This follow-up article builds up on our earlier post on lessons from the success of the Singapore public housing systems. Here, we’ll discuss lessons from China and Chile.
China’s Public Housing Programme
The Chinese government had been the only provider of public housing until 1998 when it could not match the high demand for housing and the people’s need to customise their dwelling units.
Consequently, it opened up the opportunity for the private sector developers to provide housing units.
Nevertheless, the demand kept on skyrocketing leading to urban commercial housing prices surge in 2004 that outstripped the growth of urban household incomes, thereby making suitable housing increasingly unattainable for many low- and middle-income households, especially in the cities.
As a result, the central and local governments had to resolve their conflicts on matters of land acquisition for affordable housing development to fast-track this project.
Also, the People’s Bank of China and the China Banking and Insurance Regulatory Commission started to support housing development by agreeing and directing that loans for affordable housing development not be classified as real estate loans so that high-interest rates are not applied to them and they become more affordable.
To save on time, and long-run costs and standardise quality at a large scale in the development of affordable housing, the Chinese government emphasised more on the use of assembly-type construction technologies and techniques (such as prefabrication and precast), advanced renewable energy sources (solar, wind, geothermal and battery technology), and artificial intelligence technologies to build sustainable green construction practices.
While the information on the Chinese income levels and their effect on the eligibility for allocation of housing is vague, literature shows that China has been able to achieve between 70% and 90.1% home ownership in most cities, with continuous involvement of the private sector, although the demand for housing is still higher than the current supply.
Precast and prefabrication techniques which help China to save on project scheduled time are progressive technologies that have been applied successfully in Kenya in projects such as the Nairobi Expressway.
These should be adopted in our Affordable Housing Programme to cut down on construction time and costs. That way, the housing units can be delivered faster and will help to offset the housing deficit in a relatively shorter time than anticipated.
Chile’s Public Housing Programme
Chile is one of the countries in Latin America that has a long history of policies directed towards the provision of public housing and encouragement of citizens towards home ownership.
With impacts by the political regimes in power over time, these policies have kept on evolving and their success and part failures in certain aspects can offer immense lessons to the housing sector in Kenya.
To begin with, the 1990 – 2006 Chilean housing policies were focused on encouraging greater participation by the citizens in housing development through progressive construction (incremental housing) and removal of mortgage debt for vulnerable households.
The period 2006 – 2010 switched to the development of housing policies that guarantee a better quality of life for the people and their neighbourhoods to promote social integration.
The present-day housing policy in Chile has evolved across multiple political periods to the following three main important aspects:
- Provision of private mortgage financing that allows the upper middle class and high-income families to buy houses produced by the private developers,
- A mixed system, which pivots in non-refundable cash vouchers supplied by the government and supplemented by loans from local banks which helps middle and low-income families to finance houses produced by private developers, and
- Government-constructed houses distributed with heavy subsidies to low-income families.
The subsidies are proportionally larger for low-income populations. It works by way of the government issuing a voucher to be used to pay part value of the home (typically 70% of the value for low-income earners).
This subsidy programme is attributed to a 13% reduction in the housing deficit in Chile; measured as an indicator of the additional number of dwellings needed to provide adequate access to housing to all households in the country.
The Chilean housing subsidy is a demand subsidy designed to overcome the problem of information asymmetry, reducing the need for credit and thereby avoiding excessive risks for financial institutions, which would not lend to very low-income earners without an intervening subsidy.
Turning back to our local context (Kenya), do we have the required legal framework and political goodwill to design a housing subsidy system to help low-income earners access home ownership? We can learn from Chile.
However, these lessons from Chile must first be interrogated on their cultural and social foundations before being implemented in any other country as these aspects vary from one country and community to another.
Further Reading:
The following key documents forms the source of the information presented in this article. For more insights, please obtain a copy and read through.
- Bennette, P. (2010). Chilean Housing Policy, Cities Alliance Annual Meeting, India. Ministry of Housing and Urban Development (MINVU), Chile.
- De Freitas, F, G. et. al. (2013). Chile: Subsidies, Credit and Housing Deficit. Capital Review 110.
- Zhang, G., Xu, K., Liu, Z., Huang, R., Li, B., & Wang, R. (2023). Policy-based initiatives on promoting China’s affordable housing: Challenges and opportunities. Developments in the Built Environment, 16, Article 100222. https://doi.org/10.1016/j.dibe.2023.100222