In an effort to harness the benefits of urbanization and improve the living conditions of the urban poor, Latin American countries have experimented with housing subsidies. Now that the region has several decades of experience under its belt, it is time to look back and ask: Have subsidies worked? What kind of impact have they had on the lives of lower-income residents? Moving forward, how can cities pay for ongoing urban renewal?
To address those questions and share their experiences, officials in charge of designing and implementing national housing policies in eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, Paraguay, and Peru) recently met in Washington DC, along with representatives from the World Bank, Cities Alliance, the Urban Institute, and Wharton's International Housing Finance Program.
Looking into the future, while the discussions covered a lot of ground, at least three major issues caught my attention.
1. How to align the national level policies and programs with local level decision making in urban planning and management? Each country’s housing policy has its own unique scale, context, political circumstances and measure of progress, but a number of common challenges were clear: How to implement national housing policies when working with local governments with very diverse technical and financial capacities; and avoid and/or manage the costs of urban sprawl (both formal and informal)? The Urban Institute synthetized the US experience working with block grants channeled from Washington to local governments for community development and housing so that participants could see what best fits their realities. Although the contexts are different, all governments were interested in learning from what has worked (or has not).
2. What should the next generation of housing subsidies look like? Latin America started experimenting with housing subsidies in the 1980s with Chile leading the way. But what has really worked? And, more importantly, how to improve on that? While subsidies have indeed increased access to housing in most Latin American countries, and have helped reduce the housing gap, important questions were raised: Have they made more affordable housing available close to people´s workplaces and businesses? Are subsidies diversified enough in terms of housing solutions (i.e. rental vs. ownership)? Is one single subsidy program sufficient for serving both large cities and rural and semi-rural areas? In my opinion, it is becoming clear that housing subsidies alone won’t be able to close the housing gap: a more diversified portfolio of housing solutions is needed.
3. As urbanization stabilizes, how to finance much needed redevelopment and renewal? Latin American cities are looking for new ways to redesign existing urban areas and finance it—encouraged perhaps by the sluggish macroeconomic environment. For example, to renew its underutilized downtown areas, Medellin is piloting “tax-increment financing” (a model to capture increases in land values, albeit with a rather unfriendly name).
The good news is that most Latin American countries seem to be competing for the title of the region’s affordable housing top innovator: Brazil is using pragmatic public-private partnerships involving three levels of government (federal, state and city) to redevelop city land and create space for affordable housing in the center of São Paulo; Mexico succeeded at providing subsidies and is now re-calibrating its policies to promote better located housing; Bolivia has managed to increase the supply of low-cost housing for the poor but is trying to leverage private sector support and keep prices reasonable; with a new administration in Argentina, policymakers are eager to design and implement a modern housing policy right from the start; Peru is trying to figure out how to maximize the impact of major investments in transportation infrastructure; urbanization in Paraguay is dynamic but still well below the regional average – giving authorities the opportunity to shape the future today.
Factoring in this progress and the considerable challenges that remain to provide affordable housing to Latin America’s growing urban population, it seems to me that there are three important areas that could unleash additional innovation across Latin America and deliver more results to the region’s urban poor:
1. How countries manage to capture, organize, and use granular data on the housing market for their public policies and private investments.
2. How national governments adjust their operations to a decentralized framework in order to empower provinces and municipalities to pick the housing policy mix that best adjusts to the needs of their populations.
3. How governments can better engage with private sectors to: encourage them to reach out to market segments that are underserved; embrace more efficient, resilient and environmentally friendly technologies; be open to trying new financing mechanisms to fund the kind of redevelopment projects that our cities need so badly.
After two days of interacting with so many talented policymakers and intellectuals committed to providing affordable housing for urban families, I believe there are reasons to be optimistic about the future of innovative urban housing policies throughout Latin America.