Dhaka is grappling with severe shortages of affordable housing due to en masse migration from the countryside into new urban centers, says a new report of McKinsey and Company.
The report shows that emerging market cities like Lagos, Dhaka, Mumbai and Beijing have the most severe shortages of affordable housing by that measure.
The report finds that the housing affordability gap is equivalent to $650 billion per year, or 1% of global GDP. In some of the least affordable cities, the gap exceeds 10% of local GDP.
This could mean that the global affordable housing gap would affect one in three urban dwellers, about 1.6 billion people.
These largely market-oriented solutions—lowering the cost of land, construction, operations and maintenance, and financing—could make housing affordable for households earning 50% to 80% of median income.
The report estimates that roughly $16 trillion in spending on construction and land would be required to replace today’s inadequate housing and build the additional units needed by 2025.
According to the report, four approaches can narrow the housing-affordability gap by 20% to 50%.
Such as unlocking land supply, reducing construction costs, improved operations and maintenance, lowering financing costs for buyers and developers.
Affordable housing could represent a significant opportunity for the global construction and housing-finance industries. Building homes for all the low-income households added in cities by 2025 could cost $2.3 trillion.
By 2025, roughly one in three people around the world could live in substandard housing or be forced to forgo other essentials, like medical care, to pay for their lodging, says the report.
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