Reports – Galina Alova

THE 2013 CASLE LECTURE PRIZE
has been awarded to
Galina Alova

Galina was born in Estonia and educated in Britain.  She holds an MA degree in Economics from the University of Glasgow and an MPhil degree in Urban Planning from the University of Cambridge.  Galina’s main research interests lie in spatial economics, international trade and development.  She is currently working as an Overseas Development Institute Fellow in the Ministry of Trade and Industry in the Republic of Namibia.  Her main areas of responsibility are to lead country’s value chain analysis and further industrialisation policy.

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Housing Inequality in Latin America:  The Case of Quito, Ecuador

Galina Alova
Department of Land Economy
EcoHouse Initiative
University of Cambridge

Abstract

Latin America has demonstrated steady economic performance.  This is, however, fraught with several challenges, including rapid urbanisation, poverty and housing inequalities.   This article presents the results from a qualitative study conducted in the capital of Ecuador – Quito.  The study revealed dramatic disparities in housing and living conditions across and within neighbourhoods, rooted in a vast income gap and severe socio-physical isolation.   The private and public housing sectors tend to be largely oriented on serving the needs of upper-low and middle-income groups, while people in extreme poverty or on very low incomes remain largely excluded.

1. Introduction

Ecuador constitutes a good case study for understanding developments in Latin America. Like other countries in the region, Ecuador is experiencing steady economic development, but also shares the region’s main challenges – rapid urbanisation, poverty, income inequalities, a housing deficit and slum creation.  While the residential market in Quito, the capital of Ecuador, is undergoing a boom, 53% of city’s dwellings constitute informal settlements (UNEP, 2011).  However, research on the local housing market remains scarce. This study, therefore, seeks to contribute to closing the evidence gap.  The aim is to reveal the main challenges – the housing market failures and their causes – which may have been masked by generally strong performance of the housing sector.

This article discusses the findings of a qualitative study conducted in Quito (1), which revealed dramatic disparities in housing and living conditions, rooted in a vast income gap and severe socio-physical isolation of some remote disadvantaged communities.  The private and public housing sectors tend to be largely oriented on serving the needs of upper-low and middle-income groups, while people in extreme poverty or on very low incomes remain largely excluded.

This paper is structured as follows: first, it covers the theory of housing economics, outlining the origin of key market failures.  Next, the methodology is discussed, followed by the analysis and interpretation of the results.  Finally, the paper summarises the main conclusions of the study, and the opportunities for further research.

(1)    This study forms part of extensive mixed-method researech which in addition incorporates a hedonic pricing model and a policy document analysis.  The results will be discussed in future publications.

2. Literature Review

2.1. Housing Economics: Theory

Housing is a complex compound commodity – it can both be an investment and consumption good, a luxury and a necessity, a stock and a flow of services.  Housing has also a set of distinct features (Tu, 2003).  Its three core attributes are spatial immobility, durability and heterogeneity (Megbolugbe et al, 1991).  Residential property as any other real estate varies by building, land, and site characteristics as well as the local institutional, legal and environmental framework.   Moreover, high transaction costs and asymmetrical information impede the liquidity of property markets (Witte et al, 1979).  The existence of such well-differentiated products, instead of homogenous easily transacted goods, grants developers market power which is usually incompatible with perfect competition and an equilibrated market (White & Allmendinger, 2003).  Housing supply also tends to adjust less quickly to external shocks than demand leading to their mismatch in the short term (Maclennan, 1982).Such inefficiencies may manifest in market failures, e. g.  a housing deficit and poor dwelling conditions, generating further problems of price inflation, reduced affordability and slum creation, and may require government intervention (GLA, 2003).

2.2. Quito: Housing Deficit

There is evidence that, despite increasing construction, supply still struggles to meet the strong demand for housing in Quito.  Comparing 2010 Census data on the number of households against the dwelling units in Quito, a quantitative deficit of 132,461 homes can be identified.  The shortage is disproportionately higher in urban parishes due to the influx of rural migrants.  In addition, a qualitative deficit can be estimated which takes into account the condition of the existing housing stock.  The Quito Municipality uses the concept of precariousness of a dwelling.  Certain building materials are considered inferior, e. g.  straw and zinc for roofs; cane and soil for floors and anything but bricks and concrete for walls. From these considerations, there were 87,934 substandard dwellings in Quito in 2010 (DMQ, 2011) (Fig.  2. 1).  In order to explore the problems of such housing inequalities in greater detail at a micro level of neighbourhoods and households, a field trip to Quito was organised, the results of which will be discussed in the next sections.

3. Data and Methodology

This research is based on site visits and interviews with a number of stakeholders, conducted during a field trip to Quito in March-April 2013.   The locations for the site visits were selected based on their socio-economic characteristics, and the recommendations from the Latin American NGO Un Techo para mi País.  The aim was to explore the housing conditions in vulnerable communities, suffering from poverty and social and geographical exclusion.  Quito Metropolitan Area comprises 32 urban and 33 rural parishes (Carrión & Vásconez, 2003). Quito is a mono-centric city with the centre-north linear nucleus constituting a more affluent urban core, relative to the south (WB, 2008).  However, neighbourhoods within parishes are not homogenous, with some pockets of deprivation still present in the north, while wealthier communities may also occur in the south.  As a whole, urban Quito is surrounded by a so-called belt of misery (cinturón de miseria), the neighbourhoods experiencing extreme poverty and social exclusion (UN-Habitat, 1995).  

Figure 2. 1.  Quantitative and Qualitative Deficit, Quito 2010 (housing units)

Visits were undertaken to the following neighbourhoods: San Francisco de Miravalle, La Roldós, Pisulí.  Urbanización El Condado, Chillogallo,Rancho los Pinos and Lucha de los Pobres (literal translation “the Fight of the Poor”).  In addition, families in the affluent central neighbourhoods were visited, including Iñaquito, Cumbayáand Chaupicruz to compare their living conditions against the poor peripheral areas.

The site visits focused on assessing the quality of housing based on the following criteria: a) building materials; b) quality of access roads; c) basic and telecommunication services; and d) topographic safety.  Site visits were complemented by interviews with households categorised by: a) size, b) income group (extreme poverty, low and middle income); c) tenure type (owner occupation, private renting, illegal settlement); and d) location.

Overall 24 households were interviewed, covering directly and indirectly the living conditions of a total of 121 people.   In addition, ten interviews with stakeholders in the field were organised to obtain different perspectives on the Quito housing market (Appendix). Questionnaires formed the basis for the interviews, however, in most cases conversations took a semi-structured form.  All interviews were recorded and the audio material subsequently transcribed and coded, applying the technique of open and axial coding (Corbin & Strauss, 1990).  

4. Field trip findings

4.1. Housing Stock: Physical Assessment

4.1.1. State of Homes

The field visits to residential neighbourhoods of Quito revealed dramatic inequalities in living conditions.  Luxurious apartment complexes with private pools and gyms coexist with mud huts in slums, within just a few miles distance from each other.  Differences also occur, albeit to a smaller extent, within poor neighbourhoods.  Central parts of communities usually constitute lively shopping areas with homes of adequate quality, and even perhaps an internet café.  However, the housing stock deteriorates only a few hundred metres into a neighbourhood, featuring physical degradation, particularly apparent in the general state of houses and the building materials used.  Although cement and bricks prevail, adobe, bahareque and mud are also frequent in poorer remote locations.  Room density also varies dramatically, from the cases of extreme poverty when as many as seven people can share one bedroom, to families living in spacious apartments with spare guest rooms.

What is also particular about the poor neighbourhoods is that they tend to have a high number of unfinished multi-storey buildings with usually only the ground floors fit for living. Families hope to continue construction, however, often these plans remain unfulfilled and buildings can stay half-built for decades.  The interviews with the municipality revealed another perspective on this matter: the households in illegal settlements often seek to build second and third floors to get a higher compensation in case the government intends to relocate them in the future (Interviewee B).

4.1.2. Infrastructure and Services

The quality of roads in Quito varies.  The main roads are usually good.  However, in the outskirts of the city, in illegal settlements and higher in the mountains, the access tends to be worse and roads are often gravel or mud surfaced.

“Ambulances do not come up here [Miravalle], we need to carry our diseased and handicapped to the lower part where the municipality built road starts. ” [Household B]

As a result, some communities may experience geographic isolation, affecting their quality of life.  A private foundation, Tierra Nueva, specifically targets such neighbourhoods: “We send our doctors to remote communities which do not have access to medical help” [Interviewee I].However, most of the people interviewed considered road conditions and public or private transport arrangements sufficient to meet their needs.

As for the basic services, the majority of households visited, including informal neighbourhoods, have electricity and potable water.  In some rare cases water is obtained from wells.  Sewage and garbage collection services tend to be absent in poor neighbourhoods, most households use septic tanks and either burn or recycle their waste.  In the interview with the municipality, planners clarified that the government aims to provide basic services to all neighbourhoods which are older than 10 years, starting usually with electricity and roads (Interviewee A, B).

Television, telephone and internet are still considered a luxury by most poor families, as these are usually out of their budgets.  A standard cable television monthly bill is $30, compared to unemployment benefit of $50 and a minimum wage of $318 (America Economia, 2013).   Therefore, seeing an antenna on a Techo home in Pisulí was odd and triggered a question on affordability:  

“We use a pay-as-you-go system which we top up only when we have spare money for entertainment.  This does not happen often, as we sometimes struggle to provide food to our children. ” [Household G]

4.1.3. Topographic Safety

Population living on steep slopes is exposed to landslides and floods which pose a threat to property and even lives:

“We lost our adult son in a landslide which made us relocate higher up hill.  Our house is still often flooded, damaging our belongings.  Out of four bedrooms we use only two. ”[Household L]

However, despite the risk most of the households expressed little desire to relocate, being driven by more short-term goals:

“We are not worried about the volcano, because if it erupts the lava would pass through by river, and this is why we do not need to move.   We would rather expand the house. ” [Household L]

Such attachment to their home communities significantly impedes slum clearing.  The interviews with the municipality shed light on cases where families opposed government efforts to relocate them by starting to build around the slums, exacerbating the problem of inadequate housing (Interviewee B).  

4.1.4. North-South Divide

Along with the core-periphery disparities, Quito has a distinct socio-economic divide between the richer north and the poorer south going back to colonial times, when the Spanish settled in what today is downtown, while the indigenous people moved to the south.  These differences were aggravated by city’s north expansion and planning in the 20th century “in a way that the south was meant to be for the poor, and the north was for all the rich people.  As a result, all the libraries, universities and public parks were located in the north. ”[Interviewee D]

The dramatic consequences of such urban planning became apparent decades later when the population in the south grew, resulting in increasing density but relatively lower public service provision (Interviewee D).  Today, the municipality has expressed its commitment to smoothing these disparities under the Mayor’s plan ‘El Quito del Buen Vivir’ (Quito of Good Living) (DMQ, 2011).   Although some people view the plan with scepticism: “this programme is just a campaign, it does not have concrete implementation behind it” [Interviewee D], Quito underwent a dramatic transformation in recent years.  Over last two decades, $250 million were invested into the restoration of the historical centre.  Quito’s regeneration programme involves various other projects, including the construction of a new airport, south-north metro line and a highway (Invierta en Quito, 2013).

4.2. Inequalities: Underlying Causes

4.2.1. Social Exclusion

Besides the housing disparities, the segregated nature of the city also manifests in the social exclusion of some vulnerable communities, aggravating the existing inequalities.  Social inclusion, as defined by a researcher at the National Institute of Advanced Studies (IAEN):“should involve formal employment; public services; education; and community participation” [Interviewee D].  The vast majority of the people interviewed living in extreme poverty lacked access to these elements and suffered from a severe information vacuum.  In most cases they did not have a practical understanding of government social programmes in place which could improve their living conditions.  Such families are usually unable on their own to reach out for help.  Therefore, NGOs like Techo do a lot of ground work to identify and target these pockets of deprivation:

“Training programmes and assistance with employment seeking and land legalisation are an essential next step, after constructing transitional shelter, towards a sustainable positive change in vulnerable neighbourhoods. ” [Interviewee F]

4.2.2. Access to Housing and Credit

The interviews with households and professionals pointed to dramatic inequalities in access to housing:  

“In general, there is a lot of supply of housing on the market.  If your annual income is $3,000-5,000 you can choose from a lot of projects.  There is actually oversupply.  But for the lower income class, there is a lack of supply, because big construction companies do not want to offer cheap housing.  The prices currently are between $40, 000 and $120, 000. This is the market for Quito at the moment. ” [Interviewee C]

Another problem which is closely related to the undersupply of cheap housing is the access to credit, which government seeks to resolve through its social programmes.  The respondents from the middle class generally appreciated the positive impact of these efforts:

“Currently it is very easy to secure a loan from the government.  I managed to buy an apartment and am thinking of buying another one.  I need to hurry because the easy access to credit pushes up prices and may even create a bubble. ”[Household U]

However, most interviewees on low incomes admitted that they were not able to meet the conditions for either a bank or a subsidised public loan:

“Although I have a regular income as a security guard, I did not get a small loan from IESS [Social Security Institute] to carry out improvements to my house.  I had to seek an alternative lending source. ”[Household S]

The reason is that, in practice, for people on very low incomes there is no significant difference between access to a private or a public loan.  

“The poor usually do not qualify for a bank loan.  However, the public loan is almost the same thing: it will depend on how long you have worked and how much you have paid to Social Security.  If you earn $200 a month, it may take 20 years of work to get an IESS loan. ” [Interviewee C]

Moreover, households have to provide a down payment from their savings which is often unaffordable:

“In order to obtain a subsidy and loan, a household will be required to provide 30% of the sum needed from savings.  This may take 10 years, because we are talking about extreme poverty, here. ” [Interviewee E]

4.2.3. Community Self-Organisation

The lack of strong community leadership often also impedes breaking the vicious cycle of social exclusion and poverty.  An example of weak community action is Los Pinos – a poor neighbourhood which still lacks sewage, health and education services (Minadores de Sueños, 2013).  

“A part of Los Pinos is on a slope and therefore in a landslide risk zone.  The Municipality does not want to formalise the neighbourhood as a whole.  However, the main problem is that the community is extremely dis-organised, with high crime and violence record, and therefore cannot independently take forward the case for legalisation of at least part of the area. ” [Interviewee J]

In such situations some external third-party advice and help are essential for inspiring and empowering the communities to stand for their rights:

“We offer training courses to community heads in poor neighbourhoods on how to raise their voice and ensure that communities’ interests are respected. ” [Interviewee E]

Often, however, step-by-step guidance is required, especially in the complex process of land legalisation:

“As the first step of neighbourhood legalisation, the Ministry of Agriculture to whom this land belongs asked a price of $900,000.  After two years of negotiations we managed to bring it to $9,000 which means $50 per household.  As an average household income here is $80, it will take them up to a year to save it. ” [Interviewee E]

The municipality also seeks to improve the engagement of excluded households by building community centres.  On the site visit to Pisulí, the author had a chance to meet the Mayor of Quito who was attending the opening of a new community centre in the neighbourhood.

 4.2.4. Land and Family Ties

The interviews with vulnerable communities also found a strong attachment of people to their neighbourhoods.  Land tends to have both a financial and emotional value, granting its owner a sense of security and confidence.  These ties seem to be stronger amongst people on lower incomes living in peripheral areas.  This is also expressed in their preference to live in a house close to land.  People in affluent parts of Quito are more flexible, often living in high-rise apartment blocks.  

Moreover, family ties are also of great importance to people.  This often leads to high densities, when three or more generations live in one household.  Most families interviewed in slums said they would not part from their relatives even if they were offered a better home elsewhere.  Such strong ties may pose a significant problem to the municipality, which seeks to eliminate illicit construction and to re-locate people to safer areas.  Communities often need to be re-housed as a whole.

However, this trend is not exclusive to poorer families.  Young middle-class people also tend to stay in their parents’ homes until they get married, even if they already own their property.  Therefore, living in large families is not dictated solely by economic but also cultural factors.  

5. Conclusions

This article has sought to analyse the Quito residential sector and expose potential market failures and their causes.  It concludes that the significance of housing inequalities tends to be masked by the generally strong economic position, as private and public lending are easing households’ credit constraints, while favourable market developments support growth in the construction sector.   The site visits and interviews helped to reveal dramatic disparities in housing conditions, mainly in the general state of dwellings, the building materials, availability of basic and telecommunication services, and the quality of access roads.  The location effects were shown to be of central importance, with housing conditions gradually deteriorating from the north to the south, to the urban fringe, and to rural parishes.  The housing sector works in a way that those in most need are denied access to the benefits of the country’s rapid development, its booming residential market and government social policies.  While upper-low and middle-income families enjoy a choice of housing projects and credit sources, people on very low incomes cannot afford to access them.   Moreover, the poor often live in a social and information vacuum, lacking an understanding of their rights and the options available to them.  

Further research is required to gain better knowledge of the challenges and needs of these very low income communities, in order to design tailored policies to alleviate their exclusion, in the context of the growing economy.  This qualitative work is therefore complemented by a study, yet unpublished, based on a hedonic model of the relationships between a number of dwelling and location variables and the rent variations in the urban and rural Quito.    

6. References

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7. Appendix

Table 7. 1. Household Interviews, Quito March-April 2013

Table 7. 2. Interviews with Professionals

 

©Galina Alova

The author retains the right to publish this work in the future.