The Development in the Americas (DIA) series is the flagship publication of the Inter-American Development Bank (IDB). Each year the IDB presents an in-depth comparative study of an issue of concern to Latin America and the Caribbean. This year’s edition, titled Room for Development: Housing Markets in Latin America and the Caribbean, asks a very basic question: Given their high home ownership rates and high average family incomes by developing world standards, why do so many Latin Americans live in relatively bad homes? To try to answer this question, the book begins by assessing the magnitude of the problem and looking at both the determinants and consequences of poor housing outcomes. It then examines, with new data sources and rigorous analytical methods presented in an accessible way, the main factors responsible for the region’s poor housing. Finally, it reviews the role of government policies and regulations as well as public housing programs, both at the local and federal level, in shaping housing outcomes and considers policy options for dealing with the region’s shortcomings in the financial, construction, and land markets that so greatly impact housing.

Latin American and Caribbean countries are the most urban in the developing world, enjoy very high home ownership rates, and boast high average family incomes by developing world standards. Despite significant progress over the past two decades, many of the region’s city inhabitants are still poorly housed. Of the 130 million urban families in the region, 5 million rely on another family for shelter, 3 million live in houses that are beyond repair, and another 34 million live in houses that lack either title, water, sewerage, adequate flooring, or sufficient space. Most of these dwellings and many more otherwise satisfactory homes are located in neighborhoods that lack basic urban amenities, such as public transportation, parks, and hospitals. Paradoxically, most families living in inadequate housing are not poor; rather they come from the lower middle-income sector.

Room for Development: Housing Markets in Latin America and the Caribbean looks at both the determinants and consequences of poor housing in Latin American and Caribbean cities. Even though some housing outcomes like access to potable water, sanitary disposal of household waste, and poor quality building materials are worse in rural areas, this book focuses only on urban areas (Figure 1). Urban and rural housing problems are quite different. In rural areas, precisely because the population is scattered and in some cases isolated, provision of basic infrastructure and access to social services is costly and sometimes not even feasible. Moreover, certain factors that are key to the functioning and outcomes of housing markets in urban areas are simply not relevant to rural areas. These include access to certain amenities such as open spaces and green areas or avoiding congestion. They also include so-called economies of agglomeration that come from the concentration of populations, such as links between public transportation and job opportunities, and the lower cost involved in providing basic services to a large number of people.