Inclusion and Exclusion in Cities: A Real Estate Markets and Shelter Perspective Workshop on Inclusive Cities in India

1. Inclusion and Exclusion in Cities: A Real Estate Markets and Shelter PerspectiveWorkshop on Inclusive Cities in India DelhiJune 8, 2011 Patricia Clarke Annez , World Bank pannez@worldbank.org

2. Drivers of Exclusion in Real Estate and Shelter • Government constraints---regulation and underinvestment-- make real estate unreasonably costly- • Programs that tend to give empty promises for most rather than delivering results for all • A heavy handed state that pays more attention to concept and process than to implementation and results

3. Exclusion in Government Real Estate Policy • Government policies make it harder for the poor to afford decent shelter • These policies have more impact than government programs to provide affordable homes • Effects cut across all income groups but hurt the poor the most Government intentions/programs to improve housing for the poor do not suspend operation of market –that really only works for wealthy and well connected

4. Policies reduce Supply of Land and Housing • Regulations that decrease land supply and underutilize land • Green belts, Urban Growth Boundaries, restrictive zoning • Large government and parastatalland holdings (12.5% of island city Mumbai belongs to port trust) • Regulations and practices that make supply inelastic • Complex and uncertain processes • Building permits system • Rural urban land conversion, permitting etc. • Unclear tenure and land ownership system • Neglect of Investments to increase supply of well located land • Primary infrastructure network infrastructure, to increase carrying capacity • Public transport & Connectivity

5. Policies then inflate demand for land • Regulations that increase land consumption • Maximum FARs very low at 1.33=4, far below world standards for large cities (NYC mostly 10, now 33 in some places, 16 in Bangkok) • Minimum lot size, streets and open space standards, parking requirements, street widths, reservations, etc. bid up cost of legal homes • These rules bid up the cost of land—and most strongly penalize the poor.

6. Housing Outcomes in Mumbai - over 50% of population in slums—most of them not poor and numbers growing over time Preliminary 2010 data suggest > 65% of Pop’n Now in Slums

7. Ahmedabad –Slum Population Growing in Prosperous City and State

8. Empty promises--Direct govt supply will never be large enough to do the job • Direct Subsidies and Provision are inherently limited • Fiscal capacity • Political and social consensus—many unmet needs for middle class • Poor people will not stay in housing if it does not suit their needs • Cost of providing govt standard low cost housing in India 20-30% of GDP—without counting the 250M popn due to be added in the next 20 years

9. Government Provided Housing Limited: Mumbai Gov housing --7% of total

10. Ahmedabad

11. Are TDRs the answer? It will take a generation to house the population in Mumbai’s slums Annual Flow of TDR Housing would be about 4% of total requirement—asof 2001

12. TDRs partial but also a flawed answer • These barter transactions make no provision for infrastructure improvement while increasing intensity of land use—divisive with middle class • Scope for abuse built into design will land heavily on the poor and vulnerable • Developers artificially increase number of slum dwellers • Coercive tactics for obtaining consent of 70% of slum dwellers through • Squeezing slum dwellers into a small area and offering poor quality and unsuitable housing • Detract attention and interest from in situ upgrading

13. Inescapably—such promises of free housing are empty for all but a few—and exclude most

14. Government so often on the Critical Path-in practice excludes the poor • Heavy Hand and Expansive Powers in Land Acquisition and Allocation, Evictions and Relocation • Restrictive and Redistributive Master Planning • Positive permissions rather than negative list of nuisances • Chronic Public Service Rationing—Exclusive and Divisive • Institutional Fragmentation and complexity • Complex and Difficult to Execute Projects • Little ex post evaluation and learning (although this is changing)

15. There are alternatives: Start with in-situ upgrading

16. Inclusion and in situ upgrading • Affordable: Rs. 20-25,000 per household for basic services. Roughly 1 % of GDP to handle today’s problem is manageable • Leveraged—Unleashes multiples of government spending in private household investment

17. Inclusion and In Situ Upgrading • Robust models for implementation SNP Ahmedabad • Household financial contribution—buy in • Community supervision--control • Community manages difficult tradeoffs—relocations and demolition--autonomy • Limited de facto property rights—feasible at scale, and provides security to invest

18. Inclusion and In Situ Upgrading • Legitimizes affected households, their land use and their homes • Lesson learned—Identify expected relocations up front to make no eviction promise credible. • Extensions • Improve city wide infrastructure at same time to provide benefits to middle class • Reduce policy driven supply constraints to improve long term affordability and avoid further slum proliferation

19. Thank you!