Apartments for all: Cutting superfluous costs

When I first saw the name 'REHAB' I thought it was some kind of NGO working for rehabilitating evicted squatters. It was a time when I was involved with housing rights, worked briefly for ADB on urban poverty reduction where shelter was a small component to be delivered through the NGOs, as a means to provide affordable workspace to the poor that could enhance their productivity. But then learnt that it was the abbreviated version of real-estate developers' association. Ever since I have thought of how to bring apartments closer to affordability of a larger number of families, which in fact was a topic of my PhD completed in 1990. I also had applied the 'theory' into practice by initiating an apartment project by a group of BUET teachers in 1992 which cost about half the market price, and the method has been replicated!
So how can REHAB-members reduce their flat price, and thus increase coverage from the present 5 per cent of the stock in Dhaka or 10 per cent of its population?
The reason why there is a housing problem in the cities of Bangladesh is that the resources are scarce and highly priced, and people's affordability is low. When we can reduce the gap between housing cost and affordability, many people can be supplied with standard housing. The gap can be narrowed down by reducing the cost by way of arresting the cost escalation in individual elements on one hand, and enhance affordability through saving and finance on the other.
Land is one essential and the most expensive element (up to 50%) excruciatingly short in supply. Lack of management and control has allowed speculation that has made land hard to find, given that Dhaka has a water-locked conurbation and neither the land-hungry country can afford to loose anymore agriculture land, nor can much of the wetlands be filled up. Yet both 1981 Dhaka Metropolitan Area Integrated Development Programme and the 1995 Dhaka Metropolitan Development Programme (Master Plan) opined that through proper planning and more judicious use (of low-density areas like cantonment) double the present population can be accommodated within the current built up area.
Other studies suggested that the issue of land is not a technical one (of developing more number of serviced plots), but a political one (fundamental structural adjustment regarding ownership and development rights, etc.; for example, the idea of one plot for one family no matter how small the plot size is has to be completely divorced off).
Combining the above two would mean that we need strong willpower and commitment of the government to tackle the land problem, without necessarily extending the city limits and inviting environmental disaster (as a result). Decentralisation, satellite city, efficient commuting system, mass rapid transit etc. have been popular catch phrases heard in every seminar since the emergence of planning profession in Bangladesh. But the government has not wholeheartedly tried any of those in last half century resulting in the worsening of the crisis. It needs a visionary and strong leader who can both foresee where the city is destined for in 3-5 decades ahead, and what need to be done to save it. Just imagine by 2025 we have to accommodate 30 million people in this city!
And all conventional approach would be rendered impotent.
The First Five Year Plan talked about encouraging housing cooperatives (eventually to lead to a socialistic society) by providing incentives which were never put in place. In countries like Sweden or Israel, which have welfare democracy, and elsewhere, the commune and kibbutz systems have worked excellently where groups of people get together to solve their housing needs. In Malaysia and Columbia, Valorisation has been used where the government provides serviced land to cooperatives and developers conditionally so that a fixed proportion of flats are sold at cost-price.
Land Repooling or Reconstitution technique has given good result in all over SE and East Asia. One such attempt in Dhaka failed due to an absence of motivated workforce to convince the landowners of the benefits. Land Sharing is working in Bangkok, Mumbai or Manila. Spare Plot mechanism has been applied in Mexico. Thus there is no shortage of good practice; only lessons have to be learnt and adopted to local context.
Dhaka's residential land price is one of the highest in the world, which is ridiculous as Bangladesh is among the 50 least income countries of the world! Developers, who are in competition with each other, and will do almost anything to entice a landowner, have contributed into that in a large extent. Most of them do not buy it outright, and hence can offer anything, and the landowners who have no credit in owning a high price plot are taking advantage. Why cannot the REHAB members put a cap on the land price and practice it judiciously for their own sake? Why cannot they go away from the inner city, and themselves create a demand for flats in fringe areas. Think about the visionary developers who in the 1950s bought the land, developed housing and are still getting the dividend.
Payment of Gain Tax and such other charges by the developer, that legally have to be paid by the landowner, and then transferring the cost on the flat buyers is increasing the price. The idea of gain tax is to capture some of the windfall gains made by the landowner due to increase in land value for which the credit mostly is of the government (who may have put infrastructure, services etc.) and his neighbours (making the area liveable and enhancing the status).
Paying the landowner 3-year rent (as dislocation charge) is another illogical cost incurred, thanks to the developer, which again is added to the flat price. One developer started it, and now everybody is offering more lucrative deal to get a bite in the cake! The land (equivalent price) is the investment by the landowner while the developer's investment is the cost of the building (including such overheads as documentation, fees and levies, construction management, sales promotion). Why then it has to rent a house for the landowner? Why cannot the REHAB members put a stop on such practice for their own sake?
Reducing the cost of other components like materials, services, finish, labour etc. is another way of reducing the housing cost, for which various methods are available, specially targeted at the low-income groups. Design is also important; by engaging experienced and innovative architects (efficient use of floor area) and engineers (proper structure and service design and strict supervision) cost can be much reduced. For example, some architects would design vertical cores and horizontal circulation in such a way to unnecessarily increase the gross area or reduce the net area.
In Singapore, corridors have moderate finish, and are separated to charge at cost price to keep overall costs less. In all public buildings there, rainwater (from roof and corridor) and gray water (from kitchen sink) is collected and used for flushing toilet, washing car or gardening, and thus maintenance cost is reduced. Unit area of toilet is more expensive than that in any other room due to fixtures and finish. Ninety percent of European houses have only one toilet and one bathroom! Why do we require attached toilet with each bedroom? Why cannot flats be less than 120 m2 in Uttara or much below 180 m2 in Dhanmondi? Why cannot they take up project in large plots so that more facilities can be provided, and yet more open areas are there? Every developer in order to reduce their flat price to reach a greater population should ponder upon these questions.
Finance as an important housing element (as a means to provide fund and increase affordability) is being recognised worldwide from the 1970s. It is mainly based on domestic saving and long-term loan. In many countries of the world, housing cooperatives, societies and developers work as a finance institute, thereby enabling their own members/clients to buy housing units. Instead of having wishful thinking like there will be housing bank(s) with ready loans at rates as low as 5 per cent, why cannot the nearly 400 members of REHAB develop their own bank? When the inflation rate is 10 per cent, conventional market cannot sustain such low-interest loans. Therefore, other sources for the funding and credit have to be looked for. Insurance money is a good source. International market is another. But long tern solution would be to develop a sound fiancé mechanism with the help of the government, based on contractual saving.
Countries like Sri Lanka or Singapore which have successfully provided all citizens with proper housing have done the miracle through finance mechanism. In Sri Lanka small easy term loans have been provided to a million families so successfully that the housing minister had landslide victory when he contested in the presidential election. Singapore has a supernumery scheme whereby all employees are forced to save 22.5 per cent in the housing fund from their monthly wage. In a country which gave birth to micro-credit, or at least for the government employees, why cannot one or several of such methods be introduced?
In fact providing government employees with ready houses has been termed by the government itself as "perennial wastage of limited national resources", which recommended instead to go for hire-purchase system. Yet the bureaucrats couldn't go above their class interest; on the backside of the same policy paper they wrote construction of numbers of housing units as their programmes. That large employers would be encouraged with incentives to solve housing problems of their own employees remained as an unimplemented policy.
Thus the policies are all full of contradictions. Even if these exist, there is no guarantee of implementation. Sometimes even policies approved by the Parliament are changed by office directives that have vested interest. If we argue that it is the responsibility of the government to meet the fundamental needs of all citizens that includes housing, then it should play the lead role in the concerned sector. But when the requirement is enormous, any conventional solution render government efforts impotent. Instead the government should play the role of a facilitator or enabler with its regulations, monitoring and control, set systems and incentives in place, so that there is a positively conducive environment for other actors.
Since the 1990s, private-public partnership has been another jargon in the development sector whereby the government(s) recognises its limitations in service delivery or meeting basic human needs, and hence within regulatory framework encourages private enterprises and the NGOs to operate. In housing, it has been increasingly recognised as a valid method particularly since the 1996 Istanbul Habitat. The real-estate developers can play a strong role in this regard. The government on the other hand by taking the real estate developers into confidence can initiate various partnership schemes.
So wake up developers, and address the housing problem of the majority of population.

Mahbubur Rahman is Professor of Architecture, North South University.