Affordable housing in Latin America and the Caribbean

Latin America and the Caribbean is a region made up of a diversity of countries, each with its geographical, cultural, economic and social characteristics that make them unique. However, there is a common challenge that many of them face, also shared by other regions in the world, and that is the increasing price of housing and the consequent difficulty for many people and families not being able to access adequate habitat. .

It is estimated that in Latin America and the Caribbean, the quantitative housing deficit affects more than 23 million people and the qualitative deficit (deficiencies in materials, amount of basic services that reach the home, etc.) affects more than 46 million people. , figures that, added together, represent almost a third of the urban residents of Latin America and the Caribbean. This problem is especially pronounced in urban areas, where housing demand often outstrips supply, driving up prices and making it difficult to create more affordable housing options.

An important characteristic to highlight of these gaps in access to housing is that they deepen if aspects linked to ethnicity and gender are considered. Just to illustrate this fact, it can be noted that more than 57% of Afro-descendants and indigenous people in urban environments live in informal neighborhoods or that only 25% of homeowners in the region are women. In some countries, very marked inequalities are also observed in terms of access to basic services. For example, in Colombia, Bolivia and Uruguay, the indigenous or Afro-descendant population suffers two to three times more from lack of water than the rest of the population.

Closing these gaps requires policy interventions in multiple dimensions that involve environmental, economic and financial, regulatory and planning aspects, and also gender and inclusion perspectives. Among the key interventions, those that improve people's incomes, but also lower the costs of housing production, are very important. An important part of the components of this cost structure is excessively high in the region. For example, in many cities, the price of land, a key component in the final costs of housing construction, tends to double every 6 to 10 years, while the average income of a Latin American household does so approximately every 80 years. The costs of construction materials such as steel or cement are also high in many Latin American and Caribbean countries, which poses important barriers for real estate developers or families themselves to build affordable, quality housing. .

Without attempting to be exhaustive in the approach, some recommendations can be pointed out to improve housing affordability in the region.

• Stimulate mortgage credit: On average, mortgage credit is shallow in the region (8% of regional GDP), well below the European average (37%) and the United States (70%). This instrument must be encouraged because it is impossible to address the size of the deficit with public resources alone. In a context of greater access to mortgage credit, more affordable financing options for low-income households, such as subsidized mortgages or microfinancing programs, may have greater reach and effectiveness.
• Improve urban planning and design: Urban planning and design can play a fundamental role in creating more affordable housing options by promoting denser, more compact development and mixed-use zoning, rationally controlling the expansion of urban sprawl. The more buildable or constructible land that can be made available, the greater the chances of finding an offer that meets demand.
• Stimulate land adjustment and real estate tax reform: Many Latin American countries have complex land ownership systems, which can make it difficult to mobilize land for affordable housing. Governments can implement land readjustment programs to regularize tenure and facilitate the construction of affordable housing. Property tax reform can also help reduce the property tax burden on low-income households.
• Promote better designs, and the use of innovative construction materials and technologies: The design and execution of infrastructure must consider the risks and effects of climate change. Resilient and low-carbon design is presented as an opportunity to increase the resilience of infrastructure and reduce its environmental impact. Additionally, bioclimatic and sustainability strategies must be incorporated from the design of the projects that allow reducing energy use and water consumption. The use of innovative construction materials and technologies, such as prefabricated housing, can reduce the cost of construction while maintaining the quality standards required for adequate housing.

The above list is just a small sample of the policy options that must be considered to address the complex and multifaceted challenges facing the housing sector in Latin America. It is key to start with a good diagnosis to identify the best options and the sequence of policies, but a comprehensive vision of the problem that considers all the dimensions indicated and transcends the strictly sectoral view of housing production is also very important.

These and other issues linked to the sector will be discussed by CAF at the 5th Latin American and Caribbean Housing Forum, to be held in the city of Bogotá from August 31 to September 2. The Forum constitutes one of the most important spaces in the region to discuss housing issues, and it is estimated to convene, in person and virtually, around 900 participants from different countries in the region and the world. There will be the presence of ministers, mayors and high authorities of the region, businessmen, social leaders, academics, multilateral organizations and international agencies, therefore, a very conducive environment is expected to exchange ideas and views and propose solutions to the enormous challenge. to close the large gaps in housing that the region faces.