Speech by World Bank Managing Director and COO Sri Mulyani Indrawati at the 7th World Bank and IFC Global Housing Finance Conference

Thank you, Simon. I’m very pleased to welcome all of you to the 7th World Bank and IFC Global Housing Finance Conference.

I am particularly pleased that we have both public and private sector delegates in the audience – Including lenders, policy makers, regulators, developers, investors, and donor agencies from over 30 countries. This is good, because it takes the expertise of all of you to tackle the challenges of providing housing to the poor.

This conference is important because it is closely aligned with the World Bank’s goals of ending poverty by 2030 and promoting shared prosperity. Ensuring access to adequate, safe, and affordable housing is also part of Sustainable Development Goal #11, which commits the global community to making cities inclusive, safe, resilient and sustainable.

By 2030, the global population will reach over 8 billion, with almost 60 percent living in cities. Urbanization is happening everywhere, but the transition is especially rapid in sub-Saharan Africa and South Asia.

Cities are a source of wealth and growth. In fact, no country has reached middle income status without a high level of urbanization. Cities connect knowledge and innovation, people and opportunities, workers and jobs, capital and investments. But rapidly growing cities face deep challenges.

Cities can be a source of productivity but they require transportation systems, water and sanitation infrastructure, and of course housing. The rapid urbanization we are seeing is putting increasing pressure on the capacity of the public and private sector to deliver the housing needed. Where formal housing cannot be supplied, informal housing quickly fills the gaps and slums proliferate.

In the last few years, emerging markets have made great progress in addressing the challenge of safe and affordable housing. Still, a significant gap remains.

In order to achieve the 2030 goal, the world needs to build 300 million new housing units. This will require a vast investment, which governments alone cannot shoulder. It also calls for smart policies that help cities avoid the downsides of urbanization – urban sprawl, insecurity, and pollution.

The World Bank’s experience shows us that poorly designed housing finance policies can have serious implications on urban sprawl. In many cases, housing finance policies, particularly subsidy rules, drove markets to undertake developments far away from downtown areas.

When people need to travel long distances to reach their jobs or schools, low-income households are hit hardest. They end up spending a much larger portion of their incomes on transportation, and their family finances become unsustainable. Housing in remote areas drives up the cost of infrastructure services such as water and sanitation. A sprawling city is also inefficient, with high water and energy consumption, standing in the way of a low-carbon growth path.

The upside is, that when done right, the development of housing markets stimulates economic growth, creates jobs, and helps reduce poverty.

Investments in the housing sector have one of the best returns in terms of job creation and multiplier effects on the broader economy. For example, in India, it is estimated that every job created in housing can result in the creation of eight indirect jobs in related sectors, such as finance, services, construction or manufacturing.

To create a thriving housing market and to avoid the downside of urbanization, housing finance policies need to be smart and targeted to reach the truly poor. Well targeted policies, combined with solid financial inclusion programs, are key to bringing opportunities to these segments of the population.
Reaching the goal of adequate, safe and affordable housing for all – especially for the extremely poor, will require a systemic approach to establishing the right legal, regulatory, and market environment for the efficient deployment of private and public capital.

Solutions to improve the supply of affordable housing should include private-public partnerships, financial sector regulatory and mortgage banking development, as well as improved infrastructure and urban planning.

We can improve access to longer-term finance through capital markets instruments such as covered mortgage bonds and securitization as well as enhanced systems to incentivize longer term savings.
Which brings me to why you are here today and my aspirations for this conference. Over the next two days you will focus on practical solutions and share experience to tackle the challenges I’ve only touched on.

We need innovative solutions to tackle the global affordable housing challenge. Nowhere is that challenge more felt than on the African continent, which will see itself transformed over the coming decades through a growing and urbanizing population.

Again, I welcome you at the World Bank, and I hope you will have good discussions on developing financial systems that will increase access to sustainable housing finance for all. I wish you a lively and productive conference.

Thank you.