Affordable Housing Institute : US

On June 5, at a well-attended and highly anticipated Istanbul panel held as part of the Annual Summit of the Turkish national Real Estate Association (GYODER), I delivered a speech summarizing our six-month ‘country assessment’ of Turkey’s affordable housing ecosystem.

 

It sounds better in English

 

Our goal was to examine Turkey’s affordable housing financial environment today, identify gaps in the delivery system, identify peer nations (developed nations, parallel emergent nations, and some that serve as cautionary tales), offer a comprehensive vision of the future, and present action recommendations.

 

Father and son along the Bosphorus

 

AHI is still finalizing the report – when it’s done, we’ll post it, and I’ll describe it in more detail – so for the time being let’s limit ourselves to the main points, taken from the executive summary, which we wrote in English and translated into Turkish 

 

For Turkey to be competitive with developed nations in Europe and the Americas, Turkey needs to improve its housing – total supply, housing quality, and housing affordability – which lag behind other sectors of the Turkish economy relative to these countries to which Turkey aspires. 

 

Turkey’s economy is growing and its standard of living is rapidly rising.  

 

A developed nation in most respects, but not in housing finance

 

With a growing economy comes rapid urbanization and increasing housing demand, but housing production, finance, and formalization are lagging behind the need.

 

Improving Turkish housing across the board will not only improve the Turkish economy broadly but also lead to an increase in overall Turkish household income and better quality of life, as people have more flexibility to buy or rent housing they need.

 

Turkey should emphasize urban development, because that is where the growth will be, and that is where demand is rising faster than supply.

 

Regular AHI blog readers know that I’m an urbanist.  Cities are humanity’s future, and Turkey is urbanizing very rapidly, its economy booming.

 

Since the Romans, the Bosphorus has been a critical transshipment point for trade with Russia.

 

Turkey’s current population of over 70,500,000 people is growing at about 1.5% annually, projected to grow to 81,650,000 by 2015.  Most of this growth is happening in cities, which are growing at 2.0% to 2.5% annually, with the excess growth coming through rural immigration.  As a result Turkey, which was already urbanized by 2000 (65% urbanized), is today 70% urbanized and projected to be 75% urbanized by 2015, when roughly 61,250,000 families will be urban, an increase of perhaps 3,600,000 new urban households, requiring a similar number of urban housing units.  

 

Alanya, on Turkey’s Mediterranean coast

In the next 25 years, 2,000 cities worldwide will exceed 1,000,000 people

 

Our principal action recommendations are:

 

1. Shift government from housing production into housing finance.  TOKI should not be a builder or developer, but a lender, financier, and bank, as are its counterparts in Mexico and Thailand.

 

2. Diversify TOKI from just the supply side (more houses) to include also the demand side (helping customers buy homes), as in Mexico’s SHF, and the US GSEs (Fannie Mae and Freddie Mac).  Use the proceeds from securitizing TOKI’s loan portfolio as the equity base for reorienting TOKI into a housing bank.

 

Throughout the world, government tends, when it first ventures into housing, to start by being a direct actor – a builder, an owner.  In the US, we did it with public housing; the UK did it with council housing.  Many nations in the global south are doing it with for-sale construction programs.  Some, like Egypt, consolidate land use, zoning, ownership, and financing under one roof, creating in effect a market-insulated pipeline that runs as if in an alternate universe.  TOKI, to its credit, is much more active in the broader arena, and does excellent work throughout Turkey. 

 

But the demand side – helping people buy homes that are built by private developers – is empty, and will give Turkey much more affordability for the government’s role. 

 

3. Catalyze private mortgage banks by creating new financial products that complement the market.

 

When homes are a financial asset as well as a physical one, money moves faster.

 

Uskudar, the Asian side of Istanbul: booming residential growth

 

4. Allow municipal government to obtain nationally owned land for urban development and regeneration.

 

5. Create a national gecekondu transformation pilot program built around (a) demolition-and-rebuilding with formal housing, (b) favorable loans to transform and earthquake-reinforce housing.

 

More than half of all of Turkey’s housing is estimated to be gecekondu – either built out of compliance with building codes, or illegally on someone else’s land, or both.  This must be formalized somehow.  The path is complex, and the risk of granting undeserved amnesty is great … but cities must formalize, and the longer it is delayed, the more damage the delay does to urbanization and national growth.

 

Alanya waterfront: a gecekondu slotted in among formal housing

 

6. Develop consumer earthquake-reinforcement loans for sale through mortgage banks.  Use them as part of broad-based new policies to improve existing informal neighborhoods.

 

Even high-rises can be structurally unsound: Izmit, 1999

 

7. Create a rental housing association model for long-term affordable apartments.

 

This one’s more long-term than immediate, but it’s clearly desirable.  While we Americans think we have a high homeownership rate, the real strength of our residential sector, from the perspective of national competitiveness, is our permanent professional rental apartments, which promote labor mobility and household formation (more bedrooms mean more babies).

 

That afternoon, I was interviewed (in English) by CNN Turkey (click here for the 15-minute talk; I’m in English, but I’m translated over, so you may find it hard to hear me), and the next day, my talk was prominently featured in Turkey’s major newspapers, including Hürriyet and Sabah.

 

From Sabah

 

I hope I get the chance to go back, and start turning these recommendations into reality.

 

Back again in the fall?

Send post as PDF to