Challenge of inclusive growth: Why housing sector is key

Rahul Nahar

The richest 1 percent now have more wealth than the rest of the world combined. According to the World Economic Forum, rising income inequality now threatens continued economic growth and social cohesion across the globe. We need to address the reality that our global economic system, while generating immense wealth for the fortunate few, has excluded too many for too long.

The unequal nature of the global economy must be countered by innovative policies and approaches that create stable, and inclusive, economic development - and this effort must start with housing. Ensuring economic growth benefits everyone - the concept of inclusive development - has rapidly risen up the international development agenda as politicians and policymakers alike are recognising its win-win allure: increased equity generates increased prosperity.

While attempts to operationalise this aspiration have typically focused on issues such as employment and tax, the centrality of housing to promote inclusive development has been overlooked. Globally, housing is fastly becoming a larger proportion of individual's income expenditure.

In London, for example, tenants typically spend 72 percent of their earnings on rent, while the average European now spends the equivalent of around 17 minutes out of every hour working to pay for their rent. While housing costs make up an increasing proportion of our household spending for the general population, it is low income households who are hit the worst. In many cases, high housing costs act as a barrier to individuals moving to locations where there are better employment prospects, causing housing to perpetuate social and financial inequalities.

Equally, an absence of skilled workers in a location due to high housing costs is likely to deter continued investment. In some countries, inadequate housing not only threatens livelihoods, but can pose significant risks to health and lives. As people flock to urban centres out of necessity, unmanaged urbanisation can lead to overcrowding, poor sanitation, unsafe water supplies and a lack of public services. All these factors contribute to the rapid spread of serious health problems including tuberculosis, malaria and typhoid.

The average life expectancy in Indian slums is just 49 years, for example, twenty years below the country’s national average. Successful cities invest effort into designing policies that improve quality of life alongside economic prospects, and for this reason affordable housing for low income groups has become an important consideration across the globe. South Africa, for example, provides free land for houses for its poorest income groups, while Singapore provides public housing for more than 80% of its population through a dedicated Housing Development Board.

The centrality of decent housing to inclusive development is even reflected in the Sustainable Development Goals, which have set out to “ensure access to all to adequate, safe and affordable housing by 2030”. Achieving this goal will present a significant challenge for India, where it is predicted that 590 million people will live in cities by 2030- nearly twice the population of the United States today. While this trend is most likely unstoppable - 70 percent of net new employment will be generated in cities by 2030 - the current situation in which luxury apartments sit empty alongside sprawling slums must be addressed.

Prime Minister Modi’s recent commitment to build “housing for all by 2022” demonstrates a realisation that housing is a key driver of equitable development, and the granting of infrastructure status to affordable housing developments is a promising first step.

While the government can create an enabling environment to increase the supply of affordable housing, the scale of the issue at hand - $2.1 trillion capital investment is needed to meet the projected demand in India’s cities - cannot be addressed by the private sector alone. Xrbia, as India’s affordable housing leader, is committed to increasing the supply of efficient, affordable housing for the next generation of homeowners.

The route to inclusive growth is not one where we can or should expect the central government to lead the way. A truly inclusive development process is one where individuals, businesses and governments all contribute to creating a society that benefits everyone.

Author is Chairman at XRBIA Developers