The Asian Development Bank (ADB) recently released a briefing paper attempting to
learn lessons from the UK as to successes and failures of affordable housing policy. It is
justifiable to critique the UK’s faltering policy of delivery over a number of decades, but
this is precisely why it is a fruitful area of enquiry from analysts considering other parts
of the world. The UK has benefitted from significant resources, and policymakers have
been under considerable pressure from the electorate to ensure adequate housing across tenures. This is why the Chief of the Urban Sector Group at the ADB, Manoj Sharma, saw fit to commission this work, and report on its conclusions.
The reasons for the deficit of suitable accommodation in many societies undergoing rapid social change are varied. Broad macro trends such as urbanization are widely cited. In the ADB analysis, it points to the fact that thirty years ago, around one third of Asians
lived in urban areas, however, this is now around half of the aggregate population. In
the coming years this is anticipated to reach nearly 65%, equating to over three billion
people. The scale of this challenge cannot really be overstated, but it is only part of the
challenge.
High birth rates also have a meaningful effect where the median age of citizens is low, as
the shortfall continues to grow each year, without any meaningful reduction. Similarly in
countries experiencing rapid economic growth developers are often disincentivised from
building at the lower end of the income spectrum since outsized gains can be realized by
catering to the wealthier. Likewise, underdeveloped mortgage and financing markets
mean it is more challenging for consumers, but also often entails greater risk for the
developer. In both instances, this acts against large scale development of the type
required to satisfy both extant and future demand.
Sharma’s analysis is particularly instructive in considering how governments can support
the development of affordable housing. It is not simply enough to build, but to ensure
that the eventual units delivered relate to the depth and direction of demand. The
government typically does have a key role to play in this and if discharged correctly, it
will stimulate activity in the other areas it is less equipped to serve.
The paper draws out four main lessons which can be taken from the UK. Firstly, it is the
state which must provide housing for the most vulnerable in society and that significant
errors have been made in this regard. The Thatcherite policy of selling off social units to
tenants led to attrition in the overall housing stock available to the most disadvantaged
and instead led to a subsidisation of home ownership for a select few at the expense of
generations to come. Once there is a sale of state property or land- then it is difficult to
replace. This is especially true in societies where properties prices continue to increase.
The sale of state property marks a form of privatisation which was electorally popular in
the short term but stored problems for the future. A better option, though, is to support
housing associations. Though supported by government, they mostly operate with a
great deal of independence, and introduce plurality and efficiencies into the market,
which could be useful in response to different demand drivers. Creating arm’s length
separation has had notable success in the UK and merits consideration.
One of the most important lessons which can be gleaned from the UK is that affordable
housing takes many different forms and that though this is now widely appreciated, it
was not always the case. There are differences pertaining to geography and tenure and
support for the particular needs of each sub sector are crucial. Rentals can vary from
social rent for those in the lowest socio-economic groups through to intermediate tiers,
for key workers. Sales may involve shared ownership or equity and may also involve
longer payment plans and subsidisation of mortgage provision.
This is allied to the need for flexibility in the mechanisms by which housing development
and investment are secured. Here it is fair to say there is more leeway for governments
in mature economies since often they are able to borrow at more advantageous rates
and for longer horizons. However, with support from entities such as the ADB and others,
it would be wrong to suggest there is a complete lack of optionality. The ADB’s analysis is
certainly instructive and candid in drawing out the UK’s successes and failures. Its study
of one country as a template to understand public policy across multiple countries in
Asia, though, limits its utility. Just as the UK has had to deal with particular challenges, so
too, does each and every developing country, particularly those experiencing rapid
changes of circumstance.
