The housing affordability problems of the middle-income groups in Dhaka : a policy environment analysis

Abstract

The concepts and definitions of housing affordability vary depending on the economic and social contexts of specific countries. However, irrespective of the context, housing affordability is not only influenced by the market conditions, but also by the prevailing policy environment, among other social and economic factors. The impact of the supply-side instruments of the policy environment, such as the regulatory regime, on the provision of affordable housing and housing affordability has been widely studied mainly in the context of developed or richer developing countries where strong regulatory and institutional frameworks exist. Little has been done in the context of developing countries with weak regulatory and institutional frameworks. This dissertation pioneers a study of this kind in the context of Bangladesh. It aims to investigate the housing affordability problems of the middle-income groups in Dhaka and to identify the underlying supply-side causes of the policy environment.

A qualitative approach is adopted for this research. The social constructivist paradigm combined with the interpretive type of narration has been engaged as the research strategy. Both the ratio and residual-income based approaches of measuring housing affordability are used. Working definitions of housing affordability and income groups are also developed. Primary and secondary data were collected using various approaches such as document analysis, questionnaire survey and interviews.

This study reveals that the formal housing market in Dhaka failed to provide affordable housing for the middle-income groups. The price-to-income ratio in Dhaka is one of the highest among the major South Asian cities. The middle-income groups struggle to maintain a minimum standard of living and largely rely on rental housing. However, rents are also unaffordable to them and Dhaka has the highest rent-to-income ratio in Asia. The housing units in the informal settlements could be affordable to them, but their social status inhibits them from living in these settlements.

The regulatory and infrastructure development regimes are found to be non-enabling. Existing land-use regulations encourage land hoarding and land value speculation. Despite the weak urban growth control, the land price is very high and the land-supply fails to meet the demand. Further, the planning permission processes for residential development are significant time and cost inflators. Investment on infrastructure is not targeted to facilitate residential land supply. Serviced residential land is expensive due to the short supply of residential infrastructures. Institutionally, the non-participatory mode of governance, absence of a clear line of authority, and poor human resources capacities of the related government organizations are the main underlying causes of the non-enabling performance of supply-side regimes.

This study recommends pro-active government initiatives to strengthen the enabling functions of the regulatory regimes. Utilization of planning tools such as planning incentives and mandatory contributions of affordable housing in private housing projects are recommended. Infrastructure investment targeting at facilitating residential land supply is suggested. Institutional restructuring and the establishment of a housing data bank are also recommended. This study enriches the literature related to the impact of the policy environment on housing by widening the debate to cover the developing countries.