The wealth divides are deepening and the base of the pyramid is feeling the greatest strain. In cities across the developing world, evictions of the poor are becoming more commonplace and the local authorities are unable to find solutions that address long term housing problems at the bottom of the pyramid. The evictions are becoming increasingly brutal as the nouvea riche in the developing countries are increasingly viewing the poor as a nuisance and an “embarrassment” to their well laid out lives. In Africa and many Asian cities, the situation is set to get bleaker as more people migrate to the cities leading to overcrowding and the stretching of resources. These cities will double in size in the next 20 years and no contingency plans have been made to expand services and increase access to affordable housing. In poorer countries, the situation is exacerbated by poor land laws and regulations, corruption, and a nonexistent or poor synergy between the private and public sectors.
Current market trends not favourable for social housing
The response to this housing crisis has been wanting. In the developing countries, many under-resourced NGOs have been making social investments to bridge the gap but it is a pitiable drop in the ocean. Even in the developed markets, lack of affordable housing has pushed many to homelessness. Austerity measures in most Western countries have seen many governments and local authorities cut down on budgets for public housing projects. Local authorities are off-loading public housing schemes to the private markets so as to expand revenue base. Many government initiatives that were traditionally aimed at social housing providers are now attracting the big real estate developers further diminishing the potential of the social housing market.
Meeting the Challenge for Social Housing
Meeting the challenge for social housing requires a very multi-pronged approach. There is a need for synergy amongst the disparate players-real estate developers, social landlords, financiers and policy makers so as to meet the housing challenge for the poor. Some of the players have deployed a hybrid approach towards this problem. For example, some social landlords are diversifying into private rented sector and reinvesting the profits back to the social housing market to ensure sustainability. This mixed business model can be profitable and sustainable but the social landlords must have good knowledge of the private market. Many large commercial real estate developers are also diversifying into the social housing market.
Funding for Social Housing
Social housing initiatives have traditionally relied on grants to invest in their communities but there’s a need for a paradigm shift and new business models. Can social housing companies pursue new investment and funding channels and still remain profitable? The social landlords must improve their capacity and learn to compete in a tough financial climate. Greater partnership is needed with local authorities, and other partners in the industry to develop longer term investments in the communities. The onus is on social housing providers to increase efficiency and emphasize the importance of their work to gain greater support from key partners.