scarp.ubc.ca · 2016. 4. 8. · Sri Lanka Colombo Nagagahapura Shanty upgrading 70 70 1 L 6 Colombo Nawakelanipua Sites-and-services 113 113 1.5 L 6 Colombo Aramaya Place Shanty upgrading

Assessment of Experience with the Project Approach toShelter Delivery for the Poor

Table of Contents

Foreword

Introduction

I. Recent trends in shelter projects

II. Financial and economic impact of shelter projects

1. Mobilization of household savings

2. Affordability, subsidy and cost recovery

3. Institutional framework and financial management

o 1. Institutional culture of public-sector agencies

o 2. Role of local government agencies

o 3. Relationship with local community groups

4. Comparison with non-project shelter standards and costs

III. Social impact of shelter projects

1. Social impact at the local level

2. Contribution to residential stability

3. Proximity of projects to employment locations

4. Job creation at the local level

5. Impact of projects on the development of community-based and non-governmentalorganizations

6. Acceptability of project components to project beneficiaries

IV. Impact of the project approach on total shelter demand

1. Shelter demand and levels of supply by projects

2. Replicability of housing projects

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V. Shelter projects and national policies

1. Impact of projects on policy, and consistency of project and policy objectives

2. Consistency with the objectives of the Global Strategy for Shelter to the Year 2000

VI. Achieving a multiplier effect through shelter projects

1. Impact on institutional capabilities and public-sector roles in the shelter-deliveryprocess

2. Impact on urbanization, urban growth, spatial planning and infrastructure provision

3. Addressing constraints in land and housing markets

4. Impact on building and planning codes, regulations and standards

5. Development of the construction industry and construction techniques

VII. Conclusions and recommendations

1. General criticism of the project approach

2. Projects in the context of national shelter strategies

3. Future emphasis and priorities in housing projects

o 1. Projects to provide new shelter

o 2. Upgrading projects

4. A framework for assessing the efficiency of project components

o 1. Elements provided by projects

o 2. Provision of other elements

o 3. Guidelines for preparing and assessing future shelter projects

5. The role of projects in the development and implementation of national shelter policiesand the Global Strategy for Shelter to the Year 2000

List of references

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List of Tables

Table 1. Projects reviewed in this report

Table 2. Household savings mobilization and loan recovery in three Sri Lanka housing projects (up toApril 1990)

Table 3. Breakdown of project costs

Table 4. Urban housing need and production in Turkey

Table 5. Decision-making matrix for the four programme levels of the MHP

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Table 1. Projects reviewed in this reportCountry City Name of project Type of project Number of units Number of householdsSite area (ha) Target groups* Project duration (years)Colombia Cartagena Chambacu Slum clearance 1,862 1,862 - L 10

Bogotá Kennedy City Row houses and apartments 10,568 10,568 367 L 4Bogotá Bolivar City Serviced plots10,300 10,300 11,000 L 9

Indonesia Semarang Sugyapranata NGO scheme sector housing 1,700 1,800 - L/M25

Jakarta Klender Core houses, apartments, plots etc. 9,515 10,608 176 L11

Bandung Margahayu Raya Private sector housing 5,585 5,585 120 L/M 11+Sri Lanka Colombo Nagagahapura Shanty upgrading 70 70 1 L 6

Colombo Nawakelanipua Sites-and-services 113 113 1.5 L 6Colombo Aramaya Place Shanty upgrading 64 64 1 L 2

Turkey Tarsus Tarsus Expansion Row houses 488 488 32 L 3Ankara Aktepe Apartments, core houses 3,626 3,626 96 L 12

Zimbabwe Harare Kuwadzana Sites-and-services 7,398 7398 n.a. L n.a.Kwekwe and Gutu Kwekwe-Gutu Sites-and-services 1,045 1045 103 L

n.a.*: Low- (L) or middle- (M) income groups.Source: Herlianto (1990), Jayaratne (1990), Mutizwa-Mangiza (1990), Tokman (1990) and Utria (1990).

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Table 2. Household savings mobilization and loan recovery in three Sri Lanka housing projects (upto April 1990)Project Average loan amountSLRs Average household mobilization(SLRs) Loan recovery(percentage)Nawakelanipura 15,000 36,000 16Aramaya Place 15,000 48,000 50Nagagahapura 15,000 30,000 16Total 15,000 38,166 n.a.Source: Jayaratne (1990: 99 and 105).

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Table 3. Breakdown of project costs- Market (or opportunity) cost of land- True cost of finance (based on commercial rates of return)- On-site services (and possibly a proportion of off-site costs)- Building materials- Labour- Administrative and professional costs- Costs of project maintenance

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Table 4. Urbana housing need and production in TurkeyYear Housing need(number of dwelling units) Housing productionb

Number of dwelling units Percentage of housing needPercentage of public sector1984 272,000 122,580 45.1 4.41985 280,000 118,200 42.2 2.71986 290,000 168,600 58.1 3.61987 298,000 191,109 64.1 3.41988 305,000 205,483 67.3 2.81989 318,000 246,164 77.4 n.a.Total 1,763,000 1,052,000 59.7 3.4ca: Muncipalities with population of more than 2000.b: According to occupancy permits.c: 1985-1988 only.Source: Tokman (1990: 1-3).

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Table 5. Decision-making matrix for the four programme levels of the MHPDecision-making level Decision/choice SupportHousehold - designing the house- choice of technology- choice of materials- building the house- mobilizing resources - design options- technology options- community building guidelines small housing loan- information and trainingCommunity - organizing CDCs- planning and programming the Action Plan- collective decision-making in the content of the building guidelines- design and construction of amenities - organizing workshops- regularization of tenure- blocking out guidelines- preparation of design and Bills of Qualities- provision of funds- information and trainingLocal authority - identification and prioritizing of settlements programming of work- allocation of funds- selection of householders - implementation guidelines- provision of funds- technical supportNational - linking housing to local governments- strengthening the local government- ensure countrywide programmes and implementation- how not to dominate local institutions - define and interpret support-based policies- articulate programme through various forms of support: financial, technical and training- national guidelines and proceduresSource: Jayaratne (1990: 92).

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List of abbreviationsCBO Community-based organizationCDC Community Development Council (Sri Lanka)DDA Delhi Development Authority (India)GSS Global Strategy for Shelter to the Year 2000HCDC Housing and Community Development Committee (Sri Lanka)HDA Hyderabad Development Authority (Pakistan)IYSH International Year of Shelter for the Homeless (1987)MHP Million Houses Programme (Sri Lanka)NGO Non-governmental organization NHDA National Housing Development Authority (Sri Lanka) NUHDC National Urban Housing Development Corporation(Perum Perumnas) (Indonesia)UNCHS United Nations Centre for Human Settlements (Habitat)UNDP United Nations Development ProgrammeUSAID United States Agency for International Development

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List of references

Angel, S., and S. Boonyabancha (1985) "Land sharing as an alternative to eviction: the Bangkokexperience" (unpublished manuscript).

Angel, S., and T. Chirathamijkul (1983) "Slum reconstruction: land sharing as an alternative to eviction inBangkok", in Angel, S., and others, Land for Housing the Poor. Singapore, Select Books.

Archer, R. (1987). "Transferring the urban land pooling/readjustment techniques to the developingcountries of Asia". HSD Working Paper No.24, Human Settlements Division, Asian Institute ofTechnology.

Chana, T. (1984). "Nairobi: Dandora and other projects", in Payne, G. ( ed.), Low-income Housing inthe Developing World: The Role of Sites and Services and Settlement Upgrading. Chichester,John Wiley.

Cohen, M. (1983). "The challenge of replicability: Towards a new paradigm for urban shelter indeveloping countries", Regional Development Dialogue, vol. 4, No. 1. pp. 90-91.

Davidson, F. 1984. "Ismailia: combined upgrading and sites and services in Egypt", in Payne, G. (ed.),Low-income Housing in the Developing World: The Role of Sites and Services andSettlement Upgrading. Chichester, John Wiley.

Davidson, F., and G. Payne (eds.) (1983). Urban Projects Manual. London, Overseas DevelopmentAdministration.

Development Planning Unit (1984). The First Year of the Rural Housing Sub-programme: AnEvaluation of the Sri Lanka Million Houses Programme. Report of the Evaluation Mission,DPU, London.

Hardoy.J., and D. Satterthwaite (1981). Shelter: Need and Response. Chichester. John Wiley.

Hasan, A. (1986). OPP's Low-cost Sanitation and Housing Programme: An Overview. Karachi,OPP.

Hasan, A. (1987). "A study on metropolitan fringe development in Karachi, focusing on informal landsubdivision". Prepared as part of an ESCAP study on metropolitan fringe areas in the major citiesof the ESCAP region (mimeo).

Herlianto (1990). "Experience with the project approach to shelter delivery for the poor in Indonesia".Nairobi, United Nations Centre for Human Settlements (Habitat).

Honadle, G.H., and J.K. Rosengard (1983). "Putting 'projectised' development in perspective", PublicAdministration and Development, vol. 3, pp. 299-305.

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Jayaratne, K.A., (1990). "Experience with the project approach to shelter delivery for the poor in SriLanka". Nairobi, United Nations Centre for Human Settlements (Habitat).

Jere, H. (1991a). "Case Study: Kalingalinga Integrated Upgrading", (mimeo).

Jere, H. (1991b). Unpublished letter to G. Payne.

Keare. D.. and S. Parris (1982). Evaluations of Shelter Programs for the Urban Poor. World BankStaff Working Papers Number 547.

Kent-Koop (1989). "Kent-Koop Booklet".

Morgan, E.P. (1983). "The project orthodoxy in development: re-evaluating the cutting edge". PublicAdministration and Development, vol. 3, pp. 329-339.

Mutizwa-Mangiza, N.D. (1990). "Experience with the project approach to shelter delivery for the poorin Zimbabwe". Nairobi, United Nations Centre for Human Settlements (Habitat).

Oestereich, I. (1980). "The upgrading of a squatter community: some conclusions drawn from theKalingalinga Integrated Upgrading Project in Lusaka, Zambia", Trialog, vol. 13, No.14, pp.30-35.

Payne, G. (1982a). "The Gecekondus of Ankara", in Ward, P., Self-Help Housing: A Critique.Mansell.

Payne, G. (1982b). Project Appraisal and Policy Recommendations for Urban SettlementsProvision. Port Moresby, GovemmentofPapuaNew Guinea, Department of Urban Development.

Payne, G. (1989a). Information Housing and Land Subdivisions in Third World Cities. Oxford,CENDEP, Oxford Polytechnic.

Payne, G. (1989b). "The impact of planning on access to land for housing", paper presented at theconference on "Cities and People" London.

Payne, G. (ed.) (1984). Low-income Housing in the Developing World: The Role of Sites andServices and Settlement Upgrading. Chichester, John Wiley.

Rakodi, C. (1989). "Developing institutional capacity for meeting the housing needs of the urban poor: Areview of experience in Kenya. Tanzania and Zambia". Cities. August.

Rapaport, A. (1977). Human Aspects of Urban Form. Oxford, Pergamon.

Rapaport, A. (1979). "An approach to designing third world environments", Third World PlanningReview, vol. 1, No.1.

Rapaport, A. (1980). "Culture, site layout and housing", Architectural Association Quarterly, vol. 12,No.1, pp. 307-327.

Randinelli, D.A. (1983). "Projects as instruments of development administration: a qualified defense andsuggestions for improvement", Public Administration and Development, vol. 3, pp. 307-327.

Silas, I. (1991). Unpublished letter to G. Payne.

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Struyk, E., M. Hoffman and H. Katsura (1990). The Market for Housing in Indonesian Cities. TheUrban Institute Press.

Tokman, B. (1990). "Experience with the project approach to shelter delivery for the poor in Turkey".Nairobi, United Nations Centre for Human Settlements (Habitat).

Turner, B. (ed.) (1988). Building Community: A Third World Case Book. London, HabitatInternational Coalition.

Turner, J.F.C. (1990). "Barriers, channels and community control", in Cadman, D. and G. Payne (eds.),The Living City. London, Routledge.

UNCHS (1984). Promoting Organized Self-help through Co-operative Modes of Participation.Nairobi, United Nations Centre for Human Settlements {Habitat).

UNCHS (1987). Supporting Community-based Housing: Sri Lanka Demonstration Project CaseStudy, Part Two. Nairobi, United Nations Centre for Human Settlements (Habitat).

UNCHS (1990). Global Strategy for Shelter to the Year 2000. Nairobi, United Nations Centre forHuman Settlements (Habitat).

Utria, R.D. (1990). "Experience with the project approach to shelter delivery for the poor in Colombia".Nairobi, United Nations Centre for Human Settlements (Habitat).

van der Linden, J. (1986). The Sites and Services Approach Reviewed. Aldershot, Gower.

van der Linden, J. (1989). Successful Supply of Plots for the Poor: The Case of Hyderabad. UrbanResearch Working Papers, No.22. Amsterdam, Free University.

Walton, D. (1984). "The role of international consultants", in Payne, G. (ed.), Low-income Housing inthe Developing World: The Role of Sites and Services and Settlement Upgrading. Chichester,John Wiley.

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Notes

1. For a discussion of the relevance of the project approach in general, see Honadle and Rosengard(1983), Rondinelli (1983) and Morgan (1983).

2. See Angel and Boonyabancha (1985) for examples of land-sharing projects in Bangkok.

3. This not known how public-sector officials and professional planners reacted to this newrelationship with low-income communities or the CDCs.

4. See for instance Rapaport 1977, 1979 or 1980.

5. See Angel and Chirathamkijkul (1983) and Archer (1987) for examples.

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ABOUTAssessment of Experience with the Project Approach to Shelter Delivery for the Poor

HS/241/91 EISBNE 92-1-131499-2 (electronic version)Text source: UNCHS (Habitat) printed publication: ISBN 92-1-131165-9 (published in 1991).

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Foreword

In many developing countries, the provision of shelter, particularly for the low-income groups, isgrossly inadequate. There are many reasons for this, most of them beyond the control of the individualhouseholds concerned. Despite shelter programmes, projects and other forms of government actiontaken in most countries, the shelter problem prevails with increasing dimensions.

Government involvement in the shelter sector ranges from the provision of completed housing unitsto several forms of supporting measures. The inadequate and, sometimes, negative effects ofpublic-sector intervention in the shelter-delivery process can be summed up as problems of insufficientcoverage, affordability by beneficiaries, lack of replicability and, to a lesser degree, social acceptability.Relevant strategies must deal with these issues which limit the effectiveness of actions in the form ofplanned projects.

The Global Strategy for Shelter to the Year 2000 (GSS), adopted by the United Nations in 1988,is addressing the shelter problem of the developing countries through a perspective where the fullcapabilities of all actors involved in the shelter sector can be utilized. The enabling concept, as it isoutlined in the GSS, does not imply a reduction of public-sector responsibilities in the shelter and servicessector, but rather, a new arrangement of financial, institutional, human and physical resources,coordinated by public action.

The elements of shelter projects that are considered appropriate means of providing at least somecomponents of the needs in the shelter sector will have new roles within this approach. The researchproject described in this publication was undertaken to evaluate the experience with theproject-by-project approach to low-income shelter delivery in the developing countries. Based on thisevaluation, the main objectives of the study were to identify the components of the shelter-deliveryprocess that can most effectively be addressed by the project approach, and to find ways to improve theintegration of projects with large-scale programmes and policy level directives.

This report is based on information from case studies in Colombia, Indonesia, Sri Lanka, Turkeyand Zimbabwe. Where appropriate, reference has been made to other sources of information. Althoughthe report is limited to a number of projects in a few countries, the case studies cover a wide range ofdifferent experiences, and the projects reviewed broadly reflect approaches that have been widelyadopted by several governments.

I gratefully acknowledge the support provided by Mr. Geoffrey Payne, for the global research andevaluation of the country case studies and Messrs. Herlianto, K.A. Jayaratne, N.D. Mutizwa-Mangiza,B. Tokman and R. Utria, for the preparation of the case-study reports.Dr. Arcot RamachandranUnder-Secretary-GeneralExecutive Director

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Introduction

The scale and the complexity of urban housing problems in developing countries raises majorquestions concerning the role of the shelter sector within social and economic development strategies.State intervention in the shelter sector exerts both direct and indirect influences on patterns of savings andinvestment. These in turn influence the quality of life for all. While public-sector expenditure on sheltermay be somewhat modest compared with that of other sectors, total investment frequently represents aconsiderable part of total capital accumulation in a country. Furthermore, on the household level, itusually represents the largest single investment ever to be made. The social and economic significance ofthe shelter sector is thus considerable.

In their attempts to improve existing housing conditions and stimulate the supply of shelter for theirincreasing populations, governments in developing countries have pursued a wide range of policies,programmes and projects. Yet, the wide range of institutions and professions actively involved in theshelter sector complicate the assessment of these approaches. Further complications arise from the closelinks to developmental and welfare strategies. This diversity and ambiguity may account for the lack ofspecific shelter policies in many countries. It also partly explains the widespread adoption of projects asthe main vehicle for public-sector intervention.

The obvious advantages of projects are that they are designed to produce a measurable and visibleoutput for a pre-determined investment, are subject to established administrative procedures, and can betargeted at specific social groups. They also offer the potential for flexibility in the use of resources and inorganizational learning and capacity-building. Furthermore, they fit comfortably within the grant provisionand lending practices of international aid agencies (Honadle and Rosengard, 1983). In a qualified defenceof the project approach, Rondinelli (1983) sums up the advantages of the project approach as outlinedbelow:

Projects are identifiable, bounded and organized sets of development activities;

Projects can be effective means of translating development plans and policies into specificcourses of action;

Projects are vehicles for mobilizing and allocating resources to development activities;

Projects can be analysed and appraised before funds are committed;

Projects are temporary activities that can lead incrementally to accomplishing largerdevelopment goals;

Projects can be used to undertake unique, innovative or non-routine development activities;

Projects can be used to channel development resources to specific groups of beneficiaries andto particular locations;

Projects can be formulated as manageable units of activity guided by well-defined planning and

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administrative procedures;

Projects can be organized in a variety of ways and undertaken by a wide range of organizations;

Projects can be externally supervised and controlled and used to exert influence on broaderdevelopment policies.

Conventional projects for new housing have generally involved the construction of housing units inspecific locations for a number of previously selected households unable to afford acceptable housingprovided by the private sector. Early approaches towards existing substandard, or unauthorizedsettlements regularly focused on slum clearance and relocation projects in an effort to imposepre-determined notions of officially acceptable shelter solutions, without reference to their affordability oracceptability. The failure of either of these approaches to bring housing within the reach of low-incomepopulations in rapidly expanding urban areas has led to criticism not just of these specific projects, but ofthe relevance of the project approach itself. (1)

During the last two decades, however, several innovations have taken place in the projectapproach. This suggests that a re-evaluation is in order. Sites-and-services and settlement-upgradingprojects have been adopted by countries at different levels of economic development and of differentpolitical persuasions in all parts of the world. These approaches emphasize the benefits of incrementaldevelopment, flexibility and efficiency in the use of scarce resources and the need to achieve a "multipliereffect". The changes have coincided with major innovations in shelter policy. They involve a shift awayfrom attempting to meet housing needs through direct provision, towards enabling or facilitatingapproaches. Such approaches are designed to support the efforts of existing suppliers of land andhousing, such as the formal and informal private sectors and community groups.

Rather than suggesting a scrapping of the project approach as such, due to shortcomings of thepast, this report identifies how it can better reinforce broad policy objectives. The project approach willthus, not only because of its present pre-eminence, remain a major factor in enabling the urban poor toobtain affordable and acceptable housing as cities continue to grow. This report assesses the experiencegained to date through the project approach and identifies some major lessons learned. It also offersrecommendations intended to improve the role of projects within the framework of enabling shelterstrategies as described in the GSS (see UNCHS, 1990). It is based upon reports commissioned byUNCHS in Colombia, Indonesia, Sri Lanka, Turkey and Zimbabwe, though reference is also made toother cases where appropriate. It would be presumptuous to claim that the report is eithercomprehensive or definitive, since the sample is only based on five countries. Yet, the countries selectedcover a wide range of experiences, and the projects reviewed broadly reflect approaches that have beenwidely adopted.

In assessing the experience gained, it is important to relate examples to their context, since anyapproach is likely to have limitations as well as benefits and some will work better in some contexts thanin others. The real question when assessing the impact of a policy, programme or project is whether itsmerits outweigh its defects. This report, therefore, concentrates on the major characteristics of theproject approach as these have been observed in the five countries mentioned above in particular, and inother countries for which general information has been made available.

The specific projects reviewed were selected according to some general criteria. The projects are:

Located in urban areas;

Explicit about their focus on the shelter needs of low-income groups;

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Completed and evaluated (to enable assessment that could lead to policy changes); Consideredas successful in meeting their objectives to address the needs of low-income groups. Basicinformation on the case studies reviewed in this report are presented in table 1.

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Chapter I. Recent trends in shelter policies

Housing conditions and political priorities vary considerably between developing countries. Yet, itis possible to detect a general trend in the approach to shelter projects. Throughout the world, it has beenrealized that the cost of building houses or apartments for those who cannot afford their full cost in theprivate market, can only be achieved by high levels of subsidy. Due to financial constraints in mostdeveloping countries these subsidies restrict the number of units provided to a small proportion of totaldemand. The remaining households are forced to fend for themselves in unauthorized settlements.

The emphasis of recent projects has therefore moved away from the direct provision of land,services and housing for a minority, towards a range of options that concentrate on the provision of oneor two of these elements, such as land, or services. Furthermore, the residents of many recent projectsare allowed to control the provision of houses according to their own priorities and resources. Thesechanges are intended to reduce unit costs and enable scarce resources to reach a significantly higherproportion of households in need. They are also intended to enable beneficiaries to obtain the types ofhousing they prefer at costs they can afford, so that economic, social and environmental priorities can beachieved.

This shift to a more flexible approach can also be observed as changing attitudes towards existingforms of shelter and settlements that do not conform to official norms and standards. Whereasslum-clearance projects were the conventional response of public sector agencies during the 1960s and1970s, it is now widely accepted that these only dealt with the symptoms and not the causes of shelterproblems. Displaced households simply settled elsewhere, so that the social antagonism and economiccosts offset any other benefits achieved. Recent efforts have focused on improving unauthorizedsettlements wherever possible, since the costs of doing so are small compared with the social andeconomic benefits achieved.

The case studies reviewed in this report reflect the gradual transition from conventional to moreflexible and innovative approaches. They include projects for new housing and the upgrading of existingsettlements by a combination of public agencies, non-governmental organizations (NGOs) and privatedevelopers. The types of shelter provided include apartments, row and core houses, prefabricated unitsand serviced plots. The size of projects range from 64 units on a site of one hectare to more than 10,000units on several hundred hectares (see table 1 ).

The transition from conventional provision to more innovative support strategies has requiredconsiderable changes in the attitudes of professionals and in the roles of governments. These changeshave not been achieved quickly or smoothly. Some of the difficulties involved are clearly evident inTurkey, where projects have tended to be small and not easily accessible to low-income groups. About70,000 plots were allocated in sites-and-services projects between 1978 and 1989; an average of lessthan 6000 a year. Although this represented a considerable increase in public-sector supply, it comparespoorly with the performance of informal processes that have provided about 95,000 units a year,representing 90 per cent of total low-income supply (Tokman, 1990: 10-11).

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The Aktepe project in Ankara provides a good illustration of the conventional approach. In 1965,it was designated as a "squatter prevention area" by the Ministry of Reconstruction and Resettlement. By1975 it had provided 3626 units in the form of apartments, core houses, prefabricated units and servicedplots (Tokman, 1990: 13-14). Although the project was centrally located in the city, poor projectmanagement delayed implementation and increased costs, few of which were subsequently recovered.

The Tarsus project reflects a change in that provision was based upon a housing-demand analysis,with standards and forms of housing adapted to meet the needs and resources of different sectors ofdemand (Tokman, 1990: 22). It also reflects a move to decentralize decision-making to local levels. Yet,decentralization of resource mobilization and allocation processes still needs to be effective. At the levelof the individual project, it appears impossible to overcome this limitation. Recent projects in Turkey,such as the Bati-Kent development scheme near Ankara, suggest that the issues of scale andmanagement efficiency are now being addressed. Few of the units in these projects, however, areaffordable to low-income households, especially if transport costs to places of employment are included.

Another example of the difficulties in changing the approach to projects for new housing can beseen in the case of Colombia. For many years only a few shelter projects were undertaken. Most ofthese were conventional construction projects executed at a small scale and incapable of beingdeveloped into truly effective solutions. Most of these projects had little relationship to other sectoralpolicies and actions and rarely even fulfilled their internal objectives (Utria, 1990: 12). During the 1980s asubstantial number of housing units was constructed, but these units catered only for the middle-incomegroups. Sites-and-services projects were introduced in an attempt to compete with illegal subdivisions.They were reasonably successful in satisfying their internal objectives of providing basic services tolow-income households and security of tenure to land. Yet, the sites-and-services projects have not beenfree of political motivations or subsidies. Furthermore, they have attracted migrants from rural areas,drawn by the prospect of a generous solution (Utria, 1990: 30).

Some projects, however, have been undertaken at a scale that enables them to address totaldemand. The Kennedy City project in Bogotá, for example, provided more than 10,000 dwelling unitsfor 120,000 people in the form of apartments, row houses and plots for aided self-help construction inthe early 1960s. It has since expanded to accommodate nearly 2.5 million people in what is now almostan autonomous metropolitan settlement (Utria, 1990: 80). Another project known as Bolivar City (also inBogotá) has also provided more than 10,000 units in the form of serviced plots. The project wasintended to provide a legal and affordable alternative to squatting or unauthorized settlements. An addedinnovation was that the project also involved improvements to the largest marginal settlement in Bogotáand directly or indirectly benefited 1.3 million people (Utria, 1990: 37-38).

Another example of the gradual evolution of the project approach can be seen in the case ofZimbabwe. When the populations of cities expanded rapidly, partly due to increased rural-urbanmigration during the war for independence, the Government implemented ultra low-cost housing projectsdeveloped by large scale contractors. Since independence, however, national policy has concentrated onseven measures: freehold tenure, higher minimum standards, aided self-help, building brigades, housingco-operatives, partnerships between public and private sectors, and full cost recovery(Mutizwa-Mangiza, 1990: 10).

The Kuwadzana project in Harare represents an example of current government approaches toaddressing the housing problem. This has exerted a considerable influence on national policy through itsemphasis on aided self-help for households below the median-income level (Mutizwa-Mangiza, 1990: ii).The types of housing provided represented a compromise between the desire to raise minimum initialstandards, whilst at the same time recovering project costs. In this sense, the project served as aneffective means of introducing changes into other developments by both public and private sectors.

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Since 1980, eight shelter projects have been undertaken in Harare. Four of these have been locallyfunded, three by the World Bank and one by the German Agency for Technical Cooperation (GTZ) andUSAID. There has been an increasing emphasis on the role of the private sector, especially buildingsocieties and employers. Building societies played a major part in the development of the Kwekwe-Gutuproject, despite initial concerns regarding affordability and default rates in lending to low-income groups.The project sought to develop affordable and innovative housing solutions based on self-help practices. Italso sought to achieve replicability through the establishment of domestic thrift societies and other financemechanisms. As will be discussed below. these innovations have greatly increased the ability ofpublic-sector agencies to address the scale and nature of housing demand in Zimbabwe.

A similar evolution has taken place in many other countries. In Indonesia, for example, governmenthousing projects were initiated as part of the first Five Year Development Plan in 1969. These started asresearch and development projects, but were expanded in the second plan when Perum Perumnas, theNational Urban Housing Development Corporation (NUHDC), was established. Since then, the projectapproach has been expanded regularly. Housing built by both public and private sectors in the periodfrom 1984 to 1989 amounted to about 300,000 units, or an average of 60,000 a year. Yet, unauthorizedsettlements increased even more rapidly and the Kampung Improvement Programmes were expanded tobridge the gap. Some settlements were considered too difficult to improve, however, and the UrbanRenewal Programme initiated in 1979 was directed at these. Complete settlements were demolished andrebuilt on the same sites using apartment blocks. Multi-storey housing is not, however, popular inIndonesia and many people decided to move elsewhere (Herlianto, 1990: 13).

An early example of Indonesian housing projects is located in the east of Jakarta in an area knownas Klender. This was one of the first projects designated by NUHDC w hen it was established in 1974and provided for a mixture of housing options from apartment blocks, duplex houses, sites-and-serviceswith core houses and ready-to-be-built plots. The project was nominated by the Government ofIndonesia as one of four demonstration projects during the International Year of Shelter for the Homeless(IYSH) in 1987. This suggests that although it was developed some years ago, it is still regarded asreflecting current thinking on housing and the role of the public sector. The project succeeded inproviding housing for about 57,000 people, or nearly 10,000 households. More than 75 per cent ofthese, however, work for the Government or the army. Very-low-income households, or those workingin the informal sector, had difficulties in participating (Herlianto, 1990: 21).

The increasing tendency to involve the private sector in housing projects affordable by low-incomegroups is illustrated by the Margahayu Raya project in Bandung. This was designed specifically toaddress low-income needs and was designed and implemented in only two years. It was frustrated byinflation, however, and ended up accommodating middle-income households (Herlianto, 1990: 33-35).In an even more innovative approach, NUHDC has initiated joint public-private-sector projects in whichprivate developers are free to redevelop parts of inner-city slums for commercial purposes, in return fortheir agreement to build rental housing units for the existing low-income residents on the remainder of thesite.

According to Silas (1991), the main development in the shelter sector in Indonesia during the lastfive years has been in improving the quality of prevailing projects, especially the Kampung ImprovementProgramme, which has been adapted and refined to suit local needs. In Surabaya, it is intended tointroduce an integrated urban development programme, linking the planning, implementation andmanagement of settlement and infrastructure projects. Guided land-development projects are alsoenvisaged.

Among all countries that have adopted an enabling strategy, Sri Lanka must be considered themost radical. In 1984, the Government initiated the Million Houses Programme (MHP). The programme

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consisted of six sub-programmes covering rural and urban areas, the private sector, plantation housingand major resettlement projects. The urban sub-programme consisted of about 300 housing projects in51 local authority areas. It was launched in 1985 with three objectives:

(a) Making a substantial and lasting impact on the housing situation of the urban poor;

(b) Placing the poor at the centre of the process (by adopting a devolved approach);

(c) Ensuring that the approach was sustainable in the longer term.

Sri Lanka's prominence in the adoption of an enabling or support approach ensures that itsexperience is of particular interest and significance. Yet, it should be noted that the MHP was introducedas a national shelter strategy, which took the form of a coordinated, large-scale programme at the outset.This makes it fundamentally different from an incremental project approach adopted in most countries,where innovative projects are commonly used as experiments to test the validity of new policy optionsbefore they are adopted at a large scale. The issues of replicability and the need to generate politicalsupport had already been resolved in principle. One of the most significant issues raised by the SriLankan experience thus relates to the development of institutional capability to implement the newapproach effectively. The scale of the programme and the commitment of the government to theapproach have generated an equal commitment to monitoring and evaluating the progress of theprogramme. Bottlenecks can thus be identified and overcomed. Such a willingness to learn fromexperience is not present in all countries.

The question of subsidies is critical in assessing the possibility of expanding projects andprogrammes to the scale required on a long-term basis. In Sri Lanka land-ownership rights have beengranted to all slum dwellers in the city of Colombo. This has been done free of cost except for a smallmonthly charge to cover the cost of deeds (Jayaratne, 1990: 21). This hardly acts as a deterrent to thefurther development of squatting and other forms of unauthorized development.

Another crucial issue in the Sri Lankan approach is the emphasis placed upon decentralization, notjust of implementation, but of decision-making as well. This was also emphasized in the rural programme,where the new approach was promoted under the slogan "Minimal intervention, maximum support by theState and maximum involvement of the builder families". The rural programme, which was initiated in1984, did not abrogate the State's responsibility for assisting the poor. Instead, it involved taking on amore difficult responsibility, that of providing and maintaining the necessary components of secure andaffordable land, infrastructure and facilities to enable households to organize their own housing accordingto their means and priorities (Development Planning Unit, 1984: 4).

Many other examples of innovative shelter projects exist in other countries. The IncrementalDevelopment Scheme, or Khuda ki Basti undertaken by the Hyderabad Development Authority (HDA)in Pakistan, for example, is notable in attempting to learn from the practices adopted by illegaldevelopers, or land grabbers. The HDA even went so far as to employ one. As a result, initial standardsof services provision are modest, and absolutely no standards are imposed concerning the design orconstruction of individual houses (van der Linden, 1989: 9). To ensure that only low-income households,or those in genuine need applied, the project agency established a reception area in which all householdsapplying were required to live for two weeks. After this period they were allocated a plot and expectedto begin construction of their house immediately (van der Linden, 1989: 10). The approach wasdeveloped by HDA's director in secrecy, since it was feared that powerful vested interests, both insideand outside government, would seek to prevent it. Only after the scheme had been approved by theChief Minister was it formally presented to the governing body of HDA for approval and implementation(Hasan, 1987: 17).

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The willingness to address vested interests and use shelter projects as experiments as illustrated bythe Khuda ki Basti case study, indicates the extent to which the project approach has evolved in recentyears. Although such examples present an encouraging sign of steady progress, the majority of projectsremain dependent on direct or hidden subsidies, achieve poor levels of cost recovery and fail to achievereplicability.

Approaches towards existing low-income settlements have undergone a similar transformation tothat of new shelter provision. Relocation projects have been replaced by projects to improve or upgradesuch settlements wherever possible. In some countries (e.g., Colombia), slum-clearance and relocationprojects are still undertaken. These are less common though, and likely to be for specific reasons relatingto urban renewal programmes, rather than as attempts to improve the appearance of cities, or to removethe poor. In the Chambacu project in the tourist city of Cartagena, about 1800 households were offeredsubsidized plots with completed houses elsewhere in the city, as compensation for vacating their informalsettlement near the major tourist sites. These subsidies were intended to be generated from profits fromthe commercial centre developed on the site and were agreed to by residents. In the event, however, thecommercial development has not taken place, suggesting that the development was, in practice, intendedas a slum clearance project rather than one of urban renewal (Utria, 1990: 68).

In many other countries, upgrading projects have been undertaken at a scale sufficient to benefitthe majority of low-income households. The greatest achievement in this respect must be that ofIndonesia, where the Kampung Improvement Programme has benefited almost all low-income residentsof informal settlements in Jakarta, Bandung and Surabaya. Although these projects concentrated on thephysical upgrading of public services and adopted an engineering approach that did not attempt the fullrecovery of project costs (Herlianto, 1990: 18), they stimulated residents to make substantial secondaryinvestment in shelter improvements. These dramatically improved living conditions and public healththroughout each city. at density levels that would have been difficult to achieve in new developmentprojects.

Upgrading projects place increasing emphasis on community participation in the formulation ofproject objectives and plans, as well as in their implementation. The Kalingalinga upgrading project inZambia enabled 4400 low-income squatter households to obtain improved houses, services and securityof tenure (Jere, 1991b). This was achieved with the active involvement of the community at all stages ofthe development. A more efficient land use reduced overcrowding and provided 1800 overspill plots fornew houses. The Zambian objective of maximizing economic development in shelter projects wasachieved by creating small companies and other commercial activities locally to produce concrete blocksand other essential elements.

One problem affecting the Kalingalinga project was that many early community leaders weremembers of the political party that was in opposition before Zambia became a one party State. Theiraccess to people in positions of influence was thus limited. Oestereich (1980: 31) considered the nextgeneration of leaders to be of an inferior stature. Eventually, however, a residents' committee was formedwhich was able to generate official support for the upgrading of the settlement. This suggests that the roleof effective local organizations in initiating, as well as planning, implementing and maintaining a project,needs to be fully acknowledged.

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Chapter II. Financial and economic impact of shelter projects1. Mobilization of household savings

Evidence concerning the extent to which shelter projects have succeeded in mobilizing domesticsavings is not easily available. In Sri Lanka, for example, there is no institution that takes in deposits andmobilizes resources with the aim of providing housing finance. Nonetheless, the MHP generated six timesmore investment by residents than that made available by the public sector (Jayaratne, 1990: 28). Thiswas a major achievement by any criterion. Table 2 below shows that household savings mobilization inthe three Sri Lankan projects reviewed in this report was two-and-a-half time that of the publiccontribution. Yet, cost recovery in public projects was very low, and greater success was achieved bythrift and credit cooperative societies (Jayaratne, 1990: 29).

About 86 per cent of all investment in house building is apparently made through informalprocesses, such as loans from relatives, friends and moneylenders. To encourage such investment, theGovernment of Sri Lanka provided 40-year leases to shanty dwellers in low-income project areas andinstalled services and community facilities as well. In the Aramaya Place upgrading project, it appearsthat the provision of tenure security and basic shelter were sufficient to encourage even low-incomegroups from ethnically mixed settlements to invest between SLRs.1000 and SLRs.150,000 in houseimprovements. Several links have also been established between the Community Development Councils (CDCs) and locally active NGOs (Jayaratne, 1990: 71-72).

In Turkey, housing finance is provided by the National Housing Fund. In practice, however,low-income households can only have access to such loans if the municipality in which they live isundertaking a shelter project, or if they can afford to pay the "buyer's share" when purchasing a housingunit in the local market that meets the criteria of the Fund. Another consideration in Turkey is that allprojects implemented by the Ministry of Public Works and Settlement require initial payments amountingto 25 per cent of total costs. Household savings are losing their value, however, due to inflation. In asituation where fewer shelter units are produced, the result is that household savings are utilizedelsewhere (Tokman, 1990: 34). Low-income groups are thus effectively excluded from participation inhousing projects. Yet, early experiences like the Aktepe project, when inflation was lower, have shownthat well designed and affordable projects can be an effective means of mobilizing household savings.

In Zimbabwe, the shift of emphasis towards aided self-help resulted in a parallel shift of thefinancial burden on to project beneficiaries themselves (Mutizwa-Mangiza, 1990: 53-54). The projectsare held to have generated a ratio of public to private sector investment of about two to one, representinga substantial amount of investment by households themselves (Mutizwa-Mangiza, 1990: 54 ). The abilityof residents in sites-and-services projects to take in tenants, or use their plots for commercial purposeshas further supported affordability and socio-economic development. This has a number of benefits; itenhances the incomes of project beneficiaries, ensures that investment in housing is increased and, by nomeans least, indirectly enables projects to benefit the poorest households by expanding the provision ofcheap rental housing.

Several methods have been tried in Indonesia to stimulate domestic savings and improve housing

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affordability. One of these is the Down-Payment Saving system, recently renamed the Pre-FinancingSystem. This was designed to help low-income households save for the deposit required on entry topublic housing projects. The system attracts interest on the savings until the household can raise theamount necessary for the deposit. It also provides project agencies with an indication of the household'sability to pay, and it encourages households to save regularly and to budget for large items, such ashousing. Traditionally Indonesians prefer to keep their savings as cash, rather than investing them. Whencash is available, they tend to spend it on consumer durables (Herlianto, 1990: 70). Housing has been asuccessful means of encouraging people to invest in major capital assets and has, of course, generatedconsiderable employment in the process, to the benefit of the economy as a whole.

In Colombia, the Constant Real Value Savings System (UPAC), which was established in 1972,has been extremely successful in capturing savings. The system protects savings against inflation by meansof a daily monetary adjustment, to which interest is added. It currently takes in about $US500 million ayear, with total resources of about $US3000 million. Although it is not related to any shelter projects, ithas enabled many households to participate in such projects (Utria, 1990: 14). In practice, however, thelow-income households have been unable to borrow from the UP AC, due to the relatively high cost ofsuch loans (Utria, 1990: 14).

The ability of a shelter project to mobilize domestic savings depends on many factors. A majorfactor is the perception by beneficiaries of the extent to which it meets their needs. Another is the extentto which they are able and accustomed to place small capital assets in an institution. Traditionally,low-income households have not considered such institutions an attractive or reliable place to deposittheir savings, possibly for fear that they will attract official attention, or that they will not be accessiblewhen needed. Any attempt to mobilize and put them to good use for the benefit of national and localeconomies will need to accept and address these deep-seated reservations. Given their limitedexperience of dealing with low-income groups, conventional banks or housing-finance institutions will findthis difficult to achieve. Since the majority of all housing for the poor is financed by domestic savings, thetotal sums involved are clearly enormous. The potential for developing new forms of savings and lendinginstitutions is considerable and has yet to be tapped.

The greatest success in this respect has been achieved by locally based community banks, savingsassociations, credit unions and similar institutions. These manage to combine local accountability withefficiency and ease of access, and are able to process small savings and loans efficiently. Furthermore,the benefits of success are shared by the community rather than outsiders, thereby reinforcing theirattractiveness. The Grameen Bank in Bangladesh is a prime example of such successes.

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Chapter II. Financial and economic impact of shelter projects2. Affordability, subsidy and cost recovery

A primary objective of recent shelter projects has been to reduce unit costs to a level that can beafforded by the project's target population. This is intended to reduce subsidies, recover a higherproportion of project costs and enable existing budgets to benefit more households. The ability to achievethis objective clearly depends on patterns of income distribution and the costs of land, services, buildingand finance attributable to the project. These will, in turn, be determined by their market, or opportunitycost and the minimum standards of initial provision considered acceptable by the project agenciesconcerned.

Despite increasing awareness of the need for shelter projects to be affordable and for an increasedproportion of costs to be recovered, the evidence suggests that progress to date has been modest. Keareand Parris (1982: vi) claim that plots in sites-and-services projects financed by the World Bank duringthe 1970s were affordable down to the twentieth percentile. Such affordability has, however, often beenachieved by subsidizing project components such as land, finance, or services to levels that restrict thenumbers that can be delivered within available budgets. For this reason, even when it can be achieved,affordability is of little consequence if the supply of affordable units is restricted and households aredenied access.

One possible reason for this problem may lie in the concept of affordability itself. Any approachthat determines forms and standards of provision based on what households with different levels ofincome can afford for housing, or other expenditure, is forced into making assumptions that may not bejustified. Furthermore, data on incomes are notoriously unreliable and households at a given level ofincome may have very different expenditure priorities. Finally, the ability to afford a commodity shouldnot necessarily be equated with a willingness to pay for it.

A more reliable indicator of affordability is probably the existing level of expenditure for a givenstandard and type of shelter. This is also more useful to project planners in that it can be compared toshelter of a particular type, in a particular location, at a given time, providing an insight into the optionswith which a project will be compared by its target population. The purpose of assessing the amountsthat households can afford for housing is to provide a basis for determining total project costs for initialdevelopment. A breakdown of such costs is provided in table 3 . The reduction or elimination of any ofthese costs from the project budget will amount to a subsidy on that element. This will, in turn, bereflected in the perceived value of the shelter within the urban housing market and also restrict the numberof units that can be provided. Experience shows that it is extremely rare for shelter projects to be plannedon the basis of true costs, even during the feasibility stage. The largest single element of subsidy isinvariably that of finance, since even a small percentage reduction in the rate of return charged to aproject has a dramatic impact on the capital value saved. The next subsidy in terms of value is invariablyin the cost of land. In urban areas this can be substantial. Beyond these, the costs of administration,professional fees and project maintenance are almost never attributed to shelter projects in full, and areroutinely omitted altogether.

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The understandable desire by project planners not to create developments that might beconsidered "planned slums" frequently results in project standards being higher than low-income groupscan afford. This leads to pressure to provide subsidies in order to ensure affordability, but producesprojects that are attractive to higher income groups than those intended. Needless to say, manybeneficiaries may be tempted to realize the full market value of the housing received by selling theirinterest. Furthermore, the high demand for housing provides no incentive for project planners to relatestandards to levels of affordability. The dependence on subsidies is thus reinforced. This restricts thenumber of developments that can be undertaken and creates expectations that are difficult to satisfy.

Another important issue when assessing the economic viability of shelter projects for the poor, isthe extent to which attributable costs are recovered for reinvestment in order to achieve replicability. Thecase studies provide valuable information on the issues of affordability, subsidy and cost recovery. InTurkey, for example, costs in squatter-prevention projects are allocated at market value, except thatinterest rates are only 5 per cent and a 25 per cent deposit is required. Inflation in recent years has beenaround 60 per cent and commercial rates of interest 70 per cent. The finance subsidy is thus at least 55per cent per annum. In upgrading projects, no charge is made for the plot of land, even though the valueof this may increase dramatically with the granting of tenure and incorporation into the formal landmarket. Some form of subsidies is the norm in public-sector projects and this has been officially acceptedfor some years (Tokman, 1990: 34). In the Aktepe project in Ankara, many beneficiaries only paid theinitial cost and the percentage of default on credits was considerable (Tokman, 1990: 17). At the sametime, households in the Tarsus project had average income levels two-and-a-half to three times higherthan the specified maximum. Cross-subsidy policies are considered to have helped achieve financialviability and affordability, though the emphasis on commercial development may exclude low-incomegroups in the future.

Administrative costs can be considerable and are rarely, if ever, estimated in Turkey. Whenimplementing agencies are assessing the eligibility of project beneficiaries this involves a complicatedmethod of allocating points. This assessment adds to total project costs and adversely affects projectviability. This problem no doubt increases with the popularity of a project. Prolonged implementationperiods and high inflation rates have made housing projects unaffordable to project agencies, since thecosts of building have risen at least as rapidly as other costs (Tokman, 1990: 34). Despite subsidies,projects have therefore failed to reach more than a small percentage of the poor.

In Sri Lanka, the proportion of total project costs recovered has also been disappointing, with only58 per cent of attributable costs recovered in the rural programmes and 47 per cent in urban areas. Inthree case study projects, cost recovery levels on housing loans were 16 per cent, 16 per cent and 50per cent respectively (see table 2 ). Furthermore, out of 81 projects in Colombo city only one paysproperty taxes intended to recover a proportion of the costs for land acquisition, development andservicing. Although average household incomes among low-income groups have risen to aboutSLRs.1600 per month, households can afford only Rs. 75-100 a month of this for housing. This isinsufficient to obtain a 25 m2 plot of land at existing prices and official standards have exacerbated this byimposing minimum plot sizes of 75 m2. The inability to afford access to land effectively excludes manylow-income households from participating in government projects. The only way of reconciling thisanomaly is to provide subsidies, Although the government has recently waived normal building andplanning regulations for low-income housing projects, the only way of reconciling this anomaly may be byproviding subsidies.

Jayaratne (1990: 43) estimates that the Sri Lankan projects received subsidies on attributablecosts of infrastructure and house construction loans that amounted to more than 50 per cent of totalcosts. In addition, land costs and charges were subsidized considerably and only 20-50 per cent of the

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market price was charged on suburban sites, with even less in Colombo itself. This has been possiblebecause projects for new development have generally been located on Government-owned land. Oncethis is exhausted and land has to be acquired from private owners at market rates, it will be difficult tosustain the programme. It also appears that some elements of infrastructure works were not costed to theprojects. This implies an additional element of subsidy. Yet, even these subsidies have apparently failedto make shelter components affordable to the target groups. Actual costs seem to be five to seven timesthe levels that the households themselves indicated that they could afford. The ability to sustain the levelsof subsidy inherent in the housing loans from the National Housing Development Authority (NHDA)must, therefore, be open to question.

In Zimbabwe, standards of residential development were raised after independence in line withnational aspirations. The minimum plot size was established as 300 m2, and a four-room dwelling built ofbreeze blocks was established as the norm (Mutizwa-Mangiza, 1990: 60-61). This was eventuallyrelaxed after pressure from funding agencies such as USAID. It was also hoped that building costs wouldbe reduced through the operation of building brigades working without the profit motive. Theachievement of the brigades has, however, been disappointing.

In terms of their internally defined target populations, the solutions offered within the twoZimbabwean projects examined in this report have, generally, been affordable. An assessment of theaffordability of these solutions in the context of the entire spectrum of low-income distribution, however,has revealed serious affordability problems. When the Kuwadzana package was tested against the thenincome distribution in Harare's low-income areas (assuming, as the Government did that 27.5 per cent ofthe monthly income is devoted to housing), it was revealed that 16 per cent of the low-incomehouseholds in Harare could not afford any of the available options and that only 16 per cent could affordthe full four-room core house that the Government of Zimbabwe had insisted on as the minimum to becompleted in 18 months. Yet, empirical evidence revealed that only 17.6 per cent (instead of the officialfigure of 27.5 per cent) of monthly income was available for housing. On this basis 42 per cent of thelow-income households in Harare could not afford any of the available options while only 7 per centcould afford a four-room core (Mutizwa-Mangiza, 1990: 55).

In the Kuwadzana project in Harare, land costs were subsidized and this is considered to affect thereplicability of the project adversely, especially for private sector developers. A further erosion ofaffordability was due to the time that it took for the project to be completed. Inflation in the costs ofbuilding rose at 60 per cent over two years (1986-1988), a much higher level than was budgeted, or thathouseholds could afford (Mutizwa-Mangiza, 1990: 31). Similarly, inflation in the construction sector hasresulted in a nine-fold increase in the cost of houses within four years (1981-1985), while the generalinflation rate was between 20 and 30 per cent per annum (Mutizwa-Mangiza, 1990: 54). There is someevidence that project beneficiaries are selling their plots. It is not clear, however, if this is because ofcosts being unaffordable, or if it is to realize the capital value of the subsidies provided.

In Indonesia, affordability is assessed by dividing the target population into two groups. The firstgroup is the lowest-income group, which is defined as households earning less than $US250 per month;they receive subsidies on project costs and terms of finance. The second group consists of householdswith incomes between $250 and $500 a month. These households not only pay the full cost of theirhousing, they also contribute to cross-subsidies to help the lowest-income groups. This suggests that thetrue costs of land, services, finance and shelter provided are based on affordability levels of $250 amonth, requiring repayments of about $100 a month.

Commercial interest rates in Indonesia are 18 to 19 per cent. These are charged to middle- tohigh-income groups, though projects for low-income households are only charged at 12 per cent(Herlianto, 1990: 15). This represents a considerable subsidy on finance alone. Cross-subsidies are

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generated from commercial and other activities, as well as from higher-income group housing.

In the Kampung Improvement Projects financed by the World Bank subsidies of about $US25 perhousehold are allocated by the Government to cover the cost of improving public infrastructure. In othersettlement improvement projects, carried out under the National Pioneering Project, subsidies amountingto about $USI700 per hectare are granted (Herlianto, 1990: 18). Considerable use of subsidies was alsoevident in the Klender project. This project was intended to serve the needs of a wide range of incomegroups, in the ratio of one high-cost: three-medium cost: six low-cost, thus reflecting the incomedistribution for Jakarta as a whole (Herlianto, 1990: 26). Herlianto claims that the scheme wasself-financing (1990: 27), though it is difficult to see how this has been achieved, given that 75 per cent ofall plots received subsidies (it also appears that few of the remainder were paying full commercial costs).Certainly, this would help explain why up to half of the original government employees allocated plots inthe project appear to have moved out (Herlianto, 1990: 28) and been replaced by households withhigher incomes.

Projects implemented by Yayasan Sosial Sugyapranata (YSS), an NGO in Semarang, forvery-low-income households received substantial funding from donations and grants within Indonesia andoverseas (Herlianto, 1990: 50). This enabled the projects to be affordable, but it inevitably restricts theirreplicability. YSS required only token repayments, in order to instil an awareness that households areacquiring their own assets. The repayments are placed in a revolving fund to contribute to future projects.It appears, however, that the project is essentially undertaken on a charity basis.

Affordability in Indonesia, as elsewhere, has been adversely affected by inflation and devaluation.Shelter projects have thus been increasingly unable to reach their target populations (Herlianto, 1990:62). As. a result, credits (and their associated subsidies) are being received by lower-middle- andmiddle-income households, rather than the low-income groups intended (Herlianto, 1990: 63). Officialproject assessments of affordability are based on an expenditure of 33 per cent of incomes on housing.As inflation has eroded affordability and interests have been adjusted, adjustments have been made towhich households are eligible to participate in the projects. This problem has been most significant in newdevelopment projects, where land has to be acquired, than for upgrading projects where people are inplace and the emphasis is on physical upgrading. Private-sector schemes seem to be more affected bythis than public schemes. Private developers now find it impossible to reach lower income groups.

One reason why affordability issues are less problematic in upgrading projects, is perhaps that unitcosts involved are less or that upgrading standards are more flexible than those for new developments. Itis also possible that the existence of a local community that can be consulted about project componentsand costs enables the most appropriate package to be prepared, and that this increases the willingness topay. In the Kalingalinga project in Zambia, cross-subsidies were applied to reduce unit costs andgenerate a revolving fund to finance future works. Unfortunately, inflation eroded the value of repaymentsbased upon fixed rates of interest. The funds recovered were thus insufficient for this purpose (Jere,1991a).

Housing agencies in Colombia recognize that the problem of low-income groups is a priority. Inpractice, however, government action has concentrated on those groups that can afford the housingprovided (Utria, 1990: 18). Low-cost housing has always been subsidized in Colombia. The subsidycommonly amounts to 70 per cent, including land, professional, financial and administrative costs. Thedefinition of target groups contributes to problems of affordability, since an estimated 71.5 per cent ofhousing supply is targeted to middle- and high-income groups, while 28.5 per cent is directed atlow-income groups. The corresponding figures for housing demand are 27.4 percent and 74.6 per centrespectively (Herlianto, 1990: 29).

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Disparities between intentions and outcomes are, of course, common to policies and programmes,as well as to projects, and may be due to a combination of factors. In the Ismailia DemonstrationProjects in Egypt, all project components were costed at rates that, at the time of project preparation,were both affordable and replicable. Cross-subsidies were to be generated from the sale by auction ofattractive and well located concessions, and commercial and industrial plots, as well as from differentialpricing of all other residential plots. This was intended to enable the project to cater for the needs of allincome groups on a self-financing basis.

To ensure that this objective was achieved, initial standards of provision in terms of infrastructureand house construction were extremely modest. The emphasis was thus on stimulating a local process ofincremental consolidation. In the event, several changes were made to the project that made it moredifficult for low-income groups to participate. These included discouraging the construction of housesusing temporary materials, increasing the price of land, reducing the period of repayments from up to 30years to only 5 years, increasing the size of deposit required, installing full public services at subsidizedrates, increasing the minimum width of plots and, perhaps most critically, changing the criteria forselecting beneficiaries so that income levels and evidence of need were no longer applied (Davidson,1984: 142-144). The outcome of these changes was to stimulate considerable investment in the projectarea. Yet, the degree to which low-income groups were able to participate was less than intended.

In the Bolivar City project in Bogotá, affordability was achieved by subsidizing the serviced plotsand interest rates on credit. This represented a combined subsidy of 70.6 per cent, or about $US 1208.In addition, the costs of road provision, administration and professional services were not charged to theproject, representing an even higher level of subsidy (Utria, 1990: 44). It is hoped that some of thesesubsidies can be recovered through property taxes, though it is still too early to assess the amounts, sincethe project has only recently been completed. In another Colombian project, Kennedy City in Bogotá,subsidies were provided under the Alliance for Progress programme, making it difficult to replicate theapproach with local resources.

The above examples have confirmed that most shelter projects, even those intended to beself-financing, have failed to be affordable to low-income groups. It has also demonstrated that attemptsto close this gap through the provision of subsidies have generally been unsuccessful. When the problemsof affordability and subsidy are compounded by poor levels of cost recovery, the financial viability ofshelter projects is impossible to achieve and the prospects for replicability are severely constrained.Unfortunately, the record has not been good, even for sites-and-services projects. Van der Linden(1986: 67) cites evidence from more than 60 projects carried out with financial support from the WorldBank showing that none had achieved full cost recovery. According to Keare and Parris (1982: xii), ratesof default in the Zambian World Bank project were generally in excess of 50 per cent and, in somecases, upwards of 80 per cent, with many households making no payments. Yet, it should not beassumed that poor repayment levels automatically reflect a lack of affordability. In Zambia, the poor levelof repayments was largely caused by lack of an effective collection system, and also of political will onthe part of Zambian Government leaders. Keare and Parris even went so far as to state that governmentreluctance to make defaulters pay may be a disguised form of subsidy to project participants (1982: 64and 85).

In Sri Lanka, the situation is no better. Only 13 per cent of the total repayments due had been paidup to 1986, though this gradually increased to 50-60 per cent, excluding the backlog. Levels later variedbetween 10 and 30 per cent, depending on how defaults are calculated (UNCHS, 1987: 50 and 64).Cooperative thrift societies have been proposed to improve this aspect of the MHP.

Government policy in Zimbabwe has been to recover all project costs except for land. It is notclear, though, if the cost of finance is based on commercial or subsidized rates. Arrears on repayments in

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the Kwekwe-Gutu project are between 22 per cent and 28 per cent. Quite obviously this has had anadverse effect on replicability. Yet, this is considered as broadly consistent with the record ofmiddle-income groups and not, therefore, a cause of serious concern. It is not clear how this affected thevalue of the revolving fund established by international grants. What is clear is that some householdsassumed that because it was a government project, they would not have to make any repayments(Mutizwa-Mangiza, 1990: 46).

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Chapter II. Financial and economic impact of shelter projects3. Institutional framework and financial management

When addressing the issues of institutional framework and financial management there are threemajor issues to be considered. These are analysed in the three following sections.

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Chapter II. Financial and economic impact of shelter projects3. Institutional framework and financial management1. Institutional culture of public-sector agencies

One of the primary factors that influence the success or failure of shelter policies, programmes andprojects is the institutional culture of the public-sector agencies involved. If these are positively disposedtowards innovation and responsive to changing patterns of demand, the chances of success areconsiderably enhanced. Where agencies are reactive and inflexible, opportunities for progress will becorrespondingly reduced. The first approach can be characterized as a management approach, in whichresources are continually being redeployed in line with assessments of need, while the latter represents anadministrative approach and is characterized by a preoccupation with implementing inherited, orreceived, norms, standards and procedures, irrespective of their relevance in the wider environment.Unfortunately, public-sector agencies in many countries have not yet shaken off the traditionaladministrative approach. This has particularly negative consequences for the shelter sector, since it is notthe exclusive preserve of anyone profession or discipline, and depends for success on the collaborationand sensitivity of many professions and agencies.

The introduction of new approaches to shelter projects under such conditions is greatly facilitated ifpolitical support is available at the outset. This has been the catalyst in many successful cases, of whichthe MHP in Sri Lanka is perhaps the clearest example. This was administered by a high-level committeerepresenting 12 ministries, with the NHDA acting as the lead agency. Despite the enormous scale of theprogramme, the data show that the rural and urban sub-programmes achieved a high proportion of theirtargets (95 per cent in rural and 76 per cent in urban areas). The Ministry of Policy Planning andImplementation has indicated that the Programme was completed satisfactorily by the end of 1988. If thisis correct, it was no doubt directly due to political commitment at the highest level of government and thevery high levels of public investment involved.

Similar political commitment was largely responsible for the successful introduction ofsites-and-services projects in Egypt (Davidson, 1984), and the expansion of the settlement-upgradingprogrammes in Indonesia and Zambia. Where such support is not available, the degree to which projectscan be expected to achieve their internal objectives, let alone generate a multiplier effect, will berestricted. Innovative projects, such as those sponsored by international funding agencies, tend to remainas isolated project cells. More often than not, the concepts or methods that they were testing are neverbeing absorbed into the mainstream of the parent agency's activities.

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Chapter II. Financial and economic impact of shelter projects3. Institutional framework and financial management2. Role or local government agencies

If local government agencies are excluded from the formative stages of project design andimplementation, they may be reluctant to accept responsibility for maintenance. This problem resulted inthe inability to consolidate innovative new shelter projects and recover project costs in Papua NewGuinea (Payne, 1982b). The only solution to this problem is to ensure that local authorities are introducedto the underlying principles of innovative projects at the earliest stage in their development. Even then, itmay be difficult for local authorities to undertake the tasks required of them, due to a lack of institutionalcapability, or cumbersome procedures. In Colombia, for example, administrative procedures concerningcontract tendering require a minimum number of bids, below which tenders are not accepted and thewhole process has to begin again, with a resulting delay and increase of costs. Given that large-scalecontractors may not be too enthusiastic about undertaking projects for low-income groups in the firstplace, such a situation is not uncommon. To exacerbate this problem further, all contracts have to beapproved by the Administrative Court, which functions independently of the district administration, but isconsiderably overloaded. This process alone can add 6-12.months to project preparation (Utria, 1990:41). Similarly, in the Bolivar City project, it appears that inadequate attention was given to operationalplanning, or the implementation process. This necessitated changes to the project after implementationhad commenced, resulting in further delays and increased costs (Utria, 1990: 48).

One reason for the limited capability of public agencies is the lack of adequately qualified andmotivated professional staff. In the Zimbabwean projects, a shortage of land surveyors, together withinappropriately high standards slowed down site development and consequently raised project costs(Mutizwa-Mangiza, 1990: 46). Yet, the picture is not totally negative. In the MHP in Sri Lanka, thedevelopment of institutional mechanisms at the local authority level was an integral element in its success.These enabled NHDA to offer construction contracts to community groups rather than to privateconstruction companies, thereby reducing administrative costs from 30 to 15 per cent (UNCHS, 1987:45), not to mention the other benefits of community involvement. It is not clear, however, if this includesthe cost of technical assistance from project staff which placed considerable demands on staff resources.One major difficulty with the MHP is related to the financial terms, under which interest rates variedbetween 6 and 10 per cent in sites-and-services and other low-income projects. This represented asubstantial subsidy, to which was added subsidies on land and land-development costs, the provision ofbasic infrastructure and community facilities. No mechanism for recovering the cost of land developmentand infrastructure was established under the MHP. The total cost of these elements has routinely beenborne by the Government (Jayaratne, 1990: 43). The present value of the interest-rate subsidy alone inthe rural programme is greater than the present value of the loan amount. Channels for obtaining housingloans are limited and not accessible to the poor because of collateral and deposit requirements.

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Chapter II. Financial and economic impact of shelter projects3. Institutional framework and financial management3. Relationship with local community groups

A third major factor related to the institutional framework is the extent to which project agenciescan develop positive relationships with local community groups. Administrative flexibility in Sri Lankaeven enabled the local community in the Nagagahapura project to block out the land and prepare the sitelayout for a small (1 hectare) sites-and-services project and allocate plots among themselves. They thenproceeded to formulate their own building regulations with official professional advice. This must be oneof the most innovative approaches in terms of community-led new shelter development undertaken withofficial support, though it is by no means unique. In Zimbabwe, for example, the Kuwadzana projectprovided a model for local authorities. The project provided community orientation materials anddeveloped cost and loan affordability calculation methodologies. Furthermore. it provided guidelines forlegal agreements and guidelines on project staffing (see Mutizwa-Mangiza. 1990: 29).

A major innovation of the Kwekwe-Gutu project was its use of building societies to financelow-income housing, despite their normal reluctance due to problems with affordability and default(Mutizwa-Mangiza, 1990: 36). The arrangement involved substantial grants from the UNDP and USAID. The funds from USAID were used to set up revolving funds that would enable building societies toestablish a financing system for low-income housing. As an alternative to deposits, an allowance wasimputed for the value of self-help labour. The loan only required repayment of the cost of the building,however, and it appears that land, infrastructure and interest rates were largely subsidized.

The ability of urban authorities to ensure the provision of land, services and social facilities on aroutine basis ultimately depends upon the revenue base they are able to generate. Efficient projectmanagement can contribute significantly to this by encouraging a sense of financial rigour in all sections ofthe population. Politicians and administrators seem to share a common tendency to regard projects as awelfare service, rather than a developmental investment 1ltis tendency militates against this approach andprevents adequate resources from being generated. The evidence from the case studies suggests that theopportunity to use projects as a means of increasing the urban revenue. base has yet to be grasped.

One example from Sri Lanka exemplifies this issue. As was mentioned earlier, only one out of the81 projects undertaken in Colombo pays property taxes to the Municipal Council. One reason for thispoor performance is that although decision-making in projects has been decentralized to local levels,procedures for cost recovery are still centralized. Another reason is that the whole process of costrecovery within the MHP has been politicized. Before the Presidential elections in 1989, the Governmentdecided to forgo collections of loan payments from all households with incomes below the official povertyline. Since most households in housing projects belong to this category this has been a major reason forthe low level of cost

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