Innovations in shelter finance

There is continuing support for innovations that help to increase the relevance of housing finance for low-income households. Such innovations in addressing shelter needs are clustering around four basic approaches. Since the approaches target different groups, they should be regarded as complementary, each with an important role to play in any strategy that hopes to address the housing needs of low-income or disadvantaged groups. No group can meet its housing needs if the needs of other, more powerful groups are not also met—all that happens is that the more powerful groups ‘crowd out’ the less powerful. Hence, even if the basic objective is to target low-income groups, a range of solutions are needed that address the housing needs of all income groups. The four approaches:~* Market led—bringing mortgage finance ‘down-market’;~* Integrated neighbourhood development—upgrading existing settlements or developing greenfield sites, with optional housing microfinance for individual households;~* Comprehensive, inclusive, city-wide development—multi-option development of low-income settlements; and~* Federated, community-driven development—locally managed improvements done in alliance with state agencies and coordinated by an autonomous network of grassroots organizations. All four approaches seek to work with households’ demand, rather than simply supplying housing whether demand is present or not, as government programmes traditionally have done. Each approach seeks to ensure a three-fold improvement, securing land tenure, gaining access to services and making affordable home improvements for the groups they target. Each encourages resident contributions and gives as much choice as possible to the residents, in a nondirective system of allocation within a framework for combining public and individual investments, sometimes with the participation of commercial financial institutions. All four approaches, to some extent, try to recover costs, in part so that subsidy finance can be spread as widely as possible.