Author Archives: Geoff Payne

Assessing housing needs

Assessing housing needs[1]

A primary consideration in evaluating the impact of regulatory frameworks on land and housing is to assess existing and future housing needs. This will enable projections to be made of the area of land required according to the existing regulatory framework. It will also indicate where changes to planning standards or regulations may be needed to help upgrade existing settlements and improve access to new legal housing.

The extent of housing needs

As the population of towns and cities grows, so does the need for housing. How can the extent of this need be assessed? The following methodology has evolved from that developed by Struyk et al (1990) and variations applied by many professionals throughout the world. This latest version has the important merits of being more comprehensive and concise. It recommends the following operations:

  1. A twenty year planning period (though this can be revised if required). Results are produced for every fifth year of the period.
  2. Estimating the need for new and upgraded housing units based on the number required to meet a minimum acceptable standard to be defined. This stage has five aspects:
  • The rate and scale of new household formation. This can be estimated crudely by dividing the total anticipated population increase by the average household size. In practice, new households are usually formed with two people, so this estimate will be conservative.
  • The replacement of existing units which will have fully depreciated during the plan period. This will depend to a large extent on building condition, which is in turn influenced by the type and quality of construction, the level of maintenance applied and the climate, etc. Excluding external considerations, such as flooding, earthquakes, etc, the average lifespan of a structure will enable an estimate to be made. For example, if the average lifespan is considered to be fifty years, the replacement needed will be 2 percent a year; for 33 years 3 percent and 66 years 1.5 percent a year. Remember that in practice, buildings invariably last much longer than official estimates or the period for repaying their capital costs.
  • The replacement of deficient units whose upgrading is not economically feasible. A large proportion of substandard housing can usually be improved, providing the owners feel secure and have access to credit. However, there will also be a proportion for which this is not feasible. It may not be practical to replace this stock immediately, so estimates will need to be made over a reasonable period. This will determine the annual number of units to be replaced.
  • The number of units required to relieve over-crowding levels present at the start of the plan period. Definitions of over-crowding vary considerably and are influenced heavily by cultural considerations. What is considered acceptable in one context may be intolerable in another. Any definition is therefore arbitrary and official definitions tend to err on the high side, such as one household per dwelling unit, even though multi-occupancy is often widespread. Consideration will also need to be given to the definition of a dwelling unit, since it is common for very poor households to live in a single room.
  • The upgrading of deficient units existing at the start of the plan period where this is economically feasible.

The estimate of needs assumes that a new unit is produced for every newly formed household.

To undertake this analysis, it is necessary to assess the following:

  • The projected future demographic growth of the city or country during the plan period.
  • The nature of the existing housing stock, classified as acceptable; unacceptable but upgradeable; and unacceptable but not worth upgrading.
  • The rate at which deficits are to be reduced over the plan period must be determined.

It should be remembered that estimates of ‘housing deficit’ based on these or any other considerations need to be treated with great caution, since the criteria by which they are defined are partly subjective.

The nature of housing needs

Having estimated the extent of housing needs, it is then important to estimate the nature of such needs. This is because not all households want or can afford the same type of housing. What households want will be determined by social and cultural considerations, What they can afford will be determined by economic considerations, or affordability. Affordability will be largely determined by incomes, though savings may also be relevant.

It can therefore be seen that the nature of housing needs is difficult to estimate. However, a start can be made by concentrating on the economic aspects, as this can help to calculate the total amount of investment required to meet the projected extent of housing needs. This is sometimes known as effective housing demand and can be estimated by:

  • Calculating affordability by estimating the amount households can afford at different levels of income (or expenditure) – probably for each quintile – for housing and related expenditure (eg fuel, utilities, maintenance, etc). An allowance may be made for existing savings or other assets and their availability for use as deposits.
  • Determining (or estimating) what types and standards of housing can be obtained for given levels of affordability. To do this, it is recommended that costs be estimated for each of several standards and types of development in a range of typical areas. Such costs should include all land, construction and utility connection costs, together with administrative costs associated with obtaining official permissions and the financing costs. This latter item, which includes the interest payments or finance charges needed to fund the unit may represent the largest single project cost, especially if interest rates are high. From this, it is possible to relate the levels of affordability and costs to assess the degree of ‘fit’ achieved. Gaps that remain will provide a basis for modifying either the rate at which existing deficits are reduced or the standards and types of initial provision. Remember that encouraging incremental house development can reduce initial costs substantially and therefore improve effective affordability.
  • Estimating the average costs of upgrading existing deficient housing to bring it up to a defined standard. This, of course, tends to an arbitrary estimate.

Outputs from the methodology

This methodology is able to generate several outputs:

  1. The number of new and upgraded units needed every fifth year during the plan period
  2. The classification of households by the type of housing they can afford.
  3. The level of investment required to meet the specified level of housing needs. The difference between what households can afford for a specified unit is the ‘affordability gap’ and will need to be bridged by providing external or internal subsidies, further reducing standards (of initial provision), or a combination of these options. When making a decision on which option to adopt, it should be remembered that external subsidies are rarely available at the scale required and that even when they are they are often captured by higher income groups than those intended and therefore distort land and housing markets. Modifying planning regulations and standards therefore presents a more effective and sustainable approach to reducing costs and improving access to legal and affordable shelter.

This approach is only able to provide a starting point for assessing the likely extent and nature of housing needs. Its usefulness will depend partly on the accuracy of data inputs and partly on the appropriateness of standards applied. The study should be repeated regularly so that these can be tested against changing circumstances and adapted as required.

Finally, remember that estimates of housing needs should not be assumed to mean that all new housing should take the form of individual family houses. In larger urban areas or where land prices are a significant proportion of total housing costs, apartments will form a large part of total new housing.

For these reasons, it is vital to apply such estimates with caution rather than as a sound basis for policy without the benefit of additional information.

Geoffrey Payne, Geoffrey Payne and Associates, UK

Further reading:

 

Struyk. R, Hoffman. M, and Katsura. H. (1990) ‘The Market for Housing in Indonesian Cities’, Urban Institute Press, Washington.

[1] The first part of this note draws extensively on Struyk R, Hoffman M, and Katsura, H, ‘The Market for Housing in Indonesian Cities’ Urban Institute Press, Washington, 1990.

Urban land tenure and property rights

The extent to which people feel secure in their housing is major determinant of the degree to which they will invest in maintaining and improving it. It is therefore vital to understand the level of tenure security that people perceive they possess and the property rights regarding land and housing that apply to different tenure categories.
International experience and the vast literature on the subject shows a range of primary tenure regimes: public and private statutory systems, customary systems, and religious systems, as in Islamic contexts. In addition to these are a vast range of non-formal or semi-formal, as when somebody legally acquired land but builds in areas not officially zoned, or when housing does not conform to official regulations. The range of tenure categories can be extremely large and each one forms a key option within the overall urban land and housing market. Understanding how these relate to each other is therefore vital in anticipating the outcomes of land policy, since a failure to reasonably anticipate the outcomes of a policy invariably mean they are different from those intended.

New GPA Associate!

Geoff is happy to announce the appointment of a new GPA Associate! Daniela Munoz-Levy is collaborating with Geoff on a major study for UN-Habitat on land based finance for affordable housing. As her Bio (click here for details) shows, Daniela has wide ranging academic and professional experience on urban development, housing and transport policy and practice. 

The Bartlett Development Planning Unit meeting in London!

Geoff attended the Bartlett Development Planning Unit meeting to celebrate five years of the DPU’s 60th Anniversary PhD Scholarship at University College London on 16 May. He was happy to meet current students on the Building and Urban Design in Development (BUDD) MSc course which Geoff established in 1993. Karen Waneska (right) is currently helping Geoff with some research.

Land based finance for affordable housing

Geoff and Daniela at UN-Habitat, Nairobi.

GPA has been commissioned by UN-Habitat to prepare a report on international examples of land based finance that can improve access to affordable housing. The project includes countries at all levels of social and economic development and builds on ongoing research by UN-Habitat, the World Bank and academic publications. Geoff invited Daniela Munoz-Levy to undertake the project with him and a draft working paper was submitted for peer review in March 2019. A presentation based on the working paper was presented to senior UN-Habitat staff in Nairobi during a visit between 06-10 May 2019 and both Geoff and Daniela are now preparing a revised paper as a guide for elected officials and professionals. It is intended that this will be ready for publication by the end of the year.

Geoffrey Payne is in Tirana!

A view from colorful streets of Tirana.

Geoff was invited by the United Nations Economic Commission for Europe (UNECE) to contribute to a meeting in Tirana, Albania on formulating indicators for implementing the SDGs related to urban land and housing, in May 2019. The visit demonstrated the massive improvements to the public realm in Tirana since Geoff was there in 2011 contributing to a City Development Strategy. Many roads are pedestrianised and building painted bright colours!


Book re-launch!

Geoff is pleased to announce that Routledge publishers have decided to relaunch a book he co-edited (with David Cadman) called ‘The Living City: Towards a sustainable future’. Given that the book was originally published in 1990, Geoff is flattered that ideas and examples published nearly thirty years ago are still considered relevant for the future. The book is to be relaunched in July 2019.

Land-based finance for affordable housing

In early 2019, Geoff was commissioned by UN-Habitat to prepare a report on land-based finance for affordable housing. The study will will review, analyse and propose ways to link housing finance and land value capture mechanisms in countries at all levels of economic development and with diverse legal, institutional and political structures.

Geoff has invited Daniela Munoz-Levy to undertake the study with him and a review of the extensive literature has been undertaken. This forms the basis for a draft report which will be presented at a series of meetings and workshops in Nairobi in early May. Following discussions, a final report will then be prepared and submitted for publication.


 

Housing and planning in Ankara, Turkey

Prof. Dr. Rusen Keles and Cemre at the Faculty of  Political Science at Ankara University.

Cemre Sahinkaya, a GPA Associate, has successfully completed a literature review and short fieldwork studies of housing and planning in the Turkish capital, Ankara thanks to financial support from GIZ. The aim of the study has been to update the literature following Geoff’s major three volume study undertaken in the 1970’s. It is hoped that additional funding may be obtained to undertake more extensive fieldwork this summer in order to produce enough material for a book covering more than forty years of the city’s development. 

Paynes are back in Istanbul!

After almost 40 years, Geoffrey & Rita Payne visited Istanbul in order to work on a project and see the city with the guidance of GPA associate Cemre Sahinkaya. During the visit, Paynes got to chance to cross the Bosphorus (actually two continents!) and see the beautiful coastal side of the city in Karakoy.

Spending some time in Taksim Square and Istiklal Street was a lovely refreshment for all!