Building Prosperity: Housing and Economic Development

A growing imperative for national development plans and policies is to incorporate a broader vision for their housing sectors, beyond the traditional argument of social need and towards an enhanced contribution of housing to accelerated economic growth. This book by the Executive Director of the United Nations Human Settlements Programme analyzes and identifies concrete policies and institutions to enable governments to achieve that ultimate goal.

There is a symbiotic relationship between housing, in its broader dimension, and the factors by which we measure economic development. Investment in housing, as well as an efficient handling of housing supply, development and access, generates a high multiplier effect to the wider macroeconomic and social systems. The dynamics of this interplay tend to reverberate back to housing, making it more robust and resource optimizing. This book offers an in-depth analysis to demonstrate the linkages between housing and employment, growth, incomes, savings and asset formation, productivity and welfare. As the author claims, attempts at building long-term prosperity must include housing as a major contributor to national wealth creation efforts, while attempts to end mass and endemic poverty are intertwined with raising labour output per worker and creating employment, all of which lead to improving living standards, enhancing the quality of life and promoting inclusiveness. The implications for meeting the challenge of housing deficiencies in the face of housing demand are also highlighted. This book positions the housing sector in the leading sector theories. As Rostow, Hirschman and Tinbergen once claimed, during economic depressions, the housing sectors can (and must) remain strong, contributing to employment and growth while other traditional sectors flounder.

Yet the relationship between housing and economic development is a complex circular process. Key drivers of the housing sector include demand for housing, stages of economic development, local economic models, political and economic systems, macroeconomic variables and institutions. Moreover, the last century saw a change in the share of investment in the housing sector in most countries from the 1950s onwards, as well as a paradigm shift in the role of housing, from being a mere stimulus for economic revitalization to becoming an embedded productive factor for sustainable development.

At present, a particularly relevant issue is the linkage between housing finance and economic development. Different kinds of institutional innovations have led to a growth in the near-moribund mortgage financial instruments, but new institutional mechanisms emerge to cover a wider range of financial products, organizations and delivery mechanisms. This also includes derived demand subsidies and microfinance and their variances, although more efforts are required in order to serve the poor. Finally, housing as a social policy is examined. Drivers of housing policies in low- and middle-income countries have included an acceptance of Turner’s advocacy for household-centred incremental housing development, the assumption of a new role for housing from social overhead to within the economic sector, and the internationally promoted urban development agenda. Although ex-socialist low- and middle-income countries once subordinated their housing sector to economic policy, currently, all these countries place emphasis on its privatization and the building of public–private partnerships towards improved housing delivery.