Making Housing affordable for the BoP
In 2008, for the first time in history, more people lived in cities than in rural areas. Due to the urban growth in developing countries this trend is expected to even increase. In 2050, about 66% of the world’s population is estimated to live in cities.
At the same time, slums in urban areas keep growing. Two years ago, it was estimated that a quarter of the world’s urban population, that is 863 million people, lived in slums (UN Habitat, 2013). A majority of them do not have access to safe housing solutions that satisfy basic human needs such as clean water and sanitation, or housing constructions which can withstand the pressure of climate change or natural disasters. In addition, they often lack adequate building materials, services and financing.
It is becoming increasingly clear for many private companies operating within the housing sector that future demands will to an even larger extent be driven by developing markets. With suitable product innovations they can address the housing challenges faced by the 4.5 billion low-income people in developing countries (BoP – Base of the Pyramid). It creates a win-win situation for both sides, new housing solutions targeting low-income communities lead to better living conditions. In addition, the market potential in the sector is huge, as people living at the BoP have an estimated purchasing power of more than $5 trillion a year. At the moment, 8-10% of their spending is dedicated to the housing sector, such as home maintenance and repair, major home appliances, and tools (IFC, 2015).
Nevertheless, the ability to create affordable solutions is not necessarily sufficient to succeed at the BoP. Solutions not only need to be affordable, but also suitable and desirable. An inclusive business approach can help achieve this and creates value for the BoP as it includes the BoP on the demand and/or supply side and enables companies to develop business models that leverage the resources – in ways that establish mutually beneficial partnerships.
For this reason, The Inclusive Business Action Network supports various approaches in the affordable housing sector.
In November 2015, a BoP Sector Dialogue on Housing will take place in Nigeria. The Sector Dialogue will be based on the Practitioner Guide “My home, your business”, providing interested companies with practical guidance on how to develop successful business models which integrate low-income communities. The guide serves as a basis for a two-day hands-on Workshop for entrepreneurs and company representatives to develop and further enhance their business models in a peer-to-peer learning process. More information on the event will follow soon via the Inclusive Business Action Network update and twitter.
In addition, the Network is supporting the Affordable Housing Hub aiming at connecting various actors in the Affordable Housing value chain and enable the launch of more construction projects. Initiated by LafargeHolcim, the project is also supported by UN-Habitat, the World Urban Campaign, the Inter-American Development Bank (IDB) and the Agence Française de Développement (AFD). The main feature is an online platform that uses an interactive world map to list innovative architectural concepts, best practices and projects that are looking for partners.
Relevant links / sources
IFC / World Bank Group, Global Consumption Data 2015
UN Habitat, Global Urban Indicator 2013
GIZ, My home, Your Business 2014
LafargeHolcim, Affordable Housing Hub 2015
This blog was included in the August 2015 Inclusive Business Highlights newsletter. Click here to read more news, interviews and opinions.