Addressing housing needs for lower income groups in the GCC

Comfortable places to live will translate into an entire range of social benefits.

also written by Bruno Wehbe

GCC countries face a significant housing shortage for lower income groups, despite increasing affluence and robust economic growth. The GCC population is rising fast and there is a younger generation that wants to own its homes. Aggravating the housing problem is the difficulty of accessing credit, property prices that often are inflated relative to salaries, and private landowners who are uninterested in community development. Still, policymakers can deal with this problem in a sustainable manner by building communities, rather than simply large numbers of houses.

What this involves is a fundamental change, a rejection of the old approach of constructing large volumes of dwellings for low to middle-income households. Such a strategy rarely succeeds. Too often the result is many hastily constructed low-cost houses, leaving residents in a large stock of poor quality housing that is expensive to maintain and has a negative environmental legacy.

Instead, policymakers should regard buildings as just part of the solution. What they need is a strategy that constructs communities by bringing together housing and socioeconomic policies. Five factors are critical to this strategy, factors that will make housing policies more effective and housing investment more efficient.

The first factor is the application of sustainable urban planning and design principles. This can involve mixed-use developments that include residential, commercial, retail, educational and civic spaces. These developments promote a feeling of physical and social community. Good design also means that properties will retain, or increase, their value. Sustainable designs also provide a variety of job opportunities inside and around the community.

One successful model is the one adopted by the Singaporean Housing and Development Board that builds integrated communities that provide all the necessary retail, commercial, hospitality and public spaces within easy reach. The board continually looks after and modernises dwellings and developments to maintain their value. This discourages the more successful economic groups from leaving, and so prevents the social segregation common to public housing projects elsewhere.

The second factor is the careful use of public–private partnerships (PPPs). These are not a panacea for the region’s housing shortage. Rather PPPs are an alternative to the government paying commercial developers to build dwellings on its behalf, which is a seductive but insufficient response.

PPPs should be a genuine partnership, enticing the private sector to contribute while improving public sector capabilities. Indeed, the advantage of PPPs is that the government’s funds go further because the private sector bears some of the costs. At the same time, the government’s capabilities improve, as does its ability to deliver projects on time and to budget, because of the transfer of expertise from private companies to the public sector.

In Morocco, for example, the government overcame the private sector’s inclination to exploit its grip on land and rents. PPPs were used to create mixed-use schemes in which the private sector provided quality low-cost housing in return for the chance to sell higher-priced dwellings.

The third factor is to strengthen housing finance. Getting a mortgage can be a lengthy and frustrating process in the GCC. The problem is that a mixture of regulation and poorly developed financial markets are stifling housing finance opportunities.

There are two complementary responses. From the financial side, government schemes should target low-income households more effectively by making it possible for them to purchase adequate and affordable housing. From the legal side, governments should reform balanced mortgage laws to protect low-income households – while safeguarding the rights of lenders.

The fourth factor is a broad range of housing programmes. At present, many GCC housing programs offer limited assistance: land, direct financial support, or a housing unit. As a result, they do not address the needs of many low-income households. Some families may not require a new house. Instead, they may want to renovate their parents’ home or expand it.

It can also be difficult to apply for existing programmes. For example, beneficiaries may have to repay the entire value of the assistance over time. Sometimes, the applicant’s income is too low for a housing loan or benefit. What policymakers can do is to offer rental assistance programs so that families obtain the housing they need and so that public resources are efficiently used.

The fifth factor is efficient management of housing programmes. Governments need a specialised agency to ensure that those who are eligible receive appropriate housing assistance. This agency should also set a consistent and equal standard of housing and properly maintain public housing developments.

Properly designed, funded, built, and maintained communities will do more than provide a roof over the heads of middle and lower-income families. They will lead to social inclusion, economic viability, and environmental sustainability.

The authors are: Samer Bohsali, partner; Ramy Sfeir, partner; Karim Abdallah, principal; and Bruno Wehbe, senior associate, with Strategy& (formerly Booz & Company)

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