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OPINION: Don’t overlook value of housing in COVID-19 recovery

Wednesday, 9 December 2020 15:17 GMT

FILE PHOTO: The rebuilt buildings of the families of the Tlalpan housing project, affected by the earthquake of September 2017, is seen after two years of the quake in Mexico City, Mexico September 18, 2019. REUTERS/Carlos Jasso

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* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

Research shows housing is a larger-than-expected economic engine and can boost COVID recovery

Olivia Nielsen is associate principal at Miyamoto International. Malaika Cheney-Coker is director of research and thought leadership at Habitat for Humanity’s Terwilliger Center for Innovation in Shelter.

In Mexico, officials have released $300 million to fight overcrowding through home expansions and community infrastructure. A 2 billion-pound plan in the United Kingdom supports energy-efficient home upgrades. And in Chile the government recently announced a subsidy program supporting new sanitation facilities and home expansions to alleviate overcrowding.

Each of these countries understands that investments in healthy housing not only creates a strong defense against massive shocks such as COVID-19 but also puts them on the offensive against the economic stagnation that has experts predicting global GDP “growth” of -4.9 percent in 2020.

Those of us who are passionate about the benefits of affordable housing and resilient communities are cheering these actions as win-wins: job-creators that also improve health and wellbeing.

But our enthusiasm is dampened by an unfortunate reality. They are the exception, not the rule. Out of 196 countries with COVID-19 economic responses analyzed by the International Monetary Fund, only 22 explicitly included housing initiatives. That means most countries are missing what a mounting body of evidence says is a huge opportunity.

A report recently published by Habitat for Humanity highlights the importance of investing in housing as a tool of post-COVID-19 economic recovery, especially in emerging market economies, where the size and significance of the housing sector has traditionally been poorly understood.

Authored by economists at the University of Washington and the University of Pennsylvania, the report found that that housing is a larger-than-expected economic engine, accounting for more than 13 percent of GDP across 11 sample countries.

The calculation factors in not only housing investment, or new home construction, but also housing services — the economic output of existing housing stock — which includes expenditures on rents, imputed rents for owners (also called owner-equivalent rents), maintenance and repair of the dwelling, and utility costs.

And the researchers found that housing’s share of GDP may be even larger still, because informal housing is likely undercounted or not counted at all in national accounts. Informal housing, whereby families add to their homes incrementally over time, may contribute an additional 1.2 to 2.8 percent to GDP on average, meaning housing’s real share of GDP could be over 16 percent, the report found.

Investing in housing to jumpstart the economy doesn’t mean simply building more homes, however. Repairing and upgrading existing homes costs less while creating more jobs.

That’s why, under the U.K. energy-efficient home plan, grants of up to 5,000 pounds each will help households insulate homes and reduce heating and cooling costs — all while creating up to 85,000 jobs.

Mexico’s investments in community and home upgrading projects, meanwhile, will support 60,000 households, as part of a larger effort to create 2 million jobs. And Chile’s initiative to combat unsanitary conditions by installing water and sanitation facilities also is designed to bring jobs to the very communities hit hardest by COVID-19.

The best stimulus plans are inclusive, reaching traditionally marginalized groups. This is particularly critical in low- and middle-income countries, where the health benefits of adequate housing have only grown more obvious during the pandemic.

Slums and other communities with poor housing conditions and overcrowded households have had higher COVID-19 transmission rates. Limited access to clean water, sanitation and hygiene facilities has only exacerbated the problem.

To address those challenges, housing policies at the heart of economic stimulus plans must reach families who make up the large, underserved base of the economic pyramid. Now is the time for countries worldwide to start building by offering incentives to developers, while expanding access to housing finance.

Economic stimulus plans should promote homeownership and include rental assistance. But they also should support upgrades to the existing housing stock, including through the informal housing market. This area has too often been an afterthought in developing countries, where many households need a better home, not necessarily a new one.

Housing microfinance programs can play a key role, especially those that offer support for construction quality, producing safe, secure housing and making communities more resilient to external shocks. These kinds of investments flow like oil through a country’s economic engine, helping them move more reliably and sustainably down the road to recovery.

As we support COVID-19 recoveries around the world, let’s maximize our impact by making housing a cornerstone of government interventions. When it comes to stimulus packages, we should make every dollar count — for the wellbeing of both our people and our economies.