Investment in transit infrastructure and services tends to have a positive impact on the economic potential and the real estate value of adjacent land. Consequently, households of economically weaker sections residing in the area might be pushed out by the increasing prices of land to locations poorly connected by public transit. This can deprive them from access to jobs, services and from their share in the potential benefits of TOD such as improved infrastructure and quality of living.
Defining Affordable Housing
Globally, there are multiple definitions for affordable housing. One of the most commonly accepted definitions considers affordability as a measure of expenditure on housing to income of the household. This is also adopted by the Indian Government, which defines affordable housing as “any housing that meets some form of affordability standard, which could be income level of the family, size of the dwelling unit or affordability in terms of EMI or ratio of house price to annual income” (High Level Task Force on Affordable Housing for All, December 2008). The Ministry of Housing and Urban Poverty Alleviation (MoHUPA) in its 2011 report takes into account both income and size to define the concept (Table 6). Whereas, Government of Gujarat in its Affordable Housing Policy uses cost per dwelling unit to define affordability (MMGY).
The standard cost of an EWS house as shown in the table show that a beneficiary earning between Rs. 20,000 to Rs. 25,000 per month is required to spend at least 30 to 40% of their income in about 6 to 7 years to own a house. The cost increases with the increase in carpet area of the unit, which means families with limited income are limited in the size of their dwelling. For example, a standard MIG dwelling unit costs about Rs. 15,00,000 to Rs. 22,00,000, which means it can be affordable only for individuals earning more than Rs. 60,000-80,000 per month. Thus, an increase in property value might limit the ability of lower income households to buy housing closer to transit, pushing them to peri-urban and transit inaccessible areas in the city. The distance between housing and workplace can cause them to lose employment or spend extra time and money on transportation. Thus, it is essential that residential developments in and around TOD cater to multiple income groups including the urban poor.
The task force assigned by the Ministry of Housing and Urban Poverty Alleviation (MoHUPA) has estimated a housing shortage of 18.7 million in the 12th five-year plan. Out of this, 90% of the shortage is in the Economically Weaker Section (EWS) and Lower Income Group (LIG) category (TG-12, 2012-17). The MoHUPA is working on a new Rental Housing Policy, which will focus on the sections of the population unable to own a house in the current structure of income groups. Keeping the track of incomes, it is required to work out models that will help create affordable housing with improved access to work through public transit, walking and bicycling for all incomes.
Affordable Housing Mechanism in India
Affordable housing has a high priority in national and international urban development agendas. With housing recognised as a basic need, governments at all scales are trying to provide access to housing for their citizens. In India the mechanism to attain the affordable housing functions in two ways: provision of affordable housing by private sector through independent market-based development; and provision by public sector through government intervention.
Private Sector Involvement
Though affordable housing has always been a priority of state and central governments, in recent decades the private sector has also taken up the task of building houses for lower and middle-income segments. There are several factors that have drawn private sector investments to this sector, such as easy availability of land in the suburban areas along with infrastructural connectivity and availability of facilitating and financing agencies such as the National Housing Bank, international developmental organisations, micro finance institutions etc. Since 2009, real estate developers have launched projects across Indian cities in locations that are away from the core central business/secondary business districts where land is easily acquirable and prices are affordable. Such targeted growth is seen in many projects such as Karjat, Palghar and Boisar in Mumbai, Narol and Vatwa in Ahmedabad, and Anekal in Bangalore. Some of the prominent developers involved include Tata Housing (Shubh Griha), VBHC, Foliage, DBS Affordable Home, Nirman Group, HDIL, TVS Housing, S. Raheja, Mahindra Lifespaces and Usha Breco Realty (Monitor, 2013). Typically, the projects are located 20 to 25 km away from the city centre. While such projects are characterised by limited options, these residential areas soon trigger a boom in the surrounding real estate market and often result in the escalation of the cost that encourages the purchase of houses as an investment rather than for occupation.
Public Sector Intervention
In India, affordable housing is a term largely used in the urban context. At the national level, rural housing sector falls under the purview of the Ministry of Rural Development, while housing and human settlements in urban areas fall under the jurisdiction of the Ministry of Housing and Urban Poverty Alleviation. The latter has spearheaded affordable housing as a concept and policy. The National Urban Housing & Habitat Policy (NUHHP 2007), along with the Jawaharlal Nehru National Urban Renewal Mission (JnNURM 2005), Basic Services for the Urban Poor (BSUP), Rajiv Awas Yojana (RAY) and Pradhan Mantri Awas Yojana (PMAY), provide the policy framework for affordable housing in India. The NUHHP 2007 lists a number of objectives that include urban planning, land availability, special provisions for women, public-private partnerships, management information systems and so on (High Level Task Force on Affordable Housing for All, 2008). In terms of affordable housing, its aim is to:
- Accelerate the pace of housing construction and development of related infrastructure
- Create adequate rented and owner-occupied housing stock while improving affordability through capital or interest subsidies
- Use technology to modernise the housing sector for energy and cost efficiency, productivity and quality, green and intelligent building, and mitigate disaster impacts
In 2005, JnNURM was launched with the objective of encouraging and expediting urban reforms, and construction of 1.5 million houses for the urban poor in 65 mission cities between 2005 and 2012 was included within its ambit. The BSUP is managed by the Ministry of Housing and Urban Poverty Alleviation and seeks to provide seven entitlements that include security of tenure, affordable housing, water, sanitation, health, education and social security to low income segments in 65 mission cities. The Integrated Housing for Slum Development Plan (IHSDP) covers the cities/towns that are not covered by BSUP, and conceives of an 80:20 fund sharing ratio between the national and state governments/urban local bodies (ULBs)/beneficiaries.
In 2013, MoHUPA introduced their flagship programme- Rajiv Awas Yojana, which sanctioned to develop more than 1.9 lakh housing units in just 2 years of launch. However, because of the estimated housing shortage, a new mission was launched in June 2015 called Pradhan Mantri Awas Yojana (PMAY), Housing for All by 2022. The mission aims to provide 2 crore houses by the year 2022, building 30 lakh houses every year. Till date, the government has sanctioned about 5 lakh houses over a period of 1 year. The State of Maharashtra and Gujarat have created a dedicated department and mission respectively, in Slum Redevelopment Authority in Mumbai and Affordable Housing Mission in Gujarat. These departments are primarily working for the progress of affordable housing in the state and helping cities to implement the government sponsored schemes.
Affordability is a function of both housing and transport costs; housing in the urban periphery is cheaper but requires residents to pay high commuting costs to travel into the city for employment. On the other hand, living in established areas of the city with good access to subsidised public transport is unaffordable for many given the high price of property in these neighbourhoods. To reduce the overall cost of living, cities should work to provide housing in areas connected with transit.
Affordability of neighbourhood affect:
- The change in the pace of development in a neighbourhood before and after transit improvements
- The change in household incomes, which can indicate whether the intended resident income mix has been preserved or eroded
- Modifications to the housing stock: the division of single household plots into multi-family divisions can indicate the acceptance of smaller dwelling units and increase in the demand for housing
- Commercialisation of residential units, thereby reducing housing stock
Affordable Housing: Critical Issues and Potential for TOD
One of the biggest challenge in urban India is to develop affordable housing on a large scale, promising a solution to the creation of slums; unorganised real estate development and unplanned growth. Towards this, it is essential that certain critical issues are prioritised to make affordable housing a possibility in a TOD. On the demand side, these issues include identification of the right clientele, increasing outreach through micro mortgage financing mechanisms and self-help groups (SHG's) and flexible repaying mechanisms for loans to cater to variable income flows. On the supply side, incentivising through policy (extra FSI, free sale areas etc.); developing schemes for slum redevelopment and rehabilitation; ensuring adequate availability of land; streamlining of land records; supporting inclusion of mass housing zones in comprehensive development plans (CDPs); encouraging private participation and partnership; and expanding single window clearance for smaller projects on the lines of large township projects are necessary.
Box 13: Urban Villages: An Opportunity
The urban villages are typically characterised by a mix of land-uses and generally have a compact built form, narrow circulation space and low-rise high-density developments. These mainly accommodate residential, commercial and industrial uses and function as a mix (Master Plan- 2021, Delhi Development Authority, 2009). Such villages are vital for providing temporary tenant by small modifications in their character and incentivising landowner with increased FSI, if they occur in influence zone of specialised development such as TOD. These villages even have a large potential to provide rental housing options, dormitories and other small dwelling units.
The authorities (Central, State and ULB's) have a special responsibility to enable development of affordable housing. This may not necessarily be through subsidies, it can also include fast-tracking approval processes, demystifying land laws, deconstructing the financing and land assembling processes,
and the introduction of innovative mechanisms such as earmarking areas for development, encouraging public-private partnerships, and rethinking floor space index (FSI) limits (Venkataraman. M, 2015). Affordable housing thus calls for collaborative, multi pronged and concerted effort from all stakeholders and governing authorities.
Affordability: Housing and Transportation
The affordability of housing and transportation for the urban poor dictates the savings for the basic needs (education, health, recreation and savings). More than 35% expenditure on housing (including rents or mortgages, property taxes, insurance and basic utilities) and 20% on transport, or less than 45% on housing and transport combined is considered as affordable in an urban area (Litman, 2015). Peter Calthorpe said, “Affordable housing must start with affordable neighbourhoods" (Calthorpe, 1995). In the United States, transportation is second only to housing as a household cost, with the average family spending about 32% of their income on housing and 19% on transportation. More importantly, extremely low-income households often spend over 50% of their family income on transportation and often depend on unreliable modes. Many move to suburban locations to save on housing costs, but anything they save is quickly lost as transportation costs. However, for those who live in locations easily accessible by transportation, this cost can be as low as 9% (TOD & Development).
The Center for Neighbourhood Technology (CNT), Chicago developed a Housing and Transportation Affordability Index (H+T) to assess the affordability of neighbourhoods in the United States. The index value in 917 neighbourhoods demonstrated that while considering housing costs alone, 55% of neighbourhoods were affordable for American families, but when transportation costs were included, only 26% of neighbourhoods were affordable.
Thus, balancing the housing and transportation costs is essential while strategising transportation investments under TOD; an efficient TOD investment will lead to minimisation of H+T costs for majority of households in the neighbourhood or city, depending on the scale of the investment. In Mumbai, where the median monthly household income is Rs. 20,000 (Annez, Bertaud, Patel, & Phatak, 2010), housing and transportation costs are highly unaffordable for the poorer sections. The data below illustrates this.
- The average one-way commute distance to work for households earning above Rs. 20,000 per month is 7.4 km. (Baker, Basu, Cropper, Lall, & Takeuchi, September 2005) This equals to two times the one-way commute distance for households earning less than Rs. 5000 per month.
- The main mode of choice also differs with income levels. Motorised public transport (buses) or motorised private transport (two wheelers and cars) is commonly used by households earning more than Rs. 20000 per month. On the contrary, the poor earning less than Rs. 5000 per month prefer walking followed by buses. This indicates differences in the quality and convenience of transport.
- A larger percentage (46%) of the poor households (earning less than Rs. 5000 per month) live more than 20 minutes away from the nearest train station than the wealthier households (39%) (earning more than Rs. 20000 per month).
- Overall, the poorest households spend about 15% of their income on transportation costs as compared to 10% for other households. The affordability (or lack of it) for the poorest also affects their ability to make trips for non-work purposes, especially healthcare and education.
- Home affordability is defined as 30% of the gross monthly income towards EMI or rent (Parekh, et al., December 2008). The affordable ratio for home ownership prices is 4 times the annual gross income (Parekh, et al., December 2008).
- At the current prevailing official rates, a median income household will spend 12 years of annual income to own a home in Mumbai (Praja, 2014). On a monthly basis, the household will have to pay EMI for 36 years. Such long terms loans are currently unavailable, making the ownership a challenge, unless the EMI portion is increased to 54-60% of the household income for the conventional 20-year loan offered in the Indian home loan markets.
- The total transportation and housing costs for the economically weaker sections will therefore range anywhere from 50% to 70% of their household incomes. This acts as a perverse incentive for expansion of slums to the peripheries of the city (the northern, eastern and western suburbs).
- Andheri (11 times the annual income) and Ghatkopar (14 times the annual income), the two ends of the recent Metro I corridor typify these increased housing costs (Praja, 2014).
In the case of Delhi, the authorities are unable to accommodate the continuous influx of new residents with varying income levels. This makes affordability considerations related to TOD particularly important. The 2011 national census estimated Delhi’s population at 16.7 million. According to Centre for Policy Research (CPR), report on categorisation on settlement in Delhi, only 23.7% of the city’s population live in planned communities, while 39.2% of the population live in unplanned and illegal communities. The rest 37.1% of the population reside in regularised but unauthorised colonies (these settlements are not authorised in the master plan but are allowed to exist; they mostly do not have any service delivery infrastructure as they are not part of the statutory document), which is indicating an affordability barrier to formal housing within Delhi.
To mitigate this, Delhi’s 2021 Master Plan explicitly indicates the provision of housing for residents of varying incomes as an important aspect of planned development. The issue of housing affordability in the decade-old rapid transit (Metro) corridors is also highlighted in the Delhi Development Authority’s TOD policy (draft) released in 2012 and approved in July 2015. The effectiveness of TOD depends heavily on the connection between land-use and transport planning. Strengthening their symbiotic link through equitable policies regarding the affordability of living and commuting is necessary for a modal shift to occur, especially in a city like Delhi, which covers 1483 sq. km.
The Draft TOD policy proposed a pilot project in east Delhi’s Karkardooma station. This development will have a 120-storey commercial tower, 4800 new homes, 80,000 sq. m of retail space and a 5-acre community park. The housing units will be in form of mixed development, wherein the unit sizes ranges between 25 sq. m to 40 sq. m. The draft policy targets to reserve a percentage (15%) of the FAR from all TOD projects for affordable housing. As per the draft policy, rental units within the reserved FAR should not be larger than 25 sq.m. Also, out of 15%, 5% is kept aside for other categories which include studio type blocks, units with shared kitchen & toilets, dormitories and hostels. These provisions were changed in the final TOD policy for Delhi.
Incentives for Affordable Housing within TODs: Study of Global Policies
Transit Oriented Development in cities with a high proportion of EWS and LIG residents should address the conundrum of housing and transportation by offering incentives and/or mandating provision of affordable housing within TODs. Global examples of TOD projects have seen trends from gradual gentrification to wide scale displacements. City governments have adopted a mixture of policy tools to address these issues. Some of them are discussed below (Pollack, Bluestone, & Billingham, 2010).
- Transit-Oriented Development Acquisition Funds for Land Banking
Denver, New York, Los Angeles, San Francisco and an increasing number of cities in the US are establishing revolving loan funds to finance land acquisition for affordable housing development near transit lines. The funds are either raised through “Linkage Fees”- fees charged to developers in a TOD project or through grants from commercial lenders, investment funds and foundations. These funds for transit-oriented development are used proactively either to acquire land parcels near transit for future affordable housing developments or to preserve existing affordable housing units that may be lost due to price appreciation after transit investments. An example of this mechanism can be seen in San Francisco where the Bay Area Transit-Oriented Affordable Housing Fund (Bay Area TOD) of $50 million provides financing to purchase or improve available property near transit lines.
- Inclusionary Zoning for Affordable Housing
Inclusionary zoning is a regulation-based tool mandating a certain minimum percentage of affordable housing units to be built within a TOD. In cases where a mandatory provision of affordable housing units within a TOD is restrictive for the private developers, in-lieu fees are charged for off-site development. The off-site development is still restricted to an accessible area (1/2 mile) from a transit station with the provision of feeder services to the transit line. FAR/FSI bonuses are also sometimes given for exceeding the mandated minimum proportion of affordable housing. Montgomery County in Maryland has the Moderately Priced Dwelling Unit Ordinance that requires all mixed-use projects with 20 or more residential units to have 12 to 15% affordable units for low-income housing in exchange for a 22% FAR/density bonus. Delhi’s Masterplan 2021 has recognised the need for affordable housing units within TOD development norms (UTTIPEC, 2015). While necessitating high built-up densities (200 to 800 dwelling units per hectare depending on the FSI), the norms also require minimum 15% of built up area to be allocated for rental and/or ownership housing provided unit sizes are no larger than 25 sq.m. Delhi's draft TOD policy also required an additional 15% to be allocated to unit sizes 40 sq.m or less. Further, housing for low-income families, government employees, single working people, youth hostels, night shelters and serviced apartments for young professionals has been listed as desirable uses for evaluation of TOD proposals.
- Value Capture Through Tax Increment Financing
Most municipal governments in the US use Tax Increment Financing (TIF) (HousingPolicy.org) as a tool for funding targeted investments for neighbourhood revitalisation through transit. The tool establishes a base property tax collection before improvements and then captures the increased part of the revenue (due to improvements) for subsidising transit improvements, housing or other infrastructure expansion. The state of Utah requires municipalities that generate $100,000 of annual tax increment to set aside minimum 20% of the increased revenues for affordable housing construction and retention within the TIF district (HousingPolicy.org). Similarly, Sacramento used TIF funds to purchase 116 formerly private buildings in south Sacramento and redeveloped them into 1, 2, 3, 4 bedroom rental apartments for low-income families and seniors (HousingPolicy.org).
Box 14: Supporting Schemes on Housing Development in India
Development along transit corridors are very much dependent on the nature of cities and their economic activities. Any kinds of expansion or development will always attract migrant and ocall workforce in secondary and tertiary sectors. Both the categories will only move if they have basic services in the transit zone. The basic parameter is to provide shelters for all, whether migrants or local. The government is continuously trying to provide housing for all the citizens of the country. For the same, the Government of India has initiated various schemes, which support the State government and local bodies to accomplish the housing shortage issues. Recent schemes of Government of India in affordable housing are:
- Pradhan Mantri Awas Yojana (PMAY): The "Pradhan Mantri Awas Yojana-Housing for All" mission was formally launched on 25 June 2015. It will be implemented during 2015-2022 and will provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs under four verticals: a). In-Situ slum rehabilitation of slum dwellers with the participation of private developers using land as a resource; b). Promotion of affordable housing for economically weaker sections through credit linked subsidy; c). Affordable housing in partnership with public & private sectors and; d). Subsidy for beneficiary-led individual house construction. The schemes covered all statutory towns as per Census 2011 and towns notified subsequently will be eligible under the mission. Note: States/UTs will have the flexibility to include in the mission the planning area as notified in the respective statutory document. The brief of the policy is given in Annexure (1. A)
- National Rental Housing Policy: The National Urban Rental Housing Policy (NURHP), 2015 promote sustainable development of rental housing stock in the country with a view to ensure equitable supply to all sections of society. It also focuses on a multipronged approach such as enabling legal and regulatory measures; encouraging involvement of private sector, cooperative, non-governmental organisations, industrial sector (for labour housing) and the services/institutional sector (for employee housing) to promote rental housing. The Policy promotes various types of public-private partnerships for the promotion of rental housing in the country, which will act as a catalytic force to achieve the overall goal of Housing for All by 2022. Models of rental housing include: a). Rental housing for the prospective migrants/homeless; b). Rent to own scheme; c). Converting slums on ULB land to rental housing. The key outcome of this proposition is the security of tenure for vulnerable slum households. Security of tenure, even if for a limited time, allows households to invest in their housing units and reap gains in health, education, and income. The other critical outcome of this proposition is significant revenue for the ULB. This model could generate between 15 and 25% of the ULBs’ revenue. The brief of the policy is given in Annexure (1. B)
- National Urban Livelihoods Mission (NULM): The National Urban Livelihoods Mission (NULM) is prepared keeping in mind the aim to provide shelter equipped with essential services in phased manner to urban poor including urban homeless. The Mission was launched in 2013 by restructuring the Swarna Jayanti Shahari Rozgar Yojana (SJSRY) in all district headquarters (irrespective of their population) and in all cities with a population of 1 one lakh or more. The scheme is further divided into seven major components: a) Social Mobilisation and Institution Development (SM&ID); b) Employment through Skills Training and Placement (EST&P) c) Self-Employment Programme (SEP); d) Capacity Building and Training (CB&T); e) Support to Urban Street Vendors; f) Shelter to Urban Homeless (SUH) and; g) Innovative and Special Projects. This scheme is anticipated to bring down the vulnerability of the urban poor, especially the urban homeless and provide a better living condition with a possibility of security of tenure in the long run. The impact of this scheme can be measured at the city level and the direct beneficiaries are majorly the below poverty line segment and the urban homeless. The brief of the policy is given in Annexure (1. C)
- Incentivising PPP for TOD Investment
Additional incentives in TODs will also help to bring about a paradigm shift in the mindsets of private players to invest more on TOD rather than other locations within the cities. Governments are advocating to adopt more inclusive policies which will attract the attention of private player investment either as an individual or in joint ventures (JV). An example of this is the Private Sector Involvement (PSI) initiative for the delivery of public services and infrastructure in Hong Kong, which has brought a significant shift in their development and economic transformation.
To summarise, urban policy for TOD has increasingly recognised the inevitable struggle between transit improvements and the increase in housing costs. According to the Centre for Transit Oriented Development, the demand for housing near transit will nearly triple in the next twenty years, an estimate that could easily change with increasing prices and commute times. Moreover, population groups such as singles, couples without children, the elderly, and low-income households are likely to seek housing in l. Inocations close to public transit in TODs. Indian cities such as Delhi and Mumbai that are particularly struggling with a large shortage of affordable housing, need to address it through mechanisms such modifications in DCRs and robust TOD policies. Financing and legislative mechanisms for incentivising affordable housing within TOD can minimise the disruption, manage the risk of gentrification and leverage the project for addressing the housing problem.
Higher density, diversity and good urban design together with sufficeint housing in relation to jobs encourage walking, cycling and use of public transportation; but only with corresponding infrastructure and supporting policies. To push people away from the use of private vehicles and to pull them to use public transportation and non -motorised modes, mobility with all its aspects - effective parking management, improvement in public transportation, and provisions for NMT and pedestrian movement becomes necessary in a TOD; as illustrated in the next section.