JA N UA RY 2 02 0 Urban Land and Housing Market Assessment: A Toolkit Acknowledgements This paper was written by Paavo Monkkonen, Yan Zhang, and Andre Comandon, under the leadership of Judy Baker (Lead Economist) and Dean Cira (Lead Urban Specialist), the co- leads of the Global Solution Group on Urban Poverty and Housing. Yan Zhang and Yuan Xiao managed the writing and publication process. Sameh Wahba (Global Director) provided strategic guidance to the team. The paper benefited from peer review comments from Wael Zakout (Senior Technical Adviser), Ellen Hamilton (Lead Urban Specialist), Albert Saiz (Associate Professor of Urban Economics and Real Estate, MIT) and Nancy Lozano Gracia (Senior Economist). The authors thank Kecia Rust (Center for Affordable Housing Finance) and Claudio Acioly (UN-Habitat), for excellent suggestions and feedback on earlier drafts. The report also benefitted from discussions with Xueman Wang, Michael Manville, Steven PHOTO BY: © DOMINIC CHAVEZ/WORLD BANK | DESIGN: ALEJANDRO ESPINOSA/SONIDEAS.COM Louis Rubinyi, Peadar Davis, Paul Bidanset, Graham Deane, Charles Mulindabigwi Ruhara, Luis Triveno, Achilles Kallergis, Thomas Esch, Malcolm Childress, Shohei Nakamura, Sarah Elizabeth Antos, and Alejandro Blei. Rodica Olariu supported the editing process. This pa- per was generously funded by the Global Platform of Sustainable Cities (GPSC). Urban Land and Housing Market Assessment: A Toolkit 3 PHOTO BY: © WORLD BANK Quick user guide WHO IS IT FOR? This Toolkit aims to assist practitioners in undertaking a standard upstream diagnosis to inform policies and programs in the housing sector at the city level in developing countries, with a focus on the supply side. The diagnosis is designed to balance the need for achieving a comprehensive assessment of a complex sec- tor like housing and the political impetus to identify problems and take actions within a short timeframe. WHAT IS IT FOR? The Toolkit has been designed to provide a flexible diagnostic framework to aid a team in evaluating a city’s housing challenges and developing a prioritized set of possible interventions – both reform and invest- ment – that government and private entities can take to address them. By applying the Toolkit, the team will: · Quantify the city’s quantitative and qualitative housing deficit · Describe the city’s urbanization and housing development trends · Quantify residential growth patterns of the city compared to other cities in the country · Develop a housing typology to frame different housing challenges · Identify constraints – regulatory, financial, political, or physical – to different types of housing development · Describe the most important institutions of the housing sector and relate them to major constraints and housing problems · Develop an informed and prioritized approach to intervention– reform and/or investment · Communicate the importance of the housing sector to relevant agencies and give them the tools to advocate across sectors HOW DO I USE IT? This Toolkit is envisioned as a living document that incorporates learning and continued refinement. It builds on decades of research and practice in the land and housing sector, combining elements from the three existing types of assessments, tapping into new technology while striving for practicality and ease in application. It resembles a scaled-back version of the UN-Habitat Housing Profile and draws on recent World Bank Group experience. Users are encouraged to apply this Toolkit – either in its entirety or in part, depending on the primary questions to be answered. The Toolkit is to be regularly updated with feedback from its applications in a variety of urban contexts. PHOTO BY: © DOMINIC CHAVEZ/WORLD BANK Table of Contents Table of Contents Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Quick user guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.1 Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.2 Motivation: Taking the pulse of land and housing markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.3 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.4 Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2. Part A: Indicators of Urban Housing and Land Market Performance . . . . . . . . . . . . . . . . . 17 2.1 Desk Review for Context. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.2 Geographic Scope of Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.3 Considerations in Gathering Indicator Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.4 Urbanization and Housing Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.4.1. Urbanization trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.4.2. Housing Needs and Demands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.4.3. Housing Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.4.4. Urban Land Supply for Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2.4.5. Building Regulations and Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.4.6. Infrastructure and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.4.7. Housing Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.4.8. Building Materials and Construction Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.4.9. Housing Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3. Part B: Assessing Constraints to Housing Development and Upgrading. . . . . . . . . . . 35 3.1 Survey Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 3.2 Outlines of four surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 3.3 Analyzing survey responses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Urban Land and Housing Market Assessment: A Toolkit 7 Table of Contents 4. Part C: Institutional Map, Potential for Reform, and Political Strategy. . . . . . . . . . . . . . 39 4.1 Institutional map. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.2 Surveys of high priority institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 4.3 Analyzing survey responses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 5. Framing the Report: Housing Problems and Guiding Principles . . . . . . . . . . . . . . . . . . . . . . . . 43 5.1 Urban land supply for housing: Security, Tradability, Expansion and Infill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.2 Development regulations: Appropriate, Dense, Clear and Non-discretionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 5.3 Infrastructure and services: Universal, Sustainably financed, and Community participation in upgrading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 5.4 Building materials and construction industry: Transparent rules, Promoting low-cost building materials, and Management of multi-owner buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.5 Rationalizing Subsidies: Transparent, Targeted, and Well-Located. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 APPENDIX A Technical Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 APPENDIX B Sample Survey Outlines for Housing Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 A. Formal Greenfield Development: Survey for Housing Development Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 B. Formal Infill Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 C. Informal Greenfield Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 D. Informal Infill Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 APPENDIX C Sample Doing Business Survey Output: Obtaining a Construction Permit in Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 8 Urban Land and Housing Market Assessment: A Toolkit 1. Introduction PHOTO BY: © DAVE LLORITO/WORLD BANK Urban Land and Housing Market Assessment: A Toolkit 9 1. Introduction 1.1 Overview often fail to recover their costs from users and supple- mental funding from the state is insufficient for them Access to affordable, safe, and secure housing in cities to expand to cover newly built neighborhoods, let alone is critical for human well-being and national prosperity. anticipate new neighborhood development and install Cities in emerging economies often face multiple hous- infrastructure in advance. Moreover, the problems com- ing problems – formal housing is unaffordable to most, pound without proper management of public assets – the informal housing is of low quality, basic infrastructure is infrastructure. lacking, and population growth outpaces government supported urbanization. Providing affordable and ade- Another commonly damaged link is the planning and quate housing is central to delivering the United Nations’ building regulations, which often impose unrealistic and Sustainable Development Goals (SDGs), especially with counterproductive minimum lot sizes and limitations regard to Goal 11 of Sustainable Cities and Communi- on floor area ratios. When a majority of residents can- ties. Prioritizing government intervention in the housing not afford a housing unit that meets minimum building sector is challenging because well-functioning housing and zoning codes, it is likely that on the one hand, these markets depend on competent government action in standards are too high, and on the other, a lack of co- overlapping spheres, from infrastructure provision to ordination along this chain has made the production of appropriate development regulations, as well as multiple housing inefficient. Additionally, the goal of preventing private sector industries, namely real estate develop- congestion is thwarted by imposing low densities. In fact, ment and building materials production. The high cost of city governments in countries worldwide create gridlock completed housing units relative to household incomes through low-density sprawl and giving free road space to means that a system of private sector-built housing de- private cars. pends on financing instruments. An effective primary mortgage market requires not only sound financial and This housing value chain portrayed in Figure 1 is an ide- prudential policies, but also stable local governance of alized version of the housing production process. In property rights and public services. many places, a formal housing value chain produces a small share of the overall housing stock, and the informal Housing Value Chain. One way to understand the com- value chain deserves the majority of attention given its plexity of the housing market is the Housing Value Chain. importance for most people. This informal housing value This framework links the different elements that must chain exists because the formal chain is often missing come together within national and local policy environ- links entirely. Thus describing the institutions that could ments to produce housing. As illustrated by Figure 1, each play needed roles in housing production is illustrative for link in the chain adds value to the final product. When all policymakers. the links function well, the housing market functions well. When any link is broken, the whole system will run less This toolkit, therefore, serves as a guide to create an smoothly. evidence-based assessment of a city’s land and hous- ing market performance. The focus is on describing the A commonly damaged link in developing countries is formal and informal value chains for housing produc- that of infrastructure and services. Public works agencies tion to highlight the main challenges in this sector. The Figure 1. Housing Value Chain City planning and Infrastructure Developer Public asset building regulations and services finance management Housing Access to land Construction and End user Property building materials sectors finance management 10 Urban Land and Housing Market Assessment: A Toolkit 1. Introduction PHOTO BY: © SIMONE D. MCCOURTIE / WORLD BANK constraints preventing the different components of the complementary nature of both supply and demand side value chain from functioning will assist in identifying interventions. entry points for reform and investment. This assessment can be viewed as due diligence for urban development The prevalence of informal housing solutions means that and housing sector lending operations of the World Bank local governments can have a large positive impact in the Group, and used by governments to inform their policy housing sector by removing local constraints in the formal formulations and investment decisions. It is intended housing supply chain. Small adjustments to rules and regu- to work as a “quick scan” rather than a comprehensive lations to adapt to the reality of a city’s resources can have review of the housing sector. The goal is to identify the a large impact, and expansion of access to land, trunk infra- most critical gaps in the housing sector and then later structure, targeted and transparent subsidies, and the deliv- channel resources into examining and intervening these ery of basic services are also critical for the housing sector. critical areas. This document is also intended to be a liv- ing document, as data sources improve and change, and The toolkit has three parts. Part A is focused on indica- its application provides feedback for improvement. tors to assess problems in the city’s housing and land value chain, and current housing and related policies. The approach is primarily focused on the supply side and The indicators guide the team in responding to questions on local government policies. This is an important direc- about the nature and pace of urban growth and housing tion for work in the housing sector because the supply development, housing policies, housing deficits, land side and local-level housing policies are less well under- availability, development regulations and informality, stood and less systematically analyzed than the demand the different types of existing and recently built housing side and the national level1. A companion to this toolkit stock, and the magnitude of the city’s housing problems. is a review of housing sector assessments over the past Some indicators will guide fieldwork and others will be three decades, which emphasize the importance and gathered during fieldwork. 1 For references, see: Chiquier, L. and Lea, M. 2009. Housing Finance Policy in Emerging Markets. Washington, DC: The World Bank. Available here: http://docu- ments.worldbank.org/curated/en/833371468152071863/Housing-finance-policy-in-emerging-markets. Struyk, R. 2009. Guide to preparing a housing finance strategy. Nairobi: UN-Habitat. Available here: https://digitallibrary.un.org/record/788908. Urban Land and Housing Market Assessment: A Toolkit 11 1. Introduction Table 1. Overview of Toolkit PART QUESTIONS METHOD / OUTPUT A. Indicators of What are the city’s housing deficits? Create indicators using remotely Housing and accessed secondary data and local What are the city’s affordability challenges for Land Markets data sources / Nine groups of different social groups and for renters/owners? indicators that highlight housing What are the main housing policies and problems and scale of current policies land governance frameworks? Where is the city adding housing and is there room to grow? Do resale markets exist and how do they differ by market segment? B. Constraints What are the steps of developer-built housing and Create indicators and narratives to Housing self-built / incremental expansion of housing units? using survey data of housing Development development / Description of process, Where are the constraints to different types (formal/ and Upgrading assessment of major constraints informal, greenfield/infill) of housing production? C. Institutional What are the most important governmental Survey stakeholders, review existing Map and Prioritized and non-governmental institutions in housing literature / Institutional map and Intervention Strategy arena at different levels of government? ranking of potential for change, assessment of intervention strategy What institutions relate to the most constrained links in the housing value chain? Which have the greatest potential for change? How can housing reforms align with existing political priorities and development programs? Part B is focused on assessing the different factors restrict- 1.2 Motivation: Taking the pulse ing housing production and ranking them in importance. A set of expert surveys will generate both a detailed descrip- of land and housing markets tion of the process of building different types of housing Many low-income countries are experiencing rapid ur- – formal and informal, infill and greenfield – and the con- banization. With more than half of the world’s residents straints to these different types of development. The survey live in urban areas, providing affordable housing to ac- methodology also provides a rough estimate of the impor- commodate the population growth is becoming more tance of different constraints to development and identifies challenging for national and local governments alike. the main actors involved. The team can then prioritize gov- Informal settlements have mushroomed as a coping ernment agencies, private organizations, and civil society groups to assess their potential for engagement. strategy and gateway to opportunities for migrants, while posing substantial challenge to urban management. One Part C prioritizes potential interventions by assessing of the targets of UN’s Sustainable Development Goal 11 which government actors are the most amenable to en- is to ensure access for all to adequate, safe and afford- gagement and have the greatest capacity for action and/ able housing and basic services and to upgrade slums by or reform. It builds on Parts A and B by adding surveys of 2030.2 One of the root causes for the lack of affordable actors associated with the most significant constraints to housing in the formal sector is the ill-functioning land housing production. market which pushes up housing costs and distorts the spatial distribution of housing versus employment. This document describes each of the three parts separately. The concluding section suggests an organization for the final There has been an increasing interest from client coun- report along with guiding principles for the housing sector. tries for the World Bank Group’s technical and financial Additionally, it articulates some arguments for the economic support to expand the supply of affordable housing. and financial importance of the housing sector, which many However, there has not been a common framework governments may not recognize. Table 1 presents the main for diagnosing the urban land and housing sector as a questions, methods, and outputs of the toolkit. whole, particularly on the supply side. In the absence of 2 https://sustainabledevelopment.un.org/sdg11 12 Urban Land and Housing Market Assessment: A Toolkit 1. Introduction a robust framework and standard assessment tool, the Reforms and investments in many areas can lead to large diagnoses tend to be either overly comprehensive and improvements across the entire housing value chain. The costly or incomplete or simplistic. They also lack the most common examples are expanding property rights ability of identifying key constraints, and are not driv- governance, urban infrastructure and the creation of ser- en by specific analytical lens or focused on a particular viced land for housing, rationalizing local development “building block” of the housing value chain, resulting in regulations to match a city’s resource level, improving inaccurate identification of key constraints. This limits property rights and land governance, facilitating infill and the effectiveness of proposed interventions. urban densification, and removing perverse incentives in the tax system. Housing is a uniquely complicated economic good and an essential human need. A house is fixed in space and Frequently, growing the mortgage finance system or features of its location – e.g. access to jobs, and basic ambitious new town development are government’s first services and amenities in a neighborhood – drive much instincts in addressing housing deficits. But the benefits of its value. A house is durable. Although it deteriorates of mortgage finance are limited to the higher income over time, urban growth usually means central loca- segments of the population. New housing construction tions become more valuable due to their proximity to on apparently cheap peri-urban land can end up being jobs and amenities. Facilitating infill development and very costly to service and can produce dysfunctional densification becomes increasingly important as cities neighborhoods disconnected from the city. While they grow, for affordability and environmental sustainability are market-creating measures, these approaches tend reasons. Climate change is also reshaping intervention to benefit a small share of the population and not able to in the housing sector, especially long-term planning reach down market effectively. with regards to increasing vulnerabilities to natural disasters. There are many options for intervention, however, that can improve housing access and housing quality for everyone. Housing is a challenging sector. The benefits of urban- For example, improvements to existing infrastructure to ization are such that coordinating interventions in urban facilitate infill, increased investment in trunk infrastruc- areas and investments in roads, public transit, water, and ture to create serviced land, expanding competition in sewage have substantial multiplier effects and benefits building industries, increasing property tax collection to that far outweigh the costs. Urban housing requires land fund urban services, fair application of property rights serviced with infrastructure (roads, water, sanitation, rules and land management, microfinance programs for and electricity), which depend on government agencies housing improvement, and reducing overly restrictive financing and coordinating their provision. This is often regulation of new development, such as large minimum in short supply and housing competes with other land lot sizes or excessive requirements for building permits. uses, which might seem more economically productive. Local governments may think of their well-serviced land The challenge of ill-functioning urban land markets as zero-sum rather than coordinating the expansion of and lack of affordable housing has been studied by de- services to create more of this important input to hous- velopment professionals and academic researchers for ing and other uses. Additionally, some governments think decades.3 In developing countries, notable attempts to of housing only as a consumption or social sector, rather provide a framework for evaluation with indicators in- than the important part of the economy it is. clude the 1989 the Global Housing Indicators program spearheaded by the World Bank and UN-HABITAT and Ur- In most countries, housing is a private good – produced ban Land and Housing Assessment tool developed by the by the private sector as well as by the very individuals who World Bank in 19954. Neither effort has been sustained by will consume it. Yet in all countries, the housing sector the sponsors, nor widely practiced in development coun- is interconnected with and dependent on government tries. In part, the difficulty in and cost of obtaining data in action – and inaction – at multiple levels. Because hous- low data availability environments has limited their use. ing is expensive relative to incomes, financing tools and subsidies for low-income families and individuals are With the quest for land and housing market interventions needed if they are to access what a society agrees to be a on the rise, an accessible and cost-effective tool for as- minimum quality standard of housing unit. sessing the land and housing markets has a significant 3 For a review of World Bank experience, see the IEG report on housing finance here: https://ieg.worldbankgroup.org/evaluations/world-bank-group-support- housing-finance, the World Bank report on urban land here: https://openknowledge.worldbank.org/handle/10986/24377, and reviews of World Bank shelter lending here: http://siteresources.worldbank.org/INTHOUSINGLAND/Resources/339552-1153163100518/Thirty_Years_Shelter_Lending.pdf and here: http:// documents.worldbank.org/curated/en/449241468157185647/Housing-policy-in-developing-countries-conjectures-and-refutations. 4 For details, see the companion document that reviews and summarizes prior work in this area. Urban Land and Housing Market Assessment: A Toolkit 13 1. Introduction potential benefit. Moreover, since the ambitious efforts · Describe the most important institutions of the hous- of the 1989 Global Housing Indicators program and 1995 ing sector and relate them to major constraints and Land and Housing Assessment tool, the world has un- housing problems dergone many changes. New drivers and patterns of ur- · Develop an informed and prioritized approach to in- banization and land development, the availability of new tervention – reform and/or investment data in more cities, and the adoption of new technology · Communicate the importance of the housing sector to point to the need for revisiting the diagnostic approach. relevant agencies and give them the tools to advocate In 2018, the UN-HABITAT developed the Housing Barom- across sectors eter5. It is a useful tool to support a rapid analysis of the housing sector by qualitatively assessing its performance and has been tested in a few countries. This toolkit is more in depth, outlining an assessment framework that 1.4 Approach combines a more detailed qualitative approach than the barometer with quantitative indicators. This toolkit builds on decades of research and practice in the land and housing sector, combining elements from the The present toolkit will need to be tested and improved three existing types of assessments.6 It resembles a scaled based on its roll out in a variety of urban contexts (re- back version of the UN Habitat Housing Profile7 and draws gions, levels of urbanization, and institutional setups). It on recent World Bank experience8. It is focused more on the will be most effective as a living document that incorpo- supply side, without losing sight of the entire value chain. rates learning and continued refinement. The supply side focus responds to the common association of “housing policy” with subsidies and mortgage finance, by illustrating the potential for improving housing outcomes through improved delivery of urban services, streamlined 1.3 Objectives and rationalized bureaucratic procedures, competitive building industries, and well managed land markets. The toolkit aims to provide a flexible, diagnostic frame- work designed to aid a team in evaluating a city’s housing The first group of existing housing and land market as- challenges and developing a prioritized set of possible sessments are those that attempt to gauge the efficiency interventions – both reform and investment – that gov- of a market through quantitative analysis, primarily of land ernment and private entities can take to address them. and housing prices. The most well-known examples of By applying the toolkit, the team will: this approach - and the main basis of this toolkit - are the 1989 Housing Indicators Program9 and the World Bank’s · Quantify the city’s quantitative and qualitative hous- 1995 Urban Land and Housing Market Assessment10. ing deficit · Describe the city’s urbanization and housing develop- The second group are assessments of governance and ment trends regulation that take a qualitative, survey-based approach · Quantify residential growth patterns of the city com- to ranking constraints. Notable examples are the 2012 pared to other cities in the country Habitat International Framework11, the Land Governance · Develop a housing typology to frame different housing Assessment Framework (LGAF)12, the Doing Business challenges project13, and lately, the Housing Barometer introduced · Identify constraints – regulatory, financial, political, or by UN-Habitat in 2018. This toolkit draws from the survey physical – to different types of housing development approach of these frameworks heavily. 5 UN Habitat. 2018. The Housing Barometer: A Tool to Support a Rapid Housing Sector Review. Available here: http://capacitybuildingunhabitat.org/ housing-barometer/. 6 For more, see the companion document that reviews and summarizes prior work in this area. 7 UN Habitat. 2010. A Practical Guide for Conducting Housing Profiles. United Nations Human Settlements Programme. Available here: https://unhabitat.org/ series/housing-sector-profile-series. 8 For example, see World Bank. 2019. Unlocking Ethiopia’s Urban Land and Housing Markets. Urban Land Supply and Affordable Housing Study Synthesis Report. Washington, DC: World Bank. Available here: http://documents.worldbank.org/curated/en/549221572382742218/pdf/Unlocking-Ethiopias-Ur- ban-Land-and-Housing-Markets-Synthesis-Report.pdf. 9 World Bank. 1989. The housing indicators program: extensive survey (English). Washington, DC: World Bank. Available here: http://documents.worldbank.org/ curated/en/678951468337476946/The-housing-indicators-program-extensive-survey. 10 Dowall, D. 1995. The land market assessment: a new tool for urban management. Urban management programme discussion paper 4. Washington, D.C.: The World Bank. Available here: http://documents.worldbank.org/curated/en/296941468764366469/The-land-market-assessment-a-new-tool-for-urban-management. 11 Habitat for Humanity. 2012. Global Housing Indicators: Evidence for action. Available here: https://www.globalurban.org/Global_Housing_Indicators_report.pdf. 12 Deininger, Klaus, Harris Selod, and Anthony Burns. 2012. Land governance assessment framework: Identifying and monitoring good practice in the land sector. Available here: https://www.landequity.com.au/assets/Uploads/LGAF-ESW.pdf and here: https://www.worldbank.org/en/programs/ land-governance-assessment-framework#1. 13 For more, see: https://www.doingbusiness.org/ 14 Urban Land and Housing Market Assessment: A Toolkit 1. Introduction The third group are outcomes-focused assessments in data and the UN Housing Profile in terms of comprehensiveness rich environments that focus on detailed aspects of housing and resource commitment. affordability across household types and neighborhoods. The highest quality examples of this approach are from An important first step in the assessment is identify- California14, New York15, London16, and Cape Town17. These ing the right scale of analysis, especially as it relates provide useful and sophisticated indicators to assess af- to jurisdictional boundaries of local governments. The fordability and housing market activity. appropriate analytical unit for a housing market is an urban area defined roughly by a labor market or com- A comprehensive quantitative assessment of an urban mute shed even though policies and investments are housing market - like that outlined by the UN Habitat made at the municipal or state level. Housing markets, Housing Profile - is a complex and ambitious undertaking. like labor markets, often spill over municipal bound- The Housing Profiles invite teams to conduct multiple aries and can include many municipalities in one area. surveys and specific studies of different aspects of the Defining the scope of analysis is an important initial housing sector. The data scarcity of most middle and decision that can be made based on data availability, low-income countries means that this comprehensive the urban area’s administrative context, and the goals approach would requires costly collection of survey data. of the engagement. Although this is an ideal knowledge base, these efforts may ultimately not yield insights that are any more actionable To identify which interventions have the greatest po- than a less data intensive approach. For this reason, tential benefit in a city, and which is most feasible, an this toolkit relies on limited quantitative assessment assessment of the local land and housing markets is of- using globally available data and windshield surveys, ten broad, considering the potential importance of the and dedicates more resources to targeted qualitative multiple sectors that shape housing outcomes. We have fieldwork. It can always be supplemented by primary data included the most important of these guiding questions gathering in for any of the components. One way to see this and highlight them below to orient the team and as a po- toolkit is as sitting in between the UN Housing Barometer tential framework for the final report. Urbanization Trends How do this city’s urbanization trends – physical expansion, population growth, changes in density – compare to other cities in the country? What kind of housing predominates in the recently urbanized parts of the city? Housing needs and demands What are the quantitative and qualitative housing deficits? What is the distribution of housing tenure? How do housing deficits differ for renters and owners? For what share of the city’s population is (new and existing, formal and informal, rental and ownership) housing affordable? What are average rents and prices? How does household formation compare to the rest of the country? What are housing needs projected into the future? Housing policies What are the major housing policies in effect in the city? How important are they to overall housing outcomes? What are the agencies in charge of implementing these policies? What are the most significant laws and regulations in the housing sector? 14 For more, see: https://lao.ca.gov/reports/2015/finance/housing-costs/housing-costs.aspx 15 For more, see: https://furmancenter.org/files/sotc/SOC_2018_Full_2018-05-22.pdf 16 For more, see: https://www.london.gov.uk/sites/default/files/london_shma_2017.pdf 17 For more, see: https://housingfinanceafrica.org/app/uploads/Cape-Town-Residential-Property-Market-FINAL-REPORT-Feb-2018-2.pdf Urban Land and Housing Market Assessment: A Toolkit 15 1. Introduction Urban land supply for housing What kinds of land ownership exists – public/private/customary – how much of the city’s land is in each category? How common is informal land occupation? How tolerant is the government of informally developed land? How do people access new land for housing? How expensive is land for housing relative to other costs of producing housing? What are the fees and taxes for transferring/using land? Is there sufficient greenfield land for projected urban expansion over the next two decades? Urban planning, building regulations and processes Do urban development standards unduly constrain housing development? How is land management organized in the city? How hard is it (time and cost) to urbanize rural land for housing, in terms of zoning changes and tenure arrangements? Infrastructure and services What is the governance structure for infrastructure provision? What is the backlog in coverage, deficits in quality and the rate of infrastructure provision? What is the cost to add infrastructure and how is it financed? What do households pay for water/other basic utilities? Housing supply What are the main categories of new housing supplied (government, formal private, informal private)? How many units are typically produced by these different actors? How expensive are the different types of new housing? What are the major constraints to the supply of the least expensive formal housing? Building materials and construction industry What are construction costs relative to the other costs of building housing? Are building materials sourced locally? How important are building material costs compared to other costs of construction? What share of new housing is built by large, medium, and small developers? Does the organization of the construction industry adversely affect housing production? Housing finance How prevalent (share of new housing) is mortgage lending & housing microfinance? What is the average size, prevailing interest rate, and most common terms of a residential mortgage? What is the average size and terms of a housing improvement microfinance loan? 16 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance PHOTO BY: © DOMINIC CHAVEZ/WORLD BANK Urban Land and Housing Market Assessment: A Toolkit 17 2. Part A: Indicators of Urban Housing and Land Market Performance The first part of the assessment is a set of quantitative 2.2 Geographic Scope of Analysis indicators that the team will use to frame the city’s prob- lems and urbanization trends in a national context, assess This toolkit is an assessment of housing and land mar- the severity of housing problems, and assess major policy kets for an urban area (also referred to as a city). The deficiencies and constraints. The specific mix of indica- exact boundaries of an urban area can be defined in dif- tors will vary from city to city based on data availability. ferent ways. The team can familiarize themselves with The toolkit provides varying levels of analytical precision idea of the Functional Urban Area (FUA), developed by for different contexts, after a contextual overview below the Organization for Economic Cooperation and Devel- (see Table A1 for a detailed list of data sources). opment (OECD) 18 to use as a consistent and comparable definition of a city, distinct from boundaries of a politi- cal jurisdiction. It is likely the team will not calculate the FUA precisely,19 but rely on existing definitions or create 2.1 Desk Review for Context an urban area boundary in the spirit of a labor market area. The team can first conduct a desktop review of policy and academic literature on land and housing issues in the city The FUA defines an urban area by identifying an urban and country. The review includes official reports (legis- core and hinterland that together constitute integrated lation and regulation, policy and strategy documents), housing and labor markets. Box 1 provides details. To academic research, plus recent and relevant media. The calculate it precisely requires commuting data. Alter- team can use a standardized set of online search engines nate approaches in the same spirit, e.g. using an urban to look for the research and reports. The review will ac- footprint plus any small towns within a buffer of ten ki- complish two things beyond providing basic contextual lometers, achieve the same intention. An analysis of the information. housing and land market of one municipality within an urban area is also possible but should consider the flow First, the desk review will assist the team in identifying of people and money across municipal borders. For detail potential respondents to the surveys in Parts B and C. on FUAs, see Appendix A. The team can identify survey respondents in several ways, including the people who wrote source mate- The focus of this toolkit is on one city. But time and re- rials, or who are referenced in them. Additionally, the sources permitting, calculating the basic indicators for team can identify experts through existing World Bank other, similar cities provides a comparative analytical networks or through chambers of commerce and real baseline for the focal city. Being able to compare one estate associations. The experts will include public of- city’s trends to others in the country can provide di- ficials, real estate developers, chamber of commerce rection for the team to examine specific problems and officials, property lawyers, and leaders of non-profit and policies. For example, if there are two cities with similar community organizations focused on the urban poor incomes but one is growing much faster, it may indicate and housing. housing market is a constraint to expansion. If similarly sized cities are increasing faster in density, it may indi- Second, the desktop review will help the team assess the cate a policy constraint to infill development. The team coverage and quality of available data sources, and learn can choose comparison cities based on the national con- about the country’s statistical agencies. From there, the text, or simply use all cities of a similar population size. If team can begin collecting quantitative data on its own, resources permit, the team could include all cities above as described below. some minimum population size (e.g. 50,000 people as per the OECD Functional Urban Area guidelines). At the same time, basic indicators at the national level provide context. Data on the urbanization rate in recent Important differences in land and housing markets exist decades, the level of economic development inequality, within any urban area, even in cities that are relatively the economic structure and major clusters of economic small. Therefore, resources permitting, the team can activity, demographic trends, and the political system divide the urban area into a rough typology of districts help frame the institutional capacity, long-term develop- or neighborhoods. Some indicators benefit from as- ment trends, and the place of cities in the national eco- sessment at the neighborhood or district scale, espe- nomic and political agenda. cially infrastructure and housing quality. Distinguishing 18 For more, see: https://www.oecd.org/cfe/regional-policy/functionalurbanareasbycountry.htm 19 The OECD and UN Statistical Commission will be issuing a report in 2020 shortly with a definition of all FUAs in the world, the team can rely on those definitions once they are available. 18 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance neighborhoods by housing quality and growth rates as- Primary data indicators: Indicators marked local agency sists the municipality in assessing the spatial magnitude and interviews in Table 2 will be collected through field- of intervention needed as well as the numerical. work. The survey instruments for Part B in the Appendix contain a list of questions cross-referenced to the indi- There are a number of approaches to defining neighbor- cators for which they provide data. Additionally, Part C hoods or districts. A city’s planning documents may con- indicates the sources for the indicators with a data source tain a map with neighborhood outlines. Alternately, the ‘Local Agency.’ team can create a new set of boundaries, though it is a relatively resource intensive activity. Analysts commonly Uncertain indicators: The indicators that do not have use land-use and population patterns to define relatively an easily identifiable data source are marked uncertain. homogenous areas. Combining data on land-use intensi- Some of these are the most common and important ty (building footprint and height) with population num- housing indicators, for example, indicators of qualitative bers allows for reliable inference about the type of neigh- housing deficit (1C), housing typology (7A), and major borhood. At a more basic level, the team can use satellite types of new housing (7B) may rely on the same base imagery to divide a city into districts with a similar urban data of materials and infrastructure access, and similar- form (more discussion on this in Appendix A). ly, the indicators of affordability (1D, 1E), average rents and price (7E), and income percentile that can access Of the nine groups of indicators, housing typology and mortgage finance (9C) may rely on the same base data of quality (especially infrastructure), market activity, new rents, housing prices and incomes. supply, rents and prices, affordability, and overcrowding are the most useful to disaggregate by neighborhood. Resources required to compile these indicators vary based on data availability, format, and the degree of precision the team desires. The primary distinction is places with cen- sus surveys that record building materials, infrastructure 2.3 Considerations in access, rents, prices, and incomes at the housing unit or household level. In these places, for example, estimating Gathering Indicator Data the qualitative housing deficit will be relatively straightfor- The indicators outlined here rely on multiple primary and ward. If census data are not comprehensive, however, the secondary data sources. As indicated in Table 2, there team will need to decide how much effort to expend on are five potential data sources. Two are secondary data: gathering these base data. For housing quality indicators, global data (available online) and national census data. for example, very rough estimates can be made based on Two are primary data, collected through this project from strategic site visits, use of satellite imagery, and interviews local government agencies or through interviews with of government agencies in the space of about two weeks. experts (Part B and C). The fifth, labeled ‘uncertain’ in A representative survey of housing quality in a city, on the the table, refers to indicators for which secondary data other hand, would take several months. may or may not be available. If not, the team has options for gathering data - a “quick and dirty” approach or a full To calculate a complete set of indicators in a place with survey. This toolkit outlines the former. sufficient census data, an experienced housing analyst will require at least three months. Where census data are Secondary data indicators: Compiling indicators that rely not available or not comprehensive, the team will need to on global data requires an initial investment in a set of decide how accurate and precise an estimate they need tools to make processing the data possible for analysts for indicators, and a complete housing profile using orig- with limited experience. There are large economies of inal surveys for all areas could take several years. scale in developing this set of tools and other units in the bank or international organizations are working on this. A final consideration for many of the indicators is that The World Bank’s recent experience20 has shown that a the most easily available data are biased towards formal GIS expert with knowledge of remote sensing data and housing. This data bias can lead analysts to a greater fo- housing related data could develop this set of tools to au- cus on what is sometimes a smaller share of the overall tomate the process in 30 days. With this set of automated housing stock, simply because data are available. Thus, tools, producing the global data indicators on Urbaniza- focusing more energy on gathering data on informal sec- tion Trends and Land Availability for any city would take tor housing is important, acknowledging the limitations roughly one week. in the data that are easily obtained. 20 See “City Scan” under the World Bank Group’s City Resilience Program here: https://www.worldbank.org/en/topic/disasterriskmanagement/brief/city-resilience-program. Urban Land and Housing Market Assessment: A Toolkit 19 2. Part A: Indicators of Urban Housing and Land Market Performance PHOTO BY: ©WORLD BANK 2.4 Urbanization and 2.4.1. Urbanization trends Housing Indicators Urbanization indicators show where housing is being built and how a city’s expansion compares to other cities. While The toolkit groups indicators into nine categories: ur- banization trends, housing needs and demands, housing national or local statistical agencies may have their own policies, urban land supply for housing, building regula- databases, one way of generating globally comparable indi- tions and processes, infrastructure and services, housing cators on urbanization trends is to tap into globally available supply, building materials and construction industry, and data. The idea is to inform policymakers about the city’s housing finance. The indicators highlight the magnitude growth trajectory. Is there a tendency towards greenfield of different potential housing problems. They also reveal expansion? Infill development? Or both? Is urban expansion the level of government attention to different aspects of is keeping pace with population growth? Time permitting, the housing sector. these indicators can be compared to those of other cities in the country (for example, using the Atlas of the Human Plan- When indicators do not align with expectations, it may et 2018) for context and a reference point for discussion. indicate a problem. These discrepancies can be assessed through fieldwork. For example, population growth re- 1A. Rate of urban expansion quires urban expansion either horizontally or vertically. Comparing a city’s population and rate of expansion to The rate of urban expansion measures how fast a city is ex- nearby cities gives an indication of its housing market panding outward. The team can measure it with a map of performance. Cities with ample land availability in the pe- the urban footprint from multiple years. An urban footprint riphery that are not expanding horizontally, for example, refers to the contiguous urbanized land within the function- may have regulatory or land ownership constraints. al urban area. Using GIS tools, the team can calculate the rate of urban expansion as the percent change in urbanized Table 2 lists the indicators and the rest of the section de- area between two time periods. Figure 2 illustrates the vi- scribes them one by one. Appendix A provides additional sual output from this exercise in measuring urban growth detail on definitions. around Johannesburg and Pretoria from 2000 to 2014. 20 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance Table 2. Overview of Housing and Land Market Indicators SECTOR INDICATORS SOURCE 1. Urbanization 1A Rate of urban expansion* Global data Trends 1B Population growth* Global data 1C Changes in urban density* Global data 2. Housing Needs 2A Quantitative deficit Census and Demands 2B Projected quantitative deficit Census 2C Qualitative deficit Uncertain 2D Affordability (housing costs to income) Uncertain 2E Affordability for different income Uncertain groups (for renters and owners) 2F Age-specific household formation rates* Census 3. Housing Policies 3A Share of housing subsidized Local Agency 3B Size of housing agency budgets Local Agency 3C Mass evictions or relocations in last 5-10 years Local Agency 3D Property tax rates (and collection rates) Local Agency 4. Urban Land 4A Land Administration Coverage  Global data / Interviews Supply for Housing 4B Developable land for expansion Global data 4C Developable land and environmental hazards Global data 4D Land prices: rural peri-urban / urbanized Interviews / commercial / industrial 4E Share of peri-urban land by ownership Interviews type (public, private, customary) 4F Steps, time and cost to Registering Property Global data + interviews 5. Building 5A Minimum lot sizes, Floor Area Ratio (FAR) Local Agency Regulations and restrictions, and/or height limits Processes 5B Share of urban land zoned low density Local Agency 5C Share of urban land zoned residential, industrial, commercial Local Agency 5D Steps, time and cost to obtain a construction permit Global data+ interviews 6. Infrastructure 6A Share of housing with paved roads, water, sewage, electricity Local Agency and Services 6B Infrastructure expenditures per capita Local Agency 6C New infrastructure connections per year Local Agency 6D Steps, time and cost to obtain electricity Global data+ interviews Urban Land and Housing Market Assessment: A Toolkit 21 2. Part A: Indicators of Urban Housing and Land Market Performance SECTOR INDICATORS SOURCE 7. Housing Supply 7A Housing typology (% housing informal) Uncertain 7B Major types of new housing Census 7C Share and nature of rental housing Uncertain 7D Price of cheapest new formal unit Uncertain 7E Average rents and prices (informal/formal) Uncertain 8. Building Materials 8A Construction costs Interviews and Construction Industry 8B Number of companies & size Local Agency 8C Use and common terms of construction lending Interviews 8D Share of materials sourced locally Interviews 9. Housing Finance 9A Number and value of mortgages per year Local Agency 9B Average size, interest rate and terms of a residential mortgage Local Agency 9C Income percentile that can access smallest mortgage Uncertain 9D Number and value of housing improvement loans per year Local Agency 9E Average size interest rate and terms of Local Agency housing improvement microfinance The Global Human Settlements Layer (GHSL)21 is the most provides a useful picture of density change in the city overall. convenient off-the-shelf product with global coverage. It In addition, the flexibility of grid-based data enables calcula- reports population estimates for grid cells of one square tions for the urban core (e.g. central 25% of land area) versus kilometer with reliable data for 1990, 2000, and 2014. urban periphery (e.g. outlying 25%)23. This indicator is espe- Another data source is World Pop22. Assessing expansion cially useful in assessing the relative importance of green- upward is more challenging. The above data sources give field and infill housing development. The team can use it to a measure of increase in population density, which is not determine what share of a city’s population growth occurred always associated with building height increases. in land already urbanized at the beginning of a period, com- pared to population growth in newly urbanized land. 1B. Rate of population growth 2.4.2. Housing Needs and Demands While there are population growth data available in respec- tive countries/cities, they may or may not be geographically 2A. Quantitative deficit reference. Using the GHSL data, the team can calculate to- tal population growth, and the direction and extent of that The basis of housing demand is household formation, growth. Figure 3 illustrates the densification of the city’s and a basic goal of housing policy is that every household central areas and expansion to the north and south. have shelter. Demographic measures are relatively wide- ly available and provide a reliable source of information 1C. Changes in density about access to housing. At the most basic level, a con- servative estimate of the quantitative housing deficit is The gridded population data described above provide the number of households sharing one housing unit and global coverage of population concentration at a scale that the number of households without any shelter at all. 21 Here: https://ghsl.jrc.ec.europa.eu 22 Here: https://www.worldpop.org/geodata/listing?id=32 23 See, for example, Monkkonen, Paavo. 2019. Empty Houses across North America: Housing Finance and Mexico’s Vacancy Crisis. Urban Studies, 56(10) 2075-2091. 22 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance Figure 2. Urban Expansion in South Africa Using GHSL Data Human settlement layer Value Non built-up 2014 Pretoria 2006 Johannesburg Source: https://www.earthobservations.org/geo_blog_obs.php?id=209 Figure 3. Gridded population data, years 1975 and 2015 at 250m resolution Source: Global Human Settlement Layer, https://ghsl.jrc.ec.europa.eu A broader idea of a well-functioning housing system is compared to some ideal quantity, which would house that people are able to access a housing unit when they those new families that want to form. form a new household. New families for example, or young people deciding to move out from their parents’ home. This quantitative deficit can be calculated either in ref- In places where housing costs are very high, people de- erence to past rates of household formation, or ideal lay these household formation decisions. A quantitative rates of household formation (see Monkkonen, 2013 for housing deficit, therefore, is the shortfall in housing units the example of Indonesia). The roughest estimate of the Urban Land and Housing Market Assessment: A Toolkit 23 2. Part A: Indicators of Urban Housing and Land Market Performance Figure 4. Age-Specific Headship Rates in Indonesia, 1995, 2001, 2007 1.00 0.90 Perfect household head or spouse 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 18 to 24 24 to 30 30 to 36 36 to 42 42 to 48 Age group 1995 2001 2007 Source: Monkkonen, P. 2013. Housing Deficits as a Frame for Housing Policy: Demographic Transition, Economic Crisis and Household Formation in Indonesia. International Journal of Housing Policy, 13(3): 247-267. household formation rate is headship, the share of the the future. These estimates, when compared to trends in adult population that is a household head. Most censuses housing production, generate a rough estimate of future contain data on household structure, which indicates an housing deficits. Data on housing production is often not individual’s position in the household including whether formally available (i.e. number of building permits issued, they are household head. for example). If not, the team can rely on housing unit counts in the census. In cities with large shares of young The difference between the current headship rate and a past adults, if rates of housing production do not match ex- number or a comparable place with a better functioning pected growth, the quantitative deficit will increase. housing market can be interpreted as a quantitative housing deficit. This approach includes overcrowded households, 2C. Qualitative deficit though calculating deficits using both methods would pro- vide the team with a range. There is a risk of interpreting the A city’s qualitative housing deficit is an estimate of the hard number of a housing deficit as set in stone, but it is a number of houses that are substandard in some way. This rough indicator and not a precise measure. refers to the type and conditions of building materials (roof, walls, and floor), the level of access to water and A more precise way to calculate housing deficits – and sanitation in the dwelling, and overcrowding. A precise an essential step deficits are to be projected into the fu- survey of housing conditions is a large task, but a rough ture – is to estimate headship rates for different ages of estimate of a city’s qualitative deficit can be generated the population. Figure 4 shows estimates of age-specific through the housing typology described below and data headship rates, again just the share of the population of a on access to infrastructure. A study used in Chile used a given age that is a household head. In this case, a signifi- methodology that segments the housing stock into three cant drop in headship / household formation is observed categories: acceptable, repairable and unacceptable. It is between 2001 and 2007, indicating that many house- important to highlight that upgrading is generally a more holds failed to form relative to past periods. The current beneficial and less disruptive approach to addressing quantitative housing deficit can be estimated using past housing quality deficits24. trends or ideal rates of household formation. An overcrowded dwelling is one with “too many” people 2B. Projected Housing Need living in it. Measuring overcrowding requires data on the number of residents per room or per square foot (usually Projections of population growth and age distributions from the census and/or additional surveys) and a subjec- can be used to generate projections of housing need in tive decision as to how many is too much. Most countries 24 For more, see: MINVU 2004, El deficit habitacional de Chile. Ministerio de Vivienda y urbanismo, Santiago de Chile 24 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance Box 1. Two Measures of Affordability for Households in Different Income Categories in Three US Cities Two common approaches to assess renters’ cost burden* are the 30-percent standard, which simply states that a household that spends over 30 percent of its income on housing is cost burdened, and the residual income approach, which estimates typical non-housing expenditures for households of different sizes and income levels and subtracts this from actual household incomes. For households where the residual is less than their actual housing expenditures, they are considered to be cost burdened. Renter Cost Burden Rate (Percent) Cleveland Phoenix Los Angeles 100 90 80 70 60 50 40 30 20 10 0 Under 30-49 50-79 80-99 100 Under 30-49 50-79 80-99 100 Under 30-49 50-79 80-99 100 30 percent 30 percent 30 percent percent or over percent or over percent or over 30% of income Standard Residual Income Approach Disaggregating affordability measures across the income distribution is important. Exhibit 8 from the Joint Center report high- lights two features of housing markets in different US cities. The first is that low-income households have high levels of cost burden no matter how inexpensive the overall housing market is. Households earning below area median income have high rates of cost burden – well over 80%. Second, the rate at which affordability increases with household income differs across cities, reflecting the housing markets. More median income households have high cost burdens in expensive cities. Households between 50 and 80 percent of area median income have half the rate of cost burden in Cleveland but three quarters or more in Phoenix and Los Angeles. * Available online here: http://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_Herbert_Hermann_McCue_measuring_housing_affordability.pdf. have their own definition. If they do not, or if it is unrealis- (H+T) gives a more comprehensive measure of housing tic, the UN defines overcrowding as more than three peo- burdens because households obtain affordable housing ple person per room25, though definitions based on square by moving to the periphery but then have to pay higher feet of dwelling space per person are also considered. transportation costs. This is especially relevant in large urban areas. 2D. Affordability (Rent to Income, Price to Income) In many contexts, however, the 30 percent indicator of Housing affordability is one of the most common indi- affordability does not make sense. A World Bank study28 cators of housing problems. Depending on data avail- on housing consumption in Sub-Saharan Africa (SSA) ability and need for precision, there are multiple ways found that 60 percent of the household or more spent to estimate affordability. The most common is that if a the majority of their incomes on food, and that they household spends over 30 percent of income on hous- accept low housing quality because of their limited re- ing26, they are in an unaffordable situation.27 Considering sources which first are spent on subsistence. Household the burden of housing costs plus transportation costs expenditure on housings in SSA ranged between 3% 25 For more, see: https://unstats.un.org/sdgs/metadata/files/Metadata-11-01-01.pdf 26 Renter housing cost is gross rent (rent + utilities). Owner housing costs include any payments on mortgages, utilities, real estate taxes, insurance (fire, hazard, and flood), and condominium fees, if any. 27 In European Union and OECD countries, households spend more than 40 % of disposable income on housing are considered housing cost overburdened. 28 Available here: http://documents.worldbank.org/curated/en/998081468003944551/pdf/WPS7112.pdf. Urban Land and Housing Market Assessment: A Toolkit 25 2. Part A: Indicators of Urban Housing and Land Market Performance to 20% of household income. Therefore, it is critical to be the incomes of the inhabitants of these publicly sub- base affordability analysis on local context and empirical sidized housing units, in order to assess the targeting of data, rather than using the 30% cut off. On one hand, in subsidies. These data may be challenging to gather in a the SSA case, it will underestimate housing challenges; comprehensive manner, but beginning a database with on the other hand, if a subsidy program is designed by what data are available will be beneficial. assuming that household can spend 30% of their house- hold income to housing, such program will likely to fail as 3B. Size of housing agency budgets there will still be sizable gaps. Part of the institutional map will be to identify all public 2E. Affordability for different income groups agencies in the housing sector operating in a city – be they local, state, or national agencies. The size of their an- Average measures of affordability mask the considerable nual budget is an important indicator of commitment to variation and often more serious affordability problems the housing sector – especially in comparison to budgets for low-income households29. Housing markets are seg- in other sectors. mented, meaning households with different incomes tend to look for different types of housing in different 3C. Mass evictions or relocations in last 5-10 years neighborhoods. If data and resources are available, the team can assess affordability for different housing If the local or state government has recently evicted or sub-markets. A simple disaggregation would be to calcu- relocated households at a significant scale, the number late affordability indicators (e.g., price/income ratio and of instances and the number of affected households can rent burden) for different quartiles of incomes. If census be used as an indicator. data and household budget survey data are not available, a survey approach can be used (though as mentioned this 3D. Property tax rates (and collection rates) is resource intensive30). The property tax is an important housing policy – and 2.4.3. Housing Policies the rate for different kinds of residential property can be recorded. Equally important is the degree of property tax The indicators describing the city’s policies specifically collection, and the rate of payment and total revenue are focused on housing – rather than the important parallel useful indicators. The ability of the tax collection agency to areas such as infrastructure or financing – are critical provide this information is also an indicator of its capacity. basic information to assess how active the government is in this sector. Comparing expenditures on housing to 2.4.4. Urban Land Supply for Housing other sectors may be a useful indicator in discussions of priorities. These numbers may not be available from lo- In a well-functioning housing market, planned land is cal government agencies, but this lack of disaggregated adequately available and serviced-land are supplied at a data may itself be framed as a policy problem. In some scale compatible with the demand for housing. The bun- cases, data accessibility is an issue. Governments should dle of rights associated with real estate property is reg- be encouraged to make agency budgets – and subsidies istered in a land administration31 system. Because land – transparent and accessible. and buildings (a majority of which is residential) account for between half and three-quarters of the wealth in most 3A. Share of housing subsidized economies, having an up-to-date, transparent, and effi- cient land administration system that records registered The number of housing units that benefit from direct property rights is essential to ensure security of tenure subsidy can include housing units directly built by the and support the development of real estate markets. government, government-issued mortgages, as well as units purchased with subsidized mortgages, subsidized 4A. Land Administration Coverage  down payments, any rental vouchers, or other form of public subsidy (tax holidays for developers for residen- The percentage of the city covered by a land administration tial property, for instance). An additional indicator would system which allows for buying, selling, long-term leasing, 29 For a useful resource on segmentation and affordability issues for different groups, see https://www.gapminder.org/dollar-street 30 One such approach is the World Bank’s 2013 Land and Property Market Assessment - Housing Market Segmentation Study: Existing Tools and Survey Strategy. 31 The term was established by the United Nations Economic Commission for Europe (UNECE) in its Land Administration Guidelines adopted in 1996. In these guidelines the UNECE defines land administration as “the processes of determining, recording and disseminating information about ownership, value and use of land and its associated resources. These processes include the determination (sometimes called ‘adjudication’) of land rights and other attributes, surveying and describing these, their detailed documentation, and the provision of relevant information for supporting land markets”. Source: http://www.fao.org/in-action/ herramienta-administracion-tierras/glossary/l/en/ 26 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance Figure 5. Map showing open land within the urban extent (yellow) and in periphery (darker gray) or mortgaging land is an important indicator to gauge the in registering a property, assuming a standardized case degree to which formal land and housing market exist. of an entrepreneur who wants to purchase land and a warehouse that is already registered and free of title As a first step, the team can refer to the World Bank’s dispute.  This indicator measures only a small part of Doing Business32 website to get an overview of the func- the housing value chain, excluding the often-lengthy tioning of the land administration system in the country process of adjudication of property rights, rural to urban by examining the quality of land administration index land conversation, land assembly, putting in infrastruc- and the score and ranking on registering property.33 ture and servicing the land, in the case of greenfield The latter examines the steps, time, and cost involved development. 32 The Doing Business project aims to provide objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. 33 For definition and methodology, see https://www.doingbusiness.org/en/data/exploretopics/registering-property Urban Land and Housing Market Assessment: A Toolkit 27 2. Part A: Indicators of Urban Housing and Land Market Performance Figure 6. Road network in Dhaka, with hypothetical locations for development. Isolated Connected Doing Business collects data for each country’s largest outside the existing urban area. The size of the buffer de- city, but also has data for the second largest city in 11 pends on the city size and growth rate. One rule of thumb economies. The data on registering property is not for for growing cities is that this area should be at least as residential property, so the team should make sure large as the rate of expansion in the last decade. Figure there is a close correlation between the steps, time, 5 shows the expansion land within the urban extent of and cost involved in registering a residential property Dhaka. with a warehouse. Expert interviews can help gauge the correlation. In Part B some in-depth surveys are rec- Once a buffer is determined, the team can calculate the ommended to capture key steps in the land value chain share of land within that buffer suitable for residential to complement the Doing Business coverage on land development. The share of land is the total area of the administration. buffer minus existing urban land uses, bodies of water, and steep terrain. This rough measure can be refined 4B. Developable land for expansion (urbanization of by taking road accessibility into account. The team can rural land) assess developable land within one or two kilometers of existing paved roads, for example. There are two sources of developable land: rural land, or “greenfield” land, and vacant land within city boundaries. Figure 6 illustrates this approach with a map of the road This indicator measures the first. The team can define an network of Dhaka and two locations in the urban edge pe- urban expansion buffer – undeveloped land surrounding riphery. The green polygon overlaps a major road that con- the existing urbanized area – to assess land availability nects to the main network and highway system. The red 28 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance shape, in contrast is far from major roads. Adding a major 4E. Share of peri-urban land by ownership type road would have to destroy existing residential areas. (public, private, customary) These measures provide direction for intervention. Re- The prevalence of different types of land ownership in gions with scarce peripheral land apt for development the area surrounding the city’s edge can have important may prefer to focus on infill development, whereas those consequences on the ease of urbanizing land and hous- with plentiful peripheral land can develop long-term ing access. If land is not privately owned and it is difficult strategies for the best use of that land. to be traded, new housing construction may be more difficult. It is possible that the local land registry and/or 4C. Developable land and environmental hazards planning agency does not have easily analyzable data on the distribution of ownership, in which case a rough A more refined assessment of developable land accounts estimate of this indicator can be generated through the for existing natural hazards, and likely changes in climate interviews in Part B. An ideal indicator in this case is a that could make land dangerous for settlement in the map along with estimates of land area, but rough shares short to medium term. In some countries, entire cities are of ownership type is nonetheless useful. at risk (e.g. from sea level rise or flooding). In general, land where mitigation from the impacts of climate change and 4F. Steps, time and cost to Registering Property extreme weather is more feasible is prioritized for devel- opment. The data on climate projection is unlikely to be The World Bank’s Doing Business project has surveyed exact enough to pinpoint areas that are riskier than others, the largest business city of each of the 190 economies in but models (e.g. Climate Impact Lab for temperatures, the the world to gather indicators of 12 regulatory processes DLR flooding risk maps) are accurate enough to develop – including registration of property. While its focus is on a a common-sense typology of land at-risk from the most hypothetical case of commercial warehouse, rather than likely events (e.g. flooding). models like ThinkHazard! a residential property, it is worthwhile for the team to provide risk assessment along multiple dimensions at the gauge the degree to which the processes and procedures same time (e.g. flood, earthquake, tsunami).  are similar (i) between transactions of warehouses and transactions of residential property; and (ii) between the 4D. Land prices: rural peri-urban / urbanized / largest business city of the country and the case city. This commercial / industrial indicator has great potential utility to aid in Part B and to begin to highlight bottlenecks in land administration. Land value data is notoriously challenging to obtain. Nonetheless, estimates – albeit rough ones – of land 2.4.5. Building Regulations and Processes values in various parts of the city and zoned for differ- ent uses (e.g. agriculture, residential, industrial) will be The formal rules and regulations for urbanizing land and useful. One source for these estimates are the experts building housing can have significant cost impacts if they interviewed in Part B. If deemed necessary, a separate are overly restrictive – for example prohibiting high den- survey of land brokers for different neighborhoods can sity housing in areas with high demand. The list here is generate data that are more accurate. In some contexts, a minimum set of indicators, some cities may have other online sources or private consulting companies may have regulations that constrain development – which will be land price data. Vacant infill parcels transact relatively part of the interviews in Part B. These indicators will likely infrequently, so subtracting an estimate of a structure’s be available from local planning agencies except for the value from the sale price of a parcel with a building on it is last one, which is available from the Doing Business proj- one approach. In many contexts, however, the benefits of ect of the World Bank. having precise, location-specific data on land prices may not exceed the costs of acquisition and rough estimates 5A. Minimum lot sizes, Floor Area Ratio (FAR) by the team ought to be sufficient. restrictions, and/or height limits Land prices can also be used to assess how costly it is to One of the most common constraints to affordable hous- urbanize rural land. A ‘land development multiplier’ com- ing is the requirement of low residential density. Cities pares the value of rural land and urban land nearby (see restrict densities of residential development in a number glossary for definition). This ratio measure demonstrates of ways. The most common are requiring a minimum lot how hard it is to urbanize land – a higher ratio of urban to size (e.g. housing units must be built on parcels above a rural prices indicate environments in which one can find certain size), restricting the Floor Area Ratio (FAR) to lim- a combination of unrealistically high regulatory develop- it the amount of physical structure (floor area) that can ment standards and high transaction costs due to poor be built on a parcel of land, and/or though building height property registration and bureaucratic red tape. limits. These all achieve a similar outcome: mandating a Urban Land and Housing Market Assessment: A Toolkit 29 2. Part A: Indicators of Urban Housing and Land Market Performance low urban density. The team should assess the different of access across the city can provide an important indi- restrictions on density as well as the level of enforcement. cator. The extent of road paving, for example, can be assessed using satellite imagery by choosing a random 5B. Share of urban land zoned low density set of points across the city and visually identifying road paving. For example, in a city of four million with about Restricting housing unit density34 in high demand neigh- 10,000 kilometers of streets, a sample of 95 points would borhoods causes prices to rise. This can be done through produce an estimate of the percentage of streets without minimum lot sizes (as above) or other restrictions. An paving with a margin of error of +/- 10%. assessment of the city’s zoning regulations as simple as noting what percent of residential land is restricted to a 6B. Infrastructure expenditures per capita low density use (and what that density is) will serve as an important indicator. Although it may prove to be elusive, data on total local ex- penditures (operations, maintenance, and capital) by all 5C. Share of urban land zoned residential, industrial, levels of government on different infrastructure services commercial (roads, sewerage, drainage, water supply, electricity and garbage collection) is important to assess what a priority Restricting significant amounts of urban land in high de- this area is in budgets. The cost and time for acquiring mand neighborhoods to uses other than residential can different types of on site infrastructure by developers will make housing more expensive, and the assessment of be recorded through the interviews in Part B, but annual the city’s zoning rules – what kind of residential develop- expenditures on trunk infrastructure is a data point that ment is legal in what percent of land area – is an indicator should be assessed. of this potential constraint. 6C. New infrastructure connections per year and 5D. Steps, time and cost to obtain a construction relative to household growth permit A rough and simple estimate of the efficiency of the local The World Bank’s Doing Business project has also cov- public services agencies can be generated by comparing ered the aspect of obtaining construction permits. The new connections to water, sewage and electrical systems structure of these surveys is to ask for a detailed descrip- relative to household growth. What share of new housing tion of the steps required to complete a procedure like is serviced? This percent, if low, can be an important mo- getting a construction permit, as well as the time and cost tivation to focus on infrastructure. for each step. In this case, the focus is on a commercial warehouse, not a residential property, so the procedure 6D. Steps, time and cost to get electricity will likely be less complex. Moreover, it is unlikely that a survey has been done for a given city. Nonetheless, the The World Bank’s Doing Business project also surveys numbers from the largest business city of the country the experts on obtaining a permanent electricity connection team is working in will provide a useful reference point for a hypothetical commercial warehouse. Although the not only for Part B, but also for a hint of bottlenecks with focus is not on residential property, this indicator gives the permitting process in a given city. some insight on the ease of access to public utilities. Electricity is sometimes the easiest to obtain of basic 2.4.6. Infrastructure and Services infrastructure for housing (it is less costly to run wires than it is to install piped water), the indicator aids in de- 6A. Share of housing with paved roads, water, veloping Part B and begins to inform the team about local sewage, electricity infrastructure providers and complications to expanding service networks. In many cities, a major part of the housing quality deficit is infrastructure. Lack of access to water, sewage, elec- 2.4.7. Housing Supply tricity and paved roads is a challenge for health, well-be- ing, and economic development. Access to water, sewage 7A. Housing typology (including % housing informal) and electricity is often surveyed by the census. The team can also consult with local public works agencies for their A core component to understanding a city’s housing assessment of infrastructure access. This is likely to vary sector is a typology of housing. The dimensions for cat- dramatically by neighborhood. Assessing the unevenness egorization and the number of types depends partly 34 Housing unit density is defined as number of housing units divided by the land area. 30 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance Box 2. Simple Housing Typology: Mexico The images below present the most basic typology of urban housing in Mexico divided into formal / informal and multi-family / single family. The multi-family / single-family category also tends to locate housing more centrally or more peripherally. Of course, within each of these four categories, further subdivision is possible. One crucial issue is that informality generally overlaps with the incremental production of housing. This is important because many interventions seek to support incremental production but not necessarily endorse informality. Whether further sub-categorization warrants effort depends on its relevance to possible intervention. A. Formal Single Family B. Informal/Incremental Single Family C. Formal Infill D. Informal/Incremental Infill Other sub-categories in the Mexico case include the origin of financing for formal developments. Much of the formal, single family housing is built and sold through a national housing finance agency, which is an important distinction for any intervention. There are multiple dimensions of informality as well – e.g. the original ownership of land versus compliance with zoning or building regu- lations. These may also be important distinctions for intervention. When creating a housing typology, the team can highlight these possible sub-categories. on the city’s complexity. It can be informed first by the Informal housing is different from informal housing background literature review and categories in a national development. The UN defines informal settlements Census. Usually there are at least four major categories of as those cut off from city infrastructure and basic ser- housing – formed by the matrix of formal / informal and vices, without tenure security, where housing does not multi-family / single family. comply with regulations.35 Informality is a spectrum 35 http://habitat3.org/wp-content/uploads/Habitat-III-Issue-Paper-22_Informal-Settlements-2.0.pdf. However, this definition does not cover, for example, a formally developed building which is informally occupied. In this case, formal and informal development can even look similar, with the differences being admin- istrative rather than in the outcome. Urban Land and Housing Market Assessment: A Toolkit 31 2. Part A: Indicators of Urban Housing and Land Market Performance Figure 7. Screenshot from Google Street View in the northern periphery of Oaxaca, Mexico rather than a binary.36 Informal housing development is contains. Specifically, that the road is not paved, electric- also incremental, lacking access to finance, not going ity is available, and that there is a mix of building materi- through a permitting process, and sometimes not built als with most buildings being one-story high. The team according to existing regulations. The categorization of can sample random points within each neighborhood housing in this typology can usefully overlap with the and develop an overview of the local housing typologies categories of housing development surveyed in Part through this virtual windshield survey. B of this toolkit. The team can further classify a city’s housing stock in many ways, for, example, by different A more precise approach would use census data (either levels of housing quality (based on building materials aggregated or microdata) to group the housing stock and/or infrastructure), height/density, tenure, and geo- into categories. Census microdata on housing would graphically by neighborhood. The housing typology and allow the team to classify by building materials, infra- neighborhood classification can be as precise as data structure, height/density, price/rent, and neighborhoods and time allow. using factor analysis. The team can also use these data to generate measures of housing quality (details on various The most basic approach to creating a typology of hous- approaches are in Appendix A). ing by materials and infrastructure would use satellite im- agery and Google Street View. A team using this approach An assessment of housing quality will assist the team in di- groups districts of the city by their predominant housing recting the focus of fieldwork. In rapidly growing cities with type as seen from above, and then roughly assesses the ample peri-urban land, the focus ought to be constraints to nature of this housing stock – at least the materials and greenfield development, whereas in cities with a housing unit density. Doing this in two time periods will allow the quality deficit and slow growth or land constraints for ex- team to locate changes and assess the nature of new pansion, infill development will take precedent. stock. 7B. Major types of new housing Where coverage is sufficient, Google Street View provides valuable information without resource intensive ground Following from the housing typology generated in 7A, truthing. Figure 7 is an example of a street in the periph- the team can roughly estimate the share of new housing ery of Oaxaca, Mexico. It demonstrates the coverage of being built in each type. At a minimum, differentiating Street View and the wealth of information a single image between the extent of large-scale planned development 36 Wells, J. 2007. Informality in the construction sector in developing countries, Construction Management and Economics, 25:1, 87-93. Available here: http:// tandfonline.com/doi/abs/10.1080/0144619060060133. 32 Urban Land and Housing Market Assessment: A Toolkit 2. Part A: Indicators of Urban Housing and Land Market Performance and gradual informal development gives an important generally not representative in developing countries, start to understanding the city’s context. The team can however, and the former are usually well below market use satellite imagery to differentiate development types value. based on patterns (e.g. gridded streets vs. amorphous patterns), and to assess change in urban form over time. 2.4.8. Building Materials and Documenting the existence and prevalence of mass Construction Industry housing subdivisions in the urban periphery and large infill developments, even at the project level, provides In some cases, the structure of the construction industry broad context and aids in identifying large developers to and, for example, the reliance on imported building ma- interview. terials, can unduly increase the price of housing. These data can be obtained both through interviews in Part B, 7C Share and nature of rental housing as well as through inquiries with any real estate industry association representatives or chambers of commerce. The most basic categories of housing tenure are owner-oc- cupied and rented. However, in many developing countries, 8A. Construction costs informal and sharing arrangements are quite common. Data on tenure, if not available in the census, will be hard to Construction cost data will not only allow the team to come by, but a general sense of the types of arrangements assess their relative constraint to housing production, will be obtained from interviews. Where possible, the team but also assess the land development multiplier and the can include a description of the tenure security implied un- cost of new housing. The team will likely need to rely on der different sharing or informal arrangements. interviews with developer and contractor associations to find out unit price of different housing typologies. The 7D. Price of cheapest new formal unit unit cost could have break down as follows: on-site infra- structure, housing construction and other costs, on a per The price of a newly built housing unit is an important square meter basis. indicator of housing sector performance. New housing is always more expensive than old housing of similar size/ Given the affordability focus, the team is advised to work structure/material in similar/comparable locations, but with Quantity Surveyors on two type of housing in respec- the relative difference in prices is indicative of the effi- tive market: (1) the cheapest formal housing built; and ciency of the housing production process. The difference (2) a median-priced dwelling unit. The Center for Afford- between costs and types of new housing vis-à-vis exist- able Housing Finance in Africa (CAHF)’s methodology in ing housing can indirectly reveal the impacts of regula- benchmarking housing construction costs across Africa tory constraints.37 Data for formal housing is easier to presents a good example, although the land and compli- obtain. Nonetheless, the team can identify the types of ance cost in CAHF are covered by other indicators in this recently built housing (e.g. formal suburban and central toolkit.39 city apartments, informal units, and any state subsidized housing) through a review of the policy literature, online 8B. Composition of real estate industry - number of research, and interviews, and collect data for each cat- companies and their concentration egory. This indicator will also benefit from interviews in Part B. The organization of the real estate development and con- struction industry impacts housing costs and production 7E. Average rents and prices (informal/formal) activity. In conversation with real estate associations, the chamber of commerce, and in interviews with experts in The accuracy of basic market indicators depends on data Part B, the team can assess the structure of the industry availability, especially through sources such as online and relative concentration of large firms by estimating listings and newspaper classifieds. These ought to be the total number of firms and a measure of concentration available in most cities, though they vary greatly in their in the industry, for example the percentage of new formal representativeness.38 Additionally, the team can assess sector housing units constructed by the five largest de- property tax records and real estate industry reports velopers (either private or public) in the urban area last and contacts for these market indicators. The latter are year. 37 For more, see: https://www.brookings.edu/research/reforming-land-use-regulations/ 38 One way to assess concerns about data representativeness is to measure the prevalence of rental and sales listings relative to quantity of housing stock in the dif- ferent neighborhoods / districts of the city. This gives an indicator of the size of the current market and volume of transactions, as well as an indicator of variation in formality because formal property is more likely listed for rent and sale online. If there are districts with a low share of listings, data are unrepresentative. 39 For more, see: http://housingfinanceafrica.org/documents/using-cahfs-housing-cost-benchmarking-methodology-to-analyse-housing-costs-in-fifteen-african-coun- tries/ Urban Land and Housing Market Assessment: A Toolkit 33 2. Part A: Indicators of Urban Housing and Land Market Performance 8C. Use of construction finance 9B. Average size, interest rate and terms of a residential mortgage The availability and use of construction finance can be measured in a number of ways, and depends to a large ex- The interest rate, terms, and average size of a residential tent on the local context. For this reason, a specific indi- mortgage can be obtained from financial institutions cator is not described here. Nonetheless, the way formal (both public and private), and income requirements for speculative housing development is financed is extreme- borrowers will also be a useful indicator for the housing ly important as a lack of construction lending hinders affordability assessment. the sector just as much as a lack of end user finance. The team can use several of the indicators in the following 9C. Income percentile that can access smallest section focused on end user finance (e.g. number and mortgage size of construction loans, interest rates and other terms, requirements for lendees). If income data are available for the city, even rough es- timates, the team can use the data from 7D and 9B to 8D. Share of materials sourced locally estimate the possible reach of the residential mortgages. Through expert interviews, and the housing typology (es- 9D. Number and value of housing improvement pecially new housing) the team can assess to what degree loans per year housing is built with locally sourced materials (in value terms). In some countries, the availability of building ma- Ideally, the availability and use of housing microfinance terials can be a significant constraint to production and would be quantified, as well as the type of institutions it is support for the building materials industry is warranted. from, i.e. public or private. These data may be challenging to acquire, but the team can try to capture the prevalence 2.4.9. Housing Finance of this industry. 9A. Number and value of mortgages per year 9E. Average size, interest rate and terms of housing improvement microfinance As part of the description of the housing sector, consult- ing with the major finance institutions about their activity In addition to the overall volume of microfinance lending can provide data for several indicators - the number of for housing improvement, typical interest rate, terms and mortgages issued per year in recent years, as well as their size of microloans will be useful for the study. This infor- total value and their characteristics (described below). mation can be obtained both from formal microfinance in- This will help frame the relative importance of formal stitutions if they exist and through interviews with experts. housing finance for the city in question. The locations of Community funds, savings groups and other forms of non- these mortgages in the city would also be a useful dataset conventional housing finance mechanisms in the city can for this study. also be identified to assess their relative importance. 34 Urban Land and Housing Market Assessment: A Toolkit 3. Part B: Assessing Constraints to Housing Development and Upgrading PHOTO BY: © 2007 JOHN HOGG/THE WORLD BANK Urban Land and Housing Market Assessment: A Toolkit 35 3. Part B: Assessing Constraints to Housing Development and Upgrading In Part B, the team assesses the constraints to housing currently practicing in the relevant field with have a mini- development and upgrading through expert surveys. This mum of 10 years’ experience, for example. part is less prescriptive than Part A. The team can use the knowledge developed in the desktop review and in con- Finding the right expert for informal housing devel- versation with country experts to shape their interview opment is a greater challenge than for formal housing strategy and adapt the survey questions. The amount of development. To identify these experts, the team can qualitative fieldwork will ultimately depend on team re- consult with academic researchers working in these ar- sources and the complexity of the city. eas, and cast a wide net to find informal land brokers or community leaders to survey. Someone who can provide The surveys will generate both a detailed description of specific information on the process as well as a broad the process of building different types of housing – formal perspective is ideal. and informal, infill and greenfield – and the constraints to these different types of development. The team will The responses of expert will be more informative if the also develop a rough estimate of different constraints team tailors questions to the local context. The team can to development, their significance, and the main actors use the indicators 4F, E, and 6E from Part A to inform the involved. surveys. The team can drop and add questions as neces- sary. The results of Part A may lead the team to focus on a specific, high-priority area of the housing sector (e.g. re- location of environmentally vulnerable population). The 3.1 Survey Strategy sample questionnaires (Appendix B), therefore, provide templates with flexibility. The survey methodology proposed here is similar to that of the Doing Business project, a survey conducted Interviewing experts is the most straightforward way to annually that measures regulations for local firms in 190 identify constraints to housing development. But this ap- economies and selected cities40. Expert practitioners and proach has limitations. Practitioners are not aware of all the local government officials are asked to outline the steps, structural constraints they face and may not have an expan- costs and time required to complete various bureaucratic sive perspective. A recent study of land use regulations in procedures, such as starting a business, paying taxes, and California illustrates this point41. In it, developers asserted registering a property transfer. that bureaucratic procedures were the major constraints to housing development, whereas city planners considered In this case, the team will ask a dozen or more expert them to be land availability. The survey therefore also in- practitioners to describe the procedures of different cludes questions about a broad range of housing market phases of housing development, from acquiring land, to issues. The team can tailor these supplementary questions obtaining a permit, to construction. Then, these experts to the city’s context, informed by Part A. will break down each procedure into individual steps, complete with forms required and relevant government Two techniques employed by the Doing Business project agencies. They will estimate the costs and time to com- are worth replicating. The first is to pay respondents for plete each step, as well as the relative burden and their their time. The second is to use an iterative approach for perspective on potential reform of the step. the description of procedures and steps. That means the team can present the first expert with a description of a Interviewing at least three experts for each type of hous- stylized housing development process, and even some of ing development provides a more robust and accurate the steps for construction permits, registering land own- perspective of the process. Surveying experts with dif- ership, and obtaining electricity from the largest busi- ferent roles in the development process provides some ness city as recorded by indicators 4F, 5D, and 6D, which checks and balances. For formal housing development, rely on existing Doing Business data. for example, this may be one developer, one real estate lawyer or notary, and one local government official from After the first survey is complete, the team can present the most relevant institution(s) in the development pro- subsequent respondents with the steps and procedures cess. Depending on their experience, practitioners may written down by previous respondents. Respondents be able to complete a survey for more than one type can add to or modify the process as previously laid out as of housing development. An ‘expert’ can be someone they see fit. This will save time. The team will likely want 40 More information on the Doing Business methodology is available here: http://www.doingbusiness.org/en/methodology and an example of the full survey is here: http://www.doingbusiness.org/content/dam/doingBusiness/media/Methodology/Survey-Instruments/DB19/DB19-RP-questionnaire-en.pdf. Experts are asked to list all the steps required, along with the cost, time, and agencies involved with that step. Appendix C is an example of the output. 41 See http://californialanduse.org/index.html 36 Urban Land and Housing Market Assessment: A Toolkit 3. Part B: Assessing Constraints to Housing Development and Upgrading Table 3. Four Basic Types of Housing Development in Mombasa, Kenya A Formal greenfield B. Informal greenfield C. Formal infill D. Informal infill to withhold the time and costs estimates for the steps, so basic idea is that informal development has one of the that their opinions are not biased by prior respondents. following characteristics: The team will use surveys to assess constraints to at least 1. Lacks a state-sanctioned permit for construction on four types of housing development –formal and informal, the parcel. and greenfield (peri-urban) and infill (redevelopment). 2. Does not conform to building, land use, or zoning Greenfield development is the conversion of rural to regulations. urban land, which occurs at the urban edge. The land 3. Claim to land is legally uncertain. must not be in urban use previously. For the interviews, greenfield development also refers to land outside the Table 3 above demonstrates how these two dimensions urban footprint. As such, empty parcels surrounded by create four types of housing development of interest. If urban land uses are considered infill. Infill development local context suggests and resources allow, the team can includes both vacant parcels within the urban footprint introduce other dimensions and assess constraints to and parcels that would require the replacement of exist- other types of housing. For example, project size (above ing uses with new ones (e.g. from low-density residential 100 units / below 100 units) or public / private financing. to multifamily residential). The distinction between informal housing and informal housing development is made in the housing typology 3.2 Outlines of four surveys discussion in Part A. To clarify the categories unambigu- ously for interviewees, a definition can be provided. The Each of the four surveys has three parts (sample survey team can modify this definition to suit local context. The instruments are available in Appendix B). The details Urban Land and Housing Market Assessment: A Toolkit 37 3. Part B: Assessing Constraints to Housing Development and Upgrading differ by housing type, especially between formal and – but the specific questions differ. The answers will pro- informal housing. The steps in informal housing develop- vide data for some of the indicators in Part A. The surveys ment are similar but questions emphasize practice and detail which questions correspond to which indicators. variation in enforcement rather than formal procedures with cost and time estimates. The team will likely want to In all cases, including a map with the survey can ensure modify the survey instruments to fit local context. the locations that the questions focus on are consistent. Additionally, the outlines of construction permitting, reg- The first part is the description of the housing develop- istering property, and obtaining electricity can be taken ment process. Interviewees first list the steps required for from the Doing Business indicators for the capital city of the procedures of housing development. For each type the country as recorded in Part A (Indicator 4F, 5D, and 6D). of housing development, the survey instrument suggests procedures and steps to give experts a sense of the task. Then, for each step, respondents report the typical time to complete the step, as well as the costs, relevant actors (e.g. 3.3 Analyzing survey responses public agencies, private institutions), the importance of this as a constraint to development (on a scale of 1-5), and Once the surveys are complete, the team can summarize their opinion on the potential for reform (on a scale of 1-5). and analyze responses. Before this, the team can follow up with interviewees to assess any discrepancies be- The second section focuses on the most consequential tween answers to the same questions, for example, one constraints to development. Experts answer a series of respondent leaves out a step, or two respondents report questions that reflect on their previous description of the wildly different costs for the same step. How large a vari- production process, to judge what the most significant ation merits a follow up? Differences beyond 20%, for challenges are. example. In general, using the median, or middle value, of answers to the quantitative questions in presenting a The third section is comprised of questions about other summary of the description of housing development is challenges and issues for each type of housing devel- the most reliable approach. opment. This section differs the most between housing types. For example, formal greenfield development re- The team will present a summary of the major con- spondents are asked about land ownership in the urban straints and potential for reform based on these de- periphery, infrastructure access and costs, condomini- scriptions and the answers to part two of the survey. um laws, and the context of construction and mortgage Additionally, as described in the survey itself, some of financing, whereas informal greenfield respondents are the survey questions yield answers directly for the in- asked about property rights and land regularization. The dicators in Part A. The organization of the narrative is topics for both types of infill development are similar - described in Section 5 of this toolkit. It can be based on land ownership, infrastructure, condominium laws, and several of the components of the housing value chain the context of construction and mortgage financing that frame the indicators. 38 Urban Land and Housing Market Assessment: A Toolkit 4. Part C: Institutional Map, Potential for Reform, and Political PHOTO BY: © DOMINIC CHAVEZ/WORLD BANK Strategy Urban Land and Housing Market Assessment: A Toolkit 39 4. Part C: Institutional Map, Potential for Reform, and Political Strategy Building on the results of the expert surveys in Part B, Part between development priorities and actual commitment C consists of additional surveys of institutions identified in budgets and organizational attention. The output will with the most significant constraints for housing devel- enable targeted decision-making to alter the institutions opment. The surveys aid the overall study in four ways. producing these rules.43 The map points to the strategic First, they direct the team to flesh out the institutional locations where decisions are made. map of participants in the housing production process. Second, they provide further information about the most The typical set of institutions most relevant to urban land consequential laws, regulations, policies, or programs and housing markets are: for housing access and production. Third, they provide a framework for assessing potential entry points in the Public sector: most important agencies in the housing system. Under- standing the resourcing (both budgets as well as human · National & state government housing agencies (de- capital), the longevity of leadership, independence from centralization, public finance) politics, and the subjective judgements of practitioners · Local government regulatory agencies (planning will inform action. Fourth, this part of the study provides a agency, building permit agency) space to think about the politics of reform. It prompts the · Local public works and infrastructure agencies (roads, team to consider framing the housing sector as an im- water, sewage, energy) portant part of the economy, and highlighting the role of · Local land management agencies (cadastre, property institutional reforms in the sector as crucial to economic registry, property tax) development. · Government organizations involved in housing production Part C is the least prescriptive part of this guide because · Finance institutions (state-owned) it depends so much on the structure of local institutions and local politics. The team can rely on their judgement Private Sector: and knowledge gained to this point to refine the survey strategy and questions. Identifying housing problems · Housing producers (developers, contractors, real es- and institutional bottlenecks to housing production is tate associations) easier than intervening. Assessing potential for institu- · Finance institutions (private commercial banks, mi- tional change has less of a clear blueprint, and depends cro-finance institutions, savings and credit groups, on making an argument in line with the existing political housing cooperatives) agenda. · Real estate professionals (lawyers, realtors, brokers, notaries, property management companies) Civil Society: 4.1 Institutional map · Urban civil society organizations including communi- The institutional map describes the function of and ty-based organizations connections between the main actors who formulate · International non-governmental organizations and implement housing policies in the context of na- tional development priorities. In assessing institutions An exhaustive analysis of all above institutions is likely and organizations the team can adopt recognized beyond the scope of the project. Therefore, the team guidelines for institutional and organizational assess- should evaluate a selection of these institutions – the ment.42 The team may also be able to gather data on most important ones and ones most amenable to chang- budgets for the major housing agencies. Much of the ing or taking action. The exact number depends on the information for this institutional map will come from resources of the team, the complexity of the city, and the the desktop review and consultation with country ex- number of institutions Part B identified as consequential. perts before fieldwork. In general, there are at least ten important institutions, but if time is available, the team could collect data on The goal is to create an overview of the network of de- more. The following institutions are the most common, cision makers and organizations that shape how rules and interviews with them will provide information about are made and applied, and to assess the alignment several indicators (highlighted below in parentheses): 42 DIFD (2003) Promoting Institutional & Organizational Appraisal & Development. A Source Book of Tools and Techniques. London: DFID. 43 Aligica, P.D. 2006. Institutional and Stakeholder Mapping: Frameworks for Policy Analysis and Institutional Change. Public Organization Review 6, 79. Available here: https://doi.org/10.1007/s11115-006-6833-0. 40 Urban Land and Housing Market Assessment: A Toolkit 4. Part C: Institutional Map, Potential for Reform, and Political Strategy PHOTO BY: © 2010 WORLD BANK/ NTPC/STANISLAS FRADELIZI · Housing policy agencies (3A, 3B, 3C, 7C) educated, experienced leaders of institutions with sta- · Property tax agency (3D) ble funding and capable staff that can continue through · City planning agency (5A, 5B) changing political cycles are more likely to successfully · Real estate associations (including any developers reform. This, of course, assumes leadership is interest- and builders associations) (8B) ed in change. Assessing these features of institutions is · Public works agency (6A, 6B, 6D) challenging, and the team will need to rely on their own · Housing finance institution (9A, 9B, 9C, 9D) judgement throughout. The questions below are guidelines for a survey to gather information on the one hand, and gather a nar- 4.2 Surveys of high priority institutions rative understanding of an agency’s motivations and constraints on the other. The exact phrasing of survey In addition to the six institutions above, surveys of select questions will depend on context, but can include institutions will aid the team in prioritizing conversations both closed questions and some relatively open ended about interventions and direct those interventions. The questions. goal of the surveys is to identify institutions most inter- ested and able to change or act with investment. This Leadership: type of assessment is not quantitative analysis, but a sys- tematic approach that uses some quantitative indicators 1. What level of education do leaders have? as a framework. 2. How are the institution’s directors selected? 3. What is the oversight of institution’s leadership? What are the characteristics of institutions with the most 4. What is the length of tenure of leadership? potential for successful reform? Research shows that 5. (open ended) Are leaders interested in reform? Urban Land and Housing Market Assessment: A Toolkit 41 4. Part C: Institutional Map, Potential for Reform, and Political Strategy 6. (open ended) What are their goals while directing the 17. How dependent are the institution’s functions on institution? other institutions? 7. (open ended) What are the constraints as they see 18. Are there legal constraints or motivations that reform- them? ers can leverage (right to housing laws, for example) 19. (open ended) What other agencies limit or help this Capacity: one in achieving its goals? 20. (open ended) To fulfill its mandate, how would other 8. Technical: How many staff focus on technical aspects institutions need to change? of institution? What are their levels of education and degrees? What is the level of Information Technology? 9. Staff: Is the organization staffed at a level commen- surate with its functions? Do staff have appropriate 4.3 Analyzing survey responses resources and autonomy? 10. Financial: How is the budget determined? What is the The team can analyze the above questions in two ways. fluctuation from year to year? The first is a narrative summary based on the team’s 11. Patronage appointments: What share of workers are judgement and the answers to open ended questions. on temporary contracts vs. career appointments? Are there phantom workers? The second is a rough ‘quantitative’ assessment of 12. (open ended) Do leaders think their agency has the the closed questions. This is a simple coding system capacity to change and improve operations? for the answers to the dozen closed questions above. 13. (open ended) What is constraining them from achiev- Each question will have roughly ranked answers, from ing their goals? 1 to 3, with larger numbers indicating greater potential for change. For example, take question 17. How depen- External factors: dent are the institutions functions on other institu- tions? The respondents could be given three possible 14. Are there financial incentives or resources from state answers: A lot, Somewhat, and Not at all (ranked 1, 2 or federal government to address supply constraints? and 3 later). How significant are they relative to agency budget? 15. Are there bureaucratic networks (e.g. associations or The team can use these closed answers to generate a conferences) for this institution? Does staff/leader- rough relative indicator of potential for reform for each ship participate? agency by adding up the values. Institutions with larger 16. Are there community-based organizations that could totals have greater potential for change. The team can be included in data collection, monitoring, and for- use this more as a systematic framework to compare in- mulation and enforcement of reforms44? stitutions than a ‘true’ measure of reform potential. 44 For example, see the slum mapping efforts by Shack/Slum Dwellers International here: https://www.ideo.org/project/santa-fe-institute-of-architects. 42 Urban Land and Housing Market Assessment: A Toolkit 5. Framing the Report: Housing Problems PHOTO BY: © DOMINIC CHAVEZ / WORLD BANK and Guiding Principles Urban Land and Housing Market Assessment: A Toolkit 43 5. Framing the Report: Housing Problems and Guiding Principles Housing is an essential human need and the benefits of Importantly, housing problems are not just social prob- well-managed urbanization are substantial. Local and lems. Housing can be a significant share of a national national governments often recognize the importance of economy and financial system. Emphasizing the missed the housing sector and want to intervene, but the sector economic opportunity that a dysfunctional housing sec- is complex. The most common policy impulses – large tor represents can be a useful framing for securing politi- development projects or mortgage interest subsidies cal support for reforms. – can be less effective and less progressive if there is no substantial change and corresponding intervention The second section of the report can discuss the role and on the supply side at the local level. A well-functioning importance of local and supply policies, and frame these housing market has a balance between supply and de- in the context of the national housing agenda and devel- mand, supported by a supply of planned and serviced opment goals. The detailed description of the housing land, as well as building materials in diversity and scale, production process for different types of housing will be and access to mortgage financing and micro-finance, especially illustrative, and highlight the importance of as well as a straightforward and enforceable regulatory local government policies and practices for housing out- environment. comes. Governments may not understand the role that different policies play in housing outcomes. This toolkit proposes a framework to analyze a city’s hous- ing context, problems, and local policy environment, and This section can emphasize the importance of both de- to develop a strategy for policy reforms and investments mand and supply side policy interventions in the housing to improve access to land and housing for residents. The sector, and their connections. The effectiveness of de- following three part approach (problem definition, con- mand side interventions like mortgage interest subsidies nection between local policies to national development is hindered by supply side bottlenecks46. New formal con- agenda, and strategy for intervention) may be useful for struction programs fueled by demand side subsidies with- presenting the toolkit’s three analytical components. out due consideration of the supply side contraints, may have ultimately negative outcomes, like abandonment of First, begin with the problem. Using the first set of indica- suburban houses, costly infrastructure needs, or expen- tors, the report can present housing deficits, both qual- sive commutes.47 Moreover, exclusive focus on mortgage itative and quantitative. Most cities do not have enough finance or subsidies in the form of concessional interest housing of a decent quality that is affordable to their rates may be captured by higher income segments. residents. New formal housing is usually unaffordable to the majority of a city’s residents. As a result, families The third section focuses on a strategy for intervention. seek informal solutions, building their own housing or How can a government intervene to improve access to renting rooms of low quality or other temporary, insecure quality housing for all, especially for the bottom 40% of accommodation. By comparing population projections the income distribution? The housing value chain can to housing production rates the report can assess future be a useful framework to focus attention on local level housing deficits. interventions with potential to improve housing and ex- pand access in a programmatic and progressive manner. Qualitative housing deficits, especially in terms of infra- Using the analysis generated through this toolkit, this structure and services, negatively impact on health and can be done in two ways. The first is simply to highlight well-being. Assessing where housing quality is deficient the indicators that arise as the most constraining in the is important to frame local housing agendas in most production of housing through the interviews. middle and low-income countries. The figures from the recent Jordan Housing Sector Review45 can serve as an The second is contrast the formal production process aspirational model for presenting deficits, although it with informal development – as described above – to is from a relatively information rich context. Presenting reveal inefficiencies in local rules and practice. By focus- qualitative and quantitative deficits for different market ing on how the bulk of de facto “affordable housing” is segments – income groups and districts of a city – can actually produced, and the challenges in producing it, the be a very effective way to focus on different kinds of con- team can identify seemingly small interventions that may straints to housing access for specific sectors. have large impacts. Because of this focus on local level 45 World Bank, 2018. Jordan Housing Sector Review, Project P158331, May 2018, Washington, DC: The World Bank. Available here: http://documents.worldbank.org/ curated/en/855101555960778525/Jordan-Housing-Sector-Assessment-Housing-Sector-Review. 46 IEG report on housing finance, available here: https://ieg.worldbankgroup.org/evaluations/world-bank-group-support-housing-finance. 47 For a comparison of costs to residents of different kinds of social housing in Brazil, Colombia, and Mexico, see Libertun de Duren, N. 2017. The social housing burden: comparing households at the periphery and the centre of cities in Brazil, Colombia, and Mexico. International Journal of Housing Policy. Available here: https://www.tandfonline.com/doi/abs/10.1080/19491247.2017.1298366. 44 Urban Land and Housing Market Assessment: A Toolkit 5. Framing the Report: Housing Problems and Guiding Principles markets. In market-based housing contexts where both Table 4. Guiding Principles for Five Areas of Local customary and/or informal systems of land trading occur, Housing Policy the government should heavily invest in modern, transpar- ent land cadaster and real property registration system that AREA GUIDING PRINCIPLES facilitate registration of property, mortgage and liens is to delivery of formal affordable housing. Security of tenure Urban land · Security and tradability removes the risk of eviction and also provides dwellers with supply of real estate rights access to credit for housing construction and upgrading. · Sufficient serviced land for expansion · Sufficient serviced land for infill Sufficient serviced land for expansion both outward and Development · Appropriate to incomes upward is needed if housing supply is to meet demand. regulations · Allow density Understanding current urban expansion trends can yield important policy insight. Large cities that are rap- · Clear and non-discretionary idly expanding at the periphery and not experiencing Infrastructure · Universal densification may need interventions in both peripheral and services · Sustainably financed areas – like ring road and other trunk infrastructure – as well policies to facilitate dense infill development – al- · Upgrading with community participation lowing density and increasing infrastructure capacity in Building · Transparent rules central neighborhoods. On the other hand, cities with materials and construction · Low-cost building materials overcrowding and increasing population densities that industry · Governance of multi-owner buildings are not expanding horizontally may benefit from revising rules or removing barriers for expansion. Housing · A policy of last resort Subsidies · Transparent In order to harness the benefits of agglomeration econo- mies, to support urban density with adequate infrastruc- · Well targeted to low-income households ture, we offer two guiding principles for cities to strike a · Well-located balance between horizontal growth and densification. interventions, housing finance interventions may not be Sufficient serviced land at the periphery: Striking the right as extensively highlighted in this assessment. 48 balance in regulations governing the urbanization of pe- ripheral land is a challenge. On the one hand, overly strict Below, we suggest guiding principles for intervention in rules can lead to inefficiently low-density development or five overlapping areas –urban land supply, development widespread informality because household incomes do regulations and processes, infrastructure and services, not support the construction of even the minimum legal building materials and construction industry, and hous- standard for housing quality. On the other hand, a lack ing subsidies. Table 4 presents an overview of the sixteen of regulation can lead to uncoordinated and inefficiently guiding principles. Most of these reform efforts are long sprawling development patterns. One way to change the term, and as such, building in feedback loops and learn- approach to guiding development is to use infrastructure, ing into the report is important, as is incorporating any not regulation, to encourage expansion. Building transit past efforts that likely exist in a given city. lines into the urban periphery, for example, or rind roads, will direct urbanization more effectively than zoning cer- tain land for housing and certain land for ecological re- serves. Similarly, building trunk infrastructure will direct urban expansion in a way that planning alone cannot. 5.1 Urban land supply for housing: Security, Tradability, Sufficient serviced land within the city: Cities can sup- Expansion and Infill port infill development in multiple ways. Guidance on the needed combination of infrastructure support and Security and tradability of real estate rights: Ensuring se- finance, as well as appropriate and clear development curity of real estate rights and that rights to own and freely regulations is described below. Additionally, institution- trade housing are established by law and enforced is funda- al structures to facilitate land assembly – land readjust- mental to the well-functioning of urban land and housing ment agencies or mediation services – may be needed. 48 For more on housing finance focused policy reform, see the IEG report on housing finance here: https://ieg.worldbankgroup.org/evaluations/world-bank-group- support-housing-finance and Chiquier, L. and Lea, M. 2009. Housing Finance Policy in Emerging Markets. Washington, DC: The World Bank. Available here: http:// documents.worldbank.org/curated/en/833371468152071863/Housing-finance-policy-in-emerging-markets. Urban Land and Housing Market Assessment: A Toolkit 45 5. Framing the Report: Housing Problems and Guiding Principles PHOTO BY: © JOHN HOGG / WORLD BANK 5.2 Development regulations: and make cities less sustainable. Allowing small lots for housing and high floor area ratios facilitates housing sup- Appropriate, Dense, Clear ply of different types and increases affordability. and Non-discretionary Clear and non-discretionary permitting process: Per- Though not obviously a housing policy directed at afford- mitting processes that are clear and non-discretionary ability, the failure to consider the downstream impacts reduce the potential for corruption and allow certainty of overly restrictive, unrealistic urban development reg- among developers. Sensible rules applied consistency is ulations makes housing less affordable. Simply because a a surprisingly challenging, but worthwhile goal. city government mandates that all housing must conform to some ideal standard of size, open space and building materials, does not make it happen. It can often backfire. We offer three guiding principles for housing develop- ment regulations. 5.3 Infrastructure and services: Universal, Sustainably financed, and Appropriate requirements: The benefits of appropriate Community participation in upgrading land use regulations for housing markets have long been recognized. The definition of appropriate is the main Infrastructure and services are a large part of the housing challenge. Building codes are important for public health problem in many developing country cities. Expanding and safety, but should be adopted and revised based on infrastructure networks to reach all residents and provid- a reality check of the resources of most households and ing consistent service is among the most important goals what kind of housing they can afford. for local governments. We offer three guiding principles for infrastructure and services. Allow density: Minimum lot sizes and strict limits restric- tions on the number of dwelling units per lot are well- Provide services to all neighborhoods: Basic infrastruc- known49 to exacerbate segregation, reduce affordability, ture and services are fundamental to health and quality 49 For example, see Dowall, D. 1992. Cato Journal, 12(2), 413. Available here: https://object.cato.org/sites/cato.org/files/serials/files/cato-journal/1992/11/cj12n2-7.pdf. 46 Urban Land and Housing Market Assessment: A Toolkit 5. Framing the Report: Housing Problems and Guiding Principles of life. Infrastructure investment and service provision information for the sector, removing constraints to the should be well coordinated with land use planning; local development and use of local building materials, and public works agencies should be as proactive as possi- reducing trade barriers that apply to housing inputs, sub- ble in providing services to all neighborhoods. In places sidizing building materials that target low income house- where informal housing is prevalent, denying these holds, and improving the governance of multi-owner neighborhoods public infrastructure is counterproduc- properties. We offer three guiding principles for the tive to development. building materials and construction industries. Sustainable financing through property taxation and Transparent, Simple Regulatory Processes and Informa- land value capture: Funding urban infrastructure with tion: Governments can increase competition by creating property taxes is challenging but extremely important. transparent planning and permitting processes that treat Many cities have low property tax rates and do not col- all companies equally in the process, and by creating one- lect most of them. Though the shift to property taxes can stop shops for permitting. Simple and clear development be unpopular, when residents see their tax money being rules benefit smaller companies, reducing the potential invested in public infrastructure, they will be more likely for corruption and allowing for more competition. to pay. Other land value capture mechanisms should be explored as well, including transferrable development Promoting low-cost building materials: Ensuring the rights, density bonus and Tax Incremental Financing, availability of affordable building materials, especially in depending on legal and regulatory environment and en- a manner that targets low income households, can great- forcement at respective localities. ly improve housing conditions. As starting point, local governments should meet with construction and build- Community inclusive urban upgrading: Investment in ing materials industry and assess any constraints they improving urban infrastructure in low-income neighbor- face, including norms, standards, fees, taxes tariffs that hoods is a core component of urban housing policies to go into the final building material products that are sold ameliorate the housing quality deficit. Community in- in the market. In countries where a considerable portion volvement is important for urban upgrading to succeed. of construction materials are imported, import substitu- This is not only because it will lead to community own- tion strategy needs to be formulated, including measures ership and sustainability of the upgrading, but also cost such as specific waivers, fiscal incentives, subsidies, tax effectiveness of the investments undertaken, and more relief, etc) to stimulate the utilization of alternative or tra- importantly, to deeper and more constructive engage- ditional building materials. A more proactive approach ment with local government. is to provide low-income households with subsidies for building materials. Allowing forms of multi-owner arrangements to flourish: 5.4 Building materials and A sometimes overlooked element of supporting dense construction industry: Transparent urban housing is ensuring that the rules governing rules, Promoting low-cost building multi-owner properties are effective. Multi-owner prop- erties present governance challenges and in some plac- materials, and Management es, legal systems do not work well at ameliorating those of multi-owner buildings challenges. A well-functioning housing sector depends on a compet- itive building industry, which in turn requires affordable building materials. The best way to support developers and construction companies facilitate building materials 5.5 Rationalizing Subsidies: acquisition depends on the particular national and local Transparent, Targeted, context. Potential approaches include creating greater and Well-Located competition on the building industry, Housing subsidies50 are usually divided into supply side improving the business environment through trans- subsidies and demand side subsidies51. Supply side parent, simple regulatory processes, providing better subsidies are largely those that (i) lower the opportunity 50 For the purpose of this toolkit, a subsidy is an incentive provided by government to enable and persuade a certain class of producers or consumers to do something they would not otherwise do, by lowering the opportunity cost or otherwise increasing the potential benefit of doing so. (adapted from the US Congress, 1969). 51 Some subsidies may be considered as either. For instance, the interest rate subsidy for the low-income self-help builders can be categorized as a supply side subsidy, or can be considered as a demand side subsidy (for owner occupation). Urban Land and Housing Market Assessment: A Toolkit 47 5. Framing the Report: Housing Problems and Guiding Principles Box 3. Regulations, Policies or Subsidies? Subsidy should be a policy of last resort or, more precisely, should be used only in conjunction with other steps. The hierarchy of complementary government actions needed to improve the housing conditions for the majority of households in an economy are: i. Develop or reform institutions and policies to facilitate the role of private and non-profit lenders and developers in expanding the moderate/low income housing supply, and provide education and training to consumers and producers to improve the operation of the housing finance industry; ii. Improve the regulatory system in the different supply markets (land, finance, infrastructure) to allow more households to ac- quire authorized and healthful housing; and lastly iii. Provide subsidies to address well-defined objectives. Simply put, if government does not do what is necessary to encourage the housing construction and finance industries to function efficiently, housing supply cannot respond to price signals, and higher incomes or subsidies will not translate into better housing. Source: Marja C. Hoek-Smit and Douglas B. Diamond, 2003, The Design and Implementation of Subsidies for Housing Finance. costs and risks for private lenders or developers to deliver government are important. Clear income eligibility cri- moderate to low income housing such as tax benefits for teria, for example, and non-discrimination in who among private developers, the provision of below-market funds income groups can receive a subsidy ensure subsidies for housing loans, credit risk insurance or guarantee reach their intended targets. Unlike one time payments, schemes, or (ii) direct government lending or govern- for example, mortgage interest rate subsidies are opaque ment construction and management of housing, provi- in that future changes in inflation change the effective sion of serviced land, infrastructure or housing at below size of the subsidy meaning governments do not have a market rate. Demand side subsidies focus on increasing clear accounting of their commitment to the sector. the ability of households to consume better housing, such as housing allowances or housing vouchers for Targeting: Subsidy can be geographically targeted rental or owner-occupied housing, up-front grants tied (place-based), or people based. Refers to what kind of to mortgage or savings for housing. We offer four guiding household (e.g. what income level) receives the subsidy. principles for housing subsidy programs as below: Some kinds of subsidies, however, like mortgage interest rate supports, tend to inevitably benefit higher income Subsidy as a policy of last resort: Subsidy should be de- households. signed and implemented in conjunction with other comple- mentary government actions (as outlined above) to improve Location: There is a tension between breadth and depth the housing conditions for the majority of households in an in subsidy programs (i.e. will they help a lot of households economy. If the supply side is not responsive, demand side a little bit, or a few households a lot). The tension is often subsidy alone can be distortive and ending up subsidizing resolved by subsidizing the least expensive type of hous- in-efficiencies in the market. Therefore, it is critical to have ing. However, this sometimes means housing located far a systematic understanding of the supply and demand from the city (hence on cheaper land) and the oppor- dynamics, avoid distorting housing markets, and design a tunities city provides, and that such housing tend to be blend of supply and demand side instruments accordingly. abandoned by its beneficiaries. This should be avoided or ameliorated by carefully designing the subsidy to ensure Transparency: Clear, transparent processes of admin- that subsidies units are built in well-located areas with istration and dispersal, as well as clarity in costs to the infrastructure, services and access to jobs. 48 Urban Land and Housing Market Assessment: A Toolkit 6. Conclusion PHOTO BY: © KIM EUN YEUL / WORLD BANK 6. Conclusion The housing sector depends on a complex set of inter- the factors restricting different types of housing pro- actions between public and private actors. Many institu- duction and a prioritization of these constraints. Finally, tions and interventions that might not obviously be con- it outlines a method to prioritizing interventions, by as- sidered as housing policy have consequential impacts on sessing which government actors are the most amenable housing outcomes. On the one hand, this makes inter- to engagement and have the greatest capacity for action vention to improve housing challenging, but on the other and/or reform. In addition to guiding analysis of a city’s hand, there is potential for relatively small inexpensive housing context, problems, and potential interventions, programmatic changes in local policy to have noticeable the penultimate section provides a framework for writing impacts. The most effective strategy is coordinated inter- this analysis in a report structured as an argument for ac- vention and investment in multiple areas. tion with a menu of options for intervention. This toolkit serves as a guide to create an evidence-based This toolkit is envisioned as a living document. The next step assessment of a city’s land and housing market perfor- is to apply the methodology. After initial application in a va- mance. It has three analytical components. First, it out- riety of contexts - ideally in different regions, with different lines a set of indicators to assess problems in the city’s levels of economic development, urbanization, and institu- housing and land value chain, as well as the nature of tional setup – the approach can be further improved and current housing and other policy actions. Then, through adjusted, before potential roll-out as a standardized global a series of expert interviews, it guides an assessment of method of urban land and housing market assessment. Urban Land and Housing Market Assessment: A Toolkit 49 Appendices A P P E N D IX A Technical Definitions 1. Functional Urban Area (FUA): FUAs include urban- (e.g. cities with borders within 15 kilometers are ized land linked through labor and housing markets integrated) or consult with local experts. to an urban core. The OECD uses a three-step process c. The third step is to assess where the urban core’s to delineate FUAs, though this approach may be sim- area of influence or hinterland ends. There is no plified and urban areas defined using step 1 alone: ‘correct’ way to do this, and the process usually relies on commuting data. If this is unavailable it a. Combine a measure of density (e.g. over 1,000 is a more challenging process, and a simple buffer people per km2) and total population size (e.g. area of 10 or 15 kilometers can be used as a rule 50,000 people) to define the urban core. The of thumb. core is the aggregate of all contiguous cells with density above the minimum. If the sum of the Exhibit A illustrates urban core cells, a hinterland defini- population in these ‘high-density’ cells is greater tion of 10 km, and the challenge of including a neighbor- than the population threshold, the area is a core ing city into the greater urbanized area. It also reveals a area. Population thresholds vary from region to typical case, FUA boundaries overlapping administrative region. boundaries, and how administrative units often include b. The second step addresses the interdependence large areas of non-urban land. of adjacent or abutting cities. If their economies are integrated, they can be considered as one ur- 2. Urban extent: The urban extent is the base unit of ban area for land and housing planning purposes. analysis. It is the area covered by urban land use in the The OECD uses data on commuting to assess in- Functional Urban Area. Urban centers in close prox- tegration - if over 15% of one city’s residents com- imity are usually included as part of one FUA because mute to a nearby city they are integrated. Without they form an integrated labor, land, and housing data on commuting, a more basic decision rule market. Exhibit A. Schematic of FUA definition process: urban core, hinterland, and municipal boundaries High density cell Urban Centre (Cluster Commune > 50% of its Urban Audit city (>1500 inh. per sq.km) of HD cells with population in an urban population > 50.000) centre Municipalities 50 Urban Land and Housing Market Assessment: A Toolkit Appendices 3. Core urban areas: Using the GHSL data, urban cores a. Use the 10km buffer around the urban extent to can be identified as clusters of cells with density create a clip mask of the road network map. above 1,000 people/km2 that add up to a population b. Create a 2km buffer around major roads and tran- greater than 50,000 people. sit line from the Open Street Map (OSM) project or other country-based data set. a. Use the GHSL dataset to trace the urban extent by c. Calculate area of developable land within that including all pixels as long as at least 50% of pix- transportation network buffer. els within a 1km buffer are urban. This is the urban extent of the core. 9. Secure developable land: Much land is at risk from b. To obtain the regional urban extent, extend a buf- natural disaster. Secure developable land takes into fer equal to 25% of all urban cores and aggregate account relevant risks. Based on the developable all buffers that intersect. The urban extent is the land or accessible version, calculate the share of land footprint of the built-up area and all open areas based on assessed risk level. Figure A1 provides an within that footprint. example based on probability of rain and slope of the c. Cities in close proximity may be considered in- terrain for suitability in the land around Davao City in tegrated. For example, if more than 15% of the the Philippines. population commutes from one core to another, they are considered linked. Data on commuting 10. Housing tenure: This variable will depend on the intensity is rare. A gravity model is an alternate categories used in census or other available data. approach that takes into account pull by region The basic breakdown is owner-occupied, rental, and size and transportation costs to determine the shared/other. These categories can be complex in number of trips between areas. The existence of some cities, with owner-occupied including forms transportation infrastructure (e.g. main road or of semi-formal ownership claims, for example. railway) is easy to determine. As such, a buffer Fieldwork, though resource intensive, gives a more proportional to the size of cores (their pull) can be detailed description of tenure categories. Work on added around cores that are connected through tenure has gained attention and several projects can large capacity infrastructure to determine if a provide complementary sources (e.g. Prindex52). core will be included as part of the FUA. 11. Housing quality: Housing quality is generally di- 4. Built-up area: The built-up area of an urban extent is vided into the materials with which it is built and the sum of all areas that are coded as urban land use infrastructure. Building materials – often separated in the GHSL database. by walls, floor and roof – are usually categorized as permanent / improved or temporary / substandard. 5. Density: Density is the total population divided by a Infrastructure – usually separated as water, sewage, set area. Density can be calculated for both the urban and electricity – is usually ranked as available or extent and built-up area. not, although a more precise measure would also indicate how consistently they are available. Thus, 6. Urban expansion rate: Urban expansion rate is the there will usually be six separate components of this growth of the built area on a yearly basis. It is created indicator. The team can combined them into an in- using the built-up area of an urban extent at various dex. The main source of data for these variables is a points in time. Based on the Global Urban Footprint, national census. Another alternative is to use Google the growth of the urban footprint within the urban Street Map to gather information on building mate- extent can be calculated precisely for the past several rial and general quality. decades. 7. Developable land: Developable land is the area of 12. Housing types: The core dimension of describing land within a 10km buffer around the urban extent housing type is the size of the building, both footprint that is open, with a slope less than 10 degrees. and height. Footprint is the more feasible measure. Machine learning is making the tracing of building’s 8. Developable land accessible: Accessible develop- footprints for entire cities possible. The technology able land is land that could be developed without cre- remains too onerous to achieve coverage beyond ating new major infrastructure, especially transpor- select case studies, but is worthwhile in cases where tation. It captures land that is within 2km of a major administrative data are lacking. Similarly, tools to transportation link. acquire data on building height are being refined 52 www.prindex.net Urban Land and Housing Market Assessment: A Toolkit 51 Appendices Figure A1. Suitable land for greenfield development. Land Use Suitability Built-up-area Very high High Moderate Low Very Low Sources: Shuttle Radar Topography Mission (30m) SSBN 3 arc second Global Hazard Data (World Bandk License) Source: City Scan, Davao City. City Resilience Program and expanded. The technology requires one more 14. Housing affordability: The standard indicator is a cost dimension (z-axis) and therefore even more resource burden measure of rent as a percentage of income or intensive (e.g. the Airbus project in Senegal53). the house price to income ratio. A common interna- tional standard is that paying over 30% of household 13. Housing costs: The exact definition of this variable income on rent or mortgage indicates an unafford- will depend greatly on available data. The most com- able housing market. This 30% standard shall be mon measures are rent and price. The source of data revisited and a more grounded threshold should be can be self-reported variables in a census, assess- established based on empirical data in respective lo- ments in the property tax registry or cadaster, and the calities. Additionally, a more useful measure would be listed rent and value of housing units for rent or sale. cost burden measures for different segments of the The latter may be posted in newspapers or online and income distribution. the team would need to collect and aggregate them. In markets with high levels of digital technology pen- 15. Household formation rate: The standard measure etration, web scraping may provide enough data at of household formation is the headship rate, which the neighborhood level in an inexpensive and rapid in its most simple form is the percent of individuals manner. Such estimates pertain only to current prices above 18 that are household heads. Higher headship or rents rather than the average, and all three sources rates indicate easier access to housing. Headship have caveats. rates for different age groups, especially focusing on 53 https://www.intelligence-airbusds.com/files/pmedia/public/r50290_9_dakar_satellite_image_analysis.pdf 52 Urban Land and Housing Market Assessment: A Toolkit Appendices Table A1: Data Sources with Full and Partial Global Coverage FULL GLOBAL COVERAGE DATA NAME DESCRIPTION SOURCE Global Urban Worldwide inventory of human settlements (urban Urban TEP: https://urban-tep.eu/ Footprint (GUF) & rural) using one global coverage of SAR data with puma/tool/?id=567873922&lang=en 0.4 arcsec (~12 m) ground resolution collected by the satellites TerraSAR-X / TanDEM-X in 2011-2013. Global Humans The Global Human Settlement (GHS) framework https://ghsl.jrc.ec.europa.eu/index.php Settlement Layer produces global spatial information about the human presence on the planet. Built up maps, population density maps, and settlement maps is based on new spatial data mining technologies, satellite imagery, census data, and volunteered geographic information. Gridded Population Models the distribution of human population (counts Socioeconomic Data and Applications of the World Version and densities) on a continuous global surface. The Center (sedac): https://sedac. 4 (GPWv4) essential inputs are census data and geographic ciesin.columbia.edu/data/set/ boundaries. For GPWv4, population input data are at gpw-v4-population-density-adjusted- the smallest spatial resolution from the 2010 round of to-2015-unwpp-country-totals-rev11 censuses, which occurred between 2005 and 2014. World Pop Open spatial data on a number of topics https://www.worldpop.org/ including Global Settlement Growth. geodata/listing?id=32 Shuttle Radar High-definition elevation data and well-defined water Jet Propulsion Laboratory: https:// Topography bodies and coastlines and the absence of spikes and www2.jpl.nasa.gov/srtm/ Mission (SRTM) wells (single pixel errors), although some areas of missing data (‘voids’) are still present. The Version 2 directory also contains the vector coastline mask derived by NGA during the editing, called the SRTM Water Body Data (SWBD), in ESRI Shapefile format Global Land Cover The CCI-LC project delivers consistent global LC maps at European Space Agency: http://maps. 300 m spatial resolution on an annual basis from 1992 elie.ucl.ac.be/CCI/viewer/index.php to 2015. The Coordinate Reference System (CRS) is a geographic coordinate system (GCS) based on the World Geodetic System 84 (WGS84) ellipsoid. The legend (Table 1) uses the UN-LCCS, compatible with most models. DATA SOURCES WITH PARTIAL COVERAGE Open Street Map OpenStreetMap is a map of the world, created by OSM: https://www.openstreetmap.org people like you and free to use under an open license. International IPUMS-International collects and distributes harmonized IPUMS: https://international. Census Microdata census data from around the world, for free. Currently has ipums.org/international/ 94 countries – 365 censuses – over 1 billion person records Prindex A global dataset that measures perceptions of property https://www.prindex.net/data/ security in more than thirty countries by the end of 2018. A survey of perceptions of a representative sample of citizens. ThinkHazard! ThinkHazard! provides a general view of a locations hazards http://thinkhazard.org/en/ to be considered in project design and implementation to promote disaster and climate resilience. The tool highlights the likelihood of hazards (very low, low, medium and high) and guidance on how to reduce their impact. Google Street Map Google Street View is a free and fully accessible https://www.google.com/maps tool to the public that provides the virtual experience of walking down the street. Urban Land and Housing Market Assessment: A Toolkit 53 Appendices the prime household forming years, make for useful uses over 2.5 people per room as an indicator of comparison. Cities with higher headship rates among overcrowding. 25-30 year olds, for example, are likely to have more affordable housing. This can be calculated with most 18. Land development multiplier: A proxy for the value of census data from the variable position in household. obtaining development permissions and/or connec- tion to municipal infrastructure systems is the ratio of 16. Household structure: The prevalence of non-family the cost of permitted land with infrastructure at the households generally indicates a less affordable hous- edge of a city to the cost of adjacent land zoned for ing market. Additionally, family households with unre- agricultural use and without infrastructure. Although lated adults also can indicate lower access to housing. a precise estimate is challenging, a rough estimate based on interviews with real estate practitioners and 17. Overcrowding: The number of persons per room is a land brokers is nonetheless useful. A full land value sur- standard manner to measure overcrowding, though vey is also possible, or the use of administrative data if many countries draw the line differently. The WHO available. 54 Urban Land and Housing Market Assessment: A Toolkit Appendices A P P E N D IX B Sample Survey Outlines for Housing Experts A. Formal Greenfield to the housing development process (on a scale of 1-5), and your opinion on whether this step can be changed to Development: Survey for make housing development easier (on a scale of 1-5). Housing Development Expert Feel free to add or remove activities beyond these sev- We would like to thank you for your participation in en, or to reorganize the activities in a manner that better this survey on housing development. Your expertise matches your housing production process. Additionally, in housing development in «Survey_City» is essential for each activity, we have listed possible steps based on to the success of an ongoing analysis of the city’s land other countries’ processes. These are merely prompts and housing markets that seeks to lay the foundation to give an example of the kinds of steps in each activity. for positive reforms. Please fill out the section on your personal information and professional background be- 1. Acquiring a parcel fore proceeding. <> er, purchase Again, we are honored to be able to count on your exper- 2. Rezoning the land to urban use tise for this survey. Please do the following in completing a. Possible prompts: prepare a proposal, submit to the questionnaire: city planning · Review the assumptions of the case study before an- 3. Obtaining construction permits * swering questions a. Possible prompts: obtain certificates from water, · Please answer all questions fire or property tax, and other agencies, prepare · Contact our team with any doubts or questions about renderings, prepare urban impact study, submit the survey proposal to city, notify city upon completion of construction for certificate of occupancy Case Study Assumptions Consider the development of a housing subdivision of 4. Obtaining infrastructure * roughly 100 relatively low-priced units in the edge of a. Possible prompts: prepare required documents the city (for example, in the location indicated in Map (e.g. topographical map, subdivision plan, etc), A). <> cal agency, public works, pay required fees I. The Process: Steps, Time, Cost, and Reform 5. Obtaining construction financing The following seven activities are typically required for a a. Possible prompts: obtain development permit, new housing subdivision. For each, please list the steps submit business plan to financing agency required to complete this activity. For each step, indicate how long it typically takes time to complete, what the 6. Construction costs involved are, who the relevant actors are (e.g. public a. Possible prompts: grading, infrastructure, foun- agencies, private institutions), whether this is a roadblock dations, core housing, interiors Urban Land and Housing Market Assessment: A Toolkit 55 Appendices 7. Transferring property title * 1. How concentrated is landownership in this area, that a. Possible prompts: obtain clear title history for is, is it fragmented into many small parcels or are land, create new property registries, submit to there specific large parcels? How big the large par- notaries or recorders offices cels? (Indicator 4D) 2. Is most of the land privately or publicly owned? II: Most consequential constraints 3. How much of the peri-urban land has contested own- Please respond to the following questions, which ask you ership (e.g. multiple owners, land with legal conflicts)? to reflect on the process outlined above: 4. What percentage of peri-urban land is zoned for ur- ban use presently? (Indicator 5C) 1. Of the steps in housing development described 5. How much are typical greenfield land costs per square above, which do you think are the three most signifi- foot under different zoning regimes? (Indicator 4C) cant limitations or challenges? 6. Are you aware of any plans to expand trunk infrastruc- 2. Of the three major challenges to housing develop- ture in peri-urban areas? ment, which do you think would be the most easily 7. How is infrastructure in these areas financed (e.g. by de- reformed? Why? velopers, by local taxes, or state transfers)? (Indicator 6C) 3. In which areas do you think the actual practices and 8. What are infrastructure costs as a share of construc- actions of developers differ most from the officially tion costs? (Indicator 6C) mandated process? 9. How much are typical construction costs per square 4. Do you think there other significant roadblocks or foot? (Indicator 8A) constraints to new subdivision type development not 10. What is the price of cheapest new unit? (Indicator 7D) yet mentioned in this survey? 11. What share of construction materials are sourced lo- cally? (Indicator 8D) III: Other challenges and issues 12. Is there construction finance available for housing Finally, we would like your opinion on two additional developers from private or public banks? How com- topics: land ownership, planning, and infrastructure in mon is it? What are the major lenders? (Indicator 8C) the peri-urban area, and the context of construction and 13. What is the prevailing interest rate and tenure for mortgage financing. mortgage financing? (Indicator 9B) 14. What share of new housing is purchased with a mort- The map below shows the urban footprint of your city, gage? (Indicator 9A) with a buffer indicating an area of about 10 kilometers 15. Do microfinance institutions give loans for housing surrounding the current edge of the city. This buffer area improvement? What are the prevailing rates and ten- is what we consider the peri-urban area. ure? (Indicator 9E) Thank you for your participation! 56 Urban Land and Housing Market Assessment: A Toolkit Appendices B. Formal Infill Development 3. Obtaining construction permits * a. Possible prompts: obtain certificates from water, We would like to thank you for your participation in this fire or property tax, and other agencies, prepare survey on housing development. Your expertise this pro- renderings, prepare urban impact study, submit cess in «Survey_City» is essential to the success of an proposal to city, notify city upon completion of ongoing analysis of the city’s land and housing markets, construction for certificate of occupancy which will hopefully result in a set of positive reforms. Please fill out the section on your personal information 4. Obtaining construction financing and professional background before proceeding. <> submit business plan to financing agency Again, we are honored to be able to count on your exper- 5. Construction tise for this survey. Please do the following in completing a. Possible prompts: grading, infrastructure, foun- dations, core housing, interiors the questionnaire: · Review the assumptions of the case study before an- 6. Creating and transferring property titles * a. Possible prompts: create new property registries, swering questions · Please answer all questions submit to notaries or recorders offices, create owners’s corporation · Contact our team with any doubts or questions about the survey II: Most consequential constraints Please respond to the following questions, which ask you Case Study Assumptions to reflect on the process outlined above: Consider the development of a housing a multi-family housing project of 25 units in centrally located neighbor- 1. Of the steps in housing development described hood (for example, in the location indicated in Map A). above, which do you think are the three most signifi- <> ment, which do you think would be the most easily reformed? Why? I. The Process: Steps, Time, Cost, and Reform 3. In which areas do you think the actual practices and The following seven activities are typically required for a actions of developers differ most from the officially new multi-family housing project. For each, please list the mandated process? steps required to complete this activity. For each step, indi- 4. Do you think there other significant roadblocks or cate how long it typically takes time to complete, what the constraints to new multifamily development not yet costs involved are, who the relevant actors are (e.g. public mentioned in this survey? agencies, private institutions), whether this is a roadblock to the housing development process (on a scale of 1-5), III: Other challenges and issues and your opinion on whether this step can be changed to We would also like your opinion on four additional topics: make housing development easier (on a scale of 1-5). land ownership, infrastructure, condominium laws, and the context of construction and mortgage financing. Feel free to add or remove activities beyond these sev- en, or to reorganize the activities in a manner that better 1. How big of a challenge is the size of most parcels to matches your housing production process. Additionally, developing multifamily housing? How hard is it to for each activity, we have listed possible steps based on assemble land? other countries’ processes. These are merely prompts 2. Is most of the land in central parts of the city privately to give an example of the kinds of steps in each activity. or publicly owned? 3. What share of parcels have contested ownership (e.g. 1. Acquiring a parcel multiple owners, land with legal conflicts)? (Indicator 4D) a. Possible prompts: find a site, negotiate with own- 4. Are there any programs to assist with land assembly? er, purchase 5. Is low density zoning a challenge for multi-family de- velopment? (Indicator 5B) 2. Rezoning the land to residential use and/or higher 6. Is trunk infrastructure a challenge for multi-family density housing development? a. Possible prompts: prepare a proposal, submit to 7. What are infrastructure costs as a share of construc- city planning tion costs? (Indicator 6C) Urban Land and Housing Market Assessment: A Toolkit 57 Appendices PHOTO BY: © DANILO PINZON / WORLD BANK 8. How much are typical construction costs per square 13. What are the regulations of establishing owners’ foot? (Indicator 8A) corporations for condominium buildings? Are they 9. What is the price of cheapest new unit? (Indicator 7D) excessively onerous? In what way? 10. How much are typical infill land costs per square foot 14. Is there construction finance available for housing under different zoning regimes? (Indicator 4C) developers from private or public banks? How com- 11. Are there any requirements to improve infrastruc- mon is it? What are the major lenders? (Indicator 8C) ture when building multi-family housing? If not, how 15. What is the prevailing interest rate and tenure for are infrastructure improvements financed? (Indica- mortgage financing? (Indicator 9B) tor 6C) 16. What share of new multi-family housing is purchased 12. What share of construction materials are sourced lo- with a mortgage? What share of financing is provided cally? (Indicator 8D) by the developer? (Indicator 9A) Thank you for your participation! 58 Urban Land and Housing Market Assessment: A Toolkit Appendices C. Informal Greenfield Development 3. Obtaining infrastructure * a. Possible prompts: who can lobby local government We would like to thank you for your participation in this for infrastructure, how does this process function survey on housing development. Your expertise this pro- cess in «Survey_City» is essential to the success of an 4. Preserving property claim * ongoing analysis of the city’s land and housing markets, a. Possible prompts: who has oversight of property which will hopefully result in a set of positive reforms. claims, how frequent are negotiations, is regular- Please fill out the section on your personal information ization possible and professional background before proceeding. <> II: Most consequential constraints Please respond to the following questions, which ask you Again, we are honored to be able to count on your exper- to reflect on the process outlined above: tise for this survey. Please do the following in completing the questionnaire: 5. Of the steps in housing development described above, which do you think are the three most signifi- · Review the assumptions of the case study before an- cant limitations or challenges? swering questions 6. Of the three major challenges to housing develop- · Please answer all questions ment, which do you think would be the most easily · Contact our team with any doubts or questions about reformed through government action? Why? the survey 7. Are there other significant roadblocks or constraints to new subdivision type development not yet men- Case Study Assumptions tioned in this survey? Consider the typical process of incremental / informal hous- ing development in the periphery of your city (for example, in III: Other challenges and issues the location indicated in Map A). <> the urban footprint of your city, with a buffer indicating an area of about 10 kilometers surrounding the current edge of the I. The Process: Steps, Time, Cost, and Reform city. This buffer area is what we consider the peri-urban area. The following seven activities are typically required for developing informal housing. For each, please describe 1. How much (and where) of this area is viable for incre- the process by listing the steps required. For each step, mental / informal housing construction? indicate how long it typically takes time to complete, 2. Why is some land available for informal development what the costs involved are, who the relevant actors are and some land not? (Indicator 4D) (e.g. public agencies, private institutions), whether this 3. What are the different levels of tenure security for is a roadblock to the housing development process (on housing developed informally in this area? a scale of 1-5), and your opinion on whether this step can 4. How do neighborhoods get trunk infrastructure if de- be simplified (on a scale of 1-5). veloped informally? How common is this – after 5 or 10 years, for example? As with other types of development, add or remove activities 5. How much are typical construction costs per square beyond these seven, or to reorganize the activities in a manner foot? (Indicator 8A) that better matches your housing production process. Addi- 6. What is the price of cheapest new unit? (Indicator 7D) tionally, for each activity, we have listed possible steps based 7. How much are typical infill land costs per square foot on other countries’ processes. These are merely prompts. under different zoning regimes? (Indicator 4C) 8. How functional is the city’s land and housing regular- 1. Acquiring / claiming a parcel of land ization system? What are the reasons it is not more a. Possible prompts: find a site, negotiate with bro- successful (e.g. underfunded, no demand, contested ker, purchase ownership, etc)? 9. What share of construction materials are sourced lo- 2. Obtaining construction materials and building cally? (Indicator 8D) a. Possible prompts: where and how are materials 10. Do microfinance institutions give loans for housing typically acquired, who does the labor, how long improvement in informal neighborhoods? What are is the process the prevailing rates and tenure? (Indicator 9C, 9D) Thank you for your participation! Urban Land and Housing Market Assessment: A Toolkit 59 Appendices PHOTO BY: © JOHN HOGG / WORLD BANK D. Informal Infill Development · Contact our team with any doubts or questions about the survey We would like to thank you for your participation in this survey on housing development. Your expertise in hous- Case Study Assumptions ing development «Survey_City» is essential to the suc- Consider the incremental expansion of residential buildings cess of an ongoing analysis of the city’s land and housing in centrally located neighborhood (for example, in the loca- markets, which will hopefully result in a set of positive tion indicated in Map A). <> Please fill out the section on your personal information and professional background before proceeding. <> The following activities are typical of incremental ex- pansion of informal housing. For each, please describe Again, we are honored to be able to count on your exper- the process by listing the steps required. For each step, tise for this survey. Please do the following in completing indicate how long it typically takes time to complete, the questionnaire: what the costs involved are, who the relevant actors are (e.g. public agencies, private institutions), whether this · Review the assumptions of the case study before an- is a roadblock to the housing development process (on swering questions a scale of 1-5), and your opinion on whether this step can · Please answer all questions be simplified (on a scale of 1-5). 60 Urban Land and Housing Market Assessment: A Toolkit Appendices 1. Obtaining construction materials and building Part III: Other challenges and issues a. Possible prompts: where and how are materials Finally, we would like your perspective on land owner- typically acquired, who does the labor, how long ship, property rights, and land regularization in existing is the process informal neighborhoods. The map below shows some locations that have been adding housing density. 2. Obtaining infrastructure * a. Possible prompts: who can lobby local govern- 1. What neighborhoods are most viable for the expan- ment for infrastructure, how does this process sion of incremental / informal housing? function 2. Why do some households expand their houses up- wards and some not? Especially those reasons that 3. Preserving property claims * are not economic? a. Possible prompts: who has oversight of property 3. What are the different levels of tenure security for hous- claims, how frequent are negotiations, is regular- ing developed informally in this area? (Indicator 4D) ization possible 4. How important is infrastructure for the expansion of housing density? II: Most consequential constraints 5. How important is the renting out of rooms as a moti- Please respond to the following questions, which ask you vation to expand an existing house? to reflect on the process outlined above: 6. How much are typical construction costs per square foot? (Indicator 8A) 1. Of the steps in housing development described 7. What is the price of cheapest new unit? (Indicator 7D) above, which do you think are the three most signifi- 8. How much are typical infill land costs per square foot cant limitations or challenges? under different zoning regimes? (Indicator 4C) 2. Of the three major challenges to housing develop- 9. How functional is the city’s land and housing regular- ment, which do you think would be the most easily ization system? What are the reasons it is not more reformed through government action? Why? successful (e.g. underfunded, no demand, contested 3. Are there other significant roadblocks or constraints ownership, etc)? to new subdivision type development not yet men- 10. Do microfinance institutions give loans for housing tioned in this survey? improvement in informal neighborhoods? What are the prevailing rates and tenure? (Indicator 9C, 9D) Thank you for your participation! Urban Land and Housing Market Assessment: A Toolkit 61 Appendices A P P E N D IX C Sample Doing Business Survey Output: Obtaining a Construction Permit in Mexico TIME TO ASSOCIATED NO. PROCEDURES COMPLETE COSTS 1 Request and obtain the alignment certificate (alineamiento) 11 days MXN 1,221 and official number (número official) Agency: Delegational One Stop Shop (Ventanilla Única Delegacional), Urban Development and Housing Ministry (Secretaría de Desarrollo Urbano y VIvienda) and Mexico City Government (Gobierno de la Ciudad de México) For the official number, the Mexico City Government will assign a single official number for each property, at the request of the interested party, that has a front facing the public pathway. For the official alignment, the plot across the land indicates the restrictions or expropriation lines to be respected in the interaction between the property and the public pathway. Obtaining the single zoning certificate stating specific land use and feasibility is required. The following documents must be submitted:  · Proof of payment of applicable real estate taxes (copy) · Public deed certifying property or title ownership (original and copy) · Payment of all fees · Application form (original) · Identification of the person completing the procedure and document certifying the respective identity (original and copy) 2 Obtain a topographic map 11 days MXN 17,500 Agency : Private licensed company A topographical study is conducted prior to construction to measure the levels on the specific terrain. It is a general technical requirement when building a structure of this class. Although a topographical test is not required by law, it is consistently conducted in practice. 62 Urban Land and Housing Market Assessment: A Toolkit Appendices TIME TO ASSOCIATED NO. PROCEDURES COMPLETE COSTS 3 Request and obtain single zoning certificate 6 days MXN 1,466 stating specific land use and feasibility Agency : Subdirección de Ventanilla Única of the Secretaría de Desarrollo Urbano y Vivienda attached to the Dirección del Registro de los Planes y Programas de Desarrollo Urbano of the Dirección General de Desarrollo Urbano At this stage, BuildCo obtains the document that certifies whether a specific use of a given building is authorized. I. For the Single Land Use Zoning Certificate, the application must contain: a) Official format of the Manual de Trámites y Servicios al Público del Distrito Federal; b) Receipt of payment of rights according to the Tax Code of Distrito Federal; c) Current official identification and copy; d) Property Ballot, no earlier than 12 months after the application was submitted. 4 Request a water feasibility study 1 day no charge Agency : Sistema de Aguas de la Ciudad de México Upon reception of the zoning certificate, BuildCo must request a water feasibility study in order to continue the request of building permit. 5 Receive inspection for a water feasibility study 1 day no charge Agency : Water Services Agency After requesting for a water feasibility study, there is an inspection to assess the feasibility of the water connection, sewage and rainwater drainage services will be installed in the construction.  6 Obtain a water feasibility study 10 days no charge Agency : Water Services Agency Once the inspection has been conducted, a water feasibility study report is given to BuildCo, which will be used to continue processing the building permits.  7 Obtain a certificate of debts for Water services 0.5 days MXN 159 Agency : Water Services Agency Once the water feasibility process is on its way, Buildco. can also request a certificate of debts. This is another mandatory requirement to register a construction statement type B 8 Request and obtain a certificate of good standing with the property tax 0.5 days MXN 159 Agency : Tax Administrator Agency Obtaining a clearance providing evidence that there are no outstanding land taxes on the property is a required document to be submitted in order to obtain a building permit. The certificate of good standing of the seller on the property tax (“impuesto predial”) is one of the documents to be provided by the interested parties under art. 27 of the Fiscal Code for Mexico City for 2018; the receipts of payments of the predial (boletas) are no longer required. The applicant has to submit the Cadaster Number (Cuenta Predial) in order to obtain the information of any outstanding debts of the property.  Urban Land and Housing Market Assessment: A Toolkit 63 Appendices TIME TO ASSOCIATED NO. PROCEDURES COMPLETE COSTS 9 Register Construction Statement Type B 1 day MXN 891,071 Agency : Ventanilla Única Delegacional Construction Statement Type B applies to nonresidential or mixed uses of up to 5,000 square meters or up to 10,000 square meters for residential use or for single-family dwelling units within a risk zone.  The following documents must be submitted: · Valid alignment certificate and official number (simple original copy or certified one) · Single zoning certificate for specific land use and feasibility (simple original copy or certified copy for collation) · Four copies of the architectural project for the construction work on duly outlined scale maps and containing all specifications regarding materials, finishes, and equipment to be used, signed by the owner, the director responsible for the construction work, and the co-responsible party for urban and architectural design and installations, as the case may be · Project descriptive report · Calculation report · Registration and identification card of the director responsible for the construction work and the co-responsible party for structural safety, urban and architectural design, and installations as appropriate (simple original copy or certified copy for collation) · Two copies of the structural design signed by the director responsible for the construction work and the co-responsible party for structural safety · Proof of payment of improvement taxes for potable water and sewerage works provided by the Federal District Department and license issuance fees if the application is required (simple original copy or certified copy for collation). Because the building considered here requires installation or modification of the water main and hook-up to the sewage system, the application and proof of payment of the corresponding fees are attached. After registration of the construction statement, the one-stop shop (Ventanilla Única Delegacional) reviews the submitted data and documents and verifies the progress of the construction work under the terms stated in the Administrative Verification Rules (Reglamento de Verificación Administrativa) for the Federal District. The director responsible for the construction work undertakes to post a signboard showing the registration number in the construction work statement and the general construction work data, including the location and statement validity. The signboard must be posted in a visible place and legible from the public pathway. The validity of the statement (for construction work completion) is as follows:  · Up to 300 square meters: 1 year · 300 – 1,000 square meters: 2 years · More than 1,000 square meters: 3 years  The cost for the water connection includes the installation of the main pipeline, board, and meter. The cost to connect to water and sewage services are included in this procedure since the proof of payment of such fees are needed to request connection to these utility services (procedure 10). The cost is established by the Financial Code of the Federal District. 64 Urban Land and Housing Market Assessment: A Toolkit Appendices TIME TO ASSOCIATED NO. PROCEDURES COMPLETE COSTS 10 Notify the Municipal Authority upon completion of construction work 1 day no charge Agency : Municipality The notification of completion is made in writing once the construction has been completed. Once notified, inspectors may visit the location within a week to verify the construction is in compliance with all applicable regulation. 11 Receive inspection upon completion of construction 1 day no charge work from Directorate of General Works Agency : Directorate of General Works (Municipality) BuildCo. request the occupancy clearance once all the previous inspections have been passed in a satisfactory way. 12 Request and obtain occupancy clearance 6 days no charge Agency : Delegational One-Stop Shop Building use clearance is granted by the one-stop shop, once the occupancy clearance is issued to BuildCo. 13 Request and obtain authorization from civil protection 7 days no charge Agency : Secretaria de Protección Civil An inspection from the civil protection agency (Secretaria de Protección Civil) will be conducted upon request by BuildCo. Once the form and the emergency plan are filed, the civil protection agency will issue a certificate. 14 Request and connect to water and sewage services 30 days no charge Agency : Sistema de Aguas de la Ciudad de México Once BuildCo. receives the authorization by the Civil Protection Department, it can request and obtain the water and sewage services. 15 Update the building record at the Tax Ministry 1 day no charge Agency : Ministry of Finance of Mexico City (Secretaría de Finanzas de la Ciudad de México) Finally, BuildCo is apt to register the new warehouse. The time and cost of updating the building record are established by the Financial Code of the Federal District, Article 217. The building is not actually registered with the Property Registry. Once built, a cadastral actualization document (manifestacion de actualisacion del valor cadastral) is filed for tax purposes with the Tax Ministry. The information in the new deed is updated only when the property (with the building included) is sold. In Mexico, the owner of the land is automatically the owner of the building unless otherwise specified. Only in cases where the owner of the building and the owner of the property are two different people would the building be registered.  Urban Land and Housing Market Assessment: A Toolkit 65 PHOTO BY: © JOHN HOGG / WORLD BANK