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Oxford, UK and Malden, USAIJURInternational Journal of Urban and Regional Research0309-1317Blackwell Publishing Ltd 2005December 200529
4895915Original ArticlesHousing as a tool of economic development since 1929Godwin Arku and Richard Harris

Volume 29.4 December 2005 895–915 International Journal of Urban and Regional Research

Housing as a Tool of Economic

Development since 1929
GODWIN ARKU and RICHARD HARRIS

The wealthier societies can afford better dwellings than the poorer, and many writers
and governments have concluded that the best way to improve a nation’s housing is
to promote economic growth. But housing is not simply an indicator, a litmus test of
prosperity. Dwellings are places and objects of work, not to mention major repositories
of wealth. Builders employ thousands of workers, with multiplier effects on suppliers
and lenders. The housing sector, in other words, is a key component of development.
Like industry and agriculture, it may be deployed as a policy tool: governments may
use it to reduce unemployment, or to improve health and productivity; they may turn
existing, insecure wealth into productive capital by regularizing the ownership claims
of squatters (de Soto, 2000). Potentially, then, housing is a tool of economic
development.
It is a moot point as to how long, and even whether, international development
agencies have fully recognized the economic significance of housing. Since the late
1980s, various statements by the United Nations Centre for Human Settlements
(UNCHS) and the World Bank have asserted this significance, arguing for a strategy
that would enable the housing sector to play an active role in economic and social
development (UNCHS, 1987; 2003; World Bank, 1993; Yusuf, 1999). Many observers
have emphasized the novelty of this point of view, and assumed that in earlier
decades international agencies did little in the housing field. For example, Burns and
Grebler (1977: 86) have commented that ‘only exceptional colonial administrations had
concerned themselves with the housing . . . conditions of the native population’. But
such judgements are hasty. Few have attempted to examine the earlier policies of
international agencies in the housing field, and none have sought to identify their
economic logic (cf. Pugh, 1997; 2001; Harris and Giles, 2003). Through a survey of the
statements and actions of those agencies since the 1930s, this article sets out to rectify
this neglect and argues that housing has long been viewed as a tool of economic
development, although to this day its full potential has not been realized.
We frame our survey as a historical narrative because the fluctuating views of
international agencies have reflected a changing economic and geopolitical context. It
was in the inter-war period that industrialized nations began to promote growth in what
we now term the developing world. The first to do so were colonial powers, notably
Great Britain. From 1929 the British government made funds available for ‘colonial
development’; their magnitude and scope were expanded considerably in 1940 and then
again in 1945. After that, however, colonial empires rapidly disintegrated. The United
States took over as the leading provider of development finance and aid: directly in its
own de facto colony of Puerto Rico; powerfully through bilateral and multilateral
agencies that were active in Latin America; and prominently in new global institutions,
notably the World Bank. At the same time, the formation of the United Nations, with
its associated agencies and commissions, created a fully multilateral organization that,
inter alia, sought to promote economic development. These varied agencies faced
changing circumstances with different agenda, and we consider each in turn. We focus
initially upon the evolving views of Great Britain, as the leading colonial power, and in

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896 Godwin Arku and Richard Harris

particular upon the actions of the Colonial Office, the Colonial Advisory Committee
(1929 onwards), and the Colonial Development Corporation (1948 onwards). After
turning to the emerging views of the United States in the early post-war period, at first
in Puerto Rico and then throughout the Americas in the second section, we then compare
these with those that were being expressed within and by the United Nations in
the same period in the third section. Finally, we consider the views about housing that
were expressed by the World Bank, which, since the 1970s, has been the dominant
international agency in the housing field.
In each case it has been necessary to sieve carefully a large body of material.1 Housing
has economic aspects while serving social needs: the two aspects are intertwined. The
public agents of international development have responded to social conditions, often
in response to political pressure, and this has shaped their policies with respect to
housing. Britain became interested in colonial housing from the 1930s when the loyalty
of colonial populations became increasingly doubtful. The United States expanded its
involvement in the international housing field in the early 1960s to help meet the
challenge of communism. The World Bank entered the fray in the early 1970s after
critics had charged it with being insensitive to social needs. In each case, social and
political considerations loomed large in public debate. Often, the rhetoric of justice and
humanity drowned out economic considerations, so that investments in housing were
made to appear as social expenditures that slowed economic growth. Sometimes, a
policy might seem to promote both economic growth and social justice, so that its
proponents emphasized one aspect over the other, depending on the audience. On still
other occasions, humanitarian discourse cloaked economic motives. In each case, it is
difficult to discern what policymakers really believed about the economic role of
housing. The economic logic and justification for housing programs, then, must be
teased out.
Famously, Keynes once claimed that public policies embody the ideas of discredited
economists, but in the housing field the reverse has usually been true. Theorists of
development have been slow to appreciate the importance of housing. They have been
influenced by economic assumptions that have downplayed the influence of living
conditions on economic growth and that have condemned the building industry as
disorganized and backward (Harris and Arku, 2006). Even today, for example, housing
rarely figures in debates about the economic causes and consequences of globalization.
International agencies have undoubtedly been influenced by such views but the evidence
suggests that, just as often, they have ignored them. We discuss some of the implications
of this fact in the conclusion.

Great Britain and the late colonial era, 1929–60s

A variety of public institutions have been promoting economic development in the
developing world since at least the inter-war years. These include the agencies of
national governments, who have typically offered bilateral aid, as well as those of
international organizations such as the United Nations and the World Bank, who have
provided the increasingly important channels of multilateral assistance. At the very
beginning, and to varying degrees since the 1920s, housing has been part of their
schemes.

1 Published sources included annual reports and yearbooks of the World Bank and United Nations.
We also surveyed extensive UN material on housing that received limited circulation, together with
the unpublished records of the British Colonial Office. We would like to thank the Social Sciences
and Humanities Research Council of Canada, and the British Academy for financial support. Aurora
Tangkeko at the UN Archives provided practical assistance. Useful suggestions were provided by
Graham Tipple and two anonymous readers.

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Housing as a tool of economic development since 1929 897

The earliest agencies of development were those of the colonial powers; they
have routinely been criticized or downplayed but clearly had a substantial influence
(Cooper, 1997; Rist, 1997: 56). The weightiest colonial power was the British.
Historians continue to debate Britain’s motives in acquiring its empire; clearly these
were mixed, and changed. By the late nineteenth century official thinking was defined
by Joseph Chamberlain, who argued that colonial resources should be developed
partly for the benefit of Britain herself but also for the larger benefit of humanity
(Saul, 1957; Constantine, 1984: 25). This readily justified a complementary and often
exploitive relationship in which colonies provided the raw materials for Britain’s
industry; it also coexisted — albeit uneasily — with the idea that Britain might protect
the interests of colonial peoples, in part by acting as a trustee of traditional cultures.
Administratively, such views found expression in the idea of the Indirect Rule, whereby
Britain attempted to maintain control through local power structures. Such views
persisted into the inter-war years, but came under pressure. On the one hand, business
interests in Britain wished to promote the development in the colonies regardless of
local consequences; on the other, domestic and international criticism was directed at
the dubious morality and one-sided benefits of the colonial encounter. In this context,
in 1929 the British Parliament passed the Colonial Development Act (CDA).
The CDA provided loans and grants for development projects in the colonial
territories. Ostensibly its purpose was to reduce unemployment in Britain by promoting
colonial trade (Constantine, 1984: 188). In fact, although the advisory committee that
administered the CDA consisted mostly of businessmen it viewed its mandate as broader
(Meredith, 1975). Sir Basil Blackett, the first Chairman of the Committee, argued that
the ‘true authors’ of the Act had a ‘wider and more imaginative vision of the benefits
which it would bring to this country and to the Colonial Empire’ (Blackett, 1931: 8).
This was not mere rhetoric. The Committee’s first report stressed that its members
had taken the view that ‘wise expenditure on public health is essential to economic
development’, and it proceeded to fund a range of projects (UK Colonial Development
Advisory Committee, 1931: 18). One of the very first was a housing scheme on Antigua,
and similar projects in other territories followed (Harris, 2005).
The CDA Committee funded housing and health projects to meet a social need, but
they were alert to economic consequences. At its first meeting, the Committee was
addressed by Lord Passfield, Secretary of State for the Colonies, who urged its members
to take into account the long-term effects of investment on productivity in the colonies,
hence indirectly fostering trade (UK Advisory Committee on Colonial Development,
1929). Taking his cue, the Governor of the Leeward Islands highlighted productivity in
his application to the Committee for the housing project on Antigua; this was approved
without much debate (St Johnston, 1929). The Committee later defended their
investments in housing, and specifically a project on Montserrat, in just these terms
(Constantine, 1984: 212). Typically, its members found themselves caught between the
British Treasury, which argued for a narrow and literal interpretation of the Act, and the
Colonial Office, which favoured a broad program of action (Constantine, 1984: 171,
179). Opinion ‘ebbed and flowed’ but increasingly it inclined towards the Colonial
Office view (Butler, 1991: 120; Ashton and Stockwell, 1996: lxv, lxvii). In 1933, the
Colonial Office changed the generic title of its annual report on each colony to include
reference to ‘economic progress’; it also began to devote a separate subsection to
housing (e.g. UK Colonial Office, 1933). The following year it established a separate
‘Economic Development’ department whose purpose was to articulate economic policy
that would benefit the colonies (Lee, 1967: 47). Then, marking a shift that had already
occurred, in 1940 the CDA was replaced by a Colonial Development and Welfare Act
(CDWA) whose scope explicitly included social concerns and whose main purpose was
to benefit the colonies. Subsequent revisions to the CDWA, notably in 1945, made
increasingly large sums available for that purpose.
Passage of the CDWA marked the conversion of the British government to the idea
of the managed colonial economy (Lee, 1967: 39). In order to obtain assistance, colonies

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were required to develop comprehensive, long-term economic plans. Not all did, but
they did begin to think more systematically about the way in which economic
development might be promoted. At the same time, the established colonial ideal of
trusteeship was increasingly replaced by one of partnership, according to which Britain
facilitated economic development as a step towards political independence (Butler,
1991: 121; Cooper, 1997: 66).2 This reflected the rapidly changing political realities of
the 1940s and early 1950s. Britain faced colonial unrest, notably in the Caribbean, East
Africa, and the Rhodesian Copperbelt, and then a series of independence movements
that rapidly gained momentum after 1945 (Parpart, 1986; Cooper, 1987; Johnson, 1999);
it also came under growing criticism from other powers, notably the United States and
especially in the Caribbean. For a variety of reasons, then, it became more eager to
promote economic development in its colonies.
Through these changing conditions, housing retained a significant profile. Under the
provisions of the CDWA a regional organization was established to evaluate and channel
applications for financial assistance and to promote ‘development and welfare’ in the
West Indies (Rampersand, 1979; Stevens, 1957). In part this was a sop to the United
States, whose growing investments nearby in Puerto Rico were becoming embarrassing
to the British, especially when the formation of a joint regional Commission began to
encourage the West Indian colonies to make invidious comparisons. In 1946, for
example, the Commission reported that $105 million had been budgeted for housing
projects on Puerto Rico, including at least one project in all but one of the island’s 77
municipalities (Anglo-American Caribbean Commission, 1946: 31). In 1943 the
Development and Welfare Organisation (DWO) had established the position of housing
adviser whose job was to coordinate applications for housing schemes (UK Information
Service, 1961: 11). At first, housing accounted for only 2.5% of CDWA funds that were
channelled through the regional body, but this had risen to 5.6% by the early 1950s (UK
Colonial Office, 1952: 65). Increasingly, the DWO sought to promote home ownership,
partly because this was thought to promote social stability and also because it
encouraged savings and investment: political and economic motives were closely
intertwined (UK Information Service, 1961: 29).
Similar policies were encouraged by George Atkinson, the Colonial Office’s own
housing adviser, after he was appointed to this new position in 1948. Atkinson helped
frame colonial housing policy, and became the channel through which the Colonial
Office promoted its ideas about the role that housing should play in colonial
development. In 1953 he was encouraged to draft a substantial memorandum on housing
that the Secretary of State for the Colonies circulated to the Governors of colonial
territories (UK Colonial Office, 1954).3 In this memorandum, Atkinson argued for the
social and economic importance of investments in housing, and especially home
ownership. As an Assistant Secretary in the Treasury commented at the time, the
‘underlying intention’ was to encourage colonies to adopt a broader view of economic
development than that which the Treasury was promoting (Drake, 1953). In so doing
Colonial Office motives were, as ever, mixed. Traditionalists favoured housing schemes
in order to ‘prevent economic development giving rise to widespread unrest’
(Bourdillon, 1953). For them, housing was simply a social program. A majority,
including Atkinson, saw housing as an intrinsic aspect of economic development.
The Colonial Office had an influence even where British monies were not spent. Most
of the funds disbursed under the Development and Welfare Act of 1940 were directed to
the poorer colonies, above all the West Indies. More prosperous places such as Singapore
received, and at least in the case of Singapore sought, very little. Even so, they received
advice from London and invested their own revenues in housing. By the mid-1950s, for
example, Singapore had already mounted one of the largest public housing campaigns in

2 The purpose of trusteeship was to preserve and protect the way of life of indigenous peoples.
3 Although this memorandum focused on the African territories, it was intended for, and distributed
to, a wider audience.

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the world (Harris, 2002). There, as elsewhere, social concerns seem to have been at the
top of the political agenda, but economic considerations also played a part.
By the 1950s, debates concerning the Colonial Development Corporation (CDC)
show that the positive economic view of housing had become dominant except at the
British Treasury. The CDC was established in October 1947 in order to promote
development in, and trade with, the colonies. The main beneficiaries were supposed
to be the colonies themselves. The new agency was given a difficult mandate: it was
required to break even but to support higher-risk projects that private investors were
avoiding (UK Colonial Development Corporation, 1952: chapter 2). Some of its earliest
investments were in middle-income housing schemes and building societies. The
Treasury challenged its legal mandate to undertake them, on the grounds that they
did not constitute ‘economic development’. The Colonial Office, the CDC, and the
government of the day demurred, but legal uncertainty compelled the government to
revise the CDC’s charter so that it might continue to invest in housing (Harris and Arku,
2005). This was not merely a symbolic issue, for by the late 1960s housing schemes
had become the largest category of investment of the organization (Rendell, 1976: 232).
The CDC favoured them as a secure type of investment that promoted social stability,
and an examination of Colonial Office correspondence reveals that the politicians and
administrators who were associated with its activities never doubted their economic
wisdom (e.g. Melville, 1955; cf. Rendell, 1976: 235). Symbolically and practically, then,
the CDC marked a significant step in the movement of official opinion about housing
and economic development, away from the narrow caution of the Treasury and towards
the more liberal Colonial Office view (Cowen, 1984: 63, 67; Butler, 1991: 130). At first
tentatively after 1929, and increasingly after 1945, agencies of the British government
used housing to promote economic development.

Neocolonialism in the Americas, 1945–60s

Before Britain had formally lost most of its empire, its global power and influence
had been eclipsed. The United States was never a major colonial power, but it did
control some territories. The most important of these in the early post-war period was
Puerto Rico. More generally, through bilateral organizations such as the US Agency
for International Development (USAID) and through its domination of multilateral
organizations within the Americas, such as the Inter-American Development Bank
(IDB), the United States exerted an official influence on the form and character of growth
in the developing world that was neocolonial in character.4 Its policies towards these
agencies, and in Puerto Rico, were important to debates about housing and economic
development in the early post-war decades.
For all intents and purpose, in the 1940s Puerto Rico was a colony of the United
States. In economic, political and military terms American influence was direct and
pervasive. Comparable with the British colonies (but unlike the French), Puerto Ricans
had no elected representatives in Washington. Unlike the British and French colonies,
however, Puerto Ricans were eligible for the full range of the US domestic programs,
including those administered since 1934 by the Federal Housing Administration. The
United States could provide such funds because it was a larger and more affluent country
and because, in relative and absolute terms, the beneficiary was so small. Then, again,
it had a number of positive reasons to be generous: Puerto Rico was in its own backyard,
and could serve as a model of American influence which would be useful regionally and
worldwide. For all of these reasons, from 1945 the United States supported a very active
development program in Puerto Rico that came to be known as Operation Bootstrap.
4 Of course the economic influence of the US also depended on private investment, deployed
especially by US-based multinationals. We are concerned here only with the actions of agencies that
managed public funds.

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By the early 1950s this program was attracting attention from development economists.
W. Arthur Lewis (1950: 45 ff), for example, cited it as a model for the British West
Indies for its emphasis on export-led growth nominally funded by indigenous savings
and investment. In fact, substantial funds were provided from the United States, in the
form of public transfers and of private investment, with much of the latter being pushed
and leveraged from Washington (Perloff, 1950; Chase, 1951; Dietz, 1986; Baumol and
Wolff, 1996; Padin, 2003).
From the beginning, investments in housing figured prominently in Puerto Rico’s
development program. Between 1941 and 1947, contributions to housing authorities
accounted for 14% of all government contributions to public enterprises on the island
(Perloff, 1950). Private investments were even more impressive. A contemporary report
in the New York Times (2 October 1949) that enumerated the early successes of the
island’s development program began by describing Puerto Nuevo, supposedly the largest
housing project in the world (cf. Jenkins, 1952). This project was financed by the island’s
Government Development Bank with the backing of the US Federal Housing
Administration (Caribbean Commission, 1954: 120–1). Housing retained its high
profile. The Development Bank, which was the main public source of finance for
development, focused on infrastructure and housing and its commitment ‘influenced
heavily the decision of private banks to offer their financial support’ in these fields
(Caribbean Commission, 1954: 125). As a result, from 1950 to 1967 no less than 75%
of all long-term investments on the island went to housing (Maldonado, 1972: 126;
Padin, 2003). Extensive investment in housing made it possible to experiment with a
variety of schemes, ranging from medium-rise projects to aided self-help (Crane, 1944;
Cordner, 1947). These became models that were promoted to developing nations
in the Caribbean, the Americas, and beyond. Jacob Crane, who from 1947 was in charge
of the International Housing Office of the Housing and Home Finance Agency in
Washington, DC, was especially active in this regard. Crane received a stream of visitors
from around the world who were seeking advice about how to devise national housing
programs, and he invariably encouraged them to visit Puerto Rico for inspiration (Harris,
1997). Early in 1951, for example, George Atkinson was brought from London at US
expense to visit experts in Washington, New York and Cambridge, Massachusetts, and
then to spend five days touring the model projects in and around San Juan (Atkinson,
1952). Two years later, at a regional housing conference in San Juan, British
representatives from Antigua, Barbados, Jamaica and St Vincent were given a similar
tour (Summary of Proceedings, 1953). Crane’s office sent housing experts as advisers
to many countries, for terms that varied from a week to several months; commonly,
these stopped off en route in Puerto Rico so that they would be able to speak
authoritatively about the current best practice in housing policy. For housing, as for
economic development, Puerto Rico was presented as a model to the developing world.
Typically, it is difficult to weigh the economic as opposed to the social logic behind
the housing investments in Puerto Rico. In fact, they shifted. The initial impetus was
clearly social and political, and came from the highest level. In 1941 Rexford Tugwell
was appointed Governor of the island. Before Tugwell left Washington, President
Roosevelt instructed him to report ‘whether we have got rid of the slums’ (Tugwell,
1968: 73). He brought back photos ‘which would have revolted a Hottentot’, and which
Roosevelt reckoned ‘a disgrace to the flag’ (Tugwell, 1968: 123). The President
immediately dictated a message to the Director of the Budget: ‘The slums of Puerto
Rico are a menace to public health’, he declared, and ‘you should find a source of the
funds and get this project done. I want action’ (Tugwell, 1968: 127). For Roosevelt and
Tugwell, housing investments were a response to a glaring social need; at the same time,
for as long as the United States continued to deplore Britain’s neglect of its colonies,
such investments helped to preserve its international credibility.
After 1945, monies were poured into housing projects, many channelled through
federal grant and loan programs. A number of scholars have treated these investments
as ‘unproductive’, if socially necessary (e.g. Maldonado, 1972: 126; cf. Stanton, 1972).

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But, as the Colonial Office argued in Britain, this is a difficult distinction: if housing
was needed to secure a labour force then it was, in effect, productive. This sort of
argument was often used to justify the construction of housing adjacent to mines,
dams or factories at isolated sites; even the British Treasury went along with this
view (Melville, 1955). In Puerto Rico this idea was generalized. The whole island was
marketed as an industrial location (Dietz, 1986: 211). Contemporaries and later
observers noted that, along with other social and physical infrastructure, housing was a
key element in the Puerto Rican program of industrialization (e.g. Chase, 1951: 56–7;
Gonzáles-Cruz, 1998: 16). This strategy ran counter to the prevailing development
orthodoxy. One of the architects of the modernization program was Teodoro Moscoso,
who had headed the Housing Authority of Ponce before being brought to San Juan
to take charge of the Industrial Development Corporation and then the Economic
Development Administration, otherwise known as Fomento, or Operation Bootstrap
(Chase, 1951: 38). Moscoso insisted that he was a pragmatist, and justified expenditures
on housing and other social needs on the grounds that they were needed to secure a
labour force as well as strengthening popular support (Moscoso, 1962: 91–2). The role
of housing in the Puerto Rican development program had shifted, then. At first driven
purely by social and political considerations, it became in addition a social expenditure
necessary for economic growth.
Directly and indirectly, the Puerto Rican model influenced US involvement in the
promotion of development throughout Latin America. The direct influence was felt
when, in 1961, President Kennedy appointed Moscoso as the head of the Alliance for
Progress, a major new US initiative to fund and promote development in the Americas.
Significantly, one of the 12 objectives of the Alliance was to be the promotion of low-
income housing (Gordon, 1963: 122). Well before then, however, the demonstration
effect of Puerto Rico had encouraged both bilateral and multilateral initiatives.
Bilateral aid was built on US technical assistance programs that had been active in
Latin America since the 1930s (National Planning Association, 1956: 40). Some of these
had been tied to housing, for a number of Latin American countries had a longer tradition
of housing programs than the United States itself (Violich, 1944: 33). They were given
a new lease of life in 1950 when President Truman initiated his ‘Point 4’ program
of international development. A confusing succession of agencies were charged with
coordinating this technical assistance; these were eventually rationalized in 1960 as
USAID (National Planning Association, 1956; US Senate, 1962). Under the Alliance
for Progress, USAID’s responsibilities were broadened to include an investment
mandate similar to that of the British CDC, and its funding was increased. From the
beginning it viewed housing as an economically productive field of activity, a view that
Harold Robinson, Chief of its Latin American branch, argued cogently and at length
(Robinson, 1963). Robinson extended the argument about the need for housing as an
adjunct to specific projects to urban settings in general; he emphasized its effects on
productivity, not just through improved health but also more positive attitudes; he spoke
of house building as an industry in its own right, as an employer with multiplier effects;
finally, he emphasized home ownership as an incentive for savings. On this logic,
USAID rapidly expanded its activities in the housing field, going to great lengths to
promote the foundation and growth of savings institutions, notably in Chile (Robinson,
1963: 126, 127). By 1964 it was the source of almost one-quarter of all of the
international capital from public sources that was invested in housing in the developing
world (UNEcoSoc, 1964: 16).
The expansion of USAID made the United States a significant force in the bilateral
promotion of housing, but the growth of multilateral agencies was ultimately more
important. During the 1950s, Latin American governments were frustrated by the
paucity of international funds, especially for what they conceived as social development
projects such as housing, and they put steady pressure on the United States to create a
regional bank for this purpose. They secured the establishment of an IDB in 1959. From
the outset the Bank’s mandate included loans for housing. At first the US tried to limit

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its activity in this area, arguing that social investments should be made only ‘in certain
circumstances’, in order that ‘more directly productive investments’ might ‘achieve their
objective’ (Kenworthy, 1959: 36). The ground shifted when, as part of the Alliance for
Progress, in 1960 the IDB was charged with the responsibility for administering a new
Social Progress Trust Fund (Burns, 1961). The Trust Fund was specifically intended to
pay for social projects, of which housing was deemed to be the most important. As a
result, in the first two full years of the IDB’s operation, about a quarter of its loans went
to housing and an equivalent amount for improving water supplies and sanitation
(DeWitt, 1977: 18; cf. Koth et al., 1965: 72; Dell, 1972: 136). Over the course of the
1960s the priorities of Latin American governments changed and the share of IDB funds
that went into housing and sanitation declined to 23% for the bank’s first decade
(Herrera, 1970: 20; cf. DeWitt, 1977: 18). For at least its first decade of operation,
however, housing remained a significant development priority.5
The IDB had a substantial impact, and in a variety of ways. The obvious effects were
on the ground. In the early 1960s the bank accounted for about two-fifths of the
international capital that was being invested in housing in the developing world
(UNEcoSoc, 1964: 16). By December of 1962 it had loaned $153 million to help build
156,308 dwellings (Herrera, 1963: 440). Its regional focus meant that its investments in
Latin America were highly visible, not least because many took the form of substantial
projects. In the mid-1960s a survey of the four largest housing projects in each of the
major Latin American countries found that about half had received external funds,
chiefly from USAID, the IDB, or in a few cases the Development Loan Fund (DLF),
another lending agency that had been founded in 1958 (Koth et al., 1965: 160). The
IDB and USAID soon began to push for the establishment of a US-based International
Home Loan Bank that could finance housing in Latin America and around the world.
As a New York Times reporter noted, this proposal advanced the timetable for housing
investment that was indicated by ‘classical economical [sic] development theory’ on the
grounds that it ‘could spur not only housing but all economic development in Latin
America’ (Cowan, 1963: 11). It won the support of many experts but stalled in the Senate
(US Congress, 1963; Cowan, 1963.) The example of USAID and the IDB pushed other
institutions, including the World Bank, to consider whether they should not broaden
their funding criteria (UNECLA, 1970: 218–19; Mason and Asher, 1973: 580, 721).
Most generally, their activities triggered, for the first time, a real debate as to whether
housing should be viewed primarily as a social expenditure or as an economic
investment. It was a debate carried out by academics, at a conference sponsored by the
Pan American Union at UCLA in 1963, by administrators at the Alliance for Progress,
and by politicians on the Senate floor (Moscoso, 1962; Harris and Gillies, 1963; cf.
Klaassen and Burns, 1963; Robinson, 1963).
Although the IDB pushed for investment in housing, it was not as effective in making
the economic argument as it might have been. This was a matter of both implementation
and policy. As with the CDWA funds administered by the British, the IDB required
its loans to be conceived as part of an economic program and to be administered
by appropriate, national bodies. In a short flurry of activity, many Latin American
governments established such agencies, but in most cases their actions were cosmetic
and confused (Koth et al., 1965: 81–2; UNECLA, 1965: 168). In 1970, a well-informed
analysis of housing in Chile — which had one of the more impressive housing policies
in Latin America — concluded that that country’s housing programs had grown ‘almost
at random’ (Frankenhoff, 1970: 386). Commonly, housing investments were not
coordinated with national economic plans and in some cases they had distorted
development priorities (UNECLA, 1970: 223). Part of the problem was that a significant
proportion of the funds went into building projects that used cement and other imported

5 For reasons that remain unclear, its commitment to housing waned in the 1970s when that of the
World Bank increased. See, for example, IDB (1981: 32). Even so, over the whole period 1961–2002,
11.9% of IDB investments went to housing (IDB, 2002).

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materials and, in some cases, imported builders and labour too (cf. Koth et al., 1965:
166–8). This was not a model of how housing might promote local economic growth.
The very commitment of the IDB to the goal of using housing to promote growth is
itself open to question. In the 1950s, all aid and loan initiatives were conceived as part
of an ideological battle with the Soviet Union for the hearts and minds of people in
developing nations; investments in housing were to be judged first in political terms and
only secondarily as economic initiatives (e.g. New York Times, 20 November 1957). The
success of Castro’s revolutionaries in Cuba in 1958 gave new impetus, and a regional
focus, to this battle. The formation of the IDB and the Alliance for Progress were direct
responses and the motivations were clear. For example, in 1960 the scope of the
Development Loan Fund was expanded to include housing, and it soon announced
substantial loans for housing in Peru (de Onis, 1961a). US officials conceded that
these had been prompted by the Cuban missile crisis and the need to fight communism,
while Pedro Beltran, the Peruvian Premier, declared ‘Give the people of Peru their
own . . . house to live in, and I snap my fingers at Fidel Castro’ (de Onis, 1961a; 1961b).
Political considerations remained prominent. When the Senate began to consider the
merits of the proposed International Home Loan Bank, the New York Times reported that
they were tackling the question as to ‘how to combat communism in Latin America with
housing’ (Trussell, 1963). In this charged climate, social and political considerations
dominated the debate. Some agency administrators, such as Robinson at USAID,
recognized the economic significance of housing, but the main frame of reference was
still that which Teodoro Moscoso had brought from Puerto Rico. Housing was now seen
to be necessary for economic development but it was still not altogether of it. That, at
any rate, is what the public and scholarly debate would suggest. But actions speak louder
than words, and actual patterns of expenditure suggest a different conclusion.
Through bilateral and regional organizations, in the early post-war period colonial
powers and the United States exerted a complementary influence on global development.
Britain and France focused their energies upon the Caribbean and, increasingly, Africa.
Up to the end of 1962, the CDC had committed the equivalent of $328 million, of which
$226 million was for the British African colonies; up to 1963, under the Colonial
Development and Welfare Act (CDWA) $846 million in grants and loans was distributed
to the colonies, $455 million of which went to sub-Saharan Africa (UNECA, 1965: 44).
Through two agencies, one of which offered grants for social and economic development
while the other, a Caisse, made loans, in the same period the French invested a little
over $1 billion in Africa alone (ibid.: 43).6 In contrast, the United States concentrated
on Latin America. Up to 1973 it had subscribed $965 million to the IDB, but only $55
million to a counterpart Asian Bank (DeWitt, 1977: 40), while its investments in USAID
also showed a marked Latin American bias.
In each of these agencies, a substantial minority of the funds for development were
channeled into housing. Strikingly, the organizations whose mandate was primarily
economic devoted more to housing than those whose objectives were broader. Up to
1963, only 2.8% of British CDWA funds went for housing, but the proportion of the
CDC’s cumulative loans for housing was already 17% by then, and rising (United
Nations, 1965: 44). The proportion of CDWA funds going to housing seems to have
been highest in the West Indies, where it briefly reached 12% in the 1950s, in part
because Britain’s role there was closely scrutinized by the United States and because
the example of Puerto Rico was held up as a model (UK Colonial Office, 1958: 116).
The percentages for the two French agencies were generally higher than those of their
British counterparts, being approximately 5.5% and 30%, respectively.7 Here again, the

6 In 1959 the Fonds d’aide et de coopération (FAC) replaced and continued the activity of the Fonds
d’investissement pour le développement économique et social des territoires d’outre mer (FIDES).
It complemented the loan activity of the Caisse centrale de coopération economique (CCCE).
7 These are rough estimates since a breakdown of expenditures on housing is not available for all
years.

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agency that was required to pay most attention to the economic viability of its
investments placed a higher proportion of its funds into the housing sector. Private
investors, too, were quite willing to support national plans that included housing. For
example, in 1964 the Trinidad government was able to raise $17.5 on American capital
markets for its second five-year plan that included an investment in housing and sewers
as well as roads and electrical facilities (New York Times, 1 August 1964). Most
significantly, perhaps, the few private businesses that specifically sought to promote
economic growth in the developing world chose to devote a good deal of effort to
housing.8 The leading example was the International Basic Economy Corporation
(IBEC), a financing, development and investment concern that the Rockefeller family
had established in 1947 ‘to stimulate the economy of under-developed areas throughout
the world’ (Auerbach, 1961). It established a housing division in 1948, and by 1962
IBEC had built almost 10,000 houses, initially in Puerto Rico and subsequently
elsewhere in Latin America (Shabecoff, 1962; Rockefeller, 1963). When interviewed,
Rodman Rockefeller, the Vice-President in charge of housing, justified this simply as a
profitable way of meeting a social need. At 23%, then, the IDB’s level of investment in
housing services during the 1960s was consistent with recent colonial and business
precedents. Those who were charged with making investments in the developing world,
as opposed to giving aid, attached a high priority to housing. Whether such investments
were always wise or beneficial is open to debate, but in the minds of those who made
them they were integral to the process of economic development.

Global multilateralism since 1949

The major multilateral agencies were slower to appreciate the economic significance of
housing. The most important of these were the World Bank and the United Nations,
which included regional commissions and the International Labour Office (ILO) in
Geneva, as well as a dedicated housing centre at its New York headquarters. The United
Nations became the dominant influence during the 1950s; its position was usurped when
the World Bank entered the housing field in the early 1970s, since which time the
policies of the two agencies have developed in tandem.

The influence of the United Nations, 1945–70

A more or less representative body for independent states, the United Nations has always
expressed concerns about a wide range of issues. As decolonization gathered momentum
during the 1950s, its membership grew and the balance of debate shifted towards
the developing world. Accordingly, the UN became increasingly preoccupied by
development issues. Domestic political pressures were carried by national
representatives to this international arena, ensuring that social needs would always be
prominent in UN debates.
Certainly, social and political considerations always framed debate about housing
within the UN. Established in 1919, the ILO had long maintained a specialized interest
in the building industry, and this continued after the organization was brought under the
UN umbrella in 1946 (cf. ILO, 1945). The UN itself entered the housing field in 1944
when it organized a Relief Administration, largely for refugees. In the late 1940s, a small
office was created within the Economic and Social Commission to deal with broader
housing and town planning issues. Soon headed by Ernest Weissman, this became the
centre for discussion, and for lobbying, about such matters. Unlike the development

8 There was a fine line between companies that sought to make a modest profit by investing in
development, and the standard multinational corporation that sought unlimited profits (cf.
Auerbach, 1961). It was analogous to the distinction between 5% philanthropists and speculative
builders in late nineteenth-century London.

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banks and colonial agencies, the UN did not have the funds to make major economic
investments. Instead it focused its limited resources on providing advice and technical
assistance. From the late 1940s to the early 1960s it was the source of almost 60% of
all international technical assistance in the housing field, much of the balance being
provided by USAID (UNEcoSoc, 1964: 15).9 More important than this technical
assistance, however, Weissman’s office gave advice which, unlike that which came from
Britain, France or the United States, was perceived to be unbiased. According to Charles
Abrams, the leading international housing expert of the day, the UN’s statements on the
housing question carried particular weight (Abrams, 1964: 65).
If it is sometimes difficult to parse the views about housing that were expressed by
organizations such as the British Colonial Office and the IDB, such problems are
compounded in the case of the UN by the organization’s decentralized structure and its
collective tendencies towards prolixity (Harris and Giles, 2003). In 1975, a bibliography
of UN documents in the field of housing and urban planning identified more than a
thousand items (UNCHBP, 1975). Many are repetitive; a few are contradictory; our
reading of the UN’s changing position draws selectively on key statements. A very early
attempt to frame priorities for development was prepared for the UN by a group of
experts that included the prominent economists W.A. Lewis and Theodore Schultz,
influential theorists of development and of human capital, respectively. The group
suggested that ‘in many cases’ improved services to people would produce more
economic growth than capital investment in industry (UNDEA, 1951: 52). This
unconventional opinion never became UN policy. Instead, until the early 1960s the
dominant view seems to have been broadly consistent with that which was articulated
by the British Colonial Office and within the IDB. As Weissman put it, ‘social overhead’
projects such as housing were seen to be just as important as the ‘economic overhead’
projects such as transportation and power (Weissman, 1955: 62; cf. UNEcoSoc, 1957:
5). As such, they could be critical to the success of development plans, in effect a
precondition of economic growth (UNEcoSoc, 1955; 1957; 1964; 1967a: 6). This point
of view was articulated with particular authority by the Economic Commission for
Europe, which had acquired expertise on the European construction industry. In 1962
it turned its attention to consider the developing world and concluded that development
programs might be ‘stultified’ without direct investments in housing (UNECE, 1962:
25).
By the early 1960s the counterpoint of ‘social’ against ‘economic’ investments could
no longer contain the UN’s views. The economic importance of investment in housing
was repeatedly emphasized, with particular reference to the building industry. In 1955
the Economic and Social Council had resolved that the ‘building industry is especially
important in the development programme of any developing country . . . because
building activity will call for more building materials which means more industrial
employment and thus it acts as a most important ‘initial impulse’ or pump-priming
process’ (UNEcoSoc, 1955: 58). Extrapolating this view, in 1962 a group of specialists
advised the UN that housing be incorporated into the national development plans of
industrializing nations (UNECE, 1962: 28). At its first meeting, a new Working Party
on Housing resolved that ‘housing must be accorded its due priority as a productive
investment, not only per se but because it increased productivity throughout the entire
economy’ (UNEcoSoc, 1963: 22). This marked a decisive, though not irrevocable, shift
in thinking. Investments in housing did not merely influence economic development,
then: they were part of it.
It is difficult, and perhaps unnecessary, to determine how the new view of housing
and development within the UN emerged. It was consistent with the line that had been
taken by the ILO with respect to the building industry for some years, although it went

9 This is an overestimate since it does not take full account of technical assistance programs included
in the funds disbursed by colonial development agencies. These would have counted for a good deal
in the late 1940s but much less by the early 1960s.

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140 2.5

120
2
100
US$ Billions

80 1.5
%
60
1

40
0.5
20

0 0
1960–1965 1966–70 1971–75 1976–80 1981–85 1986–90 1991–95 1996–00
Year Total Expenditure
Housing as a % of Total

Figure 1 UN expenditures and the share going to housing, 1960–2000 (source: UN Yearbook
of Statistics, various years)

beyond the views that the ILO’s leading housing expert, Jay Howenstine, had expressed
hitherto (ILO, 1953; 1959; Howenstine, 1957). It may have been influenced by
arguments already articulated in the regional commission for Europe. At any rate, other
regional commissions soon fell into line. By 1963, for example, the one for Africa was
asserting that housing was an essential element of industrialization (UNECA, 1963: 9–
10). In 1965, a major UN survey of the African scene insisted that ‘no housing policy
and, a fortiori, no financing of such policy, can properly be considered except within
the development plan of a given country’ and pointed out that housing ‘can help to give
concrete form to the idea of development’ (UNECA, 1965: 52). Presumably sensitive
to the wave of housing initiatives that were gathering momentum through the Alliance
for Progress, the Commission for Latin America expressed broadly similar views
(UNECLA, 1965). Not surprisingly so too did the Industrial Development Organization
when it came to consider the construction industry in its ambitious survey of
development sectors (UNIDO, 1969: 87). By the mid-1960s the UN had put its official
seal of approval on the sorts of housing investments that the French development bank,
the British CDC, the administrators of Operation Bootstrap, and the Inter-American
Development Bank had been making for two decades. Housing, it now seemed clear,
was integral to economic development. Unfortunately this shift in thinking, though
significant, was fragile.
In the late 1960s there was a resurgence of concern about the social consequences of
development, and especially of urbanization. Rural–urban migration was gathering
momentum more rapidly than cities could create jobs. The growth of slums and squatter
settlements fueled a new wave of interest in housing conditions that focused on the issue
of social needs. At first these issues swamped the new way of thinking about housing
and economic growth at the UN (e.g. UNEcoSoc, 1967b; 1971). It is not clear that this
had much impact on the overall proportion of UN spending on housing issues. This rose
briefly to 2.5% in 1968 but immediately fell back into its modest, habitual 1–2% range
(Figure 1).10 The expense, and the social failures of earlier public housing initiatives
caused housing experts and development agencies to seek an alternative form of
housing policy. By the late 1960s, the ideas of a British architect, John Turner, gave new
impetus to the idea that families might be able to house themselves, with or without
assistance from the state (Harris, 2003). Owner-builders often employed tradesmen
and subcontractors, but for most of its proponents the idea of state-assisted self-help

10 Available data are incomplete and the reported categories are not perfectly consistent.

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Housing as a tool of economic development since 1929 907

appeared to be almost an alternative to the building industry, and hence to the inclusion
of housing within a development program. As a result, when in the early 1970s the
World Bank threw its considerable weight behind this idea, the initial and paradoxical
result was that in some respects the economic profile of the housing sector suffered.

The era of the World Bank, 1973–present

As its official name suggests, when the International Bank for Reconstruction and
Development (IBRD), or World Bank was established in 1944, the promotion of
international development was not its first purpose. As late as 1957, most of its
investments were in the advanced industrial nations (Mason and Asher, 1973: 458). As
the reconstruction of Europe and Japan was completed, however, it directed its funds
increasingly to the developing world which, by 1968, had become its exclusive focus.
At first the World Bank saw its mandate as that of providing long-term capital to
build the physical infrastructure necessary for development: dams, roads, electrical grids
and the like. It did not invest in industry itself, in human services such as education, or
in those forms of physical capital such as dwellings that were deemed ‘unproductive’
(Mason and Asher, 1973: 467). It made this line clear from the very beginning (World
Bank, 1948: 17; 1949: 8; cf. Laquian, 1977: 292). As Abrams (1964: 96) later
commented, in effect the Bank’s view was that ‘housing production will occur as a
spontaneous result of aid given to everything except housing’. At the same time, unlike
the broad and mixed mandate of some of the colonial agencies, and of the Social
Progress Trust Fund administered by the IDB, the World Bank was, well, a bank. It
made investments; it did not dispense aid.
As the Bank focused increasingly on the developing world, it came under growing
pressure to diversify its investments. During the 1950s, a number of developing
countries had been lobbying for a large international fund, ideally under UN control,
that would make long-term loans for economic and social development (Mason and
Asher, 1973: 380). At first the World Bank opposed this idea, but it eventually
concluded that if such a fund was to be established it would be best for the Bank to
control it. In 1960 an IDA was authorized to make loans to the very poorest of countries
and for a wide range of projects that explicitly included housing (Mason and Asher,
1973: 393). Nominally separate from the World Bank, this body in fact operated more
as a division rather than a sister agency and it was very slow to move into the housing
field. Even so, its existence, the policies of the IDB from the early 1960s, and pressure
from the UN forced the World Bank to consider the possibility of investing in human
resources or what was becoming known as human capital (Mason and Asher, 1973: 47).
In the early 1960s, for example, the UN invited the Bank to participate in several of its
housing initiatives. The Bank declined, and indeed claimed that it did not even need a
housing expert on its staff (UNEcoSoc, 1963: 13; Abrams, 1964: 95). But this was a
rearguard action. Investments that affected health and education were increasingly seen
as vital for economic growth. With the appointment of Robert MacNamara as its
President in 1968, the Bank capitulated to this idea and undertook a major reassessment
of its investment priorities. It began to express concern about the distribution as well as
the sheer quantity of wealth, addressing the growing problems of poverty in the
language of basic needs (Chenery et al., 1974). By 1973, MacNamara was able to claim
that ‘we have made a start at broadening the conception of development beyond the
simple limits of economic growth’ and added that ‘we believe economic progress
remains precarious and sterile with corresponding social improvement’ (quoted in
Mason and Asher, 1973: 475). Conceptually this was old hat: the Bank called for the
sort of balanced investment in social and economic overhead that Weissman had been
advocating in the 1950s, and that the UN transcended in the early 1960s. Practically,
however, it was a significant step.
Housing was one of the economic sectors that benefited most from the change of
thinking. The Bank accepted that inadequate housing, and especially poor sanitation,

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500000 2.5
450000
400000 2
350000
US$ Millions

300000 1.5
250000 %
200000 1
150000
100000 0.5
50000
0 0
1951–54 1955–58 1959–62 1963–66 1967–70 1971–74 1975–78 1979–82 1983–86 1987–90 1991–94 1995–98 1999–00
Year
Total Amount (US$ Million)

Housing as a % of Total Annual Lending

Figure 2 World Bank lending, and the share going to housing, 1951–2000 (source: World
Bank annual reports, various years)

could have an adverse effect on population health, and hence labour productivity. By
1975, its annual report acknowledged that better housing might make ‘a substantial
contribution to economic development and social welfare’ (World Bank, 1975: 20). Its
initial solution was to fund what it termed model ‘sites-and-services’ schemes in which
state agencies laid out plots and basic services. Prospective owners were sometimes
provided with ‘core’ houses that they could later extend, and sometimes helped to build
their own homes from scratch. Substantial sums of money were involved. In the early
1970s the Bank was growing rapidly: the amount of its annual loans rose greatly between
1971 and 1974, reaching $12.3 billion by 1981 (Figure 2). In the same period, the share
devoted to housing jumped from effectively nothing in 1971 to 1.3% in 1974 where it
leveled off. From the beginning it covered the world: in its first decade of support to
housing projects (1972–81), funds went to sub-Saharan Africa (Burundi, Lesotho,
Nigeria, Senegal, Botswana [2 projects], Burkina Faso, Tanzania [2], Zambia, Kenya
[2]), North Africa and the Middle East (Jordan, Morocco, Turkey), the Caribbean
(Jamaica), Central and Latin America (Bolivia, Brazil, El Salvador [2], Mexico, Peru),
as well as east and south-east Asia (Indonesia [2], South Korea, Philippines [3], Thailand
[2]).11 Housing never occupied as high a profile in the World Bank’s portfolio as it did
of the IDB, the French Caisse or the British Colonial Development Corporation. After
ranging between 1% and 2% in the late 1970s and early 1980s, the share of Bank loans
to the housing sector rose briefly to just over 3% in the late 1980s before falling back
(see Figure 2). It is true that at least as much again was spent on related projects to
provide urban water and sewers, so that the combined total for urban projects touched
8% in the late 1980s, but in relative terms even this spike in funding did not rival the
consistent commitments to housing of several other agencies in the 1950s and 1960s.
In absolute terms, however, the amounts were huge. In 1974 alone the World Bank
loaned $55 million to housing. This compares with the $28 million loaned over more
than a decade by the CDC (1950–62), $24 million disbursed (mostly as grants) under
the CDWA (1946–63), and approximately $79 million loaned by the French CCCE
(1946–63).12 Even allowing for inflation, it is clear that by the mid-1970s the World

11 Compiled from the online World Bank database: http://web.worldbank.org/WBSITE/EXTERNAL/

PROJECTS/0,,menuPK:115635~pagePK:64020917~piPK:64021009~theSitePK:40941,00.html
(accessed 30 March 2005).
12 Figures for housing grants made by FIDES during the 1950s are not available. They are probably
rather larger than the amount disbursed under the British CDWA.

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Housing as a tool of economic development since 1929 909

Bank’s lending activities overshadowed those of predecessor agencies. Not surprisingly,

they attracted a good deal of attention from researchers in the fields of housing and
development.
At first, the World Bank’s new commitment to housing was weakly grounded in
an appreciation of its economic importance. Sites-and-services projects were justified
above all for the way they helped to address the problems of poverty by meeting basic
needs; references to human capital and productivity were downplayed. As the agency
itself came to recognize in retrospective assessments, the projects that it funded in the
1970s were not framed with reference to the housing sector as a whole, or to national
economic plans (Nientied and Van der Linden, 1985; Mayo and Gross, 1987; World
Bank, 1993: 58; Pugh, 1997; Ward, 1998). They were as likely to frustrate or distort
other development priorities as they were to support them. Then, too, cost overruns and
‘leakage’ of benefits from the poor to the middle classes had become apparent by the
early 1980s, when the Bank was compelled to re-evaluate the nature and extent of its
commitment to the housing sector.
In the early 1980s the Bank might well have decided to downgrade its activity in the
housing field, but its broad commitment to investments in human capital provided a
specific deterrent. When the Bank threw its weight behind sites and services it also began
to fund small-scale projects to improve health and education; these typically included
the construction of schools and clinics. Such numerous, small-scale construction
projects on dispersed sites did not appeal to the large, international contractors on whom
the Bank had relied in the 1950s and 1960s. The agency found that their success
depended upon local contractors and suppliers, who were often unreliable. Very quickly
the Bank was forced to take an interest in indigenous building industries, and in how
the local production and assembly of materials might be improved (IBRD, 1973; World
Bank, 1984). The technology of building schools and clinics was very similar to that of
erecting houses, and many of the same suppliers and builders were active in all of these
types of construction. Whether or not the Bank chose to fund housebuilding, then, it
now had an interest in the building industry; because of this interest, its incentive to
remain active in the housing field was strengthened.
As the Bank reassessed its activities in the early 1980s, it began to think more
systematically about the economic dimensions and significance of the housing sector.
In particular, its housing economists considered how the Bank might influence the sector
as whole, rather than fund specific projects (e.g. Malpezzi, 1990; Malpezzi and Sa-Aadu,
1996). By the early 1990s this had coalesced into the idea of market ‘enablement’. ‘The
housing agenda’, the Bank declared in a key policy document, ‘should not be
seen . . . only as an element of welfare policy, but rather as one of managing the housing
sector as a whole’ (World Bank, 1993: 11). To that end, it ‘must be seen as . . . important
and productive, in which policies have repercussions for overall economic performance
and not, as is a common view, as a drain on productive resources’ (World Bank, 1993:
11). Its thinking had caught up to that which had been expressed by UN agencies in the
1960s, and the new language of enablement echoed that which was being expressed by
the UN. Interest in housing and town planning at the UN had continued to grow
throughout the 1960s and 1970s, and in 1978 its commitments in this area were
broadened and consolidated with the establishment of the UN Centre for Human
Settlements (UNCHS — Habitat). By the 1980s, UNCHS was reasserting — and
perhaps rediscovering — the economic significance of housing for development. In 1987
a major Global Report asserted the economic importance of investing in housing and
human settlements because of the way this created jobs and economic multipliers, as
well as reducing the need for foreign exchange if local materials and appropriate
technologies were employed (UNCHS, 1987: 209–10). Here, and in subsequent
statements, UNCHS emphasized the importance of ‘enabling’ all types of community-
based initiatives, including self-help, co-ops, and local governments (UNCHS, 1987;
1990); the World Bank’s conception of enablement was more narrowly focussed on
entrepreneurs and markets. But by the 1990s both agencies clearly acknowledged the

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910 Godwin Arku and Richard Harris

economic significance of housing, together with related settlement issues such as

sanitation, for the process of economic development.

Discussion
There is a widespread perception that it is only since the late 1980s, when the UN and
the World Bank began to articulate ideas about market enablement, that international
agencies have pushed governments to use housing to promote economic development.
This perception is inaccurate. The colonial powers, including Britain and France, had
formed a fairly clear idea about the economic significance of housing by the 1950s.
More to the point, they were acting on that basis and despite some domestic resistance,
for example from the British Treasury. So, too, did the Inter-American Development
Bank after 1960. It is not even clear that our practical appreciation for the economic
importance of housing has, over the long run, improved. To be sure, the economic
conception of the housing sector developed by the World Bank since the late 1980s and
early 1990s, and shown also in some recent statements of the UN, is both subtler and
more comprehensive than that held by any previous agency (World Bank, 1993; UNCHS
and ILO, 1995). But, measured by the allocation of funds, the commitment of the World
Bank and the United Nations to housing has never equalled that of several earlier
agencies. Indeed, there are signs that even its rhetorical commitment is wavering.
Caroline Moser recalls that, while Senior Urban Policy Specialist for the Bank, at the
second Habitat meetings in Istanbul in 1996 she had to work hard to persuade her
audience that housing should be regarded as a productive asset.13 Three years later, in
its World Development Report of 1999, housing was mentioned only briefly, and then
only as an ‘essential service’ that helps makes cities livable (Yusuf, 1999: 126, 144).
On its website in May 2004, housing has a low profile: it does not appear on a suggested
list of more than 200 possible ‘topics in development’.14 The Bank’s current
programmatic interests in the area seem to be focused on two issues, ‘cities without
slums’ and ‘shelter finance for the poor’, both of which emphasize social needs over
economic effects.15 The same wavering is apparent at the UN. In 2002 the status of the
UN Centre for Human Settlements was elevated to that of a full-fledged programme.
However, the Centre’s latest comprehensive report barely pays lip service to the
economic importance of housing, giving this issue less prominence than a decade or so
earlier (UNCHS, 2003; cf. UNCHS, 1987: 162–70, 209–10; 1990: 11–12, 19–20, 35).
These facts may signify little; more likely they are straws in the wind.
The insight that housing may be used to promote economic development appears to
be a fragile one. It emerged slowly in some agencies, including the British Colonial
Office, because their priorities were driven by a political agenda that stressed immediate
social needs. Somewhere in the mid-1960s it seems that an emerging appreciation
at the UN for the economic significance of housing was partially submerged by a rising
tide of concern about squatter settlements and slums. Of course there need be no
contradiction between the use of housing to promote an economic agenda and the
satisfaction of human needs: in theory, one should be a means to the other. In practice,
however, the two have often seemed so different as to be almost incompatible. In Britain
for several decades, economists at the Treasury dismissed the social concerns of the
Colonial Office as woolly headed; for that reason they insisted that after 1929 Colonial
Development funds should not be disbursed by an independent committee of
businessmen. Within the United Nations, for many years physical planners had little to
do with development economists, and because of its association with the former, housing
arguably suffered (UNEcoSoc, 1972: 38). Such divisions between and within agencies
13 Conversation with Caroline Moser, 28 January 2005.
14 http://;www.worldbank.org/html/extdr/thematic-alpha.htm (accessed 30 March 2005).
15 http://www.citiesalliance.org/citiesalliancehomepage.nsf (accessed 30 March 2005).

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Housing as a tool of economic development since 1929 911

persist and proliferate, as indeed they do among academic specialists. They continue to
obscure the fact that, to perhaps an unusual degree, housing straddles the divide between
social and economic development and must be recognized as simultaneously important
to both (cf. Pugh, 2001).
One of the more intriguing facts to emerge from this historical survey is that, in the
housing field at any rate, the policies of international agencies have led rather than
followed the thinking of development economists. In the early post-war decades, almost
all economists viewed investments in housing as unproductive; they argued that
improved living conditions were a straightforward effect, and in no ways a cause of
development. At the British Treasury and in the World Bank they were able to make
these views felt. Nevertheless, agencies of development invested in housing, often quite
heavily. Some of those involved seem to have conceived of these expenditures as ‘social’
in character, an unproductive price that had to be paid to placate particular interests. But
it is clear that many understood, or through experience learned to appreciate, the intrinsic
economic importance of housing. To that extent, social investments in housing helped
to generate an economic rationale, and the housing policies of development agencies up
to the 1960s may be viewed as a triumph of pragmatism over theory. It was the
academics who had most to learn, developing theories of human capital and then of
enablement to provide formal justification for investments that several organizations had
already been making. Judging from the low profile that housing still has in the writing
of development economists, they are still catching up to this fact.

Godwin Arku ([email protected]), Department of Geography and Environmental Studies, Wilfrid

Laurier University, Waterloo, Ontario, Canada N2L 3C5 and Richard Harris
([email protected]), School of Geography and Earth Science, McMaster University,
Hamilton, Ontario L8S 4K1, Canada.

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