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An estimated 900 million are living in inadequate housing and unsafe neighbourhoods.  Individuals and families struggle to secure the resources they need for healthy and prosperous lives and this includes shelter.  There are very high levels of informal tenure and incremental housing development in Southern towns and cities. 

Urban poverty is a significant cause of inadequate shelter.  Lack of finance requires individuals or households to rent poor quality accommodation or to build informally and sometimes illegally; no other options are affordable to many of those living in Southern towns and cities. 

For those who build their own homes, consolidation is generally slow due to both an absolute lack of finance, and an inability to spread costs through acquiring loans. The lack of affordable complete housing prevents households from accessing conventional (mortgage) finance.  Their financial exclusion is compounded by a preponderance of informal incomes that do not allow them to get loans from formal financial institutions.  In this context, housing is primarily financed by savings.

A further problem is that there is little legal land that can be purchased and many end up squatting or buying informal sub-divisions on agricultural land.  These plots are without access to basic services such as piped water and sanitation.  Hence households live with insecure tenure, poor quality shelter, and inadequate services, sometimes at very high densities. 

Low-quality shelter compounds the problems of poverty.  In particular, poor quality shelter is associated with significant health risks, with greater likelihood of morbidity and premature death.  Poor health also increases the incidence of poverty, reducing the opportunities to improve livelihoods and hence invest in better housing.  The adverse location of many low-income neighbourhoods increases the costs of securing livelihoods, adding to the difficulties of securing adequate incomes. 

Shelter improvements will not be secured simply by economic (and income) growth.  Citizens require a supportive state able and willing to ensure large-scale opportunities for secure tenure and for improved access to basic services especially water and sanitation.  Shelter improvements require finance but they also need supportive social and political processes that address the scale and nature of deprivation. 

To secure the kinds of political support necessary for shelter improvements, experience has shown the effectiveness of grassroots federating and networking.  Grassroots organizations are often isolated and vulnerable in their strategies to engage with political systems. 

Federating reduces the isolation and enables peer support.  As significantly, it shifts the engagement from individual communities to the neighbourhood or city level.  In recognition of the success of their strategies, IIED has developed a close working relationship with Shack/Slum Dwellers International to promote and support pro-poor people-managed development.

Our objectives are to:

• inform policy-makers, professionals and practitioners about the scale and nature of inadequate shelter and the most effective strategies for shelter improvements
• promote a holistic understanding of the relationships between urban poverty and lack of shelter
• locate shelter improvements within poverty reduction programmes
• articulate the importance of and support community-driven shelter development

The key focus for our work:

• a programme of collaboration with Shack/Slum Dwellers International and their affiliate homeless and landless people’s federations
  
• analysing housing policies and shelter finance
  
• supporting the development of savings and loan strategies for shelter improvement

Collaboration with Shack/Slum Dwellers International (SDI)

SDI seeks to support the landless and homeless to address their own needs through participating in locally managed, women’s-led savings schemes that are federated into neighbourhood, city and national movements.  Central to SDI practice is the belief that local groups need to develop solutions that work for them, collaborating with local authorities to reform regulatory processes, and secure access to essential services.

The federations embed principles of subsidiarity (ie. that decisions are made at the lowest possible level by those most effected) and the autonomy of movements of the poor from political parties and the state.   Equally central is the commitment to develop solutions that work for those with the lowest-incomes and who are otherwise the most vulnerable within the community. 

IIED’s Human Settlement’s Programme believes that SDI values and efforts are of significance to our own objectives and activities.  Hence, we work with SDI to assist in knowledge creation, documentation and dissemination related to SDI’s methodology and experiences. 

Since 2001, we have co-managed, with SDI, the International Urban Poor Fund which has provided over US $2 million to SDI affiliates to undertake activities to secure tenure and investment in basic services.  The Fund has been supported by the Sigrid Rausing Trust (from 2001), Big Lottery Fund (from 2002) and the Allachy Trust (from 2004).  

Housing policies and shelter finance

The significance of housing makes it a popular sector for state support and many countries have introduced at least some housing programmes.  Housing policies have changed considerably over the years with a shift from state construction of public housing to site and service programmes and, more recently, demand driven capital subsidies.  Neighbourhood improvement (sometimes called “slum” upgrading) are also taking place. 

Some of these programmes have received the support of development assistance agencies, most notably from the Swedish International Development Cooperation Agency (Sida) in the case of central America, with USAID and GTZ.  However, much of this funding has been central government funds.  South Africa and a significant number of Latin America governments now provide capital grants whilst interest rate subsidies remain popular in Asia.  Housing support at scale is less common in many sub-Saharan African countries.

Savings and loan strategies for shelter improvements

Small scale lending for home improvements has been a theme of our work for many years.  Savings is the primary source of finance for home improvements.  Over many years, families manage to accumulate the resources needed to upgrade floors and roofs, extend shacks, install kitchens and bathrooms, and purchase on plot access to services.  Access to micro-finance loans can speed up this consolidation process. 

In some neighbourhoods, the improvements can also help to secure official land titles.  But the lowest-income and most disadvantaged households often do not have secure tenure and cannot begin this accumulation process.  NGOs and state agencies working with these groups have developed collective loan processes to help families purchase land or negotiate for the right to stay in their present location. 

Collective loans are also used to install water and sanitation systems, and sometimes to upgrade livelihood opportunities. 

Savings and loan programmes for shelter improvements have become popular with both grassroots shelter improvement programmes and state agencies.  Savings has a critical role to play as it supports multiple processes that favour shelter improvements:

• Savings helps low-income families accumulate the resources they need for investments. 
• Savings has an obvious advantage for the lowest income households over loan finance as it involves much less risk.
• Savings can also help households to assess what they can afford prior to taking loan finance. 
  
  

At the community level, savings has further advantages:

• Communities that manage savings programmes build up the kinds of financial skills that they need to also manage development assistance finance.  Even if they are not offered control of the funds, they have the capacities they need to engage more activity with state investment institutions. 
• Savings groups help to build the social capital that is needed to persuade local authorities to support a community driven process. 
• They also build collectivity within low-income communities.  Shelter improvements require a collective capacity as individual households cannot either manage or afford to solve their problems alone.

The importance of small loan processes for shelter improvements lies in their affordability and the ease with which they integrate into, and substantively improve, the incremental development process.  Whilst shelter micro-finance has only been widely discussed during the last few years, there has actually been widespread experimentation by both micro-finance agencies and shelter NGOs for over a decade.   We have been reporting on this though our occasional newsletter, HiFi News.

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