Housing Paradigms and Housing Microfinance

I had been working in the housing sector for 15 years before I came to realize that there were two very different interpretations of what housing is and how to approach it. I originally assumed that there was a housing problem (especially for the poor) and that the natural solution to it was to build low cost houses. Over time I began to realize that effectively building houses for the poor held a lot of inherent challenges and the response was not always what was expected. Sometimes people didn’t really like the low cost houses that had been designed for them. They also often did not like to pay for them. Demand was much lower than we anticipated when offering the opportunity for a “good house” to people who were living in  materially very poor houses. I was experiencing symptoms related to the “provider” approach to housing and a focus on the house itself rather than the house in the context of its dwellers' lives.

In Freedom to Build, John F.C. Turner described two ways to define housing: Housing as a noun and housing as a verb. Housing as a noun refers to the physical structure: The house as a product or commodity. Housing as a verb focuses on the universal activity housing.[1] The two definitions correspond to two different ways of looking at housing. Those who view housing primarily as a noun will focus on physical housing units. Those who view housing as a verb are more likely to look a housing as an on-going process and concentrate on the role of housing within the context of the household's broader livelihood. Turner’s second law of housing (see previous post) states that what is important about housing is what it does and not what it is. This could be seen as a sort of manifesto for those who see housing as a verb. How we look at and define housing ultimately shapes how we approach housing interventions.

Nabeel Hamdi built upon the idea of housing as a noun or verb in his book Housing Without Houses: Participation, flexibility and enablement. Hamdi outlined two paradigms of housing that are often in conflict: Provision and Support. The provider paradigm holds that the solution to housing deficits is to build houses. Providers tend to control the housing process to deliver housing units completed to a certain standard. Rather than controlling the production of units, Supporters look at the management of resources such as land, services and finance to assist dwellers to improve their housing, rather than controlling the production of units. Providers and Supporters differing approaches can be seen this diagram adapted directly from Housing Without Houses[2]:

(click on graphic to enlarge)

Someone (or an institution) can be identified as a predominantly a provider or supporter by the language they use and the interventions they design. Providers place a heavy emphasis on their role in building housing units. They maintain a significant level of pride and ownership in the finished physical product. Their interventions tend to keep control in the institution's hands and focus on the standards of the units. The houses produced are almost always complete units. Even when implementing an incremental building scheme that uses Supporter-like language, the Providers' incrementalism is often controlled and built in complete, stand-alone stages to a given standard . Given the choice between their standards and dweller choice that may compromise those standards, Providers will stick to the standards. Providers tend to see those engaged in informal housing services commonly accessed by the poor as suspect at best, but often as illegitimate actors in the housing environment who are a menace or the source of the problem.

Supporters are often a little more ambiguous about what they actually do, because there are a wide variety of possible support interventions and approaches. They usually do not, however, see themselves as builders and instead leave significantly more control of the housing process in the hands of the dwellers. Incremental building is accepted as a reality and part of a housing process. As such, supporters are comfortable with interventions based on progress that does not necessarily result in a "complete housing solution" to the Provider's standards. Whereas Providers tend to see housing as a problem to which they bring the technical expertise to solve, supporters believe that “most solutions exist in everyday practice, they only need to be recognized and the built on. They exist not as governments and professionals might like and might not be working as effective as we would need them, but they exist nevertheless.”[3] This results in supporters usually embracing informal housing activity rather than doubting its legitimacy.

Because two sides of the divide interpret housing differently, they do not see eye to eye when it comes to their respective interventions. Supporters are likely to question the ability of Provider interventions to sustainably serve low income households at scale. They may also raise concerns whether the Providers' solutions are appropriate and sustainable in the context of the dwellers' livelihood strategies. Providers in turn inevitably will point out that Supporter interventions do not meet their housing quality standards. It is at its roots a philosophical conflict on the nature of housing that can sometimes resemble dialogue and debate between opposing political parties.

I doubt that any person or institution holds a 100% Provider or 100% Supporter position. The paradigms are more like a continuum with provision on one side, support on the other and a range of positions mixing the two in between.

(click on graphic to enlage)

Now… this seems all highly theoretical and esoteric, but the housing paradigm of the implementer has a tremendous and visible effect on the design of housing microfinance products and services. The degree to which an institution focuses on the house that results from a housing microfinance loan is an indicator of its housing paradigm. I have heard staff from an institution that provides housing microfinance berate housing choices made by their clients. They insist that the institution must only support "quality" houses with their loans and  must therefore exercise greater control on loan use. The implication was that it was more important for the resulting house or home improvement to meet institutional criteria for satisfaction than the client’s own criteria for his or her housing process. This is a view from the provider paradigm. I have also heard others deeply question whether construction services attached to a housing microfinance loan were sustainable or even necessary: The view from the supporter side.

HMF Hypothesis One: The degree to which an institution engaged in housing microfinance holds a provider or support paradigm of housing will be evident in level of construction technical support offered as part of the product.

One key factor differentiating housing microfinance products is the level of construction technical assistance offered. Some products bear the name housing microfinance or home improvement loan, but in practice are little more than a consumption loan with the word housing tacked on. Other housing microfinance products exert significant control over the loan use and the clients' housing process. Putting the above hypothesis into the proposed housing paradigm continuum, it might look something like this:

(click on graphic to enlarge)

HMF Hypothesis Two: More CTA (provider approach) will result in a higher likelihood of achieving quality standards in the house resulting from a housing microfinance product, but the associated costs and complications in the delivery process will make it harder to achieve sustainability and scale while serving low income households (the double bottom line). Less CTA will make it easier to reach sustainability and scale, but will give less of a guarantee on the quality of the house or home improvement for which the HMF product was used.

(click on graphic to enlarge)

I see housing microfinance as a support intervention. In (what I believe to be) its purest form, it is a finance intervention that provides capital to households so that they can address a finance gap in their housing process. It corresponds to housing as a verb when it leaves control of the housing decisions to the dwellers. When housing microfinance is approached as a support intervention, I believe it has the highest likelihood of reaching scale and sustainability while serving low income households. As a housing microfinance product leans more towards the provider paradigm, I would expect 1) the delivery process to become more  complicated and stress capacity, 2) demand to decrease as dwellers lose control of their housing process and either 3) subsidization to make it affordable to households with low incomes (at the expense of sustainability) or 4) an "up market" drift to wealthier clients to recover high delivery costs (at the expense of social performance).

It is not only the housing sector that may tend to lean towards the provider paradigm. Even some MFIs envision housing microfinance that more resembles a beautiful house with a conventional mortgage , than affordable housing finance for low income households  engaged in an incremental building process. I believe effective housing microfinance for households around the poverty line will fit into the housing process in which they are already engaged, but that is another topic.

I welcome any feedback through comments on these concepts and working hypotheses, particularly opposing viewpoints. I would also like to recognize once more the work of Nabeel Hamdi in describing the housing paradigms and John Turner's concept of housing as a verb. Although liberally interpreted and applied, I am indebted to their work for its influence on my approach to housing and housing microfinance.

[1] Turner, J. & Fichter, R. eds. (1972). Freedom to Build, New York: MacMillan. 151.[2] Hamdi, N. (1995). Housing Without Houses: Participation, flexibility, enablement. London: IT Publications LTD. 27

[3] Hamdi (1995). 36