Setting It Up: Definition
Financial Issues

References are arranged following the project phases. ‘Must read’ are indicated by Must Read and most include a copy of the Table of Contents or an abstract.

Increasingly policy makers are learning to recognize the significance of financial issues. This realization is not just in terms of recognizing the relation between housing and urban policy and the larger economy but also the financial constraints and nuances critical in the provision of housing and urban upgrading. The three most crucial aspects are:

  1. Financing Upgrading and Services
  2. Willingness to Pay and Affordability
  3. Cost Recovery, Subsidies and Replicability

Housing Finance in Developing Countries. Buckley, Robert. 1996. London: Macmillan.

“Resource Allocation to Housing Investment: a Comparative International Study.” Burns, Leland S. and Leo Grebler. 1976. Economic Development and Cultural Change. 25 (1).

“A Theory of Housing Interventions.” Burns, Leland S. and Leo Grebler. 1977. In The Housing of Nations: Analysis and Policy in a Comparative Framework. pp 100-125. New York: Wiley.

Housing for Low-income Urban Families: Economics and Policy in the Developing World. Grimes, O. F. 1976. Baltimore: Johns Hopkins University Press, for the World Bank.

Must ReadEvaluation of Shelter Programs for the Urban Poor: Principal Findings. Keare, Douglas H., and Scott Parris. 1982. Washington DC: The World Bank. (Table of Contents)

“Economic Impact and Implications of Shelter Investment.” Klassen, L. H. et al. 1987. In Shelter, Settlement and Development. Edited by Lloyd Rodwin, pp 35-59. Boston: Allen Unwin.

Must Read“Shelter Strategies for the Urban Poor in Developing Countries.” Malpezzi, S., S. K. Mayo and D. J. Gross. 1986. World Bank Research Observer 1 (2): pp 183-203.

Must Read“Housing Policy: Changing the Structure.” Mayo, S. K. 1994. Finance and Development, 31(1), pp 44-46.

Must ReadThe Role of Housing Finance in Development: Issues and Policies. Renaud, B. 1989. Washington DC: The World Bank Policy Planning and Research Staff, Infrastructure and Urban Development Department. (Table of Contents)

“Critical Differences Between Socialist Economies and Market Based Housing Systems.” Renaud, B. 1991. In Housing Reform in Socialist Economies, pp. 6-9, pp 34-36, World Bank Discussion Paper, No. 125. CHECK

“The Limits of Housing Finance System.” Wachter, S. M. 1990. Journal of Housing Research 1 (1): pp 163-185.

Financing Upgrading and Services

The key decision in the financing of upgrading and services is centered on where will the money come from? What source or combination of sources will finance the project? What will be the conditions for securing the finance? The typical sources are international aid, the State, the market and the people.

Must Read“Housing Finance Institutions.” Boleat, M. 1987. In Shelter, Settlement and Development. Edited by Lloyd Rodwin. Boston: Allen Unwin. (Abstract)

“Overview,” Chapter 1 of “Housing Finance in Developed Countries: An International Comparison of Efficiency,” Diamond, Douglas B. Jr. and Michael J. Lea. Journal of Housing Research 3 (1): pp 1-14.

“The Unbundling of Residential Mortgage Finance.” Follain, James R. and Peter M. Zorn. 1990. Journal of Housing Research 1 (1): pp 63-89.

“The Changing Nature of Financing Low-Income Urban Housing Development in Kenya.” Macoloo, G. C. 1990. Housing Studies 9 (2): pp 281-299.

Must Read“Building with Credit: Housing Finance for Low-income Households.” Mitlin, Diana. 1997. Third World Planning Review 19 (1): pp 21-50. (Abstract)

“Financing Shelter: New Experiments in Formal and Informal Institutional Links.” Munjee, N. M. 1992. Urban India XII (2): pp 66-91

Must Read“Housing Finance for Lower Income Urban Households in Zimbabwe.” Rakodi, C. 1995. Housing Studies 10 (2): pp 199-227.

“Private Housing Finance in India: Reaching Down-Market?” Smets, Peer. 1997. Habitat International 21 (1): pp 1-15.

Willingness to Pay and Affordability

More and more policy makers and planners are faced with the stark reality that financing of projects has to come directly or indirectly from the beneficiaries. This makes it crucial that the projects are affordable to the beneficiaries and that they are willing to pay. This of course has implications in the way urban upgrading is structured, not only in terms of what decisions are made but also how decisions are made.

“Affordable Housing in Pakistan.” Afshar, Farokh. 1991. Habitat International 15 (4): pp 131-152.

“Determinants of Housing Investment.” Burns, Leland S. and Grebler L. 1977. In The Housing of Nations: Analysis and Policy in a Comparative Framework. pp .20-46. New York: Wiley.

“The Advisory Commission on regulatory barriers to Affordable Housing: Its Behavior and Accomplishments.” Downs, Anthony. 1991. Housing Policy Debate 2 (4): pp 1095-1137.

“The Demand for Housing Characteristics in Developing Countries.” Follain, James R. and E. Jimenez. 1985. Urban Studies 22: pp 412-432.

Must Read“The Demand for Tenure Security in Developing Countries.” Friedman, J., E. Jimenez and S. K. Mayo. 1988. Journal of Development Economics 29(2): pp 185-198. (Abstract)

Must Read“The Magnitude and Determinants of Home Improvement in Self-Help Housing: Manila’s Tondo Project.” Jimenez, Emmanuel. 1983. Land Economics 59 (1): pp 70-83. (Abstract)

“Housing Demand in Developing Countries: A Case-Study of Karachi in Pakistan.” Lodhi, A. and H. A. Pasha. 1991. Urban Studies 28 (4): pp 623-634.

“The Demand for Housing in Developing Countries.” Malpezzi, S. and S. K. Mayo. XXX. Economic Development and Cultural Change 35 (4): 687-721.

“Public Sector and Urban Housing Development in the City of Nairobi, Kenya: Affordability and Implicit Subsidy and Possible Alternatives.” Ondiege, Peter O. 1992. African Urban Quarterly Vol. 7 (1-2): 90-98.

Must Read“Contingent Valuation: Estimating the Willingness to Pay for Housing Services: A Case Study of Water Supply in Southern Haiti.” Whittington, D. et al. 1991. In Housing the Poor in the Developing World: Methods of Analysis, Case Studies, and Policy. Edited by K. G. Willis and A. G. Tipple, pp 189-207. Routledge. (Abstract)

“Discrimination Analysis: Tenure Choice and Demand for Housing Services in Kumasi, Ghana.” Willis, K. G. and A. G. Tipple. 1991. In Housing the Poor in the Developing World: Methods of Analysis, Case Studies, and Policy. Edited by K. G. Willis and A. G. Tipple, pp 126-142. Routledge.

Cost Recovery, Subsidies and Replicability

Cost recovery, subsidies and replicability are the opposite side of willingness to pay and affordability. If projects are designed to be affordable, and beneficiaries are willing to pay for their benefits, then cost-recovery will not be a problem, and subsidies will not be needed. As a consequence there will be no financial constraint from replicating the projects. This ties these parameters in an interdependent consistency of sorts.

Despite this simplicity in conception, in actual practice cost-recovery is not an easy. Moreover policy makers are faced with a variety of strategies to promote cost recovery. For example should cost recovery strategies target individuals or larger groups? Similarly the issue of subsidies is much more complicated. It is almost impossible to avoid subsidies. The crucial objective is not to avoid subsidies, but minimize them and make the process as transparent and well targeted as possible. Another tricky area is how to deal with tenants.

“What Causes Arrears in Government Housing Programs?” Klak, Thomas. 1992. Journal of the American Planning Association 58 (3): pp 336-345.

“Financing of Urban Services in India: A Case for Appropriate Pricing and Cost Recovery.” Mehta, Dinesh and Pushpa Pathak. 1998. Habitat International 22 (4): 487-502.

Must Read“Problems of Cost Recovery in Development projects: Experience of the Lusaka Squatter Upgrading and Site/Service Project.” Sanyal, Bish. 1987. Urban Studies 24 (4): 285-295. (Abstract)

Bibliography Links

| Bibliography Index | Upgrading Strategies | Social Issues | Physical Issues |
| Financial Issues | Institutional Issues | Implementation Issues
| Evaluation and Impact Assessment Methods | Overview | Handbooks, Manuals |
| What is Urban Upgrading? | Doing Urban Upgrading | Case Examples |
Issues and Tools | Resources | About This Site |
Search Web Site | Site Map | Home | Ask Grady | Feedback |

Copyright © 1999-2001, The World Bank Group. All Rights Reserved.