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Shelter
February 1985
>> This Is USAID >> USAID Policy Papers >> Shelter
[Download original document] Preface and Executive Summary
PREFACE
This Shelter Sector Policy supersedes PD-55, "Shelter Program Objectives" approved on October 24, 1974. This revision reflects the additional experience USAID has gained since then, in responding to the shelter requirements of the LDCS. This policy statement also describes the forms of assistance which may be available for financing shelter projects and sets out the criteria for determining the most appropriate form for individual developing countries. The primary vehicle has been the Housing Guaranty (HG) program. The HG projects are often supplemented by DA or ESF financed capital and technical assistance concerning housing policy formulation, institutional development and training, and the introduction of appropriate technologies in the form of innovative housing design, and support for the private sector as the main vehicle for the delivery of shelter.
EXECUTIVE SUMMARY
The Shelter Context
Spontaneous shelter activities are high on individual priority lists. People throughout the world will invest personal time and energy in the construction and improvement of their own homes. Experience has proven this to be as true in the upgrading of reed huts to tin and ultimately to brick, as it is in the "do-it-yourself" construction activities of developed countries. It is USAID's policy to take account of and encourage these private energies. They act as a "multiplier effect" on official inputs.
Shelter is a basic human need, following the need for food and clothing. Most LDCs recognize shelter as a priority in their development strategies because it is a basic aspiration of their people.
- Investment in the shelter sector represents the largest capital investment in urban centers. Therefore, shelter policies, planning, and programs which are efficient, affordable, and seek maximum cost recovery are important components of national economic development and urban policy.
- Shelter is one of the highest priorities of low-income households. It represents a household's largest capital asset and is a major stimulus to individual saving.
- Shelter contributes to national economic growth objectives directly, through its stimulation of the construction and building materials sector, and indirectly through the furniture and household products industries. It provides jobs for large numbers of unskilled labor. Shelter construction by the formal and informal private sector accounts for the overwhelming portion of new shelter produced in developing countries.
USAID's Shelter Sector Objectives
USAID's shelter sector objectives recognize the relationship of shelter to overall economic development and to the basic priorities of the Agency. They are to:
- Assist in the formulation of rational housing policies.
- Demonstrate the feasibility of shelter solutions poor families can afford.
- Facilitate mobilization of additional local resources for financing shelter.
- Develop sustainable shelter and urban service institutions.
- Increase participation of the private sector, including the informal sector.
- Encourage the use of energy and resource efficient housing designs, technologies and standards consistent with the objective of producing shelter which is affordable.
- Increase the survival rate of people and buildings in disaster prone areas through adoption of appropriate zoning and building regulations.
The overwhelming portion of annual additions to the LDC shelter stock is the product of the effort and energy of the informal private sector. Any shelter program with the goal of meeting minimum shelter needs must acknowledge, facilitate, and support these informal sector efforts.
While significant, the shelter needs of a developing country are solvable within a finite period if realistic and affordable minimum housing standards are established, and appropriate financial policies adopted. Analyses undertaken in a number of countries have shown that basic shelter needs can be satisfied with a marginal increase in national investment, if realistic design standards and financial policies are adopted.
The magnitude of the shelter sector requirements of LDCs far exceeds the resources available from USAID Therefore, it is essential that USAID resources for shelter be fully exploited as a catalyst to help the LDCs mobilize their own resources for shelter and to use them more efficiently equitably. It is also important to coordinate our technical and capital assistance with that of other donors to the greatest extent possible.
USAID's shelter programs must benefit, directly or indirectly, households below the median income level of the country or city of concern.
Programs to meet USAID's objectives can include: provision of access to secure land tenure for low-income groups; modification of inappropriate building standards which unnecessarily result in structures that poor families cannot afford; strengthening of weak institutional structures; modification inappropriate interest rates; reduction of direct or direct subsidies for housing; and emphasis on objectivity of shelter decision by government.
Forms of Assistance Appropriate for Shelter Projects
Shelter programs should be based on justification in a Country Development Strategy Statement (CDSS). Shelter projects are appropriate for financing with DA, ES dollars, PL 480 and FAA generated local currencies in all countries. USAID will continue to be sympathetic to requests for assistance for reconstruction of shelter in countries struck with earthquakes or floods, or other disasters. DA or ESF fund may be used for such disaster relief as appropriate to the individual country situation, if adequate PL 480 or FAA generated local currency is not available.
Country eligibility for Housing Guaranties (HG) will be based upon the judgment of the Mission, ME, the regional bureaus, an PPC upon an analysis of the sectoral, economic, and political feasibility of the proposed program. A thorough analysis of the debt servicing capability and record is required for every candidate in order to identify borrowers with doubtful prospects for meeting their loan servicing obligations on schedule. This risk analysis must be under taken early in the project development process and any issues identified and resolved the first stages of project preparation. One reason for applying credit worthiness standards to HG loans is to enhance the prospect of timely debt service performance an in this way minimize drawdowns of the reserve fund.
As a general principle, market rate HG loans are not an appropriate form of development assistance for very poor countries. Therefore, countries which receive IDA credits, but not IBRD loans, may receive HG loans only after special justification for the exceptional country is approved by the Assistant Administrator of the Regional Bureau concerned, and the Assistant Administrator for PPC or by the Administrator.
Characteristically, very poor countries, as defined above, have shallow resource bases. Consequently, the prospects are slim for sustained improvement in their export earnings relative to their minimum import need. In order not to jeopardize their long term development hopes, these countries must exercise caution in mortgaging their prospective export earnings. These countries must examine carefully both the terms of their foreign borrowings and the purposes for which such debts are incurred. The thirty year life and the ten year grace on principal repayments of the typical HG loan are advantageous, but the near commercial interest rate is not appropriate for the world's poorest countries. In ranking competing needs for the small volume of nonconcessional foreign loans very poor countries can afford to service, priority over shelter projects must be given to financing the essential imports requirements of highly productive investments which will improve the economy's trade balance and its foreign debt servicing capabilities. Shelter projects require few imports (typically less than ten per cent of the total cost). Hence they can be financed largely with local resources. They will not improve the debt servicing capability of the borrower. Therefore, shelter projects merit low priority in the competition for foreign loan resources.
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Last Updated on: July 11, 2001 |
