Housing, Infrastructure & Services

Extending services to the urban poor requires a mix of approaches and solutions. Misaligned incentives, entrenched political interests, and misunderstandings about the needs and capabilities of the poor must each be addressed. As local governments struggle with providing services to new populations and maintaining existing facilities, various paradigms need to be considered, including the inclusion of private sector approaches as applicable.

While each of the sub-sectors (Water and Sanitation, Solid Waste Management, Housing Finance, and Slum Upgrading) has a set of issues that are unique, this section discusses four overarching areas of concern for municipalities as they attempt to improve the quality of and broaden service coverage for the urban poor:

Security of Tenure

The urban poor often live in informal settlements treated as illegal by municipal authorities. The lack of legal recognition and the corresponding lack of tenure rights by the inhabitants can be a major hurdle to securing access to improved services. Solutions require innovation on the part of municipal governments and community involvement from the residents of the informal settlements. There are creative ways in which public authorities can grant recognition to informal communities aside from the formal process of titling which will create the right conditions for expanding and improving basic services:

  • Government announcement that an informal settlement has land use and development rights for a designated amount of time, i.e. 10 years of the right to use;
  • Private rental agreements whose legality is recognized and accepted by the government;
  • Community land trusts that provide long-term leases to their members;
  • Tenure recognition through the paying of property tax and utility services; and
  • Accretion of documents such as voter registration forms, ration cards, etc.

Given the pace of urbanization in developing countries, it is expected that the number of city residents without security of tenure will only increase if efforts are not made to search for solutions.

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Access to Basic Services

Affordability of basic services for the poor has long been a concern for both the government and the private sector. A common misconception that often results in the exclusion of the urban poor from access to basic services is that they are unable and/or unwilling to pay for public services such as piped water. In reality, though, the poor do pay, and often pay more than if they were formally connected to city services.

To increase access for the urban poor, municipalities should identify the needs and demands of the community, assess their willingness and capacity to pay, and then further involve the community in the decision-making and procurement processes for constructing the necessary infrastructure. Public consultations, including referenda, town meetings and open city government sessions enable citizens to determine their preferred service mix. Bringing stakeholders together in a strategic planning process may build consensus for services that not only meet immediate needs, but also will attract businesses and contribute to urban employment and economic growth.

As customers, citizens need full information about the related costs and benefits to the various service options available. Transparent pricing through users fees – instead of hiding service delivery costs in taxes – is one way to allow citizens to determine the trade-offs. A menu of options with varying degrees of service provision along with the opportunity for periodically upgrading the level of services would empower customers to choose a service that they feel is affordable and sufficient. Customers may increase or decrease their use of services depending on pricing, administrative arrangements, perceived levels of corruption, and the availability of alternative services.

In some cases it may still be deemed necessary to provide targeted subsidies for the poor to ensure that they can access key services. Rather than utilizing universal subsidies that generally benefit the middle and upper income groups, local or national governments should carefully structure targeted subsidies that benefit the poor. One way to do this is to subsidize the upfront cost of adding new connections rather than subsidizing the regular monthly service charge. This overcomes the barrier that many poor households face in paying the high upfront cost of connections. It also allows the service providers to set tariffs at a rate that achieves full cost recovery which is essential to maintain services and to expand and improve the quality of those services.

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Metropolitan and Community-Based Services

In recent years, many developing countries have transferred responsibility for service delivery to municipal governments. For such transfers to work, certain conditions are pre-requisites: local governments must have tariff-setting authority, not be constrained by national price controls, and have access to capital markets in order to finance system expansion. However, central and regional governments cannot expect to completely abandon municipalities even though the responsibility for urban service delivery has been assigned to lower levels of government. For example, as municipalities begin financing projects, generally some type of intergovernmental support for local borrowing is needed initially; similarly, local authorities may need the planning support of higher-level governments, as well as needing capacity building to levy and collect water tariffs, and assistance in selecting appropriate technologies.

Service delivery can also be managed either above or below the municipal level. Cities may find it economical to cooperate on delivering services that naturally extend beyond their borders or when economies of scale or complementarities exist. However, service delivery can also be effective at the community level by empowering user groups and citizen associations to develop effective solutions to their community's needs. The involvement of citizens as owners and operators may offer savings as the residents may be more careful to ensure proper maintenance of capital they have mobilized themselves. Researchers have found that community-built sewerage systems cost approximately one-half to one-third the costs of systems built by governments, and these systems also have shown improved collection rates, as citizens police themselves in the payment of fees.

Often, devolution of service responsibilities has also been accompanied by greater use of private enterprises. Decentralization provides an opportunity not merely to re-allocate service responsibilities, but to re-think how public and private institutions working in concert can best meet the challenge of efficiently providing services to residents while establishing the capacity to keep pace with urban growth in the future.

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Involving the Private Sector

Greater involvement of the private sector in service delivery, through innovative approaches like public-private partnerships, may improve the institutional efficiency of service providers. Those with a profit incentive are more likely to stress efficiency in service delivery, while at the same time, the public partners in these partnerships may require greater accountability from the service providers to consumers and local government. The result can be better focused cost-recovery strategies, along with billing and collection procedures that are both more accurate and better accepted by the community. These improved efficiencies and better rates of cost recovery can generate benefits at all levels. The urban poor receive customer-oriented service, service providers can operate a financially sustainable business without becoming a drain on the general municipal budget, and political leadership can gain political capital through enhanced access to services.

Of course private-sector participation in urban service delivery can also be abused. To be fully successful it requires a regulatory framework that rewards the service provider for meeting important public benchmarks, such as defined coverage ratios for the urban population, increased system efficiency, and continued attainment of quality standards. This in turn requires active monitoring of outputs by municipalities or their agents - often community NGOs. Cities selecting to involve the private sector in service provision should be explicit about their requirements in expanding coverage to the urban poor, particularly in unserved areas, as many private sector firms are hesitant to provide services to the poor, who are incorrectly perceived as unable to pay and thus a business risk. City governments can facilitate better services for the poor by sharing risk and rewards with the private sector partner through performance incentives, penalties for poor performance, targeted subsidies where appropriate, and by specifying deliverables of the private sector partner. Some examples of private sector involvement include:

  • Contracting services – If private firms (and NGOs) compete to deliver services and are rewarded appropriately for the results delivered, they are motivated to devise cost-saving methods.
  • Management Contract – Utilizes the technical expertise of the private sector to improve the management of operations, but the city still maintains overall responsibility.
  • Leases and concessions – Used when the government is looking for the private sector to take on more financial responsibility and risk. Usually, this means a longer term commitment, from 5 to 10 years for leases and 15 to 20 years for concessions, and the private sector is sometimes responsible for capital improvements to the system for the length of the concession.
  • Privatization – Used when the market is well-developed and the regulatory framework can ensure that fair pricing and adequate levels of coverage will be maintained.

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