The political economy of development and urbanisation: Australian and Brazilian housing policy in the global context

By Rufael Tsegay

Rufael attended the 2016 Habitat III Summit where he represented RMIT University. Rufael is studying a Bachelor of Arts (International Studies) (Honours).

Abstract

This paper analyses recent urbanisation and development strategies from Australia and Brazil. Contrasting Australia’s changes in public housing from tenancy for manufacturing personnel to low income populations with favela development programs in São Paulo, Brazil. The analysis engages with and discerns the financial, political and social implications of policy decisions in these two case studies. This research aims to critically observe different examples of housing oriented urbanisation to better realise the complexities in housing strategies and implement more effective regeneration strategies for informal settlements in developing nations.

Policy recommendations

  1. Appropriate financial arrangements through regulated private investors which emphasises matching rent prices with household incomes.
  2. Empowering and protecting tenants through increased civil society and and municipal collaboration as well as greater incentives for landlords to provide longer leases.
  3. Municipal, state and federal level strategies must work in unison to connect informal and formal economies before prioritising city growth.

Since Habitat II: changes in housing and urban development

Habitat II, the second United Nations Centre on Human Settlements, established the need for sustainable living within national development strategy (Cohen, 2015). Since then there has been exponential growth in some parts of the world. China has grown into the world’s second largest economy and new nations like South Sudan have become part of the global community. At the same time, many Latin American nations experienced political and economic revolutions. Realised through regional initiatives like MERCOSUR, Rio de Janeiro and São Paulo becoming global cities and Brazil’s growth into a larger economic power as part of the BRICS (Brazil, Russia, India, China and South Africa) association (Wilson & Purushothaman, 2006). This growth and coinciding population boom created hurdles to urban development including self-built informal housing settlements which Brazil has begun to address (Magalhães, 2012). At the same time Australia grew into one of the world’s stable economies, prospering from a post-Second World War manufacturing boom. Developments which grew a public housing sector for manufacturing workers, a sector which was later forgotten and with public disengagement has deteriorated. This paper, through a contemporary analysis of Australia and Brazil, discusses different government led sustainable living and housing initiatives. It begins an overview of social housing developments in each nation. From this the ensuing sections compile key arguments from the case studies to better incorporate and introduce more applicable housing strategies to the global agenda. The goal of this paper is to better understand state-backed housing as a basis for policy development leading into Habitat III in Quito.

Some of accomplishments from Habitat II include the development of a United Nations Centre for Human Settlements, geographic considerations of housing policy and the inclusion of urban civil society organisations. Since the first summit in 1976 global policy has focused on urban regeneration, the redevelopment of land with moderate to high urban density. In the 1980s this became common practice and re-establish and resettle programmes were adopted in developing countries (Ward, 2015). In Latin America, governments ignored the increase in slums as development mostly targeted middle and upper income neighbourhoods (Ward &, 2015). These settlements were instead recognised as hotspots for insecurity, drug activity and crime. However, it has been recognised that successful urban policy must be widespread as to reach much of the low-income population.

Australian housing policy

Public housing was central to Australia’s post-Second World War economic growth, providing an affordable living alternative for migrant workers in the growing manufacturing industry (Berry & Dalton, 2004). As the manufacturing sector peaked between 1959 and 1972, many workers could access the private market and public housing saw a decline (Productivity Commission, 2003). In the 1970s this saw State Housing Authorities (SHAs), who were responsible for planning and implementing, become key administrators of the housing portfolio. Soon after the 1980s, public housing funding was significantly reduced and states began prioritising refurbishment of outdated stock buildings over the construction of new properties (Hoatson & Grace, 2002).

The 2008 National Rental Affordability Scheme (NRAS) was a subsidy programme encouraging private investment into public housing with the goal of low cost properties. Comparatively, the National Affordable Housing Agreement (NAHA) replaced the Commonwealth State Housing Agreement, the funding program in place since 1945. The agreement was made to maintain community based administration of social housing by redirecting Commonwealth investment towards not-for-profit organisations (Jacobs et al., 2013). The NRAS and NAHA are an intersection of private and not-for-profit agencies to ensure improved and continuous social housing administration. An attractive prospect for government personnel as it allows tenants to receive Commonwealth Rental Assistance benefits and in turn affordable housing at closer to market rent rates. Original estimations figured this a positive approach. Between 2008 and 2012 the NRAS helped provide 7,000 dwellings with approved funding for a further 33,000 of which 65 per cent are managed or owned by Community Housing Organisations (CHOs) (Jacobs et al., 2013).

Brazilian housing policy

Housing came to the forefront in Brazil after concentrated economic growth in its major cities. Push factors including farming difficulties, poor living conditions and low wages along with the pull of employment and better access to services and schools is what drew many rural residents to larger cities like Rio de Janeiro and São Paulo. This however created a population imbalance which along with a lack of affordable housing forced many to establish favela (urban slum) communities.

The Minha Casa Minha Vida [My House My Life] (MCMV) programme was a public sector-real estate partnership which worked to fund housing construction across the country. The programme aimed to build one million houses by 2010 and another million between 2011 and 2014 with 60% of all units being subsidised (Neto et. al., 2012 & Paulsen & Spoto, 2013). This paper looks to analyse the targets set out along with the real impact MCMV had on the Brazilian housing market to better inform the role of government in housing related city development.

Lessons from Australia and Brazil

i. Australia - Financial arrangements and supply side failures

While there is support for the NAHA, the fiscal arrangements remain an issue. To date there is no clear consensus on funding structures to continue not-for-profit administration while meeting growing social demands. One response to funding cuts by the New South Wales government was tenant lease restriction. This supply side measure was used to ensure the availability of stock for critical circumstances and pressured individuals to use public housing as only a pathway to the private rental market. Furthermore, the nature of the NRAS determines house values by market trends and not individual financial capacity, making it susceptible to manipulation by private actors with financial leverage.

The idea of state backed housing as a means of propelling people to the private market distorts the role of the government as a coercive force instead of an actor which works to improve individual living standards. More important for developing nations where slums already exist and regeneration projects are completed on the same territory where settlements have been established. Such projects should focus on a form of continued communal development as opposed to simply trying to reshape an unappealing public housing image or removing unwanted populations. A necessity from the state, whether it is transferring stock to community housing organisations or private sector financial support, is the administration and regulation of external parties to ensure tenant security. This can be achieved through secured tenures and long term lease options as well as rate reductions for landlords offering longer leases. The NRAS has worked to do so but must still monitor the actions of private actors to maintain feasible housing costs with rising living standards.

ii. Brazil - Equal inner city favela and periphery development

Similarly, initiatives in Brazil have seen a decrease of the state in favour of the market. MCMV was a project with the construction industry that ultimately failed Brazil’s poorest. MCMV aimed at city growth instead of city development, targeting the establishment of units in the city’s periphery instead of transforming favelas themselves (Serapião, 2016). The project also failed to deliver any sort of increase in jobs or services like the city’s subpar transport, ultimately creating more urban ghettos in the already neglected peripheries while failing to develop inner city favelas. This ties into the much bigger issue of integrating the informal with the formal economy, which exacerbates the issues faced in any informal housing settlements. This program postponed the need to address the city’s expanding favelas and limits the possibility of housing policy as a means of integrating precarious areas with more developed regions.

This increase in public construction resulted in a housing boom, which along with poor land market regulation, made house production more expensive mainly for the poorest (Bonduki, 2008). The oversaturated property market made it increasingly difficult to develop social housing units for favela tenants due to increasing land value in the inner city. Making the only option for more social properties a burst in the housing market bubble and a dramatic reduction in land prices, an unlikely occurrence.

iii. Australia and Brazil - Ensuing social issues

A lack of social engagement within public housing has shown its shortcomings in Australia. Lack of funding combined with limited public housing for lower income residents has made some estates notorious for crime and instability. For example drug and crime issues have had long lasting impacts on citizen engagement with state agencies, something seen with the case of racial profiling against young Africans in Melbourne’s Flemington public housing high rises (LaTrobe, 2015).

It is inadmissible that effective urban development and economic growth work in concert to achieve similar goals. Economic growth was the reason behind public housing in Australia and much of the western world as well as informal housing in emerging economies. Despite growth and initiatives in Brazil, informal favelas and the associated mass mobility are still present. The overarching public policy issue here is poverty, and in Brazil income and wealth inequality which is exacerbated through economic growth. The Gini index, a measure representing a nation’s income distribution and inequality, places Brazil as the third most unequal country in South America and number 16 in the world at 51.9 (CIA, 2016).

Towards a new understanding of housing

i. Effective financial arrangements

Brazil can learn from Australia’s financial arrangements and regulations. Much like how the NAHA and NRAS still allow people to receive government assistance, the role of the state with the provision of welfare assistance can work in partisan with existing per capita incomes. By adopting Australia’s approach, Brazilian residents can afford more while housing agencies or landlords can charge closer to market rent rates depending on individual earnings. This structure would also make it easier for people to contribute to the formal economy which would not only promote upward social mobility but in some societies, eliminate the social stigma attached with welfare payments.

A potential issue is whether individuals can find employment to pay market rates, where any income stagnation and price increases would adversely affect low income peoples. Government responsibility here is to regulate this section of the market through a rental ceiling specific to social housing. Economists may argue that ceilings for the housing market negatively restrict quantity growth and housing quality, however this is a necessity for people who are financially unable to access a growing market with potential cost increases despite control. If there is an increase in rent ceilings, the government must be to provide subsidies to achieve a supply-demand equilibrium in social housing. This has been ineffective in Victoria where people cannot afford private rates and with over 30,000 waiting for public housing, has forced many into homelessness or secondary homelessness (The Age, 2016).

An appropriate measure here would be the 30/40 rule which is a widely-used criterion for housing affordability. This refers to the point at which 30 per cent of the gross income of a household in the lowest 40 per cent of the income distribution is allocated to housing costs; beyond this, housing is deemed unaffordable. This is not without its limits with variations across household’s forms and sizes but gives a relatively accurate measure of the portion of the population found to be in housing stress. This group is usually comprised overwhelmingly of low-income renters found most commonly in the inner city.

ii. Encouraging social empowerment

For developing nations, a more constructive strategy would be to ensure development programmes specific to the geographic locations of informal settlements. This would attract private investment - as many are often located close to metropolitan centres. The role of the state here, whether it be through civil society or public agencies, would be to regulate and ensure regeneration projects for housing specific to informal occupants. Cavalheiro & Abiko’s (2015) study of the Serra do Mar project in São Paulo found that more than half of residents remained in regenerated condominiums while 36.3 per cent were settled in other developments. In this project 26% mentioned that their lives had worsened after the move, mostly due to administration and some social factors. They cited management’s inability to problem solve, a lack of maintenance and dissatisfaction with social workers despite higher charges. Ho and Gao (2013) in a case study of Hong Kong, suggest that residents and community leaders be trained to self-maintain their new houses. Also, important here is the empowerment of tenants through civil society organisations for all levels of governments to better understand social dynamics. As noted by Ward (2015), senior policy official usually have little awareness of the needs of low-income areas and may underestimate the dynamics of the resettlement process, exacerbated when general housing policy is directed at an entire country.

iii. More than housing

Any successful policy aggregates both financial and social considerations while not prioritising one over the other. As previously mentioned the proximity of favelas to wealthy districts is both an opportunity for growth but also poses risks to successful development. This was an issue in Southwest São Paulo where increases in real estate value pressured local governments to remove a nearby favela. One potentially successful plan to tackle this can be taken from the Jardim Edite project, which aimed to provide adjusted living arrangements for people of different socioeconomic backgrounds.

Another good example came from Elisabete França, former director of the São Paulo Department of Housing and Urban Development through the Guarapiranga Programme. A range of measures were introduced to manage a fluent resettlement process which took a socially oriented approach to housing development. During initial building stages, preference was given to those in most need, including people with children or disability while rent was subsidised during construction time. Many residents participated in project decisions while some received land titles and infrastructure, like sanitation systems and public spaces. Increased engagement extended to door-to-door consulting with community leaders which helped close the gap between the department and its citizens. In the Serra do Mar project an important aspect was the proximity of condominium buildings to the metropolitan centres. The study cited job availability as a positive factor as it granted women who were normally restricted to the home the option of working and engaging in the formal market economy. These small measures which are often overlooked by policy goals play a vital role in successful social urbanisation, which in themselves share a range of benefits. In Brazil, or any growing economy, national and regional governments must move away from badly serviced mass housing estates and produce more socially appropriate policy goals which equally encourage self-development by residents and the local community. The overarching goal here demonstrated by the examples, is the linking of the informal to the formal city through economic and urban development.

Conclusion

Several new initiatives came out from the first two Habitat summits, including the role played by civil society actors and the acknowledgement of previously unconsidered factors like geographical implications on urban development. The complexities of housing however have made it especially susceptible to deregulation, causing more harm to individuals that economic development aims to support. Urbanisation that is left to the private sector lays potential for social housing to be overly monetised or purchased and would see large working class populations displaced or removed from their homelands. The characteristics of housing change are key to their inhabitants and not economic interests and any policy initiatives must replicate this and work from the bottom up. Success hinges on the community’s ability to successfully interact with these programs so that they feel part of the greater development strategy. A new global initiative needs to incorporate the financial, social and regulatory measures, and equally as important are the physical and rehabilitative elements of any change in community formation or housing.

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