PIDE punches holes in WB report on housing shortage
Monday, Feb 21, 2022
ISLAMABAD: The Planning Commission’s affiliated Pakistan Institute of Development Economics (PIDE) has totally rejected the World Bank’s estimates of shortage of 10 million housing units in Pakistan, saying there might be “inadequate housing” but there were no shortages.
Now the government has come up with a policy for the housing sector but the country’s major research institutions reject the very basis by arguing that there were no shortages to such an extent at all. Dr. Nadeem Ul Haq, who is quite a vocal critique of donor-funded policies, has publicly stated that the donor policies were being followed without implying any thoughts. He went on to say that with this slavery approach, the country could not make progress.
The PIDE Policy View, based on the research done by Dr. Durre-Nayab, questions, “Shortage of 10 million housing units” has been the clarion cry in politics, media, and donor-driven research for the last 10 years. Given an average household size of well over six persons, this means that nearly one-third of the population is without housing. Do we see such a huge number of people living on footpaths, on side of roads, under bridges, or in any open area? Thankfully, no! We cannot find any clarity on where this huge figure of 10 million housing shortage came from!”
The report concludes there is certainly not a “deficit of 10 million housing units” in Pakistan. There may be “inadequate housing” in the country, but not “housing shortage”. The deficit is in the quality of life in the houses, not the absence of housing units. Even if we take into account the high fertility rate and rising population in the country, the additional demand of 0.7 million households every year, as suggested by the IGC study (2016), is very high. Going by the mean household size, it means an additional 4.5 million people need accommodation, an estimate that appears far from reality. The mean age of the head of the household in Pakistan is 44 years. Given the cultural milieu, young adults do not generally live on their own, thus, suppressing the demand for additional housing that could have been there because of the youth bulge. The notion of housing shortage and the belief that it creates employment have led the government to push for and subsidize the construction sector.
Along with fiscal pressure, it has created an unnatural demand in the real estate market. And while the ‘shortage’ is more in the rural areas, all the housing initiatives are taking place in the urban areas.
A forthcoming PIDE study on sectoral productivity over the last decade also shows the construction industry to be among the least productive ones. Any protected/subsidized industry remains unproductive, and the construction industry proves to be no exception. Migration from rural areas is given as another reason for increased housing demand in urban areas. Instead of considering it as a problem, PIDE believes it is through cities that growth happens.
Better urban planning, supporting large-scale, mixed-use housing can go a long way in providing quality affordable accommodation to people. Doing so would deal with whatever housing shortage is there, and more importantly, tackle the quality issue. PIDE has also shown that the housing shortage arises from the harsh zoning laws and building regulations that favor cars and single-family homes.
In addition, PIDE has shown that the shortage of opportunities and high rates of sub-optimal employment reduce the purchasing power of people. The PIDE underlines shortage of opportunities and not that housing. However, sensational figures and perhaps the push for loans have led to a distortion in the policy of putting housing before opportunity.
Furthermore, an opportunity too has been constrained by the same factor as housing which is excessive regulations. Clearly, deregulation which is the need of the time has been delayed because the policy is driven more by sensational figures than good analysis.
Finally, the government should take seriously the PIDE recommendation that local universities and think tanks must be involved in policy, policy research and policy making. Such studies must not make it to the policymakers tables without a thorough review. The reliance on consultants without domestic oversight has too often proved costly. And the 10 million housing shortage estimate is nothing but yet another proof of this cost, the report concludes.