Addressing the Affordable Housing Challenges for Urban Poor in Pakistan

Introduction

Pakistan faces a significant and growing affordable housing crisis, with a shortage of at least 10 million homes and a demand that far outpaces supply17. Over 40% of the urban population resides in slums, informal settlements, or inadequate dwellings1. This challenge is particularly acute in rapidly urbanizing areas, where population growth exceeds both supply and official capacity1. The lack of affordable housing leads to urban sprawl, inadequate infrastructure, and overcrowded slums12.

Key Challenges

• Housing Deficit: Pakistan faces an estimated annual housing deficit of 0.4 million units, with a backlog of 10 million units3.
• Urbanization: A large segment of Pakistan’s population lives in urban areas, and this number is expected to grow, increasing the demand for affordable housing25. The urban population is expected to grow by 2.3 million people per year, translating into demand for 360,000 households7.
• Unaffordability: Housing in Pakistan is unaffordable for most of the urban population1. Even the lowest-priced housing units are not affordable for a majority of urban households based on market mortgage finance terms1.
• Slum Conditions: A sizable portion of the urban population lives in slums or Katchi Abadis, which are often substandard and environmentally hazardous24.
• Overcrowding: High average household sizes, especially in cities like Peshawar, exacerbate the problem. Overcrowding inhibits social and economic development and can worsen health impacts1.
• Data Deficiency: A significant impediment to tackling the housing crisis is the lack of transparent and credible data on housing markets1.

Regional Disparities
Significant regional disparities exist in housing affordability across Pakistan3. Sindh faces critical issues, while Khyber Pakhtunkhwa (KPK) offers more affordable options3. Punjab demonstrates relatively better affordability across urban and rural areas3.

Efforts to Resolve Housing Issues

• Past Initiatives: Various solutions have been tried to resolve the issue of low-income housing in Pakistan, including sites and services schemes, slum clearance, and resettlement areas with core-houses provided on an installment basis2. However, these efforts have generally failed to resolve the housing issues for the urban poor2.
• Public Sector Withdrawal: The withdrawal of the public sector from housing has worsened the situation for low-income housing2.

Recommendations and Strategies

• Regulatory Reforms: Provincial governments are encouraged to streamline processes for property registration and construction permits through ‘one-window’ facilities and fast-track mechanisms1. Reducing the minimum plot size for affordable housing development can also reduce costs and improve affordability1.
• Innovative Designs: There is a need for innovative designs that maximize floor space and embrace higher-density building to address the reality of overcrowding1.
• Climate-Smart Solutions: Promoting climate-smart housing solutions would benefit from higher-density building and efficient use of resources1.
• Financial Interventions: New interventions are needed in the regulatory, financial, and political arenas to drive down costs and improve commercial viability1. Region-specific approaches combining income support, housing finance reform, and sustainable urban development are recommended to improve affordability across all population segments3.
• Infill Development: Infill developments with high-density multi-storied apartments in existing cities may be the only affordable housing option for urban populations5.
• Market Intelligence: Improving the supply of credible, accessible, and transparent market intelligence is needed to inform inclusive policymaking and attract investment in climate-smart affordable housing1.
• Promoting Female Ownership: Encouraging female or joint ownership of urban housing can also improve access to housing1.

Role of Market Shaping Indicators (MSI)
The Market Shaping Indicators (MSI) project is an initiative to improve access to quality data on housing markets1. In Pakistan, evidence was collected by Reall and Impetus Advisory Group (IAG) as part of the MSI project1. The data and evidence collated underpin the trajectory of affordable housing policy, investment, and practice in urban Pakistan1. MSI data demonstrates that the largest regulatory burdens on affordable housing developers relate to obtaining sales certifications, executing and registering deeds, and processing submitted documents1.

Housing Affordability Index
The Housing Affordability Index highlights significant disparities in affordability across Pakistan3. Middle-income groups struggle consistently across regions, highlighting the need for targeted policies3.

Government Initiatives
The government aims to promote an effective approach to poverty alleviation, aligned with Pakistan’s commitment to the Millennium Development Goals8.

Overall Situation
The current countrywide housing shortage is around 10 million and is expected to increase7. The State Bank of Pakistan (SBP) estimates the urban housing demand is 350,000 units every year, but the demand is met for only 150,000 units7. There is a significant mismatch in the provision of low-income housing7. Only 67.5% of households reside in permanent structures, with a notable urban-rural divide3. Addressing these challenges is vital for social stability and economic growth amid ongoing urbanization3.

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