Published on January 6, 2014
Housing Sector Challenges •Substantial unmet housing demand – 200,000 units per year needed •Acute shortage of buildable land in urban areas •Near absence of formal housing finance •Incomplete legal and regulatory system for private sector investment in housing •Infrastructure backlogs •Many households cannot afford decent housing •Deteriorated rental stock •Undercapitalized construction sector •Lack of established procedures to address unplanned settlements
Key Housing Policies – Enabling Approach Land • Prioritise infill developments • Encourage land wholesaling to mobilise capital for land development • Establish land inventories • Undertake electronic land title registration processes • Progressively remove subsidies on the allocation of public land, and introduce sunset clauses on undeveloped allocated land • Institute fair and appropriately scaled system of real estate taxes Housing Production • Establish a level playing field to support private developers • Rationalise housing SoEs • Encourage PPPs and cooperatives for housing delivery
Housing Policies – Enabling Approach Housing Finance • Encourage commercial banks to enter the market by: - Reviewing legal currently restrictive framework (foreclosure law) - Establishing NHF and REB as second-tier financing instruments to capitalise commercial housing finance providers • Modify building standards to make housing more affordable • Utilise government banks to provide targeted low-interest loans to poor/ vulnerable HH • Encourage more extensive use of loans for housing extension and improvement Infrastructure for Housing • Increase capital investments and improve maintenance/ management • Upgrade Trunk Infrastructure • Promote private sector involvement in the development and management of housing infrastructure (explore PPPs)
Housing Policies – Enabling Approach Housing Management and Maintenance • Increase inspection of private/public rental housing through commuity based methods to improve compliance with minimum standards • Privatize maintenance services of public rental stock Housing Construction Materials •Introduce financial instruments to support materials producers • Promote international joint ventures • Standardize operating environment and rationalize SoEs • Promote environmentally friendly, local production Informal Housing • Upgrade/ redevelop on a case by case basis using standardised criteria • Resettlement undertaken fairly, with consultation and compensation
Housing Policies – Achievement so far Land • Land policy vision, studies undertaken (PMAC), state land policy drafted – nothing yet submitted to COM • Land inventory piloted (MMPW) • Digitisation of land registry underway (MoJ RERD, USAID) Housing Production • Rationalization of MoCH SoEs initiated/ under discussion as a pilot in a PMAC led programme to rationalize SoEs Housing Finance • Capacity Building of Iraqi Private Bankers League in regard to housing finance (USAID); dialogue on reforming legal framework
Housing Policies – Achievement so far Informal Housing • Informal Settlement Upgrading piloted in Erbil and initiated in Baghdad (Governorates, line ministries and UN-Habitat) • Studies completed on Baghdad informal settlements utilizing land sharing mechanisms to redevelop high value informal settlements (UN-Habitat) Constraints • Renewed focus of MoCH on traditional housing delivery mechanisms to meet urgency of current demand • Communication strategy has been insufficient • Commitment of relevant institutions in implementing the policy is not yet translated into significant programmes and budgeted actions Result so far: Limited progress on implementation, therefore limited impacts
Suggested Way Forward Housing Policy provides appropriate directions in creating a well functioning housing market, and should remain a medium - long term goal Contributing institutions should reflect on progress and consider whether this approach is well understood, feasible given the limited interaction between ministries, and has sufficient political support If there is political will to move forward, Housing Policy implementation requires unified vision and serious commitment of relevant institutions, strong leadership and adequate resources Additionally, short – medium term mechanisms/ instruments are required in order to rapidly address the housing needs, particularly for the poor
Income: USD/month Affordable Housing (Rent to Buy) model 2000 Land /Housing is often “allocated.” Housing provision constrained by ineffective housing market Often informal/inadequate housing Requires housing assistance 500 population
Rent to Buy model Housing Agency provides low cost housing - ideally within mixed use development, or mixed housing developments Housing Agency is capitalized by government and through value capture mechanisms on mixed-use developments by private developers Housing units cost are 75 sqm and cost approx 30,000 USD to build Housing is provided on a rental basis (eg 75 USD / month – ie 3% per year of building cost). This makes it affordable to HH with incomes of 300 USD or more HH on lower incomes are provided with rent support based on a periodic means test HH are encouraged to own asset through repaying capital Rent is reduced proportionate to share of ownership
Affordable Housing (Rent to Buy) model Income: USD/month 500 400 300 Income Repayment Rent Subsidy 75 Rent cost Population
Value Capture through Land Sharing: Informal settlement, 9 Nissan, Baghdad 800 households informal 84,000 sq. m Commercial. 58,000 sq. m. MoA Research Lab 56,928 sq. m. and 211 units Private Housing 114,912 sq. m. and 1,512 units, Government supported Housing •Land is redeveloped for mixed use •Phased to avoid external relocation of existing informal residents •Value capture to finance “assisted” housing
Land Sharing: Al Bahith El Almi: proposed Outcomes Net positive Cash Flow: 115 Billion IQD (US$98.6 million) Annual Internal rate of return: 68%
Value Capture through Land Sharing: What does it take? • An agreement from the land custodian (or custodians) to redevelop the site. • An expeditious conversion of the legal land use as agricultural/protected green zone to the proposed residential and commercial uses. • An initial investment of 27.5 Billion IQD (US$23.6 million).
Recommendations: • Continue with Housing Policy Implementation to establish an effective housing market • Expedite housing delivery by establishing a land development agency that develops land for mixed uses, and uses value capture mechanisms to capitalise assisted housing for vulnerable and low income families. [urban informal settlements are a good place to start; land is often high value, has access to trunk infrastructure, local amenities, sources of livelihood, and they in any case need to be addressed] • Establish a Housing Management Organization that provides housing to vulnerable and low-income families on a Rent to Buy basis
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