The housing crisis is now at boiling point. According to Habitat, worldwide more than 827.6 million people live in urban slums, and frighteningly by 2020 this is expected to grow to almost one billion. As a result, each year more than 1.8 million young children die because of dirty water and poor sanitation. A new McKinsey report states that the affordable housing gap totals $650 billion a year; a figure that will continue to increase as urbanization spreads in cities across the globe.
To fill the gap and keep up with the pace of the soaring global population growth it is estimated that a construction spend of $9 to $11 trillion is required. There are ideas to reduce the sizeable costs involved: unlocking land supply, reducing construction costs, improving operations and maintenance, and lowering financing costs for buyers and developers are key strategies to tackle the calamitous housing shortfall. The population in Bangladesh is set to reach 26 million by 2035. It is hard to measure exactly how large the housing shortage is at the moment but in 2010 alone it surged to 4.6 million and is expected to double by 2021.
Many governments have successfully executed land reclamation projects, for example, countries like Singapore, Denmark, The Netherlands, Egypt, Kenya, Japan, and China. Since the 19th century, Japan has reclaimed 25,000 hectares in Tokyo Bay alone. However, such work is not without obstacles. Environmentalists claim that such land reclamations irreversibly damage the local marine life, and fishers argue that their livelihood is at risk.
Reducing construction costs may be possible with the arrival of green building methods and materials. An affordable housing developer can save up to $24 per square foot by using structurally insulated panels (SIPs); which allow savings on materials and labor costs. But what about labor costs? Labor and labor-related costs comprise as much as 92 percent of a building’s design, construction, operations and maintenance charges. These cost savings accrue in increased productivity and reduced overheads.
Energy efficient retrofits like insulation and new windows can comprehensively reduce operation and maintenance costs. Concerning financing costs, further development in underwriting would encourage banks to make more housing loans available to lower-income borrowers. Governments could also help to reduce the funding costs of developers by making affordable housing projects less risky; they could do this by guaranteeing buyers for finished units.