Excerpts From The Albouy and Zabek Study - NBER, 2016: Global Perspective

Housing inequality shades light on larger issues concerning consumption and wealth inequality.
Housing accounts for a large share of consumption and it represents permanent income as well.
However, Housing Inequality has less to do with tangibles e.g.- living space and more to do with
what people aspire to live in different places which offer different intangibles such as access to
employment and local amenities, safety and natural resources.
Excerpts from The Albouy and Zabek study – NBER, 2016 : Global Perspective
1.There’s a clear U-shaped pattern in housing inequality (measured in terms of the value of
housing) in the period of 1930 to 2010. Housing inequality was high in 1930 at the onset of the
depression. Then, it declined during the Great Compression in 1960s.Suburban areas started
mushrooming up. The inequality curve started to rise up again after the 1970s. And there was a
huge spike by the 1990s, followed by a levelling off in 2000, and then another surge in the wake
of the recovery from the economic crisis of 2008. in 2012, the level of housing inequality was as
much as it was back in 1930s.
2.Rent inequality showed a different pattern and it was less severe than the housing inequality.
Rents were high in the 1930s, then kept declining till 1960. From 1980, it began to creep up
gradually, but the intensity was much less than the housing curve. And much of this small rise in
rental inequality seems to stem from expensive rented spaces in metros. Though, the measures
like rent control and other affordable housing programs to assist lower-income group helped to
keep rent inequality at bay, there has always been a large wealth gap between owners and
renters. Homeowners have been able to lock in their housing costs after purchasing them, and
benefit from the appreciation of their properties thereafter. Tenants, on the other hand, have
seen rents increasing in line with the market, and sometimes faster. This threatened their ability
to maintain shelter along with equality in the places where they live in.
Other reasons:
1.Poorer families often cannot afford to pay transportation costs so they prefer to live in inner-
city locations closer to employment opportunities. To win the spatial competition for housing near
work sites (which are relatively more expensive), lower-income families compensate for a high-
priced location by accepting smaller housing or lower-quality housing. In some of the developed
countries the social class difference aggravated this inequality. For example- in the United
States, the disparity between African Americans and the rest led to the worsening inequality.
Social obstacles along with historical discrimination have prevented African Americans from
securing and accumulating assets Including quality housing.
A study found that 20 percent of potential moves made by African American households and 17
percent of potential moves made by Latino households were discouraged by discrimination in the
search process (Yinger 1997)
2. People from rural areas move to cities in search of better economic or educational
opportunities. But in most cases they lack resources to pay housing prices typical of home
ownership in urban or suburban areas. This makes them live in areas where rent and housing
prices are lower. This leads to increased population density in areas of already-low housing
quality which further deteriorates the standard of living. This is one of the prime reasons of
emergence of slums, particularly in developing countries. There is a fundamental paradox in the
housing market. Once, Housing was considered as a basic mode of shelter. As this basic
necessity has been transformed into a financial instrument, not only has housing inequality
increased, but also it has become a major contributor to wealth inequality. These situations
further exacerbated when social exclusion have made-access to adequate housing and
amenities difficult among certain communities. It contributed to the creation of sub-sections in the
market which imbalanced supply and demand and in turn lead to difficulty in accessing affordable
housing. Though various initiatives taken by government have made modest attempts to provide
housing services through various policies and programmes, the results have so far, not been
encouraging.
3. Sometimes, the rise in both housing wealth and housing inequality stems from the increase
price of lands. In other words, the spatial inequality within cities is what drives the inequality.
Factors like safety, access to quality education,employment and local amenities lead individuals
to value one neighbourhood over the next.
Effects:
The most direct effect of housing inequality is an inequality of neighbourhood amenities, which
include the condition of surrounding houses, the amount of pollution, the social-bonding etc.
Also, growing up in a high-poverty neighbourhood affects social and economic outcomes to a
great extent.
Issues with Developing Economies:
Developing countries are mired with several socio-economic issues (e.g.-class, race, religion,
economic backwardness etc.) The socio-spatial inequality is deeply rooted. This is why
Sustainable Urbanisation is a daunting challenge. The most widely accepted model of
urbanisation has been the evolution of primitive agrarian economy to a modern industrial one.
There has been a striking change in pattern of employment generation- a shift of surplus
labour from agriculture to industry and service. The consequences of this shift has been very
deep and wide. Poor health and inequality in urban areas has reduced human capital
attainment and productivity, increased social fragmentation, and threatened sustainable
development which in turn lead to housing inequality.
Indian Perspective:
A glance at housing in Urban India, 2011- United Nations University

Total Population: 377.11 million
Total households: 78.87 million
Condition: Good(68.4%),Liveable(28.7%)
Dilapidated(2.9%)
Estimated Housing 24.71 million
Shortage:
Estimated Slum Population : 93.06 million
Estimated No. of Slums: 49000
Estimated Poverty Head 25.7 million
Count:
Access to drinking water: 70.6%
Latrine facilities : 81.4%
There were 0.9 million homeless people in urban India as per the Census data of 2011 , in
addition to that almost 25% of Urban population in India found to in slums. People from India’s
distressed rural areas are migrating in large numbers to urban areas for educational and
employment opportunities. Migrants make up a sizeable chunk of India’s urban population
which is approximately 35%. India’s ambitious ‘Housing for All’ project aims at providing a
home to every poor urban household by 2022. More than 90% of the housing shortage in
urban India is faced by economically weaker sections. At the same time,70 lakhs houses
remain unsold across the metro cities which indicates the high demand-supply mismatch.
While demand is mostly in the affordable housing segment, the supply is high in the higher-
price segments.
In addition to that in 2014, McKinsey estimated that 33% of existing houses in India are of
sub-standard quality.
Water supply and sanitation facilities are crucial to the sustenance of urban life, regardless of
income status. Tap water facility which is available to only about half of the urban population,
is never distributed for more than a few hours per day. Only about 18% of slum areas have
precarious access to piped water where Non-notified slums (which amounts to 60% of all
slums) are completely deprived of water supply. As per the National Family Health Survey
2005-06 , only about 47% of the slum population has access to basic sanitation facilities
which means about 35 million people in urban India are living in unsanitary and potentially
hazardous conditions.
Way forward:
Most of the developing countries have complex social systems. Therefore, It’s challenging to
identify people who are needy. However, social welfare policies can be streamlined to reduce
housing poverty and disparity among socially and economically backward communities.
Appropriate Need based policy selection and implementation would yield positive result. It would
require a permutation and combination of policies and programmes suited to the disadvantaged
communities.
Also, policies need to be evidence-based where still, many forms of empirical data are analyzed
and used in creating policies. We have to focus on reducing the socio-economic gap among
disadvantaged communities. There could be many way forwards: for instance, enhancing access
to better jobs by generating jobs which require low-skills and improving job oriented skills, which
in turn would reduce housing poverty and disparity. Also, better jobs are the outcome of
improved education therefore, another interconnected target would be improving access to
education among backward communities.

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Housing inequality shades light on larger issues concerning consumption and wealth inequality.

Issues with Developing Economies:

A glance at housing in Urban India, 2011- United Nations University

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