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

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 2

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 3

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 parastatal land 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 4

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. 5

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

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

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 8

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

10. Ahmedabad 10

11. Are TDRs the answer? It will take a generation to house the population in Mumbai’s slums 11 Annual Flow of TDR Housing would be about 4% of total requirement—as of 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 12

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

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) 14

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

16. Inclusion and in situ upgrading 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 16

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 17

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 18

19. Thank you! 19