Housing finance in developing countries : a transaction cost approach

In most developing countries, relatively little mortgage credit is supplied voluntarily, mainly because of the high transaction costs associated with enforcing contracts. In most countries, the supply of mortgage credit is restrained more by the cost of post-contract governance than by the cost of producing contracts. This distinction is important because before-contract costs are dictated by technological conditions - that is, the nature of the production function - so little can be done to change them. The costs of governance, on the other hand, are more amenable to change. If there are significant gains from reducing these costs, institutional reforms may help realize them. In the lowest-income countries, the before-contract transaction costs of providing housing finance are probably high enough per loan dollar that low levels of demand explain the relative smallness of the housing sector. In most other developing countries, housing finance systems could grow more spontaneously and rapidly if there were more effective post-contract enforcement procedures. This growth would improve the efficiency of financial systems and reduce distortions in the economy - so the economic benefits of reducing housing transaction costs are likely to be significant.Banks&Banking Reform,Housing Finance,Public Sector Economics&Finance,Economic Theory&Research,Non Bank Financial Institutions

Shelter strategies for the urban poor : idiosyncratic and successful, but hardly mysterious

In 1986 the World Bank prepared a strategy for low-income housing in developing countries. This work grew out of the Bank's efforts to support the urban poor through an extensive housing assistance program that was launched by Bank President McNamara's speech on urban poverty. By that time, the Bank had provided more than $4 billion of such assistance, and had undertaken an extensive research effort to design support for that lending. Much has changed since that time, not only in the way the Bank provides shelter assistance, more than doubling its support since that review, but also in the changing consensus as to what shelter strategy should be. The authors review the emerging consensus. They examine three new research areas: the empirical analysis of the effects policy has on housing supply; the richer understanding of the effects that land market regulations have on specific projects and on the functioning of urban areas; and the alleged mysterious effects that de Soto, for example, claims that effective property rights have not only for shelter policy but for development more generally. The authors also examine the emergence of both a new financial innovation, micro-enterprise finance, and the increased emphasis given to project design based on community participation, showing how these approaches more fully reconcile the incentives faced by beneficiaries and donors. In sum, the authors argue that the evolving consensus on shelter strategy is not nearly as mysterious as some would claim. Housing markets in most developing countries remain highly idiosyncratic and constrained. Nevertheless, the evolving consensus on shelter strategy appears to recognize these idiosyncrasies and policy constraints as evidenced by the strong and improving performance of the Bank's shelter lending.Regional Governance,Banks&Banking Reform,Housing&Human Habitats,Public Sector Management and Reform,Urban Governance and Management,Urban Governance and Management,Regional Governance,Banks&Banking Reform,Public Sector Management and Reform,Housing&Human Habitats

Comparing mortgage credit risk policies : an options-based approach

Buckley, Karaguishiyeva,Van Order, and Vecvagare analyze the structure of approaches to mortgage credit risk that are now being used in a number of OECD and transition economies. The authors'basic approach is to show how option pricing models can help measure and evaluate the risks of various schemes. They find that mortgage default insurance can be a cost-effective tool for both improving housing affordability and efficiently addressing some of the rationing that characterizes this market. When correctly structured, as it is in a number of transition and market countries, this kind of program can be expected to reduce nonprice rationing at an actuarially fair price. At the same time, considerable care must be exercised in the development of such instruments. Geographical risk diversification, particularly across borders, can play a major role in the success of these programs. Such diversification could be important not only in smaller transition economies but in EU countries as well.Insurance&Risk Mitigation,Banks&Banking Reform,Environmental Economics&Policies,Payment Systems&Infrastructure,Labor Policies,Banks&Banking Reform,Insurance&Risk Mitigation,Housing Finance,Environmental Economics&Policies,Health Economics&Finance

Is Accra a superstar city ?

A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand.Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.Economic Theory&Research,Housing&Human Habitats,Banks&Banking Reform,,Public Sector Management and Reform

Rapid induction bonding of composites, plastics, and metals

The Toroid Bonding Gun is and induction heating device. It is a self contained, portable, low powered induction welding system developed for bonding or joining plastic, ceramic, or metallic parts. Structures can be bonded in a factory or in a the field. This type of equipment allows for applying heat directly to the bond lines and/or to the adhesives without heating the entire structure, supports, and fixtures of a bonding assembly. The induction heating gun originally developed for use in the fabrication of space Gangs of bonders are now used to rapidly join composite sheet and structural components. Other NASA-developed applications of this bonding technique include the joining of thermoplastic composites, thermosetting composites, metals, and combinations of these materials

Ceramic susceptor for induction bonding of metals, ceramics, and plastics

A thin (.005) flexible ceramic susceptor (carbon) was discovered. It was developed to join ceramics, plastics, metals, and combinations of these materials using a unique induction heating process. Bonding times for laboratory specimens comparing state of the art technology to induction bonding were cut by a factor of 10 to 100 times. This novel type of carbon susceptor allows for applying heat directly and only to the bondline without heating the entire structure, supports, and fixtures of a bonding assembly. The ceramic (carbon film) susceptor produces molten adhesive or matrix material at the bond interface. This molten material flows through the perforated susceptor producing a fusion between the two parts to be joined, which in many instances has proven to be stronger than the parent material. Bonding can be accomplished in 2 minutes on areas submitted to the inductive heating. Because a carbon susceptor is used in bonding carbon fiber reinforced plastics and ceramics, there is no radar signature or return making it an ideal process for joining advanced aerospace composite structures

Method of Attaching Strain Gauges to Various Materials

A method is provided to bond strain gauges to various materials. First, a tape with an adhesive backing is placed across the inside of the fixture frame. The strain gauge is flatly placed against the adhesive backing and coated with a thin, uniform layer of adhesive. The tape is then removed from the fixture frame and placed, strain gauge side down, on the material to be tested. If the material is a high reluctance material, the induction heating source is placed on the tape. If the material is a low reluctance material, a plate with a ferric side and a rubber side is placed, ferric side down, onto the tape. The induction heating source is then placed upon the rubber side. If the material is an insulator material, a ferric plate is placed on the tape. The induction heating source is then placed on the ferric plate. The inductive heating source then generates frequenty from 60 to 70 kilocycles to inductively heat either low reluctance material, ferric side, of ferric plate and provides incidental pressure of approximately five pounds per square inch to the tape for two minutes, thoroughly curing the adhesive. The induction heating source, and, if necessary, the plate or ferric plate, are then removed from the tape after one minute. The tape is then removed from the bonded strain gauge

Integrating housing wealth into the social safety net : the elderly in Moscow

The elderly in Russia have often been among those least able to cope with all the changes that have taken place during the transition. Unlike the situation prior to reform-when pensions were stable-they now face considerable uncertainty. If they have not been in poverty, many have been close to it. While the elderly have experienced difficulties, they have also been the beneficiaries of a very large transfer of wealth. In Russia, as in most transition economies, housing was privatized, under giveaway terms. As a result, although many elderly households have low incomes, based on their wealth, their deprivation would appear to be less serious. Unfortunately, in the absence of a developed financial system, it is difficult to use this wealth without selling it. In Russia, all households, not just the elderly, have not been able to borrow. The existence of such large unencumbered wealth holdings by lower income elderly households creates an opportunity to provide what might be termed"housing safety net insurance"at low public cost. More than reducing the incidence of poverty, such schemes could allow also many of the elderly to be able to move out of poverty and into middle income status. The authors explain why many of the elderly in the former Soviet Union (FSU), not just in Russia, are likely to have so much housing wealth. Then they discuss how financial instruments could access this wealth. The authors also discuss the empirical situation of the elderly in Moscow, illustrating the potential demand for such products. Finally, they suggest that the results for Moscow are likely to be similar in many other FSU countries because these countries also have elderly populations who also own a great deal of unencumbered housing wealth.Environmental Economics&Policies,Public Health Promotion,Payment Systems&Infrastructure,Banks&Banking Reform,Health Economics&Finance,Health Monitoring&Evaluation,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Health Economics&Finance