Behind the new and lower estimates of the shortfall in urban dwellings lie two hard facts — the deficit has not been bridged and the poor remain the worst affected

The Ministry of Housing & Urban Poverty Alleviation has rolled out the new estimates of the urban housing shortage in the country. The technical group it had constituted has pegged the current deficit at 18.78 million dwelling units, which is six million fewer than what it was in 2007 and 7.75 million less than what housing experts of the Eleventh Five-Year Plan had predicted for 2012.

Enthused by the reduced numbers, the cheerful government has claimed that the new figures prove the effectiveness of its housing programmes, improved bank funding and an increase in per capita income. But the question is, do they?

A careful sieving of the numbers reveals that the lower figures have more to do with the changes in the calculation method than in substantial changes in the ground situation. The hard truth lurks behind the apparent reduction: the housing deficit has not been bridged and the poor remain the worst affected. Of equal concern are the recommendations made by the technical group. Their brief prescriptions could encourage the state to indulge in shallow policy tinkering, reduce allocation and withdraw further from providing social housing.

Four categories

Four categories of housing conditions are taken to calculate the shortage: houses that are obsolete; non-serviceable kutcha houses – dwelling units with roof and walls made of temporary materials; the number of households living in “congested conditions” and the number of homeless. Of this, the first three categories are common to both the Tenth Plan calculation and the new estimate. The fourth category — the number of homeless — is a new addition.

The technical group makes a critical departure from the earlier methods of calculation by omitting the deficit arrived at by subtracting the total number of households and the total housing stock that is available. As the table shows, this deletion dramatically and instantly reduces the housing shortage by many millions from the 2012 estimates. Otherwise, the number of houses needed remains woefully high.

If we assume that this method is reliable, necessary correction has to be applied to the 2007 calculations as well. In which case, the resultant figure shows that the urban housing shortage has only increased and not decreased in the last five years. What was 17.24 million in 2007 has now risen to 18.78 million. Even if we add the number of homeless to the 2007 calculation it would not significantly alter the status.

Given the fact that the most of the existing government programmes for housing are way off the target, this could be the correct conclusion. For example, the Interest Subsidy Scheme for Housing the Urban Poor which commenced in 2008 has benefited only 8,734 people as against the 2012 target of 3,10,000. Similarly, only about 40 per cent of houses planned for the poor under the Jawaharlal Nehru National Urban Renewal Mission for the period 2005-2012 have been built.

Using vacant houses

Despite these facts, disappointingly, the technical group concludes that future policy response need not focus on constructing new dwelling units. Its foremost recommendation is to bring the large number of houses that are vacant to use. This would reduce the shortage by half without having to build any new houses, the technical group unconvincingly asserts.

Based on the 2011 census figures, it infers that “9.43 million residential units are lying physically unutilised” and concludes that if they are brought to use through taxation and incentive policies, the housing need would tumble to a manageable number.

There are many reasons why this recommendation would not work. The bulk of the shortage — 95 per cent — pertains to the Economically Weaker Sections (EWS) and Low-Income Groups (LIG).

The 9.43 million vacant houses, bought by investors and held back for want of well paying tenants or other reasons, would be beyond the reach of these income groups in terms of price and size. As studies in many cities such as Chennai and Bangalore show, the smallest and cheapest houses produced by the private real estate market are larger than 500 to 600 sq.ft and priced above Rs.25 lakh.

Going by the Ministry’s definition of affordable housing, EWS and LIGs can afford dwelling units priced at or less than four times their annual gross income. By this measure, a person belonging to the EWS, earning less than Rs.5,000 a month, under current market rates, can only afford dwelling units of size 80 to 100 sq.ft. Similarly, an LIG person, earning between Rs.5,001 and Rs,10,000 per month, can afford only 150 to 200 sq.ft.

It is highly unlikely that the large numbers of vacant houses are in the affordable band. In which case, it would be impractical to grossly subsidise the large units through tax incentives and make them available to the poor either to own or rent. The release of vacant houses may at the most help the middle and higher income groups.

Additional rooms

The second major recommendation of the technical group — “creating congenial policy environments” to enable construction of additional rooms in existing houses — would also not reduce the need for constructing new housing units.

More than 12.5 million households are living in houses less than or equal to 300 sq.ft in size. They live in crowded conditions and go through physical and social hardships. As the technical group itself admits, only about 80,000 households have the scope for building additional rooms within their built-up area. In the other units, it would be impossible to construct additional rooms since they are invariably a part of a multistoried building.

There is no escaping the fact that the supply of affordable housing has to be increased. To suggest that the housing problem could be solved without having to build new houses may appeal to the government, which is keen to reduce welfare subsides. But any scaling down of the allocation for social housing would prove disastrous. Without doubt the policy thrust should still be on increasing housing supply.

Declaring housing as infrastructure or industry to incentivise construction activities may help as the technical group envisions. But it has to be accompanied with caveats. Any concession has to help produce more affordable housing.

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