Providing Housing: An Opportunity for Inclusive Business to show what it’s made of

1. What are the major barriers to implementing inclusive business models in the housing and construction sector?

First of all, there is a huge demand for housing around the world. The World Bank, for example, estimates that by 2030, about 40% of the population will be in need for housing. We see this immense need already today: As estimated by the World Bank, Indonesia has a backlog of 1 million units annually. Nigeria, on the other hand, has an estimated backlog of 17 million units which is immense if you consider that annual production of housing is currently just around 100.000 a year, according to the Center for Affordable Housing Finance in Africa. This situation does not only exist in developing countries but also in countries like the UK. For the period 2015-2020, parliament estimates that the country has a housing need of up to 1.5 milion units with demand being two to three times higher than current supply.

In this kind of scenario, it is of course low-income groups who are served last in traditional models and this is precisely where inclusive business has to come in.

However, even accessing housing that is affordable means a relatively high capital investment as well as understanding and having relationships in a complex ecosystem that operates to a large part in the informal sector. Within the frame of UN Habitat III last year, we tried to raise awareness about the challenges faced in parts of the ecosystem ranging from: access to land, finance, efficient design, affordable and climate-friendly building materials as well as access to trained labor. And these are only the basics; you could also add access to water, sanitation and electricity to the list making it even longer. Due to the complexity of the ecosystem, it is already quite challenging to include the low-income groups as a consumer. When you think about having them included as part of the value chain, it becomes even more challenging. But both is possible.

2. What do your inclusive business solutions and approaches look like?

We believe that we cannot solve the challenges we are facing in the affordable housing sector with the solutions we already have at hand. We need to be innovative. So far, we are already addressing these challenges in four ways: Micro-finance and construction technical assistance for individual home builders, Earth and Cement Building Solutions, Distribution solutions for slum and rural areas and, Solutions for Collective Social Housing (For more: lafargeholcim.com/affordable-housing). In 2016, our Affordable Housing Program benefited an estimated 445,000 people in 25 countries.

Let me focus on two topics of key importance:

Like I mentioned earlier, finance is a major barrier to access affordable housing especially for the individual home builders who would like to build a new house, renovate or extend their existing homes.

We support them by:

• creating access to credit through our micro-finance partners,
• providing technical assistance, like support on designing the house and estimating the amount of building materials needed,
• providing access to quality and affordable building materials through our network of partner retailers and construction solutions like modular housing templates for bit-by-bit construction.

As you can guess, finance is one of the challenges that, if solved, can unlock the whole market, opening opportunities not only for lower revenue consumers but also for vulnerable low-income groups to participate in the value chain as housing providers.

Secondly, we need to improve access to climate-friendly and affordable building materials.

Globally, there are around 2-3 billion people that are traditionally building with earth. Many of them use wood to burn the bricks they form by hand to make the bricks stronger. This practice contributes significantly to deforestation and to high CO2 emissions in emerging countries.

While the properties of building with earth are actually quite good, like affordability and keeping a comfortable temperature inside the house, the negative aspects of burning the bricks weigh heavy.

So, our R&D teams developed an alternative that eliminates the negative aspects of burnt bricks while keeping the positive ones of building with earth. The result is DURABRIC, an earth-based brick that doesn’t require firing due to its cement content. Also, when you build with DURABRIC, 14 Trees are saved for an average house built, while being more affordable per m² of wall than burnt bricks (Learn more on durabric.com).

 

To scale up the production of this climate-friendly building material, we launched 14Trees in June 2016. 14Trees is a joint-venture established by LafargeHolcim and CDC (the UK’s Development Finance Institution owned by DfID). It aims to scale up the benefits of Affordable Housing across developing countries starting with DURABRIC in Malawi – a country with a high construction induced-deforestation rate because of the use of burnt bricks.

In Malawi, more than 3 million bricks have been produced since 2013, allowing construction of about 500 buildings. We are now producing our own bricks on industrial scale in our dedicated DURABRIC plant – the first one in the country. Like this, we are creating local jobs contributing to inclusive growth.

With 14Trees, we are also starting to address the access to the trained labor challenge through a train the trainer approach: the DURABRIC Academy. The DURABRIC Academy aims at making the technology more widely known especially to governments, NGOs, organizations of international development and entrepreneurs by offering a hands-on approach (For more visit the academy website here). With the support of 14Trees, the participants of the training can act as multipliers by cascading what they learned to low-income groups. Helping them to use this information to become suppliers of DURABRIC, would be a great way for people from low-income communities to participate in the housing value chain.

We are continuously working on new solutions to accelerate the access to affordable housing. We believe in a construction sector which acts as a lever to provide affordable housing while creating local jobs driving economic development. Together, having multi-stakeholder partnerships as called for in the SDGs in mind, we can build one.

3. Where do I find more information about what is going on in the area of affordable housing? 

With support from UN-Habitat, the World Urban Campaign, the Inter-American Development Bank (IDB), the French Development Agency (AFD) and the Inclusive Business Action Network (IBAN), LafargeHolcim initiated the Affordable Housing Hub in 2015. The Hub is a collaborative space that aims at knowledge sharing among professionals of the Affordable Housing sector. We also have a LinkedIn group which is more interactive and where you can discuss with professionals of the affordable housing sector.

This blog is a part of the August 2017 series on Affordable Housing in partnership with Business Call to Action.

Read the full series for more innovative inclusive business models, lessons learnt by practitioners, and the unique challenges of understanding and measuring impact in the housing sector.