As Indian cities struggle to house the poor, is there an alternative to slum rehabilitation schemes?

While the first cooperative housing society in India was started in Bangalore in 1909, Bombay followed rapidly in 1913. So in Bombay (now called Mumbai) we have had over a century of the successful working of cooperative housing societies.

A basic feature of these cooperative societies is that each occupant not only owns the apartment occupied but as a member and shareholder of the society also owns a share of the land on which the building stands.

This share of land ownership is normally in proportion to the size of the apartment occupied. So the apartment and a proportion of the underlying land are both owned by the occupant.

Thus, on sale of the apartment, the occupant realises not only the cost of construction of the apartment but also a share in the appreciation in land value that has taken place over time.

The amount to be paid to the cooperative society at the time of change in ownership is set out in the society’s bye-laws but is necessarily trivial, limited by law to no more than Rs 25,000.

Ownership of both land and building is entirely consistent with a market-oriented society in which land is a commodity, to be treated like any other commodity, fully open to the forces of supply and demand.

The problem is: land is not a commodity like other commodities; and subjecting it to market forces has devastating consequences for sensible urban development. The maximum damage is suffered by the poorer half of a city’s population. The poor are driven by market forces to undesirable locations, usually the ones furthest away at the perimeter of the city.

One other major difference between land and other commodities is that land falls into one of two quite different categories: (1) land that is privately owned and is both inheritable and tradeable, and (2) land that is commonly owned, that is, it is in the shared ownership of all the citizens of a country. It is not tradeable. It is off the market of tradeable lands.

It may be said to be “owned” by government in the sense that it is for government, on behalf of the people, to decide what to do with it. But such decisions must be taken in the full awareness of who owns it: the public. The use to which public land is put has to be for what is highest in the public interest, the one that best serves the largest number of people.

One such public interest is the provision of low- and middle-income affordable housing for the lowest 40 percentile of our population. No further evidence is needed for this other than the fact that 40% of Mumbai’s population lives in slums.

Rewarding developers

Such slums are spread all over the city because that is where the slum residents’ jobs are. Their homes are tiny, packed to the highest densities in the world, and without social amenities of any kind – certainly no schools or playgrounds or pocket parks or any of the other shared amenities that make urban life bearable.

So far in Mumbai the “solution” to the problem has been the work of the Slum Redevelopment Authority. Under the pretence of working for the welfare of slum residents, the real objective is how to reward developers. Slum residents are moved into pucca buildings in a part of the site they currently occupy. The rest of the site is used for high-value luxury housing or commercial development.

Land value in Mumbai can sometimes be as high as ten times the cost of construction. So the slum residents are offered their pucca housing free of cost as a sure-fire way of getting their consent to the scheme. Who would turn down unearned massive windfall profits that include the value of land on resale of a free flat? Meanwhile the developer sells the luxury component and walks away with a handsome profit, washing his hands of what happens next.

And what happens next is devastating. First, and important enough to demand a change, is that because of the very high densities demanded the buildings are necessarily packed into complexes with inadequate light and ventilation. Living on the lower floors is seriously damaging to health, as medical studies have reported.

Second, the lack of common social amenities in the original slum is replicated in the replacement. Urban life is no less narrow and devoid of basic social amenities than it was before. The buildings will last a century or more. So we are looking at several generations of children with damaged health and diminished physical growth.

But the worst of it is that the pucca housing built for slum dwellers is now on the market and can be sold for a profit. The land on which the slum stands is often mostly public land. By turning it over to a developer, it has been quietly moved from public ownership into the land market.

Many slum dwellers accept the redevelopment scheme for the reason that they can sell out with a grand bonanza for no effort on their part. Their replacement housing is no longer for low-income residents: it is on the private land market, and can be bought by middle-income families who would otherwise have to live far away in the very distant suburbs. Those who move out will find their way into new slums.

Insanitary, unhealthy homes

The middle-income families who take their place will live in long-lasting, insanitary, unhealthy homes without amenities. Alternatively, because the monthly outgoing for those living in the Slum Rehabilitation Authority buildings is sometimes unaffordable for low income families, if such families cannot find a buyer for their flat, the flat remains unoccupied and vacant while the owner reverts to living in a slum.

There is an alternative to Slum Rehabilitation Authority housing. This requires two major changes in mindset. The first is that government gives up its idea of making money out of slum lands, both for itself and for developers. Slum lands should be dedicated instead for use only by low-income residents, for their housing and their amenities.

Instead of declaring the land to be a slum, the land use category should be (and could easily be) changed of something like “low-income housing”. This would be a clear declaration of intent of what is to be the future use of that land.

The second major change in mindset is to take this a step further. We declare that land that is currently designated as a slum is not to be put on the market. The land that is to be used for low-income housing will in future not be turned over to one or more Cooperative Housing Societies. It will not be on the market. Instead it will be owned by what we will call a Community Land Reserve.

The important difference between the two is that in a Cooperative Housing Society, the underlying land (or a share in it) is owned individually, with individuals free to buy and sell their share of it in the land market; whereas in the Community Land Reserve it is owned collectively by the reserve.

Just as we have forest reserves where land is reserved for the preservation of forests, or wildlLife reserves with land reserved exclusively for the protection of wild life, we can similarly have Community Land Reserves with land reserved exclusively for low-income housing.

Individual ownership means that when an apartment is sold, it is sold with its share of the underlying land. In other words, the outgoing owner gets any appreciation in land value that has occurred since he first bought it. In the Community Land Reserve, the contract it has with the occupant on first occupation requires that selling can only be back to the reserve.

The contract specifies that the Community Land Reserve will pay a price by which the seller recovers only his own investment in the construction made when he first got the property, plus later investment in repairs, all indexed for inflation, less depreciation on account of any deterioration in the construction. Any appreciation in land value that has taken place in the interim belongs to the reserve and cannot be encashed by the outgoing seller.

The Community Land Reserve’s ownership of the land allows it to offer the new incoming occupant an apartment at the cost of construction, without having to pay for the cost of the land (which the earlier occupant also did not pay for). Thus the housing remains in use as low-income housing for all time.

How a Community Land Reserve functions is critical to its success. An important difference is that while a Cooperative Housing Society reports to the Registrar of Cooperative Societies, the Community Land Reserve is a Section 8 Company under the Companies Act operating under the laws that apply to all companies. A Section 8 company is a type of corporation established to promote non-profit activities.

But there is much more that is needed for the success of a Community Land Reserve than this change in reporting formality. This will be discussed in the next article in this series.

This is the third part in a series on low-income housing. Read the rest of the series here.

Shirsh Patel is a civil engineer and urban planner, one of the three authors who suggested the idea of Navi Mumbai. He is co-author of “6 Metros”, a comparative study of urban planning and implementation in London, New York, Tokyo, Hong Kong, Delhi and London, available in hard copy and Kindle on Amazon.