While housing is immovable, jobs and people move, and where people live in one house and work in another, they must commute between the two, mustn’t they? 

RDP houses, Soweto … and jobs are ninety minutes away

As reported in The New York Times, this is often more contentious than it should be:

SOWETO, South Africa — Since the days of apartheid, when blacks were required to live in distant townships like this, Susan Hanong, a 67-year-old maid, has commuted to the wealthy northern suburbs of Johannesburg, one of the spectral figures trudging through darkened streets on long trips to wash white people’s clothes and mind their children.

Soweto is an old acronym for South West Township:

Soweto at lower left; Sandton in upper-center

It was deliberately located out of sight, and out of mind, behind an artificial mountain of mine tailings.

A mountain of crushed ore that hid Soweto from downtown

At dawn recently, after walking through Soweto to the sounds of roosters crowing and her sandals slapping against her feet, Mrs. Hanong beheld a vision of urbanity: a stylish, new high-tech bus station.  As the doors of a gaily colored bus closed behind her, she claimed a front-row seat reserved for the elderly and settled in for a smooth, tranquil ride, so different from her usual experience on careering, jam-packed minibus taxis.

We’re visual creatures.  We take our cues from color.

“These people on taxis, they shout at us,” she said. “They say, ‘Granny, just move!’”

Curious response – move where?

“They talk funny to the people. On the bus, no one can shout at you, you see.”

South Africa has erased apartheid from its statute books, but the racist schemes of white minority rule remain engraved on the landscape in an extreme form of residential segregation. Millions of blacks still live in townships far from centers of commerce and employment.  

We’ve seen throughout the world that residential segregation is a preferred tool for keeping ‘those people’ near when we want them, far when we don’t.  We’ve also discovered that housing and transportation are intrinsically linked costs in the family budget, so it is possible to keep ‘those people’ away from us by channeling their affordable transportation alternatives.

Those with jobs, like Mrs. Hanong, must endure commutes that devour their time and meager incomes, while legions of jobless people are isolated from opportunity.

Like the QWERTY keyboard, that was apocryphally designed to slow down typing and hence prevent jamming the keys, a city can survive the deliberate inefficiency of an economically segregated residential pattern for a while … but then, as speeds increase, that inefficiency leads to insupportable traffic jams.

Traffic on the M1; note the walkers

Cities do mean traffic jams, yet traffic too snarled can undermine a city’s efficiency – and therefore its global competitiveness.

The new Bus Rapid Transit systems planned for South Africa’s major cities in recent years have promised to ease those hardships by providing fast, affordable, dignified travel on bus lanes cleared of other vehicles.

The addition of ‘dignity’ is curious.  Are the alternatives, such as combi vans known as taxis, undignified?

Prodded by a national commitment to improve public transportation for soccer’s 2010 World Cup, Johannesburg is carrying out the nation’s most ambitious program.

Need this station open by the time the stadium’s open!

Global events – like the World Cup or the Olympics – are always levers for dramatic and large-scale improvement of the urban infrastructure.  The accelerated political urgency of a hard date and global visibility conjures forth vast financial resources, and also a climate of relaxed regulatory permissiveness.  Things are done swiftly that could never be done slowly.

The city predicted that buses would be rolling from Soweto, where a quarter of the city’s four million residents live, to Sandton, the region’s commercial and financial hub, by June.

But its bus project is falling short of that goal and has also become a reminder of just how challenging it is for South Africa to transcend its scarred history. Beyond the usual logistical delays and a recession-related slowdown in financing, the project has confronted resistance from both suburbanites in what were once exclusively white enclaves and from some in the black-owned minibus taxi industry that sprang up during apartheid.

The taxis are an economically rational pure-market solution. 

The city’s formidable minibus taxi industry moves 14 million people daily in a nation of 49 million, far more than the bus and rail systems combined.

Like slums, they crammed poor people into smaller spaces, so as to raise aggregate spending power to the point of financial viability.

The economic solution: overcrowding

They also drive like madmen, with predictable results.

Fatalities after a Johannesburg taxi collision

“The transport system tells a very big story of the psyche of the nation,” said Rehana Moosajee, the City Council member who leads Johannesburg’s Transportation Department,, explaining that the country still had a long way to go in bridging racial and class divides.

Moosajee knows taxis are a big story

For the taxi operators, the problem is simple – the state-subsidized buses will destroy their business.

“Stop the BRT” = Keep us in business

The city’s first challenge was to win over the formidable minibus taxi industry.  It is perhaps the country’s greatest success story of black entrepreneurship, though with a history of ruthless violence.

Taxi operators demonstrating, March, 2009

Almost certainly it is the province of organized crime, part of the alternative power structures that operate in slums.

Experts estimate that hundreds, if not thousands, of people have died in “taxi wars” to control routes.

To the visible costs of commuting inefficiency, therefore, we must add the invisible costs of crime, violence, and extortion.

Who else lies behind the protests?

The city has sought to get the industry involved by offering taxi proprietors ownership of the bus operating company, but negotiations have dragged on, and some in the industry remain fiercely opposed.

As we saw in slums, the enemy within, inefficient systems nevertheless support free riders, fellow travelers, and fifth columnists, all of whom feed on the inefficiency and use subterfuge and manipulation to preserve it. 

Taxi blockage action, Johannesburg

After the bus line began running five months ago, along a 16-mile route from Soweto to the central business district, a bus was fired on and a passenger and a policewoman on it were hit.

Not by whites, I dare say.  This is black-on-black violence, with economics at its root.

Gunmen shot at the home of Mrs. Moosajee, hitting her security guard in the neck. And Vananda Khumalo, a taxi industry official and advocate for a deal with the city, was killed.

Murder for money, pure and simple.

At the other end of the pipeline, the opposition is more genteel but no less fierce:

The city has also faced steely opposition from suburbanites that some officials describe as a classic case of not-in-my-backyard resistance. At a packed meeting in November 2008, residents from the strand of stately, still mostly white communities along the heavily traveled Oxford Road shouted down city officials who were trying to describe proposed bus routes, including one that would use two of Oxford Road’s four lanes for buses.

Everything in Joburg goes up and down Jan Smuts

I’m very familiar with the Oxford Road area; good friends of mine live and work in its vicinity.

Although NIMBYs never want ‘those people’ to have access, this is a smidgen more rational in Johannesburg, where more affluent households have been subjected to carjackings and home invasions at gunpoint.  And not isolated incidents, either – rampant.  Many South Africans I know fear crime is rising steadily and wish they could emigrate.

Welcome to Saxonwold

“They just stood up and said, ‘No, no, no, no!’ ” recalled Tessa Turvey, a resident married to a mining industry entrepreneur. Mrs. Turvey has since honed a message in defense of her neighborhood, Saxonwold, where jacaranda trees arch over tranquil streets and homes are adorned with rose gardens, swimming pools and lush greenswards.

Plus high cement walls, razor wire, and ADT Armed Response signs …

A fast-growing sector of the economy

Mrs. Turvey, who is white, was dismissive of those who contended that the suburbs were guarding white privilege, noting that much of the black political elite, including Nelson Mandela, now lived in these same neighborhoods.  In a letter to the city, the neighborhood association’s members welcomed a mass transit system but opposed what they considered hastily and ill-conceived routes that they said would pollute the air, cause traffic to spill onto side streets, increase crime and damage property values.

 “This is not a race issue,” she said indignantly.

Regardless, it’s certainly a class issue, and a crime issue.

But Shireen Ally, a sociologist at the University of the Witwatersrand and a resident of Killarney, one of the affected suburbs, said race had everything to do with the suburbs’ reaction.

Anti-black or anti-green?  Often it’s impossible to separate.

At the raucous 2008 meeting, Ms. Ally said she grew angry as resident after resident in the overwhelmingly white audience said the bus project would damage their property values. Ms. Ally, who grew up in Lenasia, a township south of Soweto for Indians, chided residents with cars for not considering the needs of people dependent on public transport.

One in six working women in South Africa is a housekeeper or nanny. Families in the northern suburbs depend on these women, the overwhelming majority of them black, to iron their clothes and clean their toilets. Ms. Ally, who wrote her dissertation on domestic workers –

I’d love to read Ms. Ally’s book, From Servants to Workers: South African Domestic Workers in the Democratic State.  I’ll have to hunt it down.

– said she was disturbed by “the incapacity of these suburbanites to think about it from the perspective of the women they trust their children and home to, the women they call part of the family.”

Obliviousness is not necessarily racism, though.  Just oblivion.

Shortly after 5 a.m., while the suburbs slumbered, Mrs. Hanong stepped out from her small, tidy home in Soweto, a pocketbook dangling from her arm, bound for the housekeeping job she has held for a quarter century.  Just months earlier, Mrs. Hanong, who has never learned to read, was still catching taxis close to home. But her preference for the new buses is so strong that she walks an extra half hour to reach them. They cost about 65 cents each way, a savings of about 50 cents over taxi fare, a considerable sum, given her earnings of $160 a month.

In making that trade, Mrs. Hanong is paying herself about $1.00 per hour, or $25 per month, the equivalent of giving herself a 15% after-tax raise.

The newer buses in Johannesburg offer a smoother ride for workers who commute to wealthy suburbs from distant townships.

Even so, she has to transfer to a taxi to get to Sandton. Transportation still gobbles up a fifth of her salary.

As we saw in driving to the poorhouse, transportation normally takes a fifth of everybody’s salary – it’s just that the poor have less money.

Two hours after she left home, Mrs. Hanong stepped down in Sandton and headed to the townhouse of her employer, who works in a real estate office.

The near-northern business center of Sandton

There she shed her tan dress to reveal a baby blue uniform. She stripped the bedsheets, loaded the washing machine and put the dishes away with a soft clatter. When her boss’s white cat trotted into the kitchen, Mrs. Hanong pleasantly asked him, “Why not have your breakfast?”

From Ian van Coller

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[Continued from yesterday's Part 2 and the previous Part 1.]

As we continue reviewing where urban Indians live (a companion to my previous two-part snapshot of India’s housing situation), and where they will live in the future, we started at the bottom, where the poor are making their own housing and communities entirely independent of government, then looked at all the affordable homes being delivered, in one way or another, with some government assistance. Now, finally, we come to the purely market solutions:

Ad for Ambuja cement: such billboards are ubiquitous throughout India

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

7. Market walk-up

Most Indian cities are expanding rapidly.  The market’s fastest means of creating additional formal housing is for low-skilled labor to build two and three-story homes.  Neighborhoods like this are common all over Gujarat and Rajasthan:

Indian sprawl: expanding Jaipur

Sprawl is nothing unique to America – it happens whenever people have the chance to urbanize across land that is not too expensive:

Like many Indian cities, Jaipur keeps expanding until it hits natural barriers like mountains

When land is cheap, by far the easiest form of construction is a walkup, and in India, with its wealth of cement and sun, walkups are easy to build, hence cheap to buy:

However built, that’s a structurally credible three-story house

Once built, they become homes and neighborhoods:

Pride of ownership in the paint and stucco, and more homes coming behind

In most of the world – and for that matter, throughout most of history – a home is a process, something to be continuously improved:

Behind the streetscape, people keep building informally

The home is also the boundary of private space:

People make their own private urban spaces

8. Middle-income high-rise

As the city grows, its core becomes progressively more valuable, and that means it has to go further up:

High-end apartments, Mumbai: protected by concertina wire

Much of these are high-end:

Your enclave in the air: Mumbai

Much of Indian affordable housing is in the form of co-operatives, and judging by at least this one sign, the problem of free riders is universal:

A remarkable testament to ineffectuality: co-op fee defaulters

Throughout India, we see mid-rise and even high-rises springing up in the newer districts of growing cities:

High-rise, Ahmedabad

I didn’t go inside so I cannot be sure, but I expect these flats to be much larger than the low-income, perhaps 45 square meters to 70 square meters:

Balconies, piazzas, wide staircases: external signs of luxury

The goal is always the same: ownership.

A universal happy face: homeowner with keys to the new home

9. Market-plus subdivision

Name that country?

By now you might be forgiven for thinking that something in the Indian national character compels either a small flat or at minimum residence in a high-rise.  Prepare yourself for a surprise:

You’d think you were in Abilene, not Ahmedabad, wouldn’t you?

These apartments not only look Western-style on the outside, they are the same in the inside – anywhere from 80 to 120 square meters (850 to 1,300 square feet), laid out in a form and with amenities that would make any American feel completely at home.

These will still be quality homes in twenty years: Ahmedabad

I was personally agog at seeing them, they seemed so thoroughly incongruous – but then I asked myself, what housing will still be market-quality in twenty years?

High physical density but low people density: Ahmedabad

10. Havelis and palaces

Back in the eighteen and nineteenth century, when India underwent its first wave of urbanization, the great textile merchants and import-exporters lived in sumptuous townhouses called havelis.  Bikaner and Mandawa, two towns in western Rajasthan, have large concentrations of them.  Most are today crumbling into ruin – the caravan routes having been severed after the India-Pakistan partition created a barrier to land traffic – but a few are being restored, such as Haveli Nadine Le Prince:

Urban luxury, nineteenth-century style

A few have been converted into historic or heritage hotels:

Pal Haveli, Jodhpur

They are right in the center of town, meaning all of organic India is just outside the front door:

Pumping water right outside Pal Haveli, Jodhpur

Inside is private serenity:

In the afternoon cool …

And that is my takeaway from housing in India.  The outside is nothing, it is the grimy and weatherbeaten face one shows the world at large.  One keeps one’s soul inside:

Urban luxury, nineteenth-century style

Yet, just outside the gates, lies rambunctious India:

Exit your gated community, and you’re back in India

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[Continued from yesterday's Part 1.]

Does Does it matter where they live if they all go to the same school?

In yesterday’s post laying out a typology of where urban Indians live – a companion to my previous two-part snapshot of India’s housing situation – we started from the bottom up, looking initially at the purely private, purely informal solutions that people create out of necessity.  The photos demonstrate that given enough incumbency, people acquire an implied political legitimacy, and the municipality takes small steps to rationalizing the public-space aspects of the urban infrastructure. 

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

4. Slum-relocation community

As slums are a place where private investment outpaces public infrastructure, with continuous urbanization there usually comes a moment when the informal settlements have overrun the available transportation or utility infrastructure, and a portion of the slum must be demolished to create space, such as for a railroad right-of-way.

Alleyway through a slum: that’s a train going by

Commuter train, Mumbai – the municipality required ten meters right-of-way either side of the tracks

Under Indian law applicable to Mumbai, the slumdwellers had a right of access to housing, meaning that to relocate them required their consent, and to obtain it, the government promised to build them new affordable high-rise co-operative flats (which we’ll see later in this post).  But that would take time, and in the meantime, the right-of-way had to be cleared, so the municipality built relocation flats – transitional housing:

Relocation flats, Mumbai

Naturally, people living in transitional housing have little motivation to beautify their public space:

Relocation flats, Mumbai, the trash does tend to pile up

Yet they keep clean their interior space:

Flats arranged around a courtyard, and it is fairly clean

When in their relocation settlement, they conduct business.

Pipe scavenging and recycling business

5. Affordable co-op

Because housing – its location, quality, production, and affordability – will be a driver of Indian global urban competitiveness, at some point a government – usually a municipal government – decides as a kind of civic economic self-defense that it must create affordable housing. 

Mankhurd co-operatives, funded through World Bank Loan repaid by railway surtax (see below)

As cities densify, there is only one direction to go – up. 

Oshiwira 1, affordable co-operative built by SPARC, Mumbai

The city becomes vertical, and to become vertical, that requires structural framing, which implies formality. 

The scaffolding may be casual but the building is reinforced concrete

Similarly, cities mean traffic jams, and bad cities have worse traffic jams, so the municipal competitiveness – to say nothing of quality of life – requires the addition of public transportation, and depending on location, that often means railways.

In Mumbai, for instance, people relocated away from municipal infrastructure (previous grouping) benefitted from affordable new-construction high-rise co-operatives whose principal loans were repaid through a surtax on railway tickets – thus drawing a direct financial link between the improvement of middle-class infrastructure (in this case, the railroad right-of-way) and increased affordability for the poor.

Once the government is involved, formality also implies certain basic amenities.  Even though the flats are tiny, they have all the necessities, such as a flush toilet:

Toilet, which will be two footprints in the floor

The toilet lacks fixtures – for the time being, it is merely a ceramic hole into which people make their deposits – but the configuration allows for a later retrofit of an individual seat toilet.  The apartments are extremely small, averaging 25 square meters (about 270 square feet), which compels design-size limitations such as showers rather than tubs:

Bathroom: designed for just a handheld shower

Concrete, though strong, is brittle, and extremely difficult to retrofit.  (Ever try drilling into concrete?) 

Wiring running outside the structural concrete, Oshiwira 1

[We see a similar phenomenon in pre-WW1 English homes and apartments, where the plumbing and electrical run outside the structure because there is no room inside the building – and its narrow walls – to accommodate hiding the piping.]

Because increasing lower-income Indian affluence changes people’s housing consumption expectations, the embryo apartment that is an acceptable size today may be functionally obsolescent in a decade, and if so the retrofitting will be a challenge.  Even though I am delighted to see these high-rise flats going up, I worry just a little about their eventual economic or physical obsolescence. 

6. Affordable high-rise market flat

With such an enormous shortage of housing – of all configurations, particularly the affordable ones – it’s no wonder that major Indian conglomerates are rapidly entering the field of new housing production, such as with the Tata nano-house.  Sometimes it seems as if the entire nation is one gigantic construction site:

Affordable high-rise in construction, Ahmedabad, January 2010

Built, building, and planned to be built: Ahmedabad

)

Affordable new-construction high-rise flats, south Ahmedabad

Affordable new-construction high-rise flats, south Ahmedabad

Remarkably, much of the construction is being done by women:

Women are a large portion of the construction workforce

The goal is a fully formal, mortgageable house in the price range of Rs 150,000 to Rs 300,000 [Roughly $3,500 to $7,500 US – Ed.], an income band for which there is already a huge demand, one showing no signs of abating.

)

Recently built affordable market flats, Ahmedabad

The developments are well designed and highly dense:

Site plan and floor plate, Ahmedabad affordable high-rise

Though small, the apartments are fully formal:

On the inside, it’s fully formal

They have a modest but serviceable toilet:

Two footprints today, a ceramic bowl tomorrow?

In addition to the utilities – water, electrical, and heat if required (often it is not) – there is a fully practical if tiny kitchen:

Everything including the kitchen sink

Indeed, so rapidly is India urbanizing, and so inexpensive is large-scale small-apartment construction, that just above the government’s level, the marketplace is exploding with new housing:

[Concluded tomorrow in Part 3.]

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Where do urban Indians live?  In almost every configuration and tenure imaginable, from living in ramshackle sticks-and-tents to Texas-style-subdivisions, with everything in between.

Tents in the foreground, gated subdivision in the background: Ahmedabad

A little while back, returning from my three-week trip to northern India, I posted a two-part snapshot of India’s housing situation, focusing on the confluence of events across political, economic, and urbanization dimensions.  This mainly visual post will slice through the onion by income and tenure configuration levels, giving a typology of the different forms of housing now present in Indian cities.

At the South Asian Housing Finance Forum, Delhi, January, 2010

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

In a country of a billion-plus people, undergoing what is probably the highest rate of urbanization (measured in total population moving to cities), we can certainly expect to discover every imaginable type of urban residential accommodation – and that the nation is in fact greatly short of quality affordable housing.  Indeed, the Government of India officially estimates a ‘quantitative deficit’ of more than 25,000,000 homes. 

Further, because housing demand is elastic, as India becomes richer and as more new homes are created, people will consume more housing, household size will shrink, and households will increase much faster than the population does.  The result is that over the next 10-15 years India will have the ability to absorb the all-but-unthinkable number of more than 100,000,000 new homes, mostly in urban and urbanizing areas. 

Where does he live?  Where does his family live?

The India we see today is a nation in transition – exploding through the carapace of nineteenth-century soot, filth, pollution, and bustle into a twenty-first century powerhouse. 

If slums are a phase through which rapidly urbanizing cities pass – as I think they are – then we have to expect and calibrate India’s urbanization from the bottom of the pyramid on upward, starting with housing built entirely by poor people, for poor people, in the face of government indifference or hostility:

1. On the streets: pavement dwelling

We start with those who have come to the city despite having nothing whatsoever, and who live on the streets.  In Mumbai and in Delhi, one can find small or larger families some of whom live on the streets.

Family gathered on a Mumbai sidewalk

In America and the European cities, one can find the homeless, but in these developed nations, being homeless is always accompanied by a mental or behavioral problem; in India, it can be a condition of simple urban poverty. 

I’ve taken only a few photographs of Indian pavement families, because there is something so intrusive about using a long lens to peer into a household’s workings, even if the family has chosen to live their lives in public.  Still, there is also something homelike and practical, such as cooking:

Pavement family rice pot

Living on the street necessarily means evacuating on the street:

Man urinating discreetly into the gutter, Bikaner, Rajasthan

Men and boys urinating in public are so commonplace that a convention has evolved: if you turn your back to the street and hold yourself still, it is somehow understood that people should look away.    But male urination is the least of the sanitation challenges, for it can be done relatively discreetly and relatively hygienically.  More challenging is the effort to protect women and the related campaign to eliminate open defecation, which is not just a matter of esthetics but also of health – both for the evacuator and for the water supply, a risk that has been known since the dawn of history.

2. Impermanent slum (’landing paid for urban immigrants?’)

Pavement dwelling is the lowest economic form of urban existence because it is the least safe, the least private.  One notch up is the ramshackle urban slum, made entirely of found materials, and invariably located on publicly owned low-value land – usually next to the river, the stream, the paper mill, the cement factory, or the dump – where people can settle and create their own intra-community, a world of their own inside the world of the city.

I profile one such in A day in the life of a slum [Post to come – Ed.]:

Ahmedabad and the Sabarmati River

Throughout history, people have been lured to cities by the promise of higher money income, a promise that is usually true, and they imagine that when they move to the city, they will be able to keep the animals they have raised in the countryside.  That was true of the Irish who came to Boston during the Potato Famine, and it seems evidently true of the Gujaratis coming to Ahmedabad whom I photographed outside my hotel room window:

Keeping goats, most likely for milk

Critical to these households is that by moving to the city, they can earn money, give their children a better education, and expand their horizons, if not for themselves then for the next generation.

Slums adjacent to Mumbai Airport

3. Permanent slum (’informal settlement’)

Slum community built on the infill outside a truck distribution warehouse

Slums improve, though; given time, people gain a perception of security of tenure, and as they come to expect that they will be there longer, they bring more durable found materials into buildings and rebuilding their informal settlement.

Informal settlement, Mumbai

The house is made into a home, with a waterproof roof, laundry drying on the line, and herbs being cultivated in plants:

Note the plants being grown in pots

Characteristic of these slums is that they are, in general, ground-floor:

Self-built settlement, Oshiwira neighborhood, Mumbai

Buffalo yard in the Oshiwira informal settlement

People keep animals immediately outside the family home.

After a while, the slum becomes sufficiently permanent that people invest in structural materials to add a second story:

Work on the ground, live a flight up: Mumbai

Often a residence over a business:

New urbanism, home-grown: Dharavi, Mumbai

Given time, these neighborhoods become physically formalized:

Would you call that a slum?  After having seen the previous photos?

Sometimes the municipality also recognizes the legitimacy of a long-standing urban settlement, by adding public infrastructure like paving:

Jadibanagar, Ahmedabad: note paving and water tank (blue)

Jadiabanagr, Ahmedabad

Have you noticed what’s happened in this sequence of photographs?  All within the realm of purely informal housing – self-built, self-organized, self-perpetuated – we have the first faint stirrings of a civic response.  It starts with tolerance – visual aversion of their presence – and then rises to the gradual formalization of public space, for community hygiene or out of charity, it moots not.

What happens when the community decides it has a duty to these urbanites, whether or not it wished for them to arrive?

Ahmedabad: community center in informal settlement

[Continued tomorrow in Part 2.]

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I’ve given you every chance to move, Black

As revealed in a recent Guardian (UK) article, if the private participants don’t move, the government can find itself stalemated.

Why aren’t you moving?

It was a £1.5bn cash injection that was supposed to make a dent in England’s 5m-strong housing waiting list.

Five million waiting list?  In a country of 60 million total? 

The NHF, which represents housing associations, estimates that households on the waiting list in some areas would have to wait 280 years for a home.

I’ve got a good chance to be next up

Chief executive David Orr says: “What was already a significant problem [of demand for affordable housing] is getting worse on a day-by-day basis.”

Doesn’t that signal there is something powerfully wrong with the UK’s housing production system?

“In the short term, we have got to do as much as we can [to build], given the circumstances.”

So when housing minister John Healey announced the government’s new affordable housing drive this summer, first reactions were positive.

Want a billion pounds?

“The cash was a bit of a surprise and very welcome,” says Richard Capie, policy director at the Chartered Institute of Housing (CIH). “When was the last time you saw money coming from education, health and transport into housing?”

Capie can’t remember seeing money flowing from education into housing

But now the excitement has subsided, questions are being asked about the government’s new plans and its attempt to spend its way out of the house-building slump. Can the money really do anything to ease waiting lists?

Depends on how many homes the money builds, and at what affordability level.

And how can we provide enough affordable homes for the future once the funding runs out?  Such issues will be at the heart of the National Housing Federation (NHF) annual conference starting in Birmingham today [23 Sep 09 – Ed.].

Certainly, plenty of cash is going into addressing the development downturn: the new £1.5bn comes on top of £1bn in the Budget, including a special fund to restart stalled development projects. Housing associations are building, despite:

[1] Tougher access to finance

[2] Tightening land supply

[3] The collapse in demand for ownership that makes it impossible to cross-subsidise schemes with homes for sale.

You’re out of the building business

Tell again why they’re building?

Keith Exford, chief executive of one of the biggest developing housing associations, Affinity Sutton, says his association “is whole-heartedly open for business.”

Of course they are.  Sharks gotta swim, and bats gotta fly.  Developers gotta chase the next deal ’til they die.

But he warns that the recession is straining the system. “If you are going to do social housing without the benefit of cross-subsidy, then you need more grants and you build fewer houses out of available resources,” he says.

Cross-subsidy, which I liken to the unicorn – much pursued and seldom captured – is predicated on selling market-quality homes at market prices without having to spend  market costs (usually for land) to develop them.  Then the ‘excess’ profits resulting are plowed back in to greater affordability on the other apartments.

“We need to start thinking about the current development model as I can’t see how it can survive.”

That development model is precarious.  More than precarious.

Must answer me, these questions three

Ere the other side he see

In the US, we’ve seen that the LIHTC delivery system has been disrupted, and although it is slowly repairing, it has some ways to go.  The British system is under different but no less profound stress.

The NHF also argues the government is undermining social housing growth by insisting that housing association rents be cut by 2% because of falling inflation.

First case of mutual stalemate.  It’s tempting to scale back resident rent increases, but every dollar so saved is a dollar less of free cash flow to the Housing Associations – which, as non-profit MEEs, deploy their excess capital into building new homes.  By easing the stress on current residents, they prevent other people from becoming residents in the new homes Housing Associations would otherwise develop.

Orr estimates the cut would cost associations £260m a year, slashing development by up to 4,000 homes a year.

To save the many 2% a year, we leave 4,000 out in the cold.

If it were up to me, I’d charge them 2% more

And this is self-defeating; in the long run, lack of supply will push up rents.

“When we are expecting to see public capital investment reduce, reducing associations’ revenue capacity just makes development more and more difficult.”

What would make a real difference, associations say, is a readier supply of mortgages for those wanting shared ownership.

Certainly – but if the overall interest rates go lower, that will also push up prices.  Stalemate again?

They also urge more flexibility from councils on planning to make it easier for developers to build. Councils, associations believe, should not expect as much from planning gain – where developers incorporate affordable housing in return for planning permission – as they once did.

As I’ve previously posted, the UK’s form of inclusionary zoning, Section 106, is a zero-sum game.  Whatever the locality wins, the sponsor loses.  Every dollar of affordability grasped by the locality is a dollar less profit, land value, or risk cushion.

Councils themselves have now been put centre stage in developing new social housing. Earlier this month, the government confirmed 47 councils will share £127m to build more than 2,000 homes, with more money up for grabs in the autumn.

That’s £63,500 per home of permanent sunk (non-recoverable) cash equity out.

One per new affordable home?

There are also planned reforms to the way council housing is funded, allowing councils to keep money from rents. The Local Government Association (LGA) is urging the reforms to be pushed through quickly. LGA chair Margaret Eaton says: “Councils could build up to 300,000 new homes and improve conditions for millions of tenants if there is root-and-branch reform of the housing finance system and the government takes away the barriers to building.”

Like the love affair with greenfield preservation.

But some authorities are unhappy about the house-building drive, since it means the funding they need to improve their existing stock is on hold.

Another stalemate?  Spend more to build new and you have less to rehab existing? 

That’s the consequence of the public housing dependency trap.

The authorities affected – around a dozen that have set up arm’s-length management organisations (ALMOs) –

In addition to housing associations, UK public housing is operated by local authorities.  Under the Labour government, strong coercion was applied to compel those authorities to set up professional management operations (Arm’s Length Management Organizations, or ALMOs).

I’m tickled to be an ALMO

Having relied on the government for funding, the ALMOs find themselves in the position of Flounder in Animal House: “You effed up.  You trusted us.”

– now stand to lose hundreds of millions in decent homes programme funding. Gwyneth Taylor, policy director of the National Federation of ALMOs, says the government should not renege on its promises to existing tenants.

Taylor doesn’t believe in reneging

“They are throwing all their eggs into one basket, when there’s no guarantee all the £1.5bn will be spent,” she says.

Catch the subsidy!

Block that metaphor!

For the Conservatives the answer lies in scrapping current house-building targets, which, according to shadow housing minister Grant Shapps, are just imaginary numbers. “In many ways it’s not through lack of money that we are not building enough homes… [the government] has got the wrong approach, with: 

[1] Too much targeting

[2] Inefficient ways to spend money

[3] Lots of schemes that add little, and

[4] Cumbersome administration.”

(”Other than that,” he added, “they’re swell fellows.”)

For Exford, recently appointed to the Joseph Rowntree Foundation’s new housing taskforce, which aims to develop policy options, the solution could lie in more homes for intermediate and market rent.

Basic principle: if you add supply anywhere on the income/ cost continuum, you will ease stress throughout the system.  That would be a move to loosen the stalemate.

More flexible options could bridge the gap between those who can afford ownership and those who qualify for scarce social housing. “We need a more sustainable, mixed-income, mixed tenure product range,” he says.

The CIH’s Richard Capie argues that, in the wake of a government pledge to make the allocation of social homes fairer – councils are being urged to inform communities better about who gets housing, for example – there should be a range of “price points” for affordable housing.

“Someone in a social home on £65,000 and someone next door on housing benefit both pay exactly same rent. It’s not about them being in the properties – that’s a good thing – but should we be looking at rent geared to income? That would give you more rental income and that’s how you build more homes.”

Means-testing is another form of poverty trap.  Another possible mutual stalemate.

The time is ripe, many feel, for change, and this is acknowledged by Sir Bob Kerslake, chief executive of the Homes and Communities Agency: “It is critical that the sector actively joins the debate and is open to new models. Who knows what the process will bring, but we are more likely to succeed through collaborative thinking across the housing and regeneration world.”

To make a move, you’ve got to break the mutual stalemate.

At least it’s not stalemate

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