNABLE TO AFFORD HOUSflG UNDER
ASSUJMED SPACE STANDARDS AND ALTERNATIVE
COST ASSUMPTIONS
(Percent of Population Not Served)
Space Standard B    Cost Reduction   Cost Increase
(From Table II.2)   of One-Third 1/  of One-Third 2/
Mexico City               3                  1                 7
Hong Kong               18                   8                34
Nairobi                 46                  29                61
Bogota                   8                   4                13
Ahmedabad                36                 13                53
Madras                   35                 11                68
1/ This is also equivalent to 20 percent of household income devoted
to housing instead of 15 percent.
2/ Allows for administrative and maintenance costs,-interest during
construction and 20 percent rate of delinquerncies-and default on
rental payments.
Source: Annex B Tables 7,9.
36.        These examples illustrate the importance of city per capita
income levels and their distribution, of city size (and hence of land
values), and of the efficiency of supply of the various housing components
in determining the income groups that can be reached by housing policies.
The priority attached to housing low income groups -- especially the extent
to which governments are willing to reduce standards -- is also an
important factor.   If relatively high space standards are maintained,
the option permitting the greatest proportion of the population to afford
dwellings will always be at the periphery.   Our examples illustrate that
this may be achieved sometimes 'with single family and sometimes with
multi-family housing, depending upon the mix of factors mentioned above.
The essential task for housing policy is, however, to develop the trade!-
offs between other options for further cost reduction; and this too
depends upon all of these factors.
37.        Income level is the first important consideration.   In
relatively high income cities, a fairly broad range of housing options
is in most instances technically feasible; and the bulk of the population
may be reanhed with reductions in one or more standards which are substantial,
but not so great as to reduce the housing produced to uznacceptable levels



- 13 -
(see Annex B Tablte 7).   Furthermore, the proportions of the population
that can be reached in relatively high income cities does not appear to
be very sensitive to changes in costs or the percentage of family income
devoted to accommodation. 1/ Thus, for example, in Mexico City and
Bogota, the percentage of the population which could be accommodated
does not change markedly with either a cost increase or a cost decrease
of one-third (see Table II.3).
38.        In the low income Indian cities, and in Nairobi, the
percentage of households which could not afford similar housing solutions
appears to be much larger, and also more sensitive to changes in costs.
In the Indian cities, this result is attributable chiefly to low incomes.
Thus, despite the lowest construction costs in the world (see Annex B Table 2),
more than one-third of families would be unable to pay the full costs of
what are defined as low standard dwellings, with basic services at the
periphery.   In Nairobi, despite higher incomes, the figure is nearly one-
half, a result which appears to stem primarily from the high local costs
of construction and construction materials.
39.        The importance of city size and layout, operating through
their effects on land values at central and intermediate locations, comes
out most clearly in the case of Mexico City.   Thus, unless they are
among the relatively few short-term beneficiaries of rent control, the
poorest half of the population could aiford housing at the standards for
which costs were estimated o     at the periphery.  In Hong Kong and
Bogota, by contrast, despite lower incomes and relatively large populations,
substantial numbers in the lower income groups appear able to afford
in',ermediate locations.   In India, these groups clearly have a wider
range of options in Madras with its extended layout thaLn in Ahmedabad
with its highly concentrated city center.
40.        The figures suggest that the problem in the higher income cities
is in principle manageable; that is, a reasonable reduction in standa-rds
would enable the bulk of the population to be housed at peripheral locations.
However, particularly in very large cities such as Bogota, Hong Kong and
Mexico City, this may not be the best solution.   Some portion of the lower
income groups could afford intermediate locations in row housing or multi-
storey apartments; however, it would be desirable to provide a broader
range of options under which larger numbers might be able to afford
housing with better access to income ebarning opportunities for the entire
family.  Several possibilities emerge:   (i) programs which encourage or
enable families to devote a larger percentage of their expenditures to
housing; (ii) increasing densities and/or reducing interior living
space still further (see Annex B Table 8); or (iii) introducing conscious
spatial policies, for example encouragring industrial and commercial
activities to locate at the periphery or, alternatively, making higher
value land accessible for low income housing through subsidies, whether
explicit (as in the case of the Hong Kong and Singapore public housing
programs) or implicit (as in squatter area upgrading programs). Finally,
1/  Except in special circumstances as in Hong Kong, where low density housing
development at the extremes of the urban-rural fringe is not permitted.



-14 -
there are numerous market imperfections which can be ameliorated or
removed, thereby improving the efficiency of supply of the various
housing components and of the materials entering into their construction.
41.        In the lower income cities, the problem remains one of
provriding housing solutions for the poorest segment of the population.
In these instances, many of the same measures may be considered; however,
with different degrees of emphasis. For example, explicit subsidies of
any size are beyond the fiscal capacities of governments.   Furthermore,
in these cities, very low standard site and services and squatter
housing upgrading may be the only 'way to provide housing opportunities
for large numbers of the urban poor.
42.        The preceding illustrations, it must be stressed, should not
be interpreted as being indicative of where and how the Door should
live within cities. Nor do they establish an 11optimal-' residential
density or suggest circiumstances in which higher densities are required.
For one thing, present information about the social costs imposed by
lack of access to employment opportunities is too limited to permit a
more careful weighing of the trade-offs between peripheral and more
central locations.   Even if full costs were known, the results
would be no more than indicative of what could be accomplished in a
variety of political and sociological contexts.   Actual solutions will
vary with income levels, traditions, personal preferences, political
structures, urban development settings and relative costs of each city.
The perceived private costs of the housing solutions proposed will have
to be weighed against those of squatting and other options open to low
income families if the proposed solutions are to be socially successful.
43.        The data collected for this study are designed to show what
might be accomplished by reducing standards, improving markets in other
ways, changing locations and densities and utilizing self-help methods.
In all cities studied, the examples suggest that housing (including
site and services and other self-help methods of construction) could be
provided without significant subsidy for at least 80 percent of the
urban population (see Annex B Tables 7 and 8).   In the wealthier cities,
it appears that many of the lowest 20 percent could be reached within
acceptable standards and with a low subsitd  element.   In Hong Kong and
Singapore they presently are being reached, with some measure of
subsidized access for the lowest third of the population.   In the
lower income cities it is more difficult for the poorest segment of
populations to be reached by formal housing construction solutions.
Market improvements should be stressed, because they can have great
importance over time; however, squatter area upgrading programs and
site and services approaches, stressing low space standards and high
proportions of self-help construction, appear to hold the most promise
at present.



- 15 -
Housing Markets
44.        Housing markets have special characteristics and they are very
imperfect, with wide divergences between the private and social costs of
production and limits on the flow of resources to the entire housing
sector, and to low income households in particular. The scarcity of
well located land, the high capital costs of servicing land and the
durability of housing make for a relatively inelastic housing supply;
increases in urban population, family formation and income levels lead
to large demand shifts which frequently outstrip the supply response.
This results in a market rationing process in which the limited stock
of housing is allocated to the highest bidder.   Households in all but
the highest income categories are forced to accept housing which does
not meet their expectations, and increased crowding results.   Middle-
income families occupy housing designed for low-income families, and
the latter may not be able to afford "formal" housing at all.
45.        Externalities, particularly the quality of the neighborhood
environment, and the fact that housing is spatially fixed affect
household decisions to construct or imaprove housing or to change their
residence.   Superimposed on these attributes are imperfections which
can be classified as institutional or economic in nature. The latter
include restrictions on the availability of infrastructure needed to
service housing land.   Complications in dealing with indivisible
assets yielding substantial scale econormies are frequently compounded
by pricing and management rules of utilities which may restrict the
access of the poor to public services at reasonable cost.   Imperfections
in private land markets lead to very high land prices, frequently caused
in part by speculative withholding.   These high prices combine with high
transactions costs to make land assembly difficult for the poor to
undertake.
46.        Institutional constraints generally arise from legal barriers
and administrative controls erected to protect specific groups or interests.
Zoning often prevents parcels from being allocated to their highest and
best use, either by imposing limited categories of use or by restricting
unit density.   Building codes, ostensibly designed to protect the consumer
who has limited ability to judge quality of structures, often protect
suppliers of outmoded materials or favored building trades.   Minimum
wage legislation and unionization have been blamed for limiting the flow
of labor into the housing sector, raising unit costs.   Rent controls
discourage the expansion and maintenance of the housing stock.
Institutional arrangements governing housing finance, such as interest
rate ceilings and collateral requiremernts, may inhibit the mobilization
of savings. Countless additional barr-Lers restrict the access to vital
information and make compliance with required procedures more difficult,
particularly for the poor. Overcoming these constraints requires a
sustained commitment to policies which provide housing at a cost within
the reach of poor families.



- 16 -
III. HOUSING POLICY OPTIONS FOR DEVEIOPING COUNTRIES
47.        Housing, and more generally urban development, is difficult
to organize efficiently and equitably even in industrialized countries
which do not have to deal with explosive city growth.  However, several
developed and some developing countries have been able to achieve
housing standards which combine efficiency with welfare.   Developing
countries thus have a range of experience on which to draw.
The Policy Framework
48.        A country's general policy framework has important implications
for both supply and demand factors influencing housing.   Exchange,
foreign trade and other comnercial policies affect the housing market
through their impact on a country's overall competitiveness.   Monetary
policies influence the availability of housing finance; lack of
development of grass roots financial institutions, for example, means
a lack of mortgage funds.   Fiscal policies are critical to a country's
ability to mobilize resources for growth and the distribution of income.
Equally important, all these policies have spatial dimeansions which
influence the range of city sizes within each country and the location of
residences and employment within a city.   Countries with a poorly
conceived overall policy framework cannot expect to deal effectively with
their housing problems.
49.        The economic characteristics and welfare implications of housing
make it a sector of relatively high public involvement in most countries.
Important components of the housing package -- access roads, utilities
and to some degree transport -- are "natural" monopolies that require
public ownership or regulation if supply is not to be restricted so that
excessive monopoly profits may be reaLped.  External costs and benefits
also make public assistance necessary.   The substantial external
benefits of urbanization and housing are reflected in increasing land
values in the course of city growth.   Unless special effort is made to
appropriate some of these benefits for social use, the increases in
value will accrue to those individuals fortunate enough to be land
owners.   This situation encourages land speculation and "clearance" of
squatter areas, and may ultimately lead to social conflict.
50.        The welfare implications of housing are another reason for
government assist-ance. Such assistance may be designed to offset market
imperfections which are too difficult to attack directly, but which
discriminate particularly against the poor.   Thus housing subsidies
may be justified on grounds of increasing productivity, as a means of
redistributing income to the very poor, or both.



- 17 -
51.        An effective housing program requires effective acninistration.
The experience of most developing country cities suggests that existing
approaches give insufficient weight to fostering institutions with a
specialized knowledge of local conditions. Emphasis needs to be given
to fostering institutions capable of formulating urban development plans
and, within them, housing programs. 'In contrast to previous planning
methods which have relied chiefly on zoning maps to indicate which
development is to take place at which locations, strategic urban
development planning implies the analysis of socio-economic influences
on development and their coordination in a framework specifying planning
objectives and the resources at hand to meet the objectives.
52.        However, without a commitment to carry out these plans, the
best conceived institutions and management cannot be fully effective.
Government resistance to programs which allegedly "perpetuate slums"
can for a variety of reasons be very strong.   In other countries, where
resistance may not be a problem, there may still be insufficient knowledge
about the operation of housing markets and lags in dealing with their
imperfections. The first step in improving housing opportunities for
the poor is often a forthright recognition of these constraints and
their effects on the formulation-and execution of housing policy.
53.        The range of instruments avrailable for carrying out housing
strategies and policies is considerable. Although their application may
frequently lead to unexpected effects, sufficient experience has by now
been accumulated to enable some general judgments to be made about the
most appropriate use of particular instruments.
Zoning Regulations
54.        Zoning is a potentially valuable instrument of urban and
housing policy, important in protecting an aesthetically pleasing
residential environment, grouping certain (e.g. commercial) activities
in an efficient manner, and segregating unwanted activities. Yet the
inappropriate application of developed country zoning regulations may
exclude the poor from residence near industrial, commercial and high
income residential zones which provide their income earning opportunities.
Building Standard Controls
55.        Appropriate building standards can also do much to create a
safe and pleasant environment, for example by preventing or limiting the
likelihood of fires, floods and similar hazards.   However, if standards
are set too high for existing income levels, their primary effort will
be to push down the living standards of the poor by reducing the amount
of housing available at prices they can afford. The poor will then be
driven to bribery to retain or constiruct "sub-standard" housing.



- 18 -
Pricing Policies
56.        The attempt to preventi the capture of socially caused gains
by private individuals and to offset the imperfections of housing markets
by introducing rent controls has a long and unsuccessful history.   Rent
controls have only been effective for limited periods of strong social
cohesion, as during wartime, and when applied in combination with
strict controls on other incomes and prices.   Applied over longer periods,
they have eventually given way in most countries to illegal rationing
systems by which some form of "lkey money"t becomes a substitute for proper
rents, and the poor are driven out of much of the controlled housing.
But this neither undoes nor fully stops the damage. Because they limit
returns on housing below market levels, rent controls inhibit additions
to housing stock and lead to deterioration through lack of maintenalnce.
Attempts to control the prices of public utilities or urban transport
have had similar financial repercussions. In addition, they distort
the location decisions of households and firms. They also lead to
rationing situations in which the poor are seriously disadvantaged as
capital stock and the supply of services deteriorate.
57.        Measures to price these services at their full economic value,
however, may be difficult in the short run. They frequently run into
resistance. But even if they do not, their introduction in the absence
of other measures may be inequitable.   Obliging poor families, for
example, to pay the full cost of housing services may place them au a
disadvantage relative to the non-poor as well as other poor families,
if the practice is not city-wide. Yet, it is precisely in cities where
the absence of full cost pricing for housing and some services is wide-
spread that the magnitude of the change, and the numbers likely to be
affected by measures to introduce greater efficiency and equity, can give
rise to the greatest resistance. Such changes must thus be introduced
thoughtfully.  One means which appears to be gaining acceptance is to
finance part of the cost of services to the poor from profits from
operations involving richer fanilies;  these cross-subsidization schemes
have had increasing application in a number of countries.
Land Tenure
58.        Land ownership is at least as complex and as maldistributed
in urban as in rural areas. While an overall improvement in land tenure
can usually be only a long term target, squatter upgrading is a prime
policy instrument for improving the situation for at least part of the
poor population quickly. Introducing an element of equity into urban
land ownership by giving squatters security of tenure is an urgent policy
issue in most cities in developing countries, and one ;with high return[s
in terms of retained and improved housing stock, access to earning
opportunities and consequent welfare. However, the payment for at least
some portion of the actual land value should be required in exhcnage for
title to avoid excessive subsidies to only part of the poor.



- 19 -
Land Purchase and Development
59.        Most cities have found it necessary to purchase urbanizable
land to deal with housing and associated urban development problems
equitably. Some cities in developing countries have public'y owned
land which can be used to start such a process; others are interested
but have no initial land bank, and a few are legally barred from such
action.   Land within existing city limits is usually very costly, but
peripheral land can often be purchased ahead of use at low cost.   As
the present owners are generally farmers, a variety of deferred payment
schemes can assure eventual possession at current prices: in the
meantime, the land continues to be productive in agricultural use.
Public land servicing has successfully stimulated private housing in
many countries, and it is particularly suited to assisting low income
households at peripheral locations through the site and services
approach.   The preparation of serviced sites ahead of the growing
demand for housing can be used to affect; urban form as well as to
provide poor households with security of tenure and a sound basis for
building a house.   With good management, the increasing value of
serviced land can be appropriated for social use on a muchl broader
scale.   The development of land for manufacturing and commercial uses
together with housing and transport can have a strong development impact.
In these circumstances, city growth can in time become not only more
efficient and equitable, but also more financially self-reliant.
Taxes on Land
60.        The capture for social use of some of the gains, or "betterment,"
accruing to land and housing owners from public improvements is anothler
important issue. By capturing betterment, society does not penalize a
landowner for putting his land to productive use, but simply reduces any
incentive to hold land for other than productive reasons.   Capital gains
and other forms of taxes on land, as well as user charges, have often
been used for these purposes. In practice, valuation problemrs and erosion
of the tax base through exemptions have limited the effectiveness of
these taxes.   They are, nevertheless, increasingly called upon to provide
revenues, underwrite the cost of specific public improvements and achieve
a more equitable distribution of urban real resources.   Raising tax
receipts from land can alleviate some of the burden of taxes on capital,
stimulating the flow of investment and the development of financial
institutions.   Moreover, a program of public improvements financed by
betterment levies or equipment charges tends to reduce uncertainty about
the pattern of future urban growth, thereby encouraging private investors.
Building Materials
61.        The greater use of traditional materials and the adaptation
cf new techniques to traditional building methods can lower costs,
particularly in labor-surplus economies.   India has scored notable
successes in this regard.   Traditional brick and tile making methods,
for example, may not be able to utilize more than a small fraction of



-   2)  -
local clays, but a refractory technique may do so.   Although secondary
timbers in tropical countries may not be sufficiently durable for
building in their natural state, appropriately treated they will withstand
climate and predators.   The use of lime, which is in plentiful supply
near many cities, instead of cement may also produce savings.
Improving Financial Institutions
62.        The lack of mortgage funds frequently constrains housing.
However, overcoming this problem is not so much a housing issue as a
question of development of the financial sector.   In most developing
countries, to build up a range of suitable intermediaries is the first
task.  But financial intermediation generally requires reforms of
financial markets.   The freeing of interest rate restrictions, measures
to encourage competition among banks, the ending of inappropriate bankLing
practices, the promotion of life insurance companies and pension funds,
all increase the availability of long-term credit, and hence, potentially,
of finance for an efficient housing sector.   Removal of the several
specific hindrances to housing finance would allow housing to compete
more effectively with other claimants for long-term institutional finance,
and would enhance social progress through facilitating home ownership.
Mortgage insurance can be used to facilitate increasing lending for
housing and to bring such lendi-ng within the reach of lower income groulps.
Lending in small amounts to low income borrowers requires special
institutional approaches.
Public Housing
63.        Experience with large sca:Le public housing construction wahich
substantially increases housing density is varied.   There have been many
failures; however, countries active and successful in public housing
view it as an instrument for shaping cities and urban productivity, and
as a contribution to the welfare of l-ower income households.   Public
housing may improve the spatial distribution of residences and employment
by locating families where all earners hiave access to joDb opportunities.
Enough knowledge has been accumulated, as much from the failures as from
the successes, to guide countries wishing to embark on this course.
Standards have to be consistent with prevailing income levels. If
buildings are designed flexibly, initially low standards can be adapted
as incomes rise.  Construction has to be technically sound and economically
efficient. Public housing can provide the steady demand that assists
a local contracting industry to develop.
64.        Secondly, public housing has to be well located in relation
to job opportunities. In Singapore and Hong Kong public housing is well
located in relation to industry.   In addition, "flatted factories  for
small-scale industry have been built in the middle of housing develoDments,
and large-scale, labor-intensive industries have been attracted by
factonry space for leasing in the midst of housing estates to employ



- 21 -
secondary family workers.   A housing area has to be large enough to
have functional community facilities such as schools, health clinics,
markets or shops, and recreation areas and facilities, or to have good
access to them.   It is somewhat easier to manage owned than rental
units, and ownership is often also preferable for social reasons.
In any case the management input has to be substantial and efficient.
This includes not only finance and maintenance, but also staff to
collect rental or time payments according to a rigorous schedule and
social workers to assist families to adjust to high density housing
and other new aspects of their environment.   Of course, some
delinquencies are to be expected, for a variety of political and social
reasons. But in appropriately designed and managed public housing where
standards are geared to income levels, delinquencies because of inability
to meet rental payments should not be substantial.   To be effective,
public housing has to have most of these components, in forms which meet
the needs and cultural patterns of the occupants.
IV.   THE LESSOIS OF INTERNATIONAL ASSISTANCE
A.         The Evolution of International Assistance
65.        The economic and welfare gains to society from the provision
of housing have drawn the United Nations, several multilateral and
bilateral aid agencies, and private aid agencies into providing assistance
for housing since shortly after World War II.
66.        There have been two main types of assistance.  The United Nations
agencies, 1/ recognizing the importance of urban planning, have concentrated
on a "master plan" approach.  Many years of urban physical planning effort
have been supported in Bogota, Dakar, Karachi, Lagos, San Jose, Singapore
and elsewhere.   This strategic planning is designed to influence growth
in ways which improve on what a simple continuation of past trends would
produce. It may also suggest ways in which disenfranchised groups may
more equitably share in the benefits of urban growth.   Some cities,
notably Singapore, have been able to provide a counterpart planning input
backed by administrative measures and financing to bring plans to fruition
in a relatively short period.
67.        More commonly, however, such "absorptive capacity" has been
inadequate. In these cases, planning efforts are frequently overtaken
by rapid urban growth. In some instances, moreover, planning has been
unduly influenced by the standards and social goals of industrialized
countries. Zoning measures restricting land to a single use ("commercial,"
for example) might have worsened employment access problems had they been
17  Prograis relating to human settlements are undertaken by the U.N. Centre
for Housing, Building and Planning (UNCHBP), FAO, ILO, UNESCO, UNIDO,
WHO and the World Food Programme. The International Habitat and Human
Settlements Foundation (founded January 1, 1075) is also expected to
play an active role in this field.



- 22 -
effective.   The heavy reliance on transport investmenlt in many urban
plans often implies unrealistically high expenditures on transportation
to work for poor families.   Some plans have sought to orient public
sector activity toward the needs of the poor, but, even if implementation
problems could be solved, they generally offer only long-temr, prospects
for Iproved living conditions, not tangible benefits in the foreseeable
future.
68.        Most other public assistance efforts have been more direct,
primarily involving funds for housing finance institutions, although
technical assistance has also been provided on a limited scale. The
principal public aid agencies with housing commitments have been the
U.S. Agency for International Development (AID), The Caisse Centrale
de Cooperation Economique (France), the Inter-Arerican Development Bank (IDB)
and the Commonwealth Development Corporation (CDC). The AID program has
been the largest, with some $205 million in capital assistance and nearly
$14 million in technical assistance devoted to housing from 1949 to 1971.
This was supplemented by commitments of $472 million in the Housing
Investment Guaranty Program through June 1973.   This assistance has bieen
concentrated mainly in Latin America, where AID funds had contributed to
the construction of 111,000 units by 1971.  The Caisse Centrale de
Cooperation Economique is the second largest source of bilateral funds
for housIng in developing countries. It has concentrated its lending
activities in French-speaking countries, primarily in sub-Saharan Africa.
Approximately two-thirds of its loans have been made to housing
corporations, and the rest to housing authorities (O.H.L.M.) seeking to
assist middle and low income groups.   The IDB has committed $416 million,
seven percent of its total portfolio from 1960 through 1973, to urban
development projects including housing. Under IDB projects the
construction of 340,000 dwelling units had been completed by January 1, 1974.
CDC involvement in housing, also substantial, has focused primarily on
seed capital and technical assistance for mortgage finance companies and
housing estate developments in Africa, Soluth Asia and the Caribbean.
Commitments totalled $148 million from 1960 through 1073, 1/ and these
funds were supplemented by $246 million from other sources.   CDC has,
in addition, extended loans totalling $25 million to governnments and
housing authorities for low cost hous:ing.
69.        After more than a decade, it has become clear that these
efforts, although they have helped to increase the total housing stock,
have had little direct impact on housing for the poor.  The bulk of past
assistance efforts have not dealt effectively with existing market
imperfections and have not succeeded in reaching low income groups
(Anner A, Tables 2 and 3).  The unit costs of housing they have financed
have ranged from $960 to $10,000. 2/  Mloreover, "seed capital" for housing
institutions has not in practice altered banking policies which have
subsidized middle income groups and excluded the poor from housing loans.
17/-  ix A,  pp.5-6.  Sterling figures have been converted at $2.6CA.
2/ See Annex A, Table A.2.



- 23 -
70.        These programs might have reached more poor families had
they been part of a package of housing inputs, conceived in an urban
planning framework. They might have been more conducive to reducing
subsidies to middle income groups had their implementation been made
conditional on the charging of appropriate interest rates within an
appropriate package of repayment terms.
71.        AID and IDB are aware of their inability to meet the
objective of helping to provide "minimum shelter" to the urban poor.
A 1971 report prepared for AID concluded that the bulk of the housing
financed over the previous decade had been too costly for the poor.
The report recommended r'that AID redress this record by concentrating
upon the housing needs of low income people and discourage ... loans,
grants, and technical assistance programs which do not attempt to meet
their needs." 1/   A number of donors now support the site and services
approach as the most promising way of achieving this objective.
72.        Private bilateral aid agencies, for example the Foundation
for Cooperative Housing (FCH) and the Pan American Development
Foundation (PADF), appear to have been somewhat more successful in
reaching lower income groups, although on a very small scale. The FCH
has helped establish cooperatives in several Latin American countries,
achieving unit housing costs of less than $1,000.   PADF projects
organize the poor so that they may take advantage of low cost credit.
The first national foundation in the Dominican Republic, created with
PADF assistance in 1966, has since made available about $1.7 million in
loans for housing and community development involving 150,000 people,
for an average loan of $11.50 per person.
73.        Private development agencies have thus been generally more
realistic in defining the housing demands of low income groups and more
cautious in their approach; they have concentrated limited financial and
human resources on a small number of cases. Perhaps for these reasons,
they appear to have made a more innovative impact on housing than public
agencies.  The public aid agencies, viewing the range of experience --
successful and unsuccessful -- with low income housing, are reassessing
their own programs, and this has contributed to the renewal of interest
in "human settlements" in the international foreign assistance community.
B.         The Experience of the Bank Group
74.        The Urbanization Sector Working Paper (June 1972) set out an
initial strategy for the Bank Group's lentry into the housing field.
Until that time the Bank Group's lending and related institution building
efforts in urban areas had been directed toward national and sectoral
objectives, rather than affecting the growth pattern of cities and the
welfare of the poor.   The Sector Working Paper, taking a comprehensive
view of urban development, indicated a need for projects which would
1/ Foundation for Cooperative Housing, Cooperative Housing and the YInimum
Shelter Approach in Latin America, Vol.II, 1971.



- 24 -
assist countries to accommodate rapid urban growth more efficiently
and improve the distribution of income in cities. Site and services
projects, by providing access to serviced land and security of tenure,
could be a key instrument for influencing urban development.
Improvement of existing low income housing was also considered ijmportant,
although specific approaches were not worked out at that time.  The
principal objective in both these types of projects was to provide low
income families with the land and public utilities components of the
housing package, and a variety of technical and financial assistance to
enable them to use self-help to build and progressively improve their
dwellings.   Direct lending for housing was not imnnediately contemplated,
but the possibility was not excludeid that, at a later stage, there might
be direct financing of permanent housing if the cirCunstances warranted
it.  Indirect Bank Group assistance to housing through stimulation of
housing finance institutions was contemplated, provided there were no
subsidies for medium and high income groups. 1/
Site and Services Projects
75.        The first site and services pro ject was approved by the Board
in June 1972. To date, ten urban development projects involving site
and services and other housing conponents have been approved for Senegal,
Nicaragua, India, Botswana, Jamaica, Tanzania, Zambia, Indonesia,
El Salvador and Korea (see Arnex B I'able 10).   Ar. additional four, in
Kenya, Pakistan, the Philippines and Thailand, are in -preparation.  ITle
variety of situations faced in the course of project design has made a
broad range of responses appropriate (see Table IV.l for general project
characteristics and Annex B Table 10 for details).   The diversity of
projects undertaken has also contributed to a rapid evolution of the
character of lending, and highlighted the principal issues which will be
faced by the Bank Group in undertaking future projects in this field.
76.        In site and services projects, land plots are levelled and
ftulrnished with access roads, drainage, water, sewerage and electricitiy.
Schools and health clinics have been provided in all pro"ects, and in
some there are also refuse collection, fire protection services, and other
public facilities. Particular attention has been paid to locating projects
within reach of major markets and jobs. An effort has also been made to
provide job opportunities within project areas.   In the Nicaragua,
Jamaica and El Salvador projects, prcvision has been made for small
industries on the project site to assist in employrent creation; and, in
these and the Botswana project, land has been provided for industrial
development.
Upgrading of Squatter Housing
77.        Lending for squatter housing upgrading to complement the site
and services approach was adopted with the Calcutta Housing and Area
Development Project.   This feature of project design can help prevent
Urban      nSector Working Paper, June 1972, pp.64-66.



-25 -
squatters from being relocated far from employment opportunities, and
can provide low cost housing together with low cost access to employment.
It is becming an increasingly important feature of Bank Group lending,
as in the Indonesia, Jamaica, Tanzania and Zambia projects. Squatter
housing improvement provides a means of retaining and improving existing
housing stock which might otherwise be demolished. At the same time, it
maintains the access to employment and social services of relatively
central locations for low income residents. Its most important contri-
bution is to give the poor security of tenure.
78.       Issues encountered in the Tondo District of Manila illustrate
the advantages of this approach. The initial project proposal would
have involved total demolition of housing in the area, and a redevelop-
ment pattern which would have accommodated less than 30 percent of the
existing population of approximately 160,000. The other families would
have been resettled either on government land more than 30 kilometers
away, or on new land reclaimed at considerable expense from Manila Bay.
The project is now being reformulated with Bank Group advice and
assistance so that: (i) the bulk of existing structures will be
retained; (ii) most of those families that are temporarily dislocated
will be accommodated within the project area at densities approximating
those currently prevailing, but with improved access to services; and
(iii) the much smaller "overspill" population will be settled nearby.
79.       In squatter area upgrading, the objective is to avoid, insofar'
as possible, the dislocation of resideints when roads and public
facilities are introduced. In most ur'ban fringe areas and in the low
density squatter settlements of most African cities this objective can
usually be achieved. However, most central city slums and squatter
areas of long standing are densely populated. It is not usually possible
in these areas to introduce services, particularly water supply and
sewage disposal, without removing a few structures. Even when removal
is kept to a minimum, some families may have to be rehoused. In such
cases, effective area upgrading may require some multistorey construction,
e.g. three to five storey walk-up tenements, on the same site to at least
maintain the existing density and avoid costly relocations to distant
sites.
Self-help and Mutual-help
80.       In both site and services aid squatter housing upgrading
projects, self-help or mutual-help methods have been applied to the
construction of dwellings and some community facilities.  These methods
have in some cases also been employed in road formation and the laying
of water and sewer pipes. To be effective, self-help requires technical
as well as financial assistance to the poor families and the settlement
commnities. The range of technical services offered has widened with
experience. Project beneficiaries nowi receive guidance in applying for
housing, obtaining title, and learning a variety of construction methods.



26 -
Table lV.l: GSENSRAL CIHARACT-iISTICS OF SITE aIND SE?VICES
AHD SQUATTER HOUSMIG UPGRAD2NG PROJECTS FNANICED
BY THE 3BAN  GRXUP:  JTJE 1972  -  DEC-BER 1974
i{ange of Values
1/
Axaount of Credit or Loan                                   3  -2
($ Nlillion)
Lowest Target Income Group                                  0  -48
(percentile)
Number ofL Site and Services Plots                          2  -  16
(thousand)
Plot Dimensions                                            60  - 324
(scuare meters)
2/
,umber of Houses Upgraded                                   1  -  17
(thousand)
2/
Nimber of Core Housing Plots                                1-   8
(thousand)
3/
Infrastructure and Services                                 k  -  lo
(nunber of kinds included)
Distance from City Center (kilometers)
Towns                                                    1  -   5
Small Cities                                             3  -   8
Large Cities                                             E  -  15
Self-Help Proportion
(estimated percent of                                   30  -  40
total project costs)
1/  These figures refer only to that proportion of thle total credit or loan
devoted to housing;  in some instances, e.g. the Calcutta and Korea loans,
this is a small portion of the total loan or credit.
2/  Not all pro ects include these elemients.
3 See Annex B Table 10 for information on service levels.
Sources:   Annex B Table 10.
Appraisal Reports.



- 27 -
Direct Construction
81.       All Bank Group site and services and squatter housing upgrading
projects have aimed at a maximum use of self-help. However, in most
circumstances, there are aspects of the construction process (plumbing,
for example) for which self-help is inappropriate, so that some direct
construction is required for efficiency. In. most site and services
projects, the distribution network cannot be conceived as ending at the
property line; it extends to the toilet and washstand, or the utility
bloc. As it is possible to economize on these installations by providing
them for two to four houses at one time, there is frequently a case for
constructing a wet wall or "party wall"' at the same time. This principle
may also apply in cases where two storey row housing leads to a more
economic use of land. In most instances, the construction of the two
common walls would have to be organized.
82.       Some tasks, in addition, cannot be performed as efficiently
through self-help as on a contracting basis.  Even in the Botswana project,
with minimal service standards, the installation of aqua privies could be
performed by a contractor at significantly lower cost than by each family
individually. In the Korea project, construction of the foundation and
floor, which included ducts for the heating system, was beyond the tech-
nical capacity of the families which were to occupy the sites. This
construction component was thus incorporated in the project, although it
was not financed by the IBRD loan.
83.       The duration of the construction period affects the relation
between direct construction and self-help. Sometimes self-help methods
take too long to be utilized for project components which must be
completed early. For the working poor, who form a significant proportion
of very poor families, spare time to construct a dwelling may be extremely
limited.  Families often need protection from rain or cold while con-
structing or improving their dwellings. In either case, some shelter is
usually required for the self-help process to get started. Additional
particular features, such as the need for earthquake resistant design in
Nicaragua and fire prevention in Indonesia, may require some degree of
direct construction. A temporary shelter or small core unit may in some
instances be required to convince families that development will in fact
take place throughout the project area, enabling them eventually to bene-
fit through neighborhood development irom each other's efforts.  Such
partial construction is generally described as "core housing." It is
built as far as possible of traditiona.l materials, but in some cases more
modern construction methods are required for structural reasons.
Reinforced concrete, for example, was necessary to ensure resistance to
earthquakes in the Nicaragua project.
8h.       By recognizing the limits as well as the advantages of self-
help, and encouraging the provision of items that self-help can provide
only with difficulty, the Bank Group can assist small contractors and
other snall businessmen who are often the most efficient suppliers of



- 28 -
the materials and services required. Such action can often strengthen
the private housing supply capabi:Lity, and provide a promising possi-
bility for extending the Bank Groupt s traditional support for industry
by stimulating the supply of materials for self-help construction.
The Target Groups
85.       Although the target groups for all the site and services and
squatter housing upgrading projects have been low income families by
the standards of the countries concerned, in absolute terms they have
represented a considerable range of low incmes. For example, the
minimum standard sites for the lowest income groups in the Jamaica project
were too costly to be afforded by the highest income group in the Botswana
project.  The ensuing diversity in design standards has been accompanied
by a complementary range of per capita and unit project costs.  Thus,, the
total site and services costs have ranged from $15 peir project resident
in Senegal 1/ to $340 in Jamaica.
86.       Land, site preparation, on-site infrastructure (including water,
sewerage, roads and drainage, security lighting and sometimes electricity)
and plot developnent (including core housing and materials loans for
dwelling construction) are the four major elements in site and services
projects.  The weight of these items varies greatly between and within
projects. Generalizations are also difficult because a value has not
always been estimated for land already owned by the government. (An
effort has, however, been made to assess land costs in terms of foregone
opportunities in the cost-benefit framework of project evaluation.) Both
the wide variations among projects and an approximately equal distribution
over all projects between (i) land plus site preparation, (ii) on-site
infrastructure and (iii) plot development are illustrated in Table IV.2.
Table IV.2: MAJOR COST CONPONENTS IN SITE AND SERVICES PROJECTS
(Percent of Total Site Cost)
Unweighted
Cost Item                          Mean             Range
Land                                21             ih - 28
Site Preparation                    13              0 - 19 1/
On-Site Infrastructure              33             16 - 77  -
Plot Development                    33              4 - 62 2/
1/ In one case 61 percent.
2/ In four cases 0.
Source: Annex B Table 11.
1/  For the Thies component of the project.  The range for Dakar is $39 to
$120.



- 29 -
Financial Arrangements for Projects
87.       Financial arrangements for projects vary widely.  The costs
of water and other utilities are sometimes recovered through user charges,
but more often are grouped with other charges in project rental payments.
The experience of other organizations with projects of this type suggests
that payment delinquencies are relatively low, and therefore manageable,
when the projects are appropriately located, standards (and therefore
costs) are commensurate with incomes, mad management is efficient. There
have been two modifications to the full cost recovery approach. It is
accepted practice that costs of communi'ty facilities such as schools and
health clinics, typically financed out of general revenues, are not
charged directly to project occupants. Secondly, if calculations of
social costs and benefits so indicate, there may be implicit or explicit
"subsidies" in the treatment of land in central locations where the
target occupants are unable to afford such land at full market value.
The occupants thereby gain security of tenure without full, and sometimes
without any, payment. Beyond this, subsidies would generally be counter-
productive because they would make it impossible to replicate the project
on a broad scale.
Financial Arrangements for Occupants
88.       Occupants of site and services plots also need access to credit.
They generally buy their plots over time, at interest rates ranging from
7 to 14 percent, with repayment periods of 15 to 25 years. Although down-
payments are generally 15 to 30 percent, no downpayment at all is required
of the lowest 30 percent of families in the Nicaragua project. In Korea,
the downpayment is 20 percent of all land and development costs for the
lower incne families, and 50 percent for the relatively high income
families.  In the Jamaica project, downpayments are fed into a revolving
fund used for construction materials loans, and in the El Salvador project
they can be met in cash or through labor credits earned in mutual-help
activities.
89.       Finance is provided by existing institutions if they are able to
service or can adapt to servicing, such small loans. If this is not
possible -- and this is usually true of loans for construction materials
financial arrangements must be provided by the project.
Housing Finance
90.       The difficulty of financing low income families is a particu-
larly acute aspect of the general lack of housing finance institutions in
developing countries. IFC has been taking modest steps toward assisting
the development of housing finance institutions.  Two equity participations,
of 20 percent each, have so far been approved. The first was with
DAVIVIENDA, a part of the Colombian system (CAV) patterned after savings
and loan associations or savings banks as they are cammonly known in
developed countries. The second was with BNE, a mortgage bank in Lebanon



- 30 -
whose principal functions will be to mobilize domestic medium and long-
term resources and to provide long-term mortgage financing.
The Institutional Framework
91.       A country's overall housing and urban development policy
framework and the institutional structure within which housing policy
is carried out greatly influence -the success of a project. Grass roots
ccammnity organizations are no less important. A variety of arrangements
have been utilized to date.  Projects in Senegal, Nicaragua, Jamaica and
Tpnzania are to be implemented by national agencies, whereas those in
India, Botswana and Zambia are the responsibility of' metropolitan govern-
ments. In the Indonesia project, responsibility is to be divided between
national and local authorities. The El Salvador project is to be under-
taken by the Fundacion Salvadorena de Desarrollo y Vivienda Minima (FSVM),
a private, non-profit foundation whose basic objective is to improve the
living conditions of low-income people, especially those living in
squatter settlements. Indeed, it was its success in doing so on a small
scale which led the Bank Group to assist the FSVM to operate on a larger
scale.
92.       The institutions required to implement projects may not exist
at all, and if they do they are deficient in many respects. It is
usually necessary to identify the kernel of an institution and to help
build its management capacities through technical assistance. At the
city and national policy and planning levels the problems are similar.
Monitoring and Evaluation
93.       Monitoring and evaluation constitute an important aspect of
the learning by doing approach. This will provide data on the charac-
teristics of occupants, development of their plots and changes in aspects
of their environment over time. Anialyses of these data will be under-
taken to explain observed trends anid help assess whether the projects
meet their stated goals.  Project monitoring and evaluation will also
assess standards and locations in t1rms of how well they fit the behavioral
characteristics of target groups, so that the melding of standards and
locations with resources can be improved. A complementary research effort
to improve the data and analytical base is also underway. An evaluation
of urban income distribution in Latin America is now in progress (RPO 283,
285). Other research results with potential impact on project design
involve studies of fertility behavior, labor markets, urban land, and in-
come and consumption (RPO 203, 274, 290, 298, 299). Increasingly effective
project design and appraisal will be possible as these efforts bear fruit
and when monitoring and evaluation data from current projects begin to
record the income and consumption patterns of project residents.
The Impact of Other Bank Lending on Housing
9h.       Lending for site and services development aid squatter housing



- 31 -
upgrading constitutes only a portion of the Bank Group lending that
affects housing.  Lending for urban development, including urban trans-
port, is planned to increase more than tenfold from 1969-73 to 1974-78
(Table IV.3) and become about three percent of total Bank Group lending.
Table IV.3: IBRD/IDA LENDING FOR URBAN DEVELOPMENT
(CGostant FY 74 dollars)
Volume of
Number of     Percent of        Lending        Percent of
FY         Operations         Total        ($ million)         Total
1969-73           5             0.8                63          < 0.4
1974-78          35             3.2               675             2.7
Scurce:  "Revision of IBRD/IDA Program, FY7h-78," June 4, 1974
(R74-115).
The Bank Group also lends for public utilities, industrial estates,
tourism 1/ and ports projects in urban areas. Such investments have
an impact on housing, in some cases by competing with housing for land
and in others by increasing its value or creating a demand for housing
in a particular place. In each case in recent years the effort has
been made to relate these as well as site and services projects to each
other and to plans for the overall development of the city. Unfor-
tunately, since such plans are frequently lacking or uninformative,
assessment of the impact of urban investments on housing has so far
proven difficult.
V. DIRECTIONS FOR BANK LENDING FOR URBAN HOUSING
95.       The task of improving housing for large numbers of low income
dwellers in developing countries, and integrating their growing numbers
in productive towns and cities at rising standards of living over the
next 25 years, is clearly immense. In resource terms, the Bank Group's
1/ Recent tourism projects have provided new serviced sites, upgrading
of service levels in existing comm,nities and advice on land manage-
ment policies. IBRD, Appraisal cf the Puerto Plata Tourism ProJect,
Dominican Republic (October 174I); A  praisal of a Tourism Infra-
structure Project, Tunisia (May 1972).  Additional projects utilizing
cluster development to conserve on beach frontage are planned.



32 -
contribution to the improvement of housing conditions can only be
limited. However, the Bank Group is facing growing demands for assis-
tance for housing as urban develolment is becoming recognized as an
urgent task, and such demands are likely to increase fuirther as city
growth continues. Experience in lending for shelter projects is short,
but it already indicates that even limited involvement can have a
significant impact in helping member countries find approaches to
housing for the poor which are consonant with efficient urban growth.
A continuing review of the Bank Group's assistance for housing, with
particular attention to future needs, is therefore essential.
The Lending Framework
96.       Bank Group assistance for urban housing is only meaningful in
the context of an urban development; program. Government policies and
investment priorities have to be sLpportive of efforts to improve the
employment prospects and living conditions of the poor. A single set
of requirements for Bank Group involvement cannot be adopted because
the circumstances of urban development and a governmenit's freedom to
act vary widely.  Some broad indications of government priorities may
however be considered as indicative of a commitment to improve housing
for the poor:
(a) The Bank Group should intervene only if the government
has a commitment to help the urban poor. This should be reflected in
a willingness to retain and upgrade existing low-income housing stock
in slums and squatter areas, and to adopt realistic standards to bring
new housing within the financial reach of the poorer income groups.
(b) The government should be cognizant of the need for improved
land management policies.  To this end, it should be committed to clari-
fying land tenure and the means of obtaining security of tenure,
particularly for the poor; improving the means of obtainLng land for
public sector use and mechanisms for resolving disputes in such instances;
and reducing the betterment values vesting in private la;id holdings by
full cost pricing of services, land taxation and direct -oa'blic sector
involvement in the land market.  Planning for future urban. growth in
relation to national development is .an important aspect o-f land manage-
ment.
(c) There should be an understanding of present market
impeerfections, particularly those caused by current govermment policies,
and ,^n indicaticna of willingness to reduce them over tire.
SguatJter Upgrading and Site and Services Projects
97.       The analysis of the housing si;-uation, and of the Bank Group's
experience, both suggest that the upgrading of squatter housing to
ensure the retention and improvement of existing housing stock, and the
provis on of serviced sites on which lower income faim,ies may construct
new hc-'_-ng for themselves by self-heLp methods, are prime lending



- 33 -
instruments for more equitable urban delvelopment. Typically this type
of housing project involves an examination of housing problems, land
use and urban development for a city as a whole and in the context of
a country's urban system to ensure efficient and equitable development.
Technical assistance for urban policy formulation and execution, and
to the entity executing the project, is also a very important part of
this approach. As paragraphs 75 to 92 of this paper indicate, this
lending approach includes a broad range of activities: land develop-
ment, land servicing, the provision of communal physical and social
facilities, lending to project beneficiaries, and core housing con-
struction.
98.       The accumulation of experience in shelter projects has pointed
up the complementarity of formal and self-help construction methods in
providing housing for the poor. Thus, although the emphasis in squatter
upgrading and site and services projects is on self-help construction
methods to take advantage of the availability of otherwise unutilized
labor, all such projects also include scme measure of formal construction.
In squatter housing upgrading projects some relatively high density con-
struction may be necessary to replace the minimum amount of housing
removed during the physical upgrading process. In site and services
projects, the appropriate amount of formal construction varies with the
project. Core housing construction may be necessary to provide for such
technically difficult components as pluambing or heating ducts, and shock
resistant buildings in earthquake prones areas. Demonstration construction
is sometimes required to provide training for the self-help process, or
indeed to persuade potential occupants that a project will get off the
ground. In some countries climate may necessitate core construction to
give occupants adequate shelter while they complete their dwelling.
99.       The continuing attempts to reduce costs to meet the capacity
of the poor to pay highlight the importance of standards. For example,
costs can usually be lowered substantially by reducing living space within
a dwelling unit and the land utilized by each unit. Single-storey de-
tached, and even semi-detached dwellings, may imply a higher level of land
utilization than either poor families or rapidly growing, low-income
cities can afford, even at the present city periphery.  Row houses, and
in some cireumstances two-storey row houses, may provide a cheaper form
of housing for low-income groups. They are usually the prevalent form
of housing in areas where the private market operates well enough to
reach down to low-income groups. Such housing would generally require
some formal construction, though finishing could be left to self-help.
Selective Housing Construction
100.      Past views of housing as an "unproductive" sector have tended
to constrain the evaluation of the merits of formal housing construction.
Squatter housing upgrading and site and services projects cannot always
deal with the full range of housing problems confronted in the cities of
developing countries. Low income housing must be so located as to provide



-- 34 -
access to employment, including part-time or secondary jobs, for several
family members if it is not to consign the low income groups to perpetual
poverty.  Squatter area upgrading is limited to imprcving existing housing.
Site and services projects are more oriented toward handling the expan-
sion of population, but they could in some circumstances involve such high
land or transport costs that denser housing would be less costly in private
and social terms.
101.      Finding the most appropriate housing solutions for low-income
families, and for efficient urban development, requires consideration of
the trade-offs between the costs of transport and housing (including land
and utilities).  Low-income familieis' ability to pay for housing and
transport is severely limited. In relatively small cities or where trans-
port is, or can be made, efficient and cheap, it is frequently appropriate
to develop low cost land on or near the periphery using the site and
services approach. In larger cities, more central, or intermediate,
locations may be needed to provide access to earning opportunities for
several family members. To bring the costs of such housing within reach
of low-income groups would require ihigher density housing. Where land
values at intermediate locations are relatively low and under-employed
labor can be mobilized at low opportunity costs, the construction of two-
storey row houses using a maximum of self-help may be the preferred
solution.  In other large-city situations, a conjunctiorn of land, con-
struction and transport costs, together with limitations on moving employ-
ment opportunities to the periphery, may require the construction of
multi-storied buildings of various heights to economize on the use of
high priced land.  These could be four to six-storey walk-ups, or, if
costs and social attitudes permit, high rise buildings.
102.      The Hong Kong experience suggests that such buildings can
initially have very low space standards with communal pluzmbing facilities,
but with provisicn for conversion to higher standards as the occupants'
incomes rise. Access to employment for several family members sometimes
makes rental or mortgage payments possible for relativelyi high standard
housing, whereas a family living on the periphery and dependent on fewer,
or even a single income earner, would be more likely to have to rely on
self-help, usually for a lower standard dwelling. In these clrcumstances
high density dwellings may be a preferred and socially efficient housing
solution for poor families. The Bank Group should have the flexibility
to respond to such situations in the context of an overall approach to
a city's housing and urban development problems.
103.      It is envisaged that medium, and high rise housing would be
undertaken only on a very selective and experimental basis and only where
the target group consists of low-income earners. The emphasis on squatter
upgrading and site and services would be retained so that lending for
"conventional" housing would only account for a small part of shelter
related lending. It is not envisaged that the Bank Group should become
-irvolved in financing mass housing conastruction; should greater partici--
-at-ior b9 contemplated the issue would be brought before the Board.



- 35 -
104.      Precise characteristics of lending by types of cities cannot
be determined a priori. However, the type of Bank Group assistance that
is appropriate will be influenced by the income level of a country, and
by particular characteristics of the city, especially its size. In the
poorest countries, there may be a gap between the cost of even a very
low standard conventional housing unit and the amount of money a low-
income urban family is able to spend on housing.  In most of these
countries Bank Group involvement should concentrate on squatter area up-
grading, very low standard serviced sites, and possibly on high density
low standard dwelling units; that is, on those housing solutions that
are within, or nearly within, the resoTLrce constraints of poor households.
In higher income countries, where government and private resources for
housing are greater, direct financial and technical assistance for con-
ventional housing in support of good government policies should not be
ruled out. A key consideration should be that the solutions being
applied to the housing problem are within the resource constraint of the
government. For example, there should be no objection, in principle, to
subsidies for low-income housing, if it can be shown that other equally
urgent needs are being met, and that the financial resources for these
subsidies will be available for the bulk of the poor.
Housing Finance
105.      Mobilizing financial resources for housing forms part of the
overall endeavor of increasing savings and improving their allocation
through financial intermediation. The Bank Group has a particular role
to play in responding to member countries' requests for assistance in
the building of financial institutions. However, the Bank Group's
experience with institutions providing housing mortgages is very limited
and it is clear from the record of other international assistance agencies
that such assistance is fraught with many dangers. In the past, the
failure to evaluate housing finance institutions in the context of housing
markets and the financial environment has led to inadvertent heavy public
and sometimes foreign subsidies for housing for middle and upper income
groups. Such subsidies are certainly not unique. Outdated financial
policies frequently result in implicit or explicit subsidies to middle
and upper incame groups through assistance to the formal financial sector,
but they are particularly reprehensible in housing. The external bene-
fits in the form of employment during construction are relatively short
run, while the long term housing bias in favor of the relatively rich
is exacerbated. The Bank Group's contribution to housing finance there-
fore has to be carefully formulated and executed if it is to avoid such
pitfalls.
106.      Housing Finance for Middle Income Groups.  The improved func-
tioning of capital markets is an important condition for overall develop-
ment. The lack of appropriate long-term financial institutions tends to
inhibit savings and distorts the allocation of such investment funds as
are available in many developing countries. The lack of mortgage
institutions which could provide funds for middle income housing is often



36 -
a serious market imperfection, unnecessarily limiting housing construction
with its employment and multiplier effects and causing middle income
groups to "raid" lower income housing when it is provided. The provision
of "seed capital" for housing and mortgage institutions can thus play an
important developmental role. Moreover, as such lending institutions
mature, they will be able to develop lending instruments and practices to
meet the needs of the poor. In providing such "seed capital," the strong
pressures for implicit or explicit subsidies in housing loans cannot be
ignored. Housing institutions which do not lend at subsidized rates
should be given preference in the Bank Group's operations; in other cases,
the provision of "seed capital" should lead to the elimination of interest
subsidy over time.
107.      Mortgage Insurance. Mortgage insurance is an additional instru-
ment for stimulating housing finance. Such schemes decrease the downi-
payment required for individual home purchases by insuring mortgage
lenders for a certain percentage of the loan and enabling them to extend
loans covering a higher proportion of the cost of the dwelling, and thus
to reach lower income groups. The Benk Group should therefore provide
"seed capital" for mortgage insurance institutions where appropriate.
108.      Housing Finance for Low-Income Groups. Given the experience
of past attempts to provide housing finance for low-income groups, the
Bank Group should limit its endeavors to provide loans to the poor to
instances in which a supply of suitable low cost housing is being expanded.
The continuation and extension of housing finance for project beneficiaries
directly through a housing project organization is an efficient way of
financing housing for the poor. Where appropriate housing finance in-
stitutions already exist in countries in which Bank Group projects for the
poor are under way, loans to such institutions could assist them to lend
in the very small amounts needed for plot mortgages and building materials
purchase by the project beneficiaries. It is recognized that this is a
difficult area and a substantial volume of lending cannot be expected
until the supply of housing the poor can afford is increased.
Coordination of Bank Group Lending for Housing and Urban Development
109.      The Bank Group's concern vith preserving and improving the
present housing stock cannot be confined to projects specifically con-
cerned with housing. Though the Banlk Group has seldom encountered the
problem to date, individual country experience indicates that port,
industrial and other projects sometimes create a land use conflict with
existing housing. In the past, existing housing has sometimes received
little consideration, particularly if it was "illegal" or "unofficial."
The high costs associated with destroying such housing stock, as well
as the additional housing demand created by the project, ought to be
taken into account in a full cost evaluation of all Bank Group projects
in urban areas. High density development may sometimes be the best
solution, acccmuodating both former occupants and new workers. At other



- 37 -
times, an alternate site for the project, or alternate housing for the
area's residents, may provide better solutions.
110.      The Bank Graup is beginning to coordinate its lending activi-
ties in public utilities, transport and shelter, as well as with other
sectors such as industry and tourism, as a means of assisting countries
with integrated urban planning. Further improvements require the
encouragement in all lending operations of the systematic collection of
information and data needed for the planning process, the coordination
of urban development policies at the local level, and improved pricing
and financial management rules for city governments and major public
utilities.  The prospects for lending for the coordinated development of
newly urbanizing areas on a large scale are a promising future avenue of
development. However, it takes some time for most city and country
governments to establish the planning aid policy base for such develop-
ment, and the Bank Group itself must also take time to develop further
its capacity to generate a coordinated response.






ANNEX A
Page 1
INTERNATIONAL ASSISTANCE IN HOUSING
A.   The United Nations
1.        United Nations involvement in housing and urban development
has focused primarily on assisting member countries to establish the
planning and legislative framework for efficient and equitable urban,
growth. This involvement has taken different forms, including research,
training, and pre-investment studies. Most of these activities are co-
ordinated by the UN Centre for Housing, Building and Planning, with the
cooperation of the regional economic conmissions. The United Nations
Development Programme (UNDP) has been largely responsible for programming
and financing technical assistance and pre-investment planning studies.
WHO, FAO, and ILO have also participated in certain situations. The UN
financial commitment to housing and urban development grew from $1.35
million in 1963 to $3.86 million by 1970. By June 1973 the UNDP had 80
active projects in 60 different developing countries.
2.        In view of limited UN resources and the magnitude of the
problem, the Committee on Housing, Building and Planning of the UN
Economic and Social Council has identified four priority areas for con-
centration and urgent action:
(i)    To encourage and assiast countries to base their
plans for physical development on social as well
as economic considerations;
(ii)   To encourage and assist countries in adopting
the necessary legislative framework to provide
land tenure that will permit the urban poor to
build improvised shelters on their own land with
their own efforts;
(iii)  To encourage governments to provide the essential
urban infrastructure in terms of public utilities
in parts of cities occupied by migrants and other
very low-income families;
(iv)   To help governments develop their own indigenous
institutions and local skills.
These efforts offer the hope of long-term improvements in the living
conditions of the poor, but seldom lead to tangible solutions to
immediate problema. Frequently, there are inadequate local resources
to implement the recomendations of the studies. These problems have
led to discussions, within the UN family, concerning human settlements
and to the creaticn on January 1, 1975 of The International Habitat and
Human Settlements Foundation, which comld provide some of the resources
needed to translate studies and plans into action.



A&N&E A
Page 2
B. Multi-Lateral Institutions 2!
a.   Inter-American Development Bank (IDB)
3.        Since its establishment in 1960, IDB has made some 51 loans
amounting to $416 million for urban development projects.  The projects
will include some 361,000 housing units, of which scme 341,000 had been
completed by January 1, 1974. Th:is lending represents seven percent of
total IDB lending of $6.3 billion from 1961 to 1973. 2/ Despite this
substantial support of housing in the past, the IDB has more recently
moved away from housing per se toward a more comprehesnsive approach to
urban development. Greater attention is now devoted to combining housing
with water supply and sewerage investments. In addition, IDB is seeking
to direct its resources to services for low income groups. This initiative
is a departure from the past, when the majority of "low cost" units lwere
in fact too expensive for low-income groups. Table A.2 presents the
costs of these units.
4.        In order to integrate its efforts within a broader urban frame-
work while helping low-income groups, IDB has now adopted the following
criteria for urban development financing: (i) integration within
national economic and social development.plans, (ii) preferential treat-
ment for programs assisting low-income groups, (iii) institution-building,
and (iv) substantial local financing. Projects include (i) rehabilitation
of housing, (ii) community facilities associated with housing, (iii)
development of the construction industry, and (iv) research on design and
materials. Programs are concentrated in areas of most rapid population
growth, centers of greatest economy activity, and secondary cities. These
new approaches are a result of IDB re-evaluation of its efforts in tiLs
field.
b.   Organization of American States (OAS)
The OAS, through its secretariat, the Pan Amzerican Union, is
involved in housing largely through research, training, aid technical
assistance. An Urban Affairs Unit ithin the Pan American Union provides
technical assistance to member states and also undertakes research. This
unit has grown significantly in recent years, but remalns relatively
small in contrast to other agencies. A Division of Social Affairs also
is concerned with housing in Latin America. The CentroD Inter-Americano
de Vivienda y Planeamiento in Bogota, a part of the Pai American Union,
provides training and educational assistance for housing.
1/  The African Development Bank and Asian Development Bank have not so
far included housing and human settlements directly in their activi.ties.
2/  Intar-American Development Bank, Annual Report, 1973, pp 25-28.



ANNEX A
Page 3
C. Bi-Lateral Institutians
a. U.S. Agency for International Development (AID)
6.        AID has approached the shelter problem largely through housing
finance in the form of grants, loans, and housing (mortgage) guaranties,
and technical assistance. Analysis of AID involvement in urban develop-
ment 1/ frco 1949 to 1971 shows some 154 technical assistance projects
costing $67 million and 115 capital assistance grant and loan projects
costing $h08 million. In addition, scae 6h0 "extra-urban" capital
assistance projects have had impacts on urban areas. Of these totals,
21 percent of the technical assistance, amounting to almost $14 million,
was specifically devoted to housing, rhile slightly more than half the
capital assistance, some $205 million, was invested in housing. 2/ In
addition to these efforts, there have been substantial allocations to
housing through the Housing Investment Guaranty Program, created in 1963,
and now expanded to a statutory ceilinig of $780 million. By June 1973,
some $472 million had been committed through this program. 3/ In recent
years the impact of these large-scale efforts has been the subject of
much critical analysis within AID. A 1973 review noted:
Underlying this rather broad spectrum of involvement
is the fact that most of this activity has been ad hoc
in nature.  No framework has been provided or employed
to take stock of the urban impact of these projects.
Project activities generally have reflected subsectoral
considerations, such as housing, various physical facili-
ties and services, and public administration. No clear
linkages are evident between projects. 4/
7.        This internal view has been cmplemented externally by analyses
of the size and type of AID commitments in housing. Table A.3 presents
these figures for Latin American countries up to 1971. The costs of
these houses make them affordable only to middle and upper income groups.
1/ Includes housing, education, planning, urban/community development,
urban transport, services and municipal administration.
2/ U.S. Agency for International Deveilopment, Guidance Statement on
Urban Development, June 15, 1973.
3/ $50 million to Africa, $85 million to Asia, and $337 million to
Latin America.
4/ U.S. Agency for International Development, op.cit., p.9.



ANNEX A
Page 4
This pattern has been repeated in Senegal and the Ivory Coast, where
the Patte d'Oie and Fairmont projects respectively provide very
expensive housing suitable only for the wealthier famiulies in the
capital cities. While AID efforts in Latin America had produced some
111,000 housing units by 1971, their costs have excluded the income
groups most in need of improved h,ousing.
b.   Caisse Centrale de Cooparation Economigue (France)
8.        The Caisse Centrale de Cooperation Economique acts as dis--
bursing agent for the three assistance funds through which the greatest
share of French assistance is channeled. One fund (FAC) serves the
countries of sub-Saharan Africa a,nd Madagascar, the other two serve
overseas departments (FIDOM) or te,rritories (FIDES). In addition, SCET-
International provides technical assistance to projects which it
finances indirectly through the CaLisse. Most of the housing lending
activities have taken place through FAC at the rate of approximately
US$ 25 million per year; two-thirds of this assistance going to housing
corporations and one-third to public housing authorities (O.H.L.M.) which
seek to assist middle and low income groups.
c.   Commonwealth Development Corporation (CDC)
9.        The third major bi-lateral donor involved in housing is the
Commonwealth Development Corporation. Considering the great demand for
inexpensive housing throughout the developing world, CDC has sought -to
use its relatively limited financial resources in this sector to attract
finance from other sources.  These efforts have met with some success
since, excluding loans totalling approximately $25 million to govermnents
and housing authorities for low cost housing, CDC's commitments of
approximately $148 million, througl the end of 1973, to mortgage finance
companies and housing estate developments were matcheid by commitments of
approximately $246 million from other sources. 1/ In addition, there were
some 22 housing projects under direct CDC management and another 10
projects now turned over to local management. Most of these commitments
have provided seed capital and loais to housing corporations and loca1
authorities. Over 20 mortgage finance companies have been created in
Africa, East Asia, and the CaribbeEn. Technical assistance and town-
planning studies have also been supported by CDC, but on a much smaller
-scale.
D.  Private Organizations
a.   Foundation for Cooperative Housing (FCH)
10.       The Foundation for Cooperative Housing, created in the United
1/  Camonwealth Development Corporation, Report and Accounts 1973
London, 1974., p 11.  Sterling figures have been converted at $2.6(/i,.



ANNEX A
Pa-ge 5
States in 1950, has worked closely with AID, developing the latter's
institution-building program. In 1962, FCH was asked to survey the
potential for cooperative housing in Latin America.  This work has led
to extensive FCH technical assistance and the creation of many similar
organizations in Latin America and the Caribbean. Local housing insti-
tutions such as FUNDAVICO in Panama, FERCOVIL in Honduras, the Mutual
Housing Service in Jamaica, and PROVIGCOOP in Colombia were created by
FCH efforts. Pilot projects have also been established in most Latin
American countries.  Demonstration efforts, with FCH assistance, have
been funded by local governments, AII) direct loans, or private US funds
through the Housing Investment Guararnty Program. In most cases, unit
costs have been below $1,000.  In ad(ition to country-specific activities,
FCH has also established an international training program and hemisphere-
wide seminars on housing.
b.   Pan American Development Foundation (PADF)
11.       Another private institution which has provided funds for housing
is the Pan American Development Foundation. PADF, created in 1964.,
administers a National Development Foundation Revolving Loan Fund Program
in 13 countries. Combining public and private funds, the PADF supports
the creation of national development foundations which provide credit to
low income groups. By 1972, the PADF-supported institutions had granted
some 3,932 loans, valued at nearly $4h million, which involved some
320,000 people in projects. 1/ Some of these projects included low cost
housing.  One of these foundations, the Dominican Development Foundation,
established in 1965, made some 2,400 loans, valued at $1.7 million,
benefitting 150,000 people. These loans averaged $718.75. This organi-
zation, which was invited to the Junie 1974 OEGD seminar on Development
Projects Designed to Reach the Lowest Income Groups, has shown that
private organizations can reach the poor.
1/ PADF, Annual Report 1972, (Washington, 1973)



AkNNiX A
Page 6
Table A.1:  BTIATERAL ASSISTANCE IN INTEPNATIONAL PROGRALMS FOFR HOUSING,
BUILDING AND PLANNING FOR SELECTED COUNTRIES
Assistance as Percentage of
the Net Flow of Official
Development Assistance to
Less Developed Countries and
Multi-Lateral Agencies
Donor Country            2970-71),                    (1970-71)
(U $'000,,l                     W%
Australia                  3,783                          0.9
Austria                       76                          0.03
Belgium                    6,678                          2.
Canada                     n.a.                           n.a.
Denmark                    1,219                          0.9
Finland                    1,295                          n.a.
France                   126,369 1'                       n.a.
Italy                      n.a.                           n.a.
Japan                        113                          0.01
Netherlands                2,150                          0.5
Norway                    1i,095                          1 .4
United Kingdom            13,000                          1.3
United States            162,182                          2.5
1/ 1968-69.
Sources:  Information submitted by the governments of the donor countries,
and OW&D Development Comperation - 1972 Review; 1972.
United Nations Technical Cooperation in Housing  Building and
Planning; Funds Expe_lI for International Programmes, 19T7T971
(E/C.6/130) and 1968-1909 (F/C.6/110), New York.



ANNEX A
Page 7
Table A. 2:   SUPIPOR  OF THE INTER-IMERTCAN DEVELOPIENT
BATK FOR HOUSING
Average         Number of                   Total
Country                Loan Value                House Price      Dwellings Built        Investment to 1970
Argentina           $(11,000,000 est)              $8,660              3,0214
$30,000,000                    4,9314            15,200
$(41,000,000 est)
Bolivia                3,850,000                    1,923              3,394
4,000,000                    2,341              3,934
$_ 7,950,000
Brazil                 3,850,000                    1,443              4,850
$(20,000,000 est)               1,818             26,389
$(23,850,000 est)
Colc-mbia             15,200,000                    2,271             13,993
7,500,000                    2,074-             8,534
2,500,000                    3,288              7,603
$ 25,200,000
Chile                  4,000,000                    3,360              4,051
2,000,000                    2,1497             3,087
1,268,000                    2,297              1,084
10,000,000                    2,2140            10,7114
$ 17,268,000
Costa Rica             3,500,000                    2,934              2,950
3,600,0co                    2,339              2,816
$ 7,100,000
Dominican Republic    3,500,000                     1,2132             3,805                     :  00-
1,735,000                    1,282                960
$ 5,235,000
Ecuador               10,600,000                    2,728              6,500
$ 10,600,000
E1 Salvador            6,100,000                    2,221              5,060              - i
6,000,000                    2,562              5,850
$ 12,100,000
Guatemala              5,300,000                    2,014i             5,2602
$  5,300,000
lo~-anU                1,000 1,20                   2,0CC                736
s 1,  C,' (000
.-x10: _, )  :2e.             <, .iO            23,000
i.    I)
Jicaragua             5,200,000                                        2,958
5,250,000                    2,650              3,774
$ 10,1450,000
Panama                 7,600,000                    3,481              3,000                --
$ (8,000,000 est)               3,684              4,533
$(15,000,000 est)
Paraguay               3,400,000                    2,316              2,600                            est)
$ 3,1400,000
Peru                  22,800,000                    1,033             47,124
1,000,000                    4,0Doo               420
1,200,000                    4,352              4,650
$ 25,000,000
Uruguay                8,ooo,ooo                    6,000               4,100
$ 8,000,000
V-enezueia            12,000,000                    1,500             35,500
10,000,000                    2,666              5,600
10,0oo,COC                    1,740             18,000
$ 32,000,000
Total                                               2,292            295,053              $270,103,000
Source:  Foundation for Cooperative .ousing;  Cooperative Housing and the Minimum Shelter Approach
in Latin America, volume II



ANNEX A
Page 8
Table A.3:  SUPPORT OF THE JU.S. AGE-CY FOR INTERNATIONAL DETOPMENT
FOR HOU3ING
By              By             Average    Number of         Total
Congressional    Investment         House      Dwellings      Investment
Counlty          By Grant           Loan            Guaranty          Price       Built         to 1971
Argentina        $   498,ooo
$ 2,000,000                       $ 2,460         814
$ 27,721,394        7,334      2,820
$ 28,219,394
Bolivia                               700,000                          7,500         -
1,780,000           -             5,500         400
1,000,000           _-                          -
500,000           -              -            -
2,150,000       7,500         149
5,350,000
Brazil              5,000,000                                           -            -
5,000,000
Chile              5,000,000
5,000,000                         4,300       1,160
8,700,000                          -            -
4,69o,0oo       6,267         929
23,390,00
Colombia            2,000,000                                          5,000         952
48o,000                                          1,010         475
12,000,000                           960      12,472
7,500,000                         4,485       1,675
26,866,o8)4      8,071       4,102
h8,8h6,08h
Costa Rica          2,000,000                                          1,250       2,023
1,000,000                                           _            _
l,541,729        3,860        371
4,,541,729
Do ni½can          9. 000, oo
2,  00,00O0D                      5,0C0         350
5, oc0,000                         -            -
7,161,726       8,6?3         867
16 ! 26S1 726
Ecuador               225,000                                          2,250         195
5,000,000                         3,600       3,000
1,859,766        5,600        264
6,084,766
El Salvador                         3,100,000                           5,000        700
3,000,000                          -            -
9,5131,681        8,567       932
15,631,681
Guatemala           3,800,000
6,853,675        6,339      1,236
lo 653,675
Guyana                                                1,398,245         5,142        413
1,398,245
Honduras                               400,000                          2,500        160
2,000,000                           -           -
L,566,528        5,374      1,095
6,966.528
Jamaica               295,000                                           1,280        230
2,800,000                          4,630        605
10,000,000                           9,978     1,780
10,203,008         7,025     1,194
20,498,008



ANNEX A
Page 9
Table A.3: (Continued)
By            By         Average         Number of        Total
Congressional   Investment    House          Dwellings      Investment
Country         Bv Grant           Loan          Guaranty      Price           Built         to 1971
MIexico                          20,000,000                   2,600            7,700
10,760,032    5,537           3,057
$ 30,760,032
Nicaragua     $  450,000
3,700,000                 2,230            1,443
9,174,914    6,603           1,120
13,324,914
Pananaa           250,000                                     1,547              275
90,000                                    1,465            2,500
2,100,000                  -                 -
3,000,000 o                                  _
2,500,000                 5,ooo              695
3,500,000                 3,650              959
15,000,000                 2,500           15,433
$,549,894    7,122             553
30,094,894
Peru              500,000 
143,000                                      -                 72
970,000                                      -                419
7,500,000                 4,200            1,785
3,000,000                 5,000              200
6,ooo,ooo                 6,ooo            1,000
21,623,876    5,700           3,395
37,736,876
TJruguay        4,200,000
6,0oo,ooo                 8,500              706
10,200,000
Venezuela                          5,O00,O00                  3,600            2,810
o,o000,000                10,000            5,256
30,000,000                 4,000           10,839
36,749,361    9,734           3,011
81,799,361
Caribbean
Development                       10,0C,O000                  4,545            3,2 -
Bank                                                                                          10,000,000
Central
American Bank                         10,000                  6,000            1,655
for Economic                                     3,700,000    5,750               39
Integration                                                                                   13,700,000
TOTAL     $26,901,000       $211,100,000  $1i9,061,913   $4,309          111,095        $437,062,913
Source:  Foundation for Cooperative Housing;  Cooperative Housing and the Pinimun Shelter Approach in
Latin America, volume II.



ANNEX B
Page 1
HOUSING 51ATISTICS
Table 1 :    Population Growth and Housing Indicators for Selected Cities
Table 2 :    Cost of Residential Constnrction for Lowi and Medium Denisity
Housing in Selected Developing Countries
Table 3 :    Cost of Basic Construction, Land Servicing and Raw Land as
Percentage of Total Housing Cost for Lor and Moderate
Income Housing, Selected Cities
Table 4:      Estimates of the Monthly Household IncorrLe Required to
Purchase the Existing Cheapest Ccmplete Housing Unit and
the Percentage of Households Unable to Afford It,
Selected Cities
Table 5 :    Reduction of Housing Cost and the Percentage of Households
that can be Served., Selected Cities
Table 6 :    Estimates of Cost (US$, 1970 Prices) of Housing Units of
Various Standards and Locations and Percentage of House-
holds Unable to Afforel Them, Selected Cities
Table 7 :    Percent of Households Unable to Afford C1heapest Dwelling
at Various Assumed Space Standards, Selected Cities
Table 8 :    Percent of Hoaseholds Unable to Afford Cheapest Dwelling
at Assumed Iow Space Standard, Selected Cities
Table 9 :    Effect of Cost Changes on Percent of Households Unable to
Afford Cheapest Dwelling at Assumed Standards, Selected
Cities
Table 10:    IBRD/IDA Developrent Projects
Table 11:    Percentage Distribution of Development Costs for Site and
Services Plots in 9 Daz.  Group Projects srin percentage)
Table 12:    Urban Areas by Size Class for Groups of Developing Counttries,
1970



017          Ppo a Ion    ITIN   ncome ANSIOStuDos and IETD  IIB                                                                       ., 
of Otty  Urban  Oroorib    Popoolailon   Per       1.27 of      030        ofObn          ofRrl           a t  Gof         as P-ti of    Gouato          Rousn           aS  %a
1970)      Popultion      of City    of Coontry   Capia         aoooda         0        PopuI.lato    ,Poution          Coootr           Ico-nr          Psoatty      Coaditi-o  S        city
Country                        City               (ODo       of lonotry   1960-1970        1970)       (1 970)   ±0 Coototy j eo-try   of Cootry   of C.,-ootr              GDP             GDlF           of    ~     ± Cityoo try5   PPopatoion
Rslati-lu in06 Icom            Veoss...                     Plrond                  72?             10          53              76          9os        I9        5,7oH,         4 .694 81    466-1  i         4.32             lt74         1.,186/ft2      ---            hO  (1969)
___________________  Psoosasla         Osraoss                2,~~~ ~       ~     ~     ~~~293  32  473   76      1    1          97         .7E3          hP. I        ..1              6.3             1976                                         704  (1969)
V...uol                     Ba,0590i                                 h           1              76          960        ±7.7       .5240U 9       1±94H        .1,i19           4 .32                           ---7h---h   (±99
Voaosooli            ~~~~Ciodad Qaos           13             2          3 9  .I         7            6         17.7       57o4o a      .hp    .lp0                      3              17.4            ---                              199
Psoana          Poosona City              609~~~1,111   62                                      0341,                 .369           .604- .40                                     23.96          197/Pan2    38,3 (1960)    17  (1930)
Chile.                       s-ottaoo               2,623           38           3,1            74          720        17.9?      .41666619     .h0330        .4163 it         2.92            16.79                      16.7il   (1970)    25  (±66)
Hong K00g                    foog fug               3,770           97           2 9           10           170        ±.7        .130          .30H9 0                                                          -          _-7-           16  (1969)
Mooioo                      Me-i- City              3,026           13                                       70         9.7       .760 .        6687H         .7±50                               -             -           76(90          16(p
L.bno                       Bsirut                    700           61            .              1          790         9.        .5175            --           --              - ---                          --           -                 .5(1970)
singapor                     siogapo                2,072          100           2.6           110          920]        9.7          -----                      -----                                                                      15   ±9,70)
Middle Ononsa                   Punti.                      lu-k                      279           27           66'?/          6O          10         16.3       .8681H          --                            ---                                         ---            h8  (1969)
Iooy  ostAidu                                       51.376          66             7             9           701    16            .3923           ---           --             2.1109                        9,031/P.'   58.9 (960)    30  (1970)
Korsa           Inoal                  7~~~~     ~ ~      ~ ~ ~          ~~,776  66  6:  39    17         16.3       .3923 P         ---           --            2.71             10.93            -         1.9(190I1(90
Korea  Pusan             1,891           i6~~~~~~~~~~~~~~~~~~~~~~~~~25                                                                                                                          8.   190        3    190
K.3.y.i.7M  .a Aia                            31            46          507             16          990        12.6       .36330       .1.793         .1988H           --               - -                                        37y  (1971(
Hondura                                                             35rniu5p 229 36                          61        io,8       .579H9    .4833U9           .66675                             ---           ---25  (1970)
Philippi..s                  Maila (Metro Area)  2,9621                          h              23          2±0        12,        .49757 7        --             -1- 8f6A.o                                               30.1 (1967)    35  (1972)
Pero           iee,o                  ~~~~~          ~         ~~~          ~     ~~2,877  [    1  466 90   ,7       .1   0          --            --            --         a      --         4,380/Eu.2    33.7 71961)    hO  (1970)
Por                         Aroqalpa                  197           28           3.9            66          690,        (.9       .571, 4E----                                                   -              -         33.7 (1961)    40  (1970))
Porn                         Olib.t.                  103           i7            .3            4           L70         8.5      _.7714E                 ---           ---                                           ---   --               7 (1920)
Orasil  Rio Re Janoiro     h,272                    [   j        F      36~        ~~~~        ~~~~     ~~~~~~~~ 6120  6.  .553462  .53270  .1,7279   --                                           2.80(969)    30   ±90
BrashB.I Oslo  rooto                                1,106             I          6 3            51.         1.0         9.        .56534i      .5327H         4 .679H1        -.-                               -          2.8 (1969)    16  7±970)
B-ail                       teotfo                  1Q,060           1             9            5           4270        9.7       .5534. 0      5.3270        .h929H9         -----                                        2.8 (1969)    70  11970)
Orasil               lraooloa-- -kig-           7  272        12                                     1.20        9.9      .7734,0       .7327H         .6729H                             ----                      2.8 (±969)    13  (1970)
Brail                                                                                                       1.20 :   5  -,    9.  .0731 0       5.327 H       .6729H           ------                                      2.8 71969)    hi  (192)
Culoabi                     Hagia                   7,463           19                   I      5           360         6.7       .5017E       .5231H         .6527H0         3.06                0.0          ---         ---             60  (1969)
Co1nita                     0oOt                     874             6          65 6           9           31.0        9.7       .5410 0          I .3181    .15727          3.6               28.0           ---          ---            30  (1969)
ColombiA                      aaoctr                  119            ±             U47 1 0       7     I   3W           1.        .75±7 0        5731 0       .4727H 8        376              20.01            -           .               9(99
fu-agda  (Mtro- ra  2,977                                           69          6 h             1           320         9.7      .6668P                                       -----                                         -29  (±967)
Inuador              Ooa~~~G,yaqul             762           31          79              99          290         . 9       :6767E0    .5071H1         .6068l               ~--~                                    39.9 (1962)    69  (1969)
Snoegal    labor                     670           66                                I    2301        6:9    I:7660PF           .. .66-- E                                                                               60 (1971)
GoalonIn                    Goutnuol City             779           67           7.0            77          360i       --           --             -             - ---                          ---. ..                    ---j3  (±971)
T-koo                       loAkra                  1,703            9           7.9     F      31          310        --           ...- ---                                  3.97             22,16          ---         29.2 (196o1     60  (±970)
lubay                        a'ana                  2,21,7          17          6.7             31           2          --           '                                        3.97             02.16           --
Noose          Tonic                    9~~         ~         ~~~~~~             ~~~21  I 7.6  91  3 100                            -----         ---           3.97             22.16                       (_970)
Ghoos                       Aoor                      867           3C          6.6             36         3-10  I67                                                                            09 ---  ---                    764-9        3  (1965)
Jordan              ~~~~~Amos                  678           69          6.7              6         270'    ---              ---                                                                        --          -                6(91
tb-rin                      Mturoia                    96           63         10.0,            90 ~        21,3      ---           ---          ---           ---                                                                         5o --7   (±970)
bronco   ~ ~ ~~~cmloshlnc                    i,4457          31           6.2            35~         230                                                                                                 ---       34 4(197±)    78  (1971)
Horonon              Ro~~~~Tbni                485           10           9.2            35          :1±                      .                                                                                       4.17)          0(191
Csosoroooo           ~~~~D.-la (Onion          07.20         70          6.1             13          130       ---3:6(171                                                                                                           .6  (1971)
T~111..1                       -6I201)----                                                                                                                                                                      ---            88   (1970)
6,661  6  1 8                                                                                                ---          ---            25~~~~~~~~~~~~~~~~~~~~~~~~~~~9  (1970)
Caoaornoo            YaoondBsb.               6583           17           2.1            13         13I0       -.            .            .45.                                                        .1 52n 
Eadda                Uslat.1   (Metro A-ns    3,726                                                                                      4 72  39  0 .32 0  .3923H 0    -                                                                 9-., -3
Idi.                         oda                   2,616                        2.2            19    I     110       517.2       .3998E FE    .673  8        .5230                              '               .         ..               1 17
India      Ourodn                   690            ~~~~       ~~~~           ~~~         ~~~~0.  3,6  19    I    11  17.2  .39998H  .1,7328  .37038          ---               ---            --          ...            19  (199±)
pokooooo             tluraoa±I..h            o,U26           27          7.6             ±6          100        17.2      (1.389 0      .6,8275H      .3395H 0-F--                                                 79.0 (1960)    23  (1970)
ufghsoiso                   Kabu,l (Metro do-)        683           36           3.2             17          90        17.                         ..-..                                                                                    ±(91
IndneIaJolo-to                                      6,176           21          6.7             ±8           60        i7o          --           .                                               .               .         ..2(92
Indnsin                    Poodbng                1,099             7          6.6            10    F       ±        1.2          --            -1---.                                          .            --           .  7(92)
Indonsalnhna                                           7              3         38              10                     19.72         ..                                       ..                     ~         e.          ..              33  (977
Ksopa                         Z -boi                  935            60          6.2             9          171        16.0         *---           -             -             2.92            17.89           4.41.   ±92                 3    190
Ony                         Maaa                      179           23           9.9                        t15        16.0         ---          .--.                         2.92             17.88           ---        600(±962)    66  (19770))
logo           Ions                     ±1.8~~~~~~~~~~i4  78       8.2            17        1  70l       :6.o          .~ i         .       ~                     -                 .              .          .-7890
(MtroRro-)          398            02          5 .6           1i          13-6.---                                                                                                                        7 -  ---.  5-3   (1969)
lig-ro                       oaao                     736             6          3.              1          170....~ .                                                                          .                                          7%  (1920)
Suda,o              ~~~~~Port Sudan             o6            7          3.7              8    1     120        16:.0     .629i                                        ..                  -..                      se77(91
luosania  Bar os Solon,.  336         63          9.0              0          100        1~~~ ~~~~~         ~     ~~~ ~~~~~~~~6. .96P  ---  --   ---                             ---.--71  (1970)
Tlairs                      D- ..Siaa               1331            21          3.o             1'                     160           -           --I-                          ---              ---         6,589ArKo2      --             60  (1969)
Ethiopia   idOto Alula   797   07   3.7                         16.0         --           ....                                            .5.                        .              90  (i968)~~~~~~~~~~~~~~~~~~~~~~~~~~--  g   (i68
74a±1o                       Rlatyro                  1So            96         10.1/4                                 ±6.0          .                                         .                  .       4.9(96
Nepa                       Iloaob                    h             36          7.9     F                   8)        16.6          -             -             -            -      -            -            ---         20.2            22  (±96±)
bonalia  Mogadiuho         206   j       31          6.0/4   I      2                      1~~~~~~~~~~~~~~~~~~Z  6.                                                                                             7 .   .   .  ~    .   7  (0967)
Hppnr Votto                    M Ouaod-ogn            101            70          7 . 159                               161j5.                    -.-                                              .c.                                       0(96
iro;  000,  0000po,1-00o  dahoa -aoo le       l I6 -boo. ooloooooooobooao-    O   ol   oo1io    roo    tr   oot    loocdoote   eolnooao.o-ol    oooo    oy
1'P200   00  0   00ao~'0ll   ol-hIloooooono.o62000  oload   o   sl.o,n.o    0200+020000  l000,boppoaloo                                                                01  osoo,cCoonpOlO
2  apnslrboo-AllLb   00000,  loh-
"     fsRoen  Hon-oc  10 Ooo;n   eoofoo,7    rbn,OooCoodt- oho POiO  cool?  orooo of 010oi--  -d A-hiloo-.,, Oil Orb,  -oo-bo  1023.
RWr1d  -uk Alola, 12.
RooT?looOo   S=ono-  3006oooo.foa    914.






ANNEX B
Page 3
Table 2:   COET OF RESIDENTIAT CONSTRUCTIuLIN FOR LOW AND
MEDIUN D)ENSITY HOUSINfG- IN SP'IE-C.T:-D DEVELOPLING
COUNT _I3q
Basic
Construction
Country                   GNP/Capita                 Costs
US$ per sq m.
(1970)                 (1970 prices)
Kuwait                      3860                      64.86
Venezuela                    980                      34.00
Trinidad & Tobago            860                      33.00
Uruguay                      820                      33.00
Chile                        720                      42.00
Mexico                       670                      40.00
Jamaica (Kingston)           670                      73.60
Lebanon                      590                      32.52
Costa Rica                   560                      30.00
Peru                         450                      47.00
Saudi Arabia                 440                      48.41
Brazil                       420                      35000
Guatemala                    360                      25.00
Colombia                     340                      24.00
Iraq                         320                      35.84
El Salvador                  300                      29.00
Ecuador                      290                      33.00
Syria                        290                      32.25
Jordan                       250                      39.69
Korea (Seoul)                250                      61.00
Philippines                  210                      51.03
Bolivia                      180                      26.00
Sri Lanka                    110                      42.33
India                        110                      25.00
Sources:  Foundation for Cooperative Housing,Cooperative Housing and
the Minimum Shelter Approach in Latin America, (Latin American
dataT. Study of International Housing, Reports from U.S.
Agencies and International Organizations, prepared for the
Subcommittee on Housing and Urban Affairs of the Committee on
Banking, Housing and Urban Affairs, U.S. Senate, Washington D.C.,
June 28, 1971, pp.228-229, (Giddle Eastern and Asian data).
Country data (Jamaica and KoreaS.



ANNEX B
Page 4
Table 3: COST OF BASIC CONSTRUCTION, LAND SERVICING AND RAW LAND AS PERCENTAGE OF TOTAL HOUSING
COST FOR LOW AND MODERATE INCOME HOUSING 1/, SELECTED CITIES
Low-income Housing                     Mloderate-income Housing
Housing         Basic          Land         Raw           Basic          Land       Raw
City           Type       Construction   Servicing 2/  Land         Construction   Servicing   Land
Single
Family      44.9 (Al) 4/        9.3         45.8 5/   58.8               3.8        37.4 5/
Mexico City
Multi -
Family       79.9 (A3)          6.3         13.8 5/   80.1               4.7        15.2 5/
Multi-
Hong Kong 3/    Family                   68.1 (B3)           29.4 5/                      N.A.
Single
Nairobi          Family       64.5 (C6)         21.5         14.0 5/                      N.A.
Single
Family       69.5 (D6)         12.2         18.3 5/   78.5 (Dl.O)        9.1        12.4 5/
Bogota
Multi-
Family       91.5 (D9)          3.8          4.7 5/   95.6 (Dll)         1.9         2.5 5/
Multi-
Seoul 3/         Family                          N.A.                   71.4 (E3)        15.0         6.9 5/
Single
Family                          N.A.                   68.7 (F5)         8.4        22.9 6/
Ahmedabad
Multi -
Family       84.1 (Fl)          8.6          7.3 5/   77.5 (F4)          8.0        14.5 6/
Single
Family       48.1 (G2)         23.0         28.9 5/                      N.A.
Madras
Multi -
Family       76.9 (G3)         12.4         10.7 5/   80.4               6.1        13.5
1/  With individual toilet and services.
2/ Includes utilities and land development.
3/ Percentages do not add up to 100 because administrative cost not included.
4/ Number indicates type of unit from Table 13, Background Paper.
5/  Located at periphery of the city.
6/  Located inside the city.
Sources: Studies on Employment in the Mexican Housing Industry. (C. Araud, et al., OECD, 1973);
Hong Kong Housing Authority; National Housing Corporation, Kenya; DANE and Caja de la
Vivienda Popular, Bogota; Korea Housing Corporation; Gujarat Housing Commission;
Tamil Nadu Housing Board.



ANNEX B
Page 5
Table 4: ESTIMATES OF THE' MONTHLY HOUSEHOLD INCOME
REQUIRED TO PURCHASE THE EXISTING CHEAPEST
00-IZLETE HOUSING UNIT 1/ AND THE PERCENTAGE
OF HOUSEHOLDS UNABLE TO AFFORD IT,
SELECTED CITIES
Cost of        Interest Rate = 1C Percent            Interest Rate = 15 Percent
Cheapest             Monthly                                  Monthly
Housing              Household    Percent of                   Household   Percent of
Unit        Monthly  Income        Households     Monthly      Income      Households
($US,1970    Payment  Required      Unable to      Payment      Required    Unable to
City         Prices)      ($US)2/   ($US)3/       Afford        ($US)2/     ($US) 3/       Afford
Mexico City   3,005        27.6      184            55            38.8        259            66
Hong Kong     1,670        15.4      103            35            21.5        143            57
Nairobi       2,076        19.1      127            68            26.8        178            77
Bogota        1,474        13.6       91            47            19.0        127            61
Ahmedabad       616         5.6       38            64             8.7         58            79
Madras          570         5.3       36            63             7.3         49            79
1/ With individuial toilet and services.
2/ Assuming a repayment period of 25 years.
3/ Assuming no downpayment and 15 percent of household income devoted to housing.
Source: Background Paper Tables 13, 14.



ANNEX B
Page 6
Table 5: REDUCTION OF HOUSING COST AND THE PERCENTAGE OF HOUSEHOLDS THAT CAN BE SERVED, 1/
SELECTED CITIES
Percent of Households Unable t:o Afford           Percent Reduction of Present Cost
Lowest Cost Housing Unit at:                 Req!utred to Reach All. but Lowest
Present     10%           20%        1/3
Cost    Reduction   Reduction   Reduction         40%           20%            10%
Mexico City        55         52           47           37           28.4           53.7          62.4
Hong Kong         35          30           22           14            0             22.6          45.3
Nairobi           68          66           63           53           49.8          69.1           81.2
Bogota            47          42          37            26           13.8          43.2           60.2
Ahmedabad          64         58          56            51           41.9          52.3           78.9
Madras             63         52           45           31           25.6          44.7           54.2
1/ Assuming 15 percent of household income devot:ed to housing, a repayment period of 25, years, no
downpayment and 10 percent interest.
Source: Background Paper Tables 13, 14.



ANNEX B
Page 7
Table 6: ESTIMATES OF COST (US$, 1970 PRICES) OF HOUSING UNITS OF VARIOUS STANDARDS AND LOCATIONS
AND PERCENTAGE OF HOUSEHOLDS UNABLE TO AFFORD THEM, 1/ SELECTED CITIES
Mexico City        Hong Kong 2          Nairobi              Bogota             Ahmedabad             Madras
Housing Type                          Cost    Percent   Cost   Percest    Cost   Percent    Cost    Percent    Cost   Percent    Cost   Percent
Present Cheapest Housing Unit                  3,005    55        1,670      35      2,076    68         1,475      47         616      64         570       63
Periphery
Single Family,3/Individual Services 4/   1,243    14               -      -        1,860    66           754      17         531      58         747       77
Single Family, Shared 5/ Services            1,117    10           -      -        1,566    59           665      14         469      55         670       73
Single Family, Basic 6/ Services               991      6          -      -        1,272    52           576      11         408      51         592       68
Multi-Family, 7/ Individual Services         1,181    12        1,734     38       1,836    65         1,086      36         605      64         651       70
Multi-Family, Shared Services                  975      7       1,568     32       1,496    58           884      23         491      58         541       65
Multi-Family, Basic Services                   768      4       1,402     25       1,156    47           681      15         377      41         430       38
Intermediate Zone
Single Family, Individual Services          18,786    95+         -       -        2,468    72         2,884      73       1,888      91        837       81
Single Family, Shared Services              18,660    95+         -       -        2,174    69         2,795      72       1,826      91         760      78
Single Family, Basic Services               18,534    95+         -       -        1,880    66         2,706      71       1,765      91        682       73
Multi-Family,  Individual Services           4,685    72        1,850     45       1,958    67         1,512      58         676      76         669       72
Multi-Family,  Shared Services               4,479    70        1,684     35       1,618    61         1,310      42         762      72         559       63
Multi-Family,  Basic Services                4,272    69        1,518     30       1,278    52         1,107      36         648      65         448       44
City Center
Single Family, Individual Services        256,438    95+          -       -       18,930    95+       10,234      95+      2,263     95+      1,100        88
Single Family, Shared Services            256,312    95+          -       -       18,636    95+       10,145      95+      2,201      95+     1,023       87
Single Family, Basic Services             256,186    95+          -       -       18,342    95+       10,056      95+      2,140      95+        945      82
Multi-Family,  Individual Services          52,220    95+    12,485       95+      5,250    90         2,982      74         951      79         722       75
Multi-Family,  Shared Services              52,014    95+    12,319       95+      4,910    89         2,780      72         837      75         612       68
Multi-Family,  Basic Services               51,807    95+    12,153       95+      4,570    87         2,577      70         723      70         501       63
1/  Repayment period of 25 years, no downpayment and 15 percent of houselold income devoted to housing.
Z/  Peripheral and intermediate land prices are those prevailing at existing low cost housing estates; city center land prices are
estimates for areas adjacent to the city center.
3/  Single family detached housing unit with 20 sq m. of livable space and 75 sq m. of land.
4/  Individual water, toilet and kitchen.
5/  Communal water supply, sewerage and other services; site preparation and lighting.
6! Single family: centrally located water and pit latrines plus minimal security lighting and site preparation.
Multi-family:   greater sharing of facilities.
7/ Multi-family housing unit with 20 sq m. of livable space and 15 sq m. share of land in a 4-storey building.
Source: Background Paper Tables 34-38.



ANNEX B
Page 8
Table 7:  PERCENT OF HOUSEHOLDS UNABLE TO AFFORD CHEAPEST DWELLING
AT VARIOUS ASSUMED SPACE STANDARDS, SELECTED CITIES 1/
Space                             Mexico  Hong                      Ahmed-
Standard                            City   Kong   Nairobi  Bogota  abad    Madras
A      Intermediate location,  72        45      67       58      76       72
individual services 2/
A      Peripheral location,    12        38 3!   65 4/   L7 3/   58 A/   70 2/
individual services
A      Intermediate location,  69        30      52       36      65       44
basic services 2/
A      Periphieral location,     4 2/   25 2/   47 3!   :11 3/   41 2/   38 2/
basic services
B      Intermediate location,  62        35      66       43      72       70
individual services 2/
B      Peripheral location,      7 A/   31 2/   64 3/   12 3/   51 3/   68 3/
individual services
B      Intermediate location,  51        23      52       23      58       41
basic services 2/
B      Peripheral location,      3 2/   18 2/   46 4/    8 3/   36 3/  ;35 2/
basic services
Space Standard A = (Single family:  20 sq m. livable space,, 75 sq m. land
(Multi-family : 20 sq m. livable space, 15 sq m. share of land
B = (Single family:  20 sq m. livable space, 40 sq m. land
(Multi-family : 20 sq m. livable space, 10 sq m. share of land
1/  Multi-family or single family, whichever is lower cost.,
2/ Multi-family is lower cost.
3/ Single family is lower cost.
4/  Multi-family and single family are equally low cost.
Source: Background Paper Tables 13, 14



ANNEX B
Page 9
Table 8:  PERCENT OF HOUSEHOLDS UNABLE TO AFFORD CHEAPEST DWELLING
AT ASSUMED LOW SPACE STANDARD, SELECTED CITIES 1/
Space                               Mexioo                       Ahmed-
Standard                              City    Nairobi   Bogota   abad       Madras
C      Intermediate location,   35          36        14        28       18
individual services 2/
C      Peripheral location,        2 2/     33 4/      5        14 3/    14
individual services
C      Intermediate location,   28          18         8       22        10
basic services 21
C      Peripheral location,        1 2!     17 4/      3 3/    11 3/      8 2/
basic services
Space Standard C = (Single family:  10 sq m. livable space, 20 sq m. land
(Multi-family : 10 sq m. livable space, 5 sq m. share of land
1/  Multi-family or single family, whiclever is lower cost
2! Multi-family is lower cost.
3/ Single family is lower cost.
4/  Multi-family and single family are equally low cost.
Source: Background Paper Tables 13, 14



ANNEX B
Page 10
Table 9:  EFFECT OF COST CHANGES ON PERCENT OF HOUSEHOLDS UNABLE
TO AFFORD CHEAPEST DWELL-NG AT ASSUMED STANDARDS,
SELECTED CITIES 1/
Space   Mexico  Hong                      Ahmed-
Cost Assumption      Standard  City   KDng   Nairobi  Bogota  abad    Madras
One-third Reduction    B        1        8     29 4/    4 l   13 3/   11 '
(= 20 percent of                  2'
income spent on        C       I 2    n.a.    12 41    2 3/    93/    6?/
housing)
One-third Increase      B       7 2/   34 2/   61 4/   13 3/   53 3/   68
(= allowance for                  2/                        .
administrative         C       3 -    n.a.    26 4/    5 3/   25 3    13
and maintenance
costs, interest
during construc-
tion and 20 per-
cent rate of
default on rental
payments)
Space Standard:  B = (Single family:  20 sq m. livable space, 40 sa m. land
(Multi-family : 20 sq m. livable space, 10 sq m. share
of land
C = (Single family:  10 sq m. livable space, 20 sq m. land
(Multi-family : 10 sq m. livable space, 5 sq m. share
of land
1/ Peripheral location, basic services. Multi-family oIr single family,
whichever is lower cost.
2/ Multi-family is lower cost.
3! Single family is lower cost.
4/ Multi-family and single family are equally low cost.
Source: Background Paper Tables 13,14.



ANNEX B
Page U
Table lo:      lEBRDIIAAIDEVELOPNENT PROJE5CTS
SD-s,h- 1974
OP WHICh                                                                                                                OFF-
ANOINT OP         TARGET POPU7LATION          NUMBER               SITE         TRSA-                     PLOT                           CORE1                                                   SITE        ON SIT11      IN-    TECH-    MONITORING
APPROVAL      CRE01IT (C) OR  (PERCENTTLE OP                   OF                AND5          SI-      CHEAL. P0021CC. D016N5TONS                      HOUSING0             0N-SIllE INFRASTRUCTURE            INFRAS-S/ CG5MMINITY   D55-   NICAL          Aim/OR
PROJE1                        EIC          LOA(T             INCOME DISTRIBUTlON)         PLOTS            SERViCEO        TIOSTAL   ASIA (081          CE2)        OrORADENO       (PLOTIS)         WLATER          SEERAGE        OTI5R1'TRIUCTURE  EACILTITES  TRY -ASSIST.  EVALEA71ON
SENEGAL 3I518 &               J-n  1972          0.0o c          48.5 - 87                   15,600:
SERVICES                                                                               laker 14,000       Saber  14,000             Saber  400       Saber 100    Iek-r:0 ha.                     St-edpipss:       Pit Privies:  a,r        s,b,e      A,B,C,DE,,              C            C
8557              5,5                            F,O,E,L,N
soils  t,600       ThiSe  1,600              Thile   60       ',hibs 200)                                  Ir ic             S~ptir Takic:
NICARAGUA , EARTHQUAKE        Nay 1973           8.0 C           20   45                 Ma ca220                  lmi                      140           110                          2,9000       Sadlivdeal        TcdlvidScal    s,r,d                A,C,D,E,F,    I         C
SICONSTRUCTION,  SITE                                                                  Macye    800                                                                                                                                                     S'M
A SESOlCiS CLOMPONENT                                                                  Grarda    870
Jin-tepa  700
Un-
allocated 400
INRTA, CALCUTTA               AC5U-t 1973        6.7 c
IH510 8TN5AN AREA
DOEVEOPMENT
I. Sa-te  Improvnet                                                                    1,200 faiSiec                                      4                            4 hn.
2. Oaieh-abgh-ta-Petlui                                                                                                                 130              70                          1,000        Iadividua1        Icdiefdael      a         ,b        A,C,D,E,F               N
Site & Ser-loe
BOTSWANA, PFOANCSTOTWN        April 1974         3.0 1         01Cr   Serve              1,800                    000         1,000                                   1,000 hace-                   St-dpipe-         Aqua Privies  a,           ,b,r     A,C,D,L,Q   El ha.   N               N
CRBAN DEVELOPMENT                                              63 -92;                                                                                                     holds
PROJECT                                                      Tr-dIiOi-1
O - 6';
6,0500                   4/                                                                   0b,dI
JAMAICA SITL ANl              May 1974          10.0 L           33 -66                  Kinoclan 3,900         0,000c                    520              94         2,750 haut-        Bo         Edividual         Iadlvldca1    aS,b       bo,        A,C,D,E,G,      X       N
SERVICES                                                                               MunlrA                                                                              holds                                                    r,d                 J,K,M,Q
Ma7 Psn    040
10,6o0:                                   sot:  625                                                                       Pilt5
TANZANTA, NATIONAL           Jcly 1074           8.5 c           1A - 90Ja                       7,450         10,600          Upgra ong,700   08 ,000                                              Sla±cdpip-s       Aqua NP,iac-
OTTE AMDSOERVICES                                                                                                                                                    d-elliug.                        90%               90%
1,saa2.300                                                                                             Indlvid-1a:       ThOivid- I :   e,b,                A,C,DS,L,MR              N           N
10%               10%         e,d
MObeys    050
ZA1015A, LUSAKA              Je1y 1074          20.01L           15 - 100                4,400*                 4.4oo                     470          21o-324       --I,000 pin-l                  Ilpgradlng:        ipgrediag:    a           ,b,c     A,C,D,L,M
SQUATTER UPGRAITNO AN'Sl                                       (bais and no5rmal.    7;600ovreNpAll                                                                                               Stadplp-s         Nil PrIies-
STET  & SERVICES                                                plots)                 plots                                                                                                      Out. A esri.t.ll  & serve:                            A,C,D,L               11 
B - 100 (overspill                                                                                                                 Otacdpipee        Pit Priviec
plate)                                                                                                                             1,200              1,200
T,,diulIa ..I       ,Slvidc.e
3,200              3,200
INDONESIA, JAKARTA           SepI-b-r           25.0 1           205 00                  8,000                  B,0oo                     130            00-200       1,900 hce.       7,500        Upgr-dlng,        UlpgredlnD,     a,,                                                      x
CONB  DEVELOPME1NT            1774                                                                                                                                                                Slandplp-s        Eseese-e        r,d
PROTE CT                                                                                                                                                                                          Sit. & Isry-    Sanls-y
Site and
tespl-r
individ..l
EL SALVADOR, SITE            6roer              f.0 C            1? - 55                 0,000                 8000O1'                    134            6o-i2o                         4,O0OO5I    lndvIidual        Sodivid-a I       ,,       ,b,5,   A,E,fl,R,0,l4,          x             N
AND SIERVIE                   1974            lj.O                                                                                                                                                                                  r    d
KIOREA, SITE AND            January              3-4 L           20-40                   1,974                  1,034                      36           1153-247                                    Individual        Individual        ,b,     s,b                                            N
SERVICES COMIPOSNEN           1973
OP SECENDARY CITIES
REGOTNAL PROJECT
1/  Cads,,  a:  -sd   Cnrvee                          /Edee:  A, pelaray echoeS               0: e-e-erae                   J: police                   N: pcdblle tr-.portatias             3/  Ea-i-y and  h~lrs  errs..   anile.  PIa. 500 sanitary ...  -nitc I  Managaa.
6: wale  e-pply serr-la... eed-ry schart                                        I: eml scal  ind-ctry    KC, fire pr-t-aiac                P: peel efi-ir
r,Por  distiblbi-c  -slar                          C, bah   l   aee            H, r-lioar                    L: refes   -1lsrio-         Q  other p.blie bet,ldiaga           4/  Pl-c 3 sercvIc  level eptie±s.
0: elan, verse rena10                   0,~~D ra taiy rene                                        IS: n-rkot                  0: natrltiac edac..leis
7: r_errtiac                                                                          05 aped,  field                     0/  PIue 2 servis-1eve  optisa..
Sowcrce   1613R  APyreeaT Rsp-el-






ANNEX B
page 12
Table 11: PERCENTAGE DISTRIBUTION OF DEVELOPMEST COSTS FOR SITE AND SERVICES
POTS IN 9 BANK GROUP PROJECTS (IN PERCENTAGE)
Country                                                                                             'Norotlized Valuee" 2/
Near of Estimate                                     On-Site             Site                     PoTtal on-Site                                       Site           Plot
Typical Lot                                       Infrastructure     Preparation     Land     Devolobmentll_  Total            InfraStructure     Preparation      Development
1.0 NICARAGUA - 1973
1.1 110 sq.m. plot in Managua; individual
Iserices; completed 20 sq.m. dwelling              23.85             4.10        13.91       58.14           100.00
1.2 110 oq.m. plot in Managua; individual
cervices; built sanitary core;
materialo loam                                     28.70             4.94         16.74       49.62          100.00
2.0 SEN2EAL - 1972
2.1 160 sq.m. plot in Dakar; comunal water
cnd individual pit latrine                         21.23            78.77          -            -            100.00              16.45             61.05
2.2 150 oq.m. plot in Dakar, individual
servi.ce; built sanitary core                      70.42            25.11          -          4.47           100.00              54.58             19.46           3.46
2.3 200 sq.n. plot in Thies; co-vunical water
and individ,al pit latrine                         83.46            16.54          -            -            100.00              64.68             12.82
3.0 INDONESIA - 1974
3.1 80 sq.m. plot in Cengkareng; individual
services; 20 oq.m. core house; including
sanitary unit                                      42.16             1.05        18.24        38.55          100.00
3.2 140 sq.m. plot it Cengkareng; individual
cervices; 20 sq.n. core house including
sanitary unit.                                    42.48              1.08        18.69       37.75           100.00
4.0 JAMAICA - 1973
4.1 94 sq.m. plot in Marcco Earvey; individual
srerices; materials loan                           32.61            16.67         -           50.72          100.00              25.27             12.92          39.31
4.2 94 sq.n. plot in Marcus Garvey; individual
corvices; built sanitary core; materials loan      28.86            14.75         _           62.98          100.00              22.37             11.43          48.81
4.3 94 sq.m. plot in Earcus Garvey; individual
-ervices; built dwelling; mater£alr loan           21.21            10.84         -           66.50          100.00              16.44              8.40          31.54
5.0 BOTSWANA - 1973
5.1 375 sq.m. plot in Prancistown; communal
water and individual aqua privy; materials
lan                                                42.85              -           -          57.15           100.00              33.21               _            44.29
5.2 375 sq... plot in trancistoun; so-nunal
water and individual aqua privy;
"traditional area"                                100.00              -            -            -            100.00              77.50
6.0 ZAXI3A - 1974
6.1 210 eq.m. plot in Lusaka; coInunat water
and individual pit latrine; materials loan         23.45              -           -           79.55          100.00               15.85              -            61.65
0.2 324 sq.m. plot in Lusaka; co-sunal water
ood individual pit latrine; materials loan         53.40              -           -           46.60          101.00              41.39               -            34.12
5.3 324 sq.m. plot in Lusaha; individual
services; materials loan                           50.18              -           -          49.82           100.00              38.89               -            38.61
7.0 EL SALVADOR - 1974
7.1 60 sq.m. plot in San Salvador; individual
services; built sanitary core; materials
loam                                               18.87              -          19.52        61.61          100.00
7.2 120 sq.m. plot in the Secondary Cities;
individual services; built sanitary core;
materials loan                                     27.27              _           28.21       44.51          100.00
1.0 TAZSZANIA
8.1 260 sq.m. plot in Sinza, Dar-es-Salamp
comn Inal water and individual aqua privy;
materials loan                                     25.85               -           -          74.15          100.00               20.03              -            57.47
9.0 lINGUA
9.1 120 sq.m. plot in Dandora Nairobi;
individual eervines; built sanitary core;
materials loan                                     30.22             5.45          -          64.33          100.00               23.42             4.22          49.86
1/ Core houcsig and materials loano.
2/ Asscming average value of land of 22.5 percent in all projects
Source: Site & Services Proiecte Survey and Analysis of Urbanisation Standards and On-Site Infrastructure,
P. Patel, Auguot 1974, (Preliminary draft).



ANNIEX B
Pagei 13
Table 12: URBAN APEAS BY SIZE CIASS ]FOR GROUPS OF DEVELOPING COUNTRIES,, 1970
0.2 - 0.5      0.5 - 1.0       1.0 - 2.0       2.0 million
million        millionl        million         and over
Total          Total           Total,          Total
Country     No. of Popu-  No. of Popu-  No. of Popu-  No.    Popu-  Total
Group      Urban  lation  Urban  lation  Urban  lation  Urban  latiorn  Urban
Areas  (t 000) Areas  ( 000) Areas  (0OOCI) Areas  ( 000) Areas
Relatively 1 /
High Inccme    12      6,215     5    3,22 4    6     7,746    5    14,506    28
(13 coun-
tries)
Middle
Income 2/      73    20,992    28   19,1916    9    13,040   12    47,140   122
(34 coun-
tries)
Poorest 3/     76    23,370    28   18,303    9    13,007    6    25,896   119
(31 coun-
tries)
78 Countries  161               61             24             23              269
1/  GNP/capita 1970 - US$450 - 1,000
:/ GNP/capita 1970 - US$150 - 450
~/ GNP/capita 1970 - US$150 and less
Source:  Kingsley Davis, World Urbanization 1950-1970, Vol.I: Basic Data for
Cities, University of California at Berkeley, 1969.