HOUSING
EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT HOUSING IN THE GLOBAL SOUTH* (*But were afraid to ask)
By Angus Downie, Senior Economist, OPEC Fund
H ousing is an essential human need – for rich or poor everywhere. However, it is a “need” that is blurred by differences of opinion and socioeconomic factors. What is clear is that there is a housing crisis and something must be done to alleviate it. By delving into the key issues we explain how the crisis has unfolded and provide answers to help fix the problem. Human right or market commodity? The debate around whether housing should be a guaranteed human right or governed by market forces remains central to social policy discourse. If housing is a human right, why can’t everyone claim it? Quite simply, as there is a cost embedded in providing housing, or shelter in general, there are fundamental differences over who should pay for this cost. Those from the left of center generally believe that the state should bear this cost (to be met from higher taxation and wealth re- distribution) whereas advocates of the market coalesce around the view that individual responsibility drives the need to obtain shelter.
Advocates of housing as a universal right, such as UN-Habitat, the United Nations program for human settlement and sustainable urban development, emphasize the state’s responsibility to ensure adequate living conditions for all citizens as enshrined in international frameworks like the Universal Declaration of Human Rights. UN-Habitat notes that “everyone has a fundamental human right to housing, which ensures access to a safe, secure, habitable, and affordable home.” This perspective argues that access to shelter is fundamental to dignity and social inclusion. On the other hand, proponents of market-driven approaches argue that private sector dynamics encourage efficiency, innovation and responsiveness to demand. They believe that housing is not a right in itself. In the USA for example, the 1968 Fair Housing Act banned discrimination when providing housing or making housing policy, yet it did not allocate living space of a minimum size or guarantee automatic qualification for a mortgage. In this view, housing is seen as a commodity. However, market-based
systems often lead to inequalities, especially when housing becomes a speculative asset, driving prices beyond the reach of ordinary citizens. A balanced approach may involve state intervention to correct market failures while promoting private sector involvement in a regulated environment. When is housing considered affordable (or unaffordable)? Housing affordability is typically assessed by the proportion of household income allocated to housing costs, including rent or mortgage payments, utilities and maintenance. The commonly accepted threshold is that housing should not consume more than 30 percent of a household’s gross (before tax) income. Beyond this point, families often face financial strain, compromising other essential needs such as healthcare, education and food. The tipping point varies by context: in high-cost urban areas even families with moderate income may struggle, whereas in lower- cost regions affordability thresholds may be higher. Policy-makers must consider local economic conditions and wage
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