In developing countries communities are struggling to meet the need for housing. As affordable housing goes so does the economic vitality of a country and community. McKinsey’s MGI report offers four strategies for which economic development can create reasonably cost effective measures for producing cost effective housing.
Unlocking land supply. Since land is usually the largest real-estate expense, securing it at appropriate locations can be the most effective way to reduce costs. In even the largest global cities, many parcels of land remain unoccupied or underused. Some of them may belong to government and could be released for development or sold to buy land for affordable housing. Private land can be brought forward for development through incentives such as density bonuses—increasing the permitted floor space on a plot of land and, therefore, its value; in return, the developer must provide land for affordable units.
Reducing construction costs. While manufacturing and other industries have raised productivity steadily in the past few decades, in construction it has remained flat or gone down in many countries. Likewise, in many places residential housing is still built in the same way it was 50 years ago. Project costs could be reduced by about 30 percent and completion schedules shortened by about 40 percent if developers make use of value engineering (standardizing design) and industrial approaches, such as assembling buildings from prefabricated components manufactured off-site. Efficient procurement methods and other process improvements would help, as well.
Improved operations and maintenance. Twenty to 30 percent of the cost of housing is operations and maintenance. Energy-efficiency retrofits, such as insulation and new windows, can cut these costs. Maintenance expenses can be reduced by helping owners find qualified suppliers (through registration and licensing) and by consolidated purchasing. For example, buying consortia in the United Kingdom have saved 15 to 30 percent on some maintenance items for social housing.[…]