Skip to main content

A view of Delhi, from above

Photo credit: iStockphoto/urbancow

The world is undergoing an unprecedented urban transformation, with nearly 68 per cent expected to reside in urban areas by 2050. This global trend brings both promise and a significant challenge: how to ensure that cities of the future are not only thriving but also inclusive, low-carbon, climate resilient and sustainable?

Inclusive and sustainable cities are places of equity, opportunities and resilience. The Sustainable Development Goals, particularly SDG 11, envision cities that prioritize the well-being of people and the planet. However, the journey towards urbanization is marked by pressing challenges, i.e., infrastructure strains, inadequate public services, rising economic disparities, an affordable housing crisis and the ongoing threat of extreme weather events posed by climate change.

Holistic housing, urban planning and disaster-risk management policies, strategies and regulations are among the key recommendations presented in the ESCAP – UN Habitat 2023 report Crisis Resilient Urban Futures to tackle the affordable housing crises in cities.  

But what binds the solution for these urban challenges? The answer is finance. Urban finance is a common thread that runs through these intricate issues, providing the means to address them. Effective urban finance requires balancing residents', businesses' and public entities' needs while considering sustainability, climate impacts and equity.  

Despite being a cornerstone of inclusive urbanization, affordable housing is a challenge that often intersects with economic disparities and inadequate infrastructure. The 3 billion people worldwide will require adequate, affordable housing by 2030. In Asia and the Pacific, home to a significant portion of the world's urban population, finance and capacity building enable cities to allocate resources to support affordable housing initiatives.

However, meeting the huge demand for affordable housing presents a formidable challenge for public finance and surpasses governments' budgets. Here, private sector-led end-user financing is crucial, helping people improve or own housing in their own terms, easing the strain on public funds. The $16 trillion gap between affordable housing demand and supply presents a sizeable business and social impact opportunity.

Urban finance acts as a catalyst in mobilizing resources and creating an enabling environment for developing and preserving affordable housing options within urban areas. It can facilitate partnerships between public and private entities to jointly invest in affordable housing projects. Public entities can provide land, tax incentives, or grants, while private developers bring in expertise and funding to construct and manage affordable housing.

Addressing climate change and providing affordable housing are key challenges that cities face globally. In India, for example, more than 40 cities are listed in the world’s 100 most vulnerable cities to environmental and climate-related events. Affordability issues and limited supply in the region cause a significant proportion of the urban population to reside in settlements that are under-serviced, making them more vulnerable to the impacts of climate change, natural disasters, and public health emergencies. There is a need to view urban planning from the perspective of embedding sustainability in terms of ensuring climate-resilient affordable housing.

The Govt of India has launched “Housing for All by 2022” under its policy imperative of the National Mission for Urban Housing. Adequate, accessible yet affordable climate finance is the lynchpin for India to achieve its climate goals. Innovative investments in new energy systems, housing and infrastructure that can withstand climate change impacts, while securing people's health, jobs and well-being in its burgeoning cities is pertinent.

Organizations like Habitat for Humanity have been at the forefront of innovative solutions to global housing challenges. Habitat’s MicroBuild Fund, a $100 million social investment fund launched in 2012, was the first housing-focused microfinance investment vehicle dedicated towards low-income families. Positioned as blended financing, MicroBuild models a systems-level approach to address the lack of housing finance options available to low-income households by providing both long-term capital and advisory services. It has demonstrated the financial viability and the opportunity to scale up these products to meet the vast housing demand, encouraging other institutions to support this market. Most of the fund's on-lending is used for home improvement and small construction loans, and roughly 20 percent small construction loans and roughly 20 percent of the portfolio has also been used for affordable mortgages in urban areas.

Assistance is being provided to support Asian Cities’ ability to access climate finance for low-carbon and climate-resilient development under the Urban-Act program financed by the German Government and implemented by ESCAP in partnership with GIZ, CCFLA, UCLG-ASPAC and IMT-GT. Financing of decarbonization efforts and integrating renewable energy technologies in affordable housing developments is an important aspect of urban climate finance recognized under the program.

Cooperation at the regional level lets participants exchange insights and strategies to make urban finance and affordable housing finance more accessible and effective. The upcoming 8th Asia-Pacific Urban Forum and Asia-Pacific Housing Forum this October are pivotal platforms in facilitating knowledge and idea exchange.  

Print this article
Christopher Kaczmarski
Cities and Climate Change Technical Advisor, ESCAP
Jitendra Balani
Global Director, Program Design-Housing Finance System, Habitat for Humanity International
Kanika Grover
Urban Climate Change Specialist, ESCAP
Farzana Bijur
Consultant, Habitat for Humanity International
Environment and Development +66 2 288-1234 [email protected]