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Change the World for Renters, Change the World’s Housing Crisis

(Photo by Gabriel Santiago) 

The affordable housing crisis — a source of headlines in many U.S. cities — takes on fresh urgency when you consider the global figures. According to a new paper from the World Resources Institute, 330 million households, or roughly 1.2 billion people, lack access to secure, affordable spaces to call home.

“The rapid shift toward urban housing makes it all the more challenging for cities to grow equitably and sustainably,” the paper states. “These challenges are most acute in the global south (India, Africa, Asia, Latin America) where the lack of affordable, adequate and secure housing in cities is projected to grow the fastest.”

The paper spotlights three key challenge areas “to providing adequate, secure and affordable housing in the Global South,” as well as suggestions for tackling them. They include the growth of informal or substandard settlements (i.e., slums), policies and laws that push poorer residents out of the city, or to its fringes, and, interestingly, an overemphasis on home ownership.

That last one might seem counterintuitive. At least in the U.S., property ownership is usually viewed as a boon to the economy as a whole, not to mention a key facet of upward mobility. But look at housing through a public health lens, and you see more opportunity for more people by boosting the rental market, the paper contends.

The authors write:

Home ownership has been encouraged the world over as a way to create assets. The process of creating personal assets has influenced how cities grow and how citizens accumulate wealth. Governments have influenced and supported individual home ownership through incentivizing policies and financing options. …

However, policies that overemphasize home ownership implicitly penalize those who cannot benefit from them. Subsidies benefit people with regular and documented incomes, not the under-served or those who work in informal markets. Mortgage markets require documentary evidence of a job and income stability to successfully qualify candidates for loans, which are often explicitly or implicitly subsidized.

More problematically, the overemphasis on ownership in many economies just takes up too much mental bandwidth, according to the paper. Other policies (one that might “promote more housing at all price levels”) go unconsidered.

Cities could choose to embrace rental housing as a solution. They could improve the enabling environment for landlords, provide protections and mediation options for tenants and landlords, and foster a spectrum of rental housing options. In this way, it would be possible for cities to meet the housing needs of many more people, and in a wider range of locations, than if they focus merely on ownership

The paper makes a number of suggestions in the policy area — for example, governments could restructure their tax codes to incentivize renting (and providing rental units) in the way that property, income, capital gains taxes and tax breaks tend to incentivize homeownership.

Beyond the policy-side, however, it also looks at a number of creative rental models, from land leases and co-ops to lump-sum rentals, which are popular in a number of Asian countries, including Thailand, China and India. In lump-sum agreements, tenants tend to pay a large sum up-front and then minimal monthly rent over the life of the lease. The paper also makes a case for a practice known as “hot bedding,” in which “a bed space in a shared room is rented for a specific number of hours to sleep, typically 7 to 10 hours.”

(Credit: The World Resources Institute)

“Promoting a range of rental housing options expands opportunities for more renters while testing which types of rentals best meet local demand,” the authors conclude.