The Need for Affordable Housing as a Reality

Mar 21, 2021

The Affordable Housing Crisis spans nearly every country of the world be it developing or developed. Working-Class and Low-income families face a severe shortage of homes as property prices are constantly being pushed up. Currently, homeownership is out of reach for millions of people across the globe. Meanwhile, the rental rates are also skyrocketing. One in four renters is forced to pay more than 50% of their income on rent. Thus, it is not surprising that many struggle to pay for the basic needs such as food, utilities, and clothing let alone savings, education, or healthcare. The trade-offs that low and middle-income families come to face result in serious negative consequences.

According to the 13th Annual Demographia International Housing Affordability Survey , out of 293 housing markets surveyed, only 63 are considered affordable. As the worldwide population significantly increases, we foresee the imminent rise in the demand for affordable housing. Thus, governments and policymakers have placed the creation of sustainable and affordable housing programs on their daily agendas.

What are the Benefits of Affordable Housing?

Housing is a basic social condition that defines the well-being and the quality of life of every citizen. Access to quality, affordable housing fosters a stable environment for families and especially their children by avoiding frequent moves. It promotes a sense of security and safety and helps alleviate homelessness.

Housing subsidies have been demonstrated to have reduced the likelihood of homelessness for low-income families. A very robust study found that, the families that received housing vouchers were 74 percent less likely to stay in a shelter or on the street than families without a housing subsidy. Affordable housing boosts the levels of discretionary income that poorer families have available to meet their daily needs or save for the future.

The National Housing Strategy

Many affordable housing policies have been initiated worldwide. According to OECD report (2019), 25 of the member countries have some sort of national housing strategy in place. These countries include Canada, the US, France, Germany, Norway, Japan, Denmark, and the UK among others. Improving housing quality, ensuring access to affordable housing, and increasing the housing supply are the top three housing policy objectives among the countries. For the most part, the national housing strategies resemble each other. They demonstrate the commitment to creating livable communities where the families can thrive, taking steps toward advancing the rights to housing, spearheading innovative new housing research, and seeking out the inputs from voices that haven’t always been heard. The national housing programs demonstrate a “whole-of-government” approach that aligns housing with other nationwide goals including access to healthcare, education, and job creation.

The Challenges to Affordable Housing

The extent and urgency of housing needs have been long ignored not just by policymakers, but—all too often by those in the housing industry themselves. Therefore, the problem of housing affordability has been out of the public mainstream discussion for a while. Several challenges confront the development of affordable and sustainable housing. Some of the critical ones are discussed below:

Lack of Housing Programs – this issue could be considered as the root of the current housing crisis. There is a significant lack of housing affordability programs or schemes. Especially the ones at a scale necessary to make a significant impact on the population’s housing needs.

Systemic Barriers to Supply – There is frequent week coordination between national and local governments as well as poor institutional continuity. Many countries face the lack of affordable land in and nearby the cities that have access to services, jobs, and schools. Moreover, in the majority of cases, public policies emphasize on house ownership and overlook the rental demand. Even in house ownership programs, the initiatives rarely get supported with budget resources for long-term implementation.

Systemic Barriers to Demand – Usually the informally employed individuals have no access to standard mortgages. Even if not so, many of the low-income families cannot save enough for a downpayment to commit to a long-term obligation. Meanwhile, there is a low acceptance of social housing given mediocre quality and location.

Private Sector Limitations – Here we speak about the limited capacity of private sector companies to deliver affordable housing projects in an unpredictable market environment especially in the face of competition from more profitable segments. Usually, the private sector also struggles with ensuring the financial capacity with poor cost and budget management as well as lack of liquidity.

Financial Sector Limitations – the challenge of attempting to adapt microfinance models to lowest-income housing needs appears to be significant. Local currency affordable mortgages are still difficult to obtain given the high-interest rates and lack of local sources of long-term capital. However, there we’ve seen several downpayment subsidy programs to attract a large number of entry-level buyers. Meanwhile, tax credit and specialized bond instruments have succeeded in attracting long-term investments. Ensuring access to necessary finance represents a challenge itself as it requires very prudent management and credit infrastructure.

 

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