UN Predicts 3 Billion Slum Dwellers By 2030

by Martin Schuijt

(IPS) UNITED NATIONS -- A new UN report warns that governments will have to take the lead in building 96,150 housing units per day to avert a massive urban crisis in the near future.

Titled "Financing Urban Shelter," the report explores the challenges of urban development within the broader context of the Millennium Development Goals (MDGs), which include achieving a significant improvement in the lives of at least 100 million slum dwellers by 2020.

Almost half of the world's 6 billion people already live in cities. Of these, it is estimated that about a third live in slums.

"The housing crisis is already with us," the report from United Nations Human Settlements Program (UN-HABITAT) notes. "The large-scale evictions from urban areas of Zimbabwe, Mumbai, India, or Malawi are all part of a larger problem of financing urban shelter."

Anna Tibaijuka, UN-HABITAT's executive director, said that by recent estimates, more than 2 billion people would be added to the number of city dwellers in developing countries by 2030. To meet the needs of that additional population, 35 million new housing units would have to be built every year for the next 25 years.

Tibaijuka highlighted the current contradiction of "affordable shelter that is inadequate and adequate shelter that is unaffordable," adding that state-subsidized conventional housing was the solution to prevent the creation of new slums.

But unless adequate financial resources are invested in the development of urban shelter and services, including clean water and sanitation, billions of people will be trapped in poverty, deplorable housing conditions, poor health and low productivity, making today's enormous slum challenge even greater.

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

The report also highlights the strengths and limitations of current trends in conventional mortgage financing. While such financing has been expanding for the past decade and is increasingly available in many countries, only middle- and higher-income households have access to it.

UN-HABITAT stresses that it is in the interests of governments to extend mortgage markets down the income scale, as home ownership is beneficial economically, socially and politically.

"If you cannot provide housing for the relatively better off, you can definitely not serve the poor," Tibaijuka told reporters.

The majority of urban poor households can only afford to build their homes in stages, as financial resources became available, she said. In response, shelter microfinance institutions and community-based funding initiatives have emerged in recent decades.

The report concluded that short-term small loans of one to eight years in amounts from $500 to $5,000 were more useful for incremental building than the longer-term large loans favored by the mortgage markets.

It is also important to increase the number of lenders in the housing microfinance sector. Guarantees are an important mechanism for broadening the appeal of microfinance institutions to lenders and addressing the current problem of capital shortage, the report said.

Naison Mutizwa-Mangiza, head of UN-HABITAT's Policy Analysis and Dialogue Branch and an author of the report, said that the challenge of credit lay in the fact that the cost of a typical house was between 2.5 and six times the average annual salary, a ratio that rose to about 10 times in developing countries.

The report analyzed such trends as interest-rate subsidies, conventional mortgages, secondary mortgages and a growing diversity of mortgage providers. Among the main challenges, especially in developing and countries with economies in transition, were low levels of domestic savings, both private and public. One of the report's conclusions related to the need for accelerated employment and income generation, Mutizwa-Mangiza said, noting a widening gap between incomes and housing prices in many countries, which resulted in the inability of young first-time buyers to purchase homes.

From 1997 to 2004, housing prices had grown by 112 percent in Australia, for example, 139 percent in the United Kingdom, and 227 percent in South Africa.

This calls for a shift of the public sector away from direct housing construction toward assistance for home ownership through direct subsidies, he said.

About 70 percent of housing investment in developing countries takes place through incremental building, which is not acceptable to conventional mortgage financing institutions. To address that need, shelter microfinance had emerged in recent years, but its scale is still small in many countries. There is also an emerging preference of lending to women.

Tibaijuka stressed that without massive investment -- definitely involving governments -- adequate shelter would not emerge on its own. Governments needed to subscribe to the main principle of the UN-HABITAT agenda, "adequate shelter for all."

While microfinance presented important possibilities, public support and international cooperation are still needed. In particular, international support is needed for a global mechanism to assist the poor.

She noted that several programs of slum upgrading and resettlement of the urban poor were underway in Brazil, which had some of the best practices in that regard.