UNITED NATIONS	HS
	Commission on Human Settlements	Distr. GENERAL HS/C/16/7 22 December 1996 ORIGINAL: ENGLISH
Sixteenth session Nairobi, 28 April - 7 May 1997 Item 7 (a) of the provisional agenda*
THE CONTRIBUTION OF THE PRIVATE SECTOR AND NON-GOVERNMENTAL SECTORS TO SHELTER DELIVERY FOR LOW-INCOME GROUPS
Report of the Executive Director

* HS/C/16/1.    [Go back to text]

Introduction

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1. Delegates to the second United Nations Conference on Human Settlements - Habitat II, held in June 1996 in Istanbul, can claim to have laid the foundations for a successful urban future, though the challenge of turning consensus into action will be the true test of Habitat II. City planners face a huge task. At some time over the next ten years, and for the first time in history, the majority of the world's population - and of the world's poor - will make their homes in towns and cities. Approximately 90 per cent of the increase in world population between 1990 and 2030 is scheduled to take place in the developing world, and 90 per cent of that figure will be urban population growth (UNCHS 1995, p. 21). This will place enormous strains on land, housing, infrastructure and services, employment creation, and the urban environment, and will test the abilities of both markets and decision-makers to the limit. How will cities cope with such pressures? Is it possible to make rapidly-growing cities in poor countries truly liveable? Cities need to be successful in social as well as economic terms, for both women and men equally, as well as for the elderly and those with disabilities. They must also be respectful of the needs and rights of children and of future generations.

2. There are no simple or universal answers to such questions, and no panaceas for successful urban development. However, there are many signposts which point the way to effective shelter delivery. This report deals with one of the most important of these, that is to broaden and deepen the role of the private sector, non-governmental organizations, and community-based organizations in all aspects of the shelter process. Over the last decade, international development policy in general, and shelter policy in particular, has been revolutionized by the realization that centrally-planned solutions to social and economic problems are rarely workable. A properly-functioning market economy, underpinned by a dense network of civic associations and overseen by a strong but accountable Government, is the best framework for economic growth and social progress, though there is no universal model of how these things fit together on the ground. The crucial point is that all three are needed. Markets without trust, cooperation and good governance can produce growth but will result in few social and environmental benefits. Good governance without markets tends to lead to economic stagnation, which makes the eradication of poverty impossible. Yet an active civil society with a weak State structure will benefit those who belong but not those who are left out. In general, the pursuit of goals at the level of a city or a nation requires coordinated action which only Governments can take.

3. Dramatic changes in the global economy and in world politics form the basis of the move away from central planning. The wave of democratization that is sweeping the globe encourages ordinary citizens to make their voices heard in their city halls and allows more space for non-governmental and community-based organizations to operate unhindered by authoritarian Governments. Globalization integrates increasing proportions of the urban economy, including shelter delivery, into market systems, thereby expanding the role of the private sector. This is not altogether a good thing, since it poses threats to cities, as less competitive producers are exposed to the rigours of integrated markets. It may also reduce opportunities, such as increased access to private capital markets and new technologies. The challenge of blending the productive power of markets with wider social and environmental objectives in cities is a constant theme in the discussion that follows.

4. The ideal, then, is a public-private partnership, achieving the right mix between Government, business and voluntary associations, so as to maximize the benefits to the city as a whole. A partnership approach to shelter delivery recognizes that different sectors have distinctive but complementary comparative advantages. Markets, firms and individuals are best at producing shelter, for example, yet non-governmental and community-based organizations are necessary if low-income groups are to benefit from markets. Otherwise their market power is too weak. Nonetheless, Governments are the key actors in ensuring a legal, fiscal and regulatory framework which enables markets and voluntary groups to do what they do best. At the same time, they ensure overall policy coherence and conformity with wider objectives, such as the coordinated development of infrastructure or the implementation of environmental standards. The goal of shelter policy is to make these different roles and sectors mutually supportive. This has long been a central theme in shelter policy, as was recognized in the Global Strategy for Shelter to the Year 2000:

"The fundamental feature of the enabling shelter strategy is the creation on the part of the public sector of incentives and facilitating measures for housing action to take place to a greater degree by other actors" (UNCHS 1988, p. 8)

This was recently reconfirmed in the Habitat Agenda and the Istanbul Declaration on Human Settlements:

"We ... shall seek the active participation of our public, private and non-governmental partners at all levels to ensure legal security of tenure, protection from discrimination and equal access to affordable, adequate housing for all" (UNCHS 1996a, paragraph 8).

5. Although the rationale for a public-private partnership is clear and convincing in theory, however, it is a complex, difficult and controversial approach to put into practice. This is partly because there is no consensus on the appropriate division of labour between public, private and non-governmental organization sectors at any level of detail. Commentators who believe that markets generally work well in the cities of developing countries argue for minimal intervention by Government and a role for non-governmental organizations. This role is seen primarily as a provider of services to those who cannot be reached by market mechanisms, including the urban poorest. Those who emphasize the imperfections of markets place more emphasis on strong Governments and a role for non-governmental organizations in facilitating the emergence of poor people's organizations and capacities, so that they can defend their rights. The tension between these positions has been a consistent theme in debates over shelter over the last ten years. There are also substantial variations in power and interests among the three sectors, which make a real partnership very difficult. Markets and private entrepreneurs tend to move toward the short-run optimization of profits, whereas Governments and non-governmental organizations are more concerned with long-term goals such as equity and sustainability. Yet the power of markets and commerce often outweighs that of Governments and citizens. Bringing different actors together in a dialogue over policy priorities for the city is an essential step towards more effective policy. This can increase the voice of the poor in decision-making and achieve a better balance between short-term objectives like market efficiency and long-term ones like social and environmental objectives. Nonetheless, it is equally important to recognize that cities are arenas both for conflict and for negotiation between different interest groups and that building partnerships and enhancing the roles of non-governmental organizations and community-based organizations is not going to be a neutral process. Realism is the necessary complement to vision.

6. Often, there is also confusion between different components of the private sector and different types of non-governmental organizations. This is an important point because failure to understand the strengths and weaknesses of different institutions can lead to their comparative advantages being compromised by ill-conceived policy interventions. For example, stimulating informal-sector producers has very different consequences for shelter delivery to low-income groups, and for poverty reduction generally, than subsidizing larger-scale commercial contractors. Moreover, official support to large service-delivery non-governmental organizations may do little to develop the capacity of community groups and networks to play their roles effectively. That is why this report is careful to distinguish between these different subsectors, treating them separately before going on to explore the synergies and linkages which exist between them. Clear definitions are essential.

7. Throughout this report, the term "private sector" is used to cover all firms and individuals who operate in market settings and are organized to generate a profit on the investment of their resources, however small the profit that is actually made. This is regardless of whether commercial motives are mixed with other motives, as when, for example, a builder produces a dwelling at below the market price for a friend or relative. Accordingly, the private sector includes both formal and informal sector firms and owner-builders. Since these subsectors are very different in size, target group and operation, however, they are treated separately in the discussion that follows. Non-governmental organizations are defined as not-for-profit organizations which act as intermediaries between individuals, community groups and community-based organizations on the one hand; and markets, firms, banks, Government departments and other non-governmental organizations on the other. Non-governmental organizations may provide services directly to poor people, for example, credit, building materials, health and education and so on, but often they prefer to focus on training and capacity-building, grass-roots empowerment and policy influence. Many non-governmental organizations combine these different functions together in their overall activities. The focus of this report is on local non-governmental organizations rather than international ones, unless the international non-governmental organization is operational at the local level. Community-based organizations are distinguished from non-governmental organizations because they are membership organizations, made up of poor people, rather than working for them, and are directly accountable to their membership rather than to outside funders. Community-based organizations include a huge variety of organizations, from neighbourhood associations through to credit groups, mutual-aid societies and urban social movements. Their strength lies in organizing and representing their members rather than in providing services. One should not, however, treat these categories as watertight: often they blend into each other and are always interlinked and interdependent. This is particularly so with many community-based organizations, non-governmental organizations and private (informal-sector), operators. The crucial point is what each organization does, regardless whether it fits precisely into one category or another. Having said that, it is important to remain clear on definitions and differences, if the roles and strengths of each subsector are not to be confused.

8. In addition to the introduction, the report comprises five chapters. In chapter I, the focus is on the private sector which includes markets, formal and informal-sector operators, and also explores the particular advantages these organizations have in producing shelter for low-income groups. In chapter II, the focus turns to non-governmental organizations and their unique role in facilitating shelter development and related processes so that poor people in cities can really benefit from markets. The roles of non-governmental organizations in knowledge-creation and policy influence are explored alongside their more familiar activities of service-delivery and institutional development. This is followed in chapter III by a similar analysis of the activities of community-based organizations, which highlights the crucial role played by organization, representation, and cooperation in helping the urban poor to gain access to adequate shelter. Grass-roots groups are the key building blocks in reforming urban governance and in achieving the goals of sustainable development. Each of these three chapters contain both a conceptual framework and a series of examples and experiences which illustrate the contributions of the different sectors in concrete settings.

9. Chapter IV moves away from the focus of the three previous chapters, to examine the linkages and synergies which exist between different sectors. It emphasizes those factors which underlie successful partnerships and enable best use to be made of the strengths and competencies of different organizations. The core theme of this section is how to strike a pragmatic balance between the two sets of imperatives. On the one hand, there is a need to release the energies of the private sector, non-governmental organizations and community-based organizations and free them from unnecessary regulation. On the other hand, there is a need to address the problems which tend to arise from unregulated, uncoordinated activities such as exclusion of the poorest, discrimination against women, and degradation of the urban environment. Two strategies for doing this are explored. One is the conventional approach of using the legal, fiscal and regulatory framework to encourage partnerships, limit social and environmental costs, and promote equity and accountability. Another is a more radical approach which seeks to transcend these costs and conflicts by promoting new forms of organization which harness market processes to social and environmental objectives. The future of cities may rest on their success in bringing competitive and cooperative processes together in new ways, mediated by institutions such as non-governmental organizations which can bridge the public-private divide. The final section of the report, chapter V, contains a set of conclusions and recommendations for further research and action.

I. Shelter production and marketing: private-sector roles and experiences

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10. A key lesson of urban research and experience over the last two decades has been that properly-functioning markets in land, housing, finance, construction materials and some services are a better way of stimulating shelter delivery than public housing provision or direct production by non-governmental organizations. As the Habitat Agenda puts it, "a fundamental objective...is to enable markets - the primary housing delivery mechanism - to perform their function with efficiency" (UNCHS 1996b, p. 21). Making markets work efficiently and effectively in social as well as economic terms requires an appropriate degree of government intervention. This can reduce constraints to the supply of land and finance and also extend essential infrastructure. Regulation is also required to ensure minimum standards and to protect the right of all citizens to adequate shelter. This "enabling" role does not, however, include shelter production except in certain very limited circumstances. Although there is some evidence that public-sector institutions can compete successfully against the private sector in service-delivery if they are properly managed, this does seem to be an exception rather than the rule. The private sector significantly contributed to the international policy discussion on shelter as evidenced by the series of international conferences on shelter which were organized under the auspices of the International Real Estate Federation (FIABCI) during the late eighties in Vienna, Harare and Washington.

A. Informal-sector producers

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11. Market-led strategies require private firms and individuals to produce a broad range of types, tenures, levels and locations of shelter to suit consumers of different income levels and family characteristics. Yet, especially in the cities of the developing world, this does not mean the formal private sector only, or even mainly. Poor people themselves, and small firms in the informal sector, have always been the major producers of shelter in most developing countries, and their record in this respect is extremely impressive. This is in spite of low and unstable incomes among consumers and various constraints on producers, especially lack of access to affordable shelter inputs. As laid out below, formal private-sector firms do have an important role to play in some aspects of shelter delivery but, by and large, the size of the needs-demand gap is too great for them to play a significant role in the low-income housing market, finance or services. The needs-demand gap is the difference between what poor people can afford to pay and the price levels at which commercial contractors are willing to produce. In any case, the potential returns to be made from middle-and higher-income housing are much more attractive.

12. This problem is exacerbated by the existence of large-scale imperfections in the markets of the developing countries with supply constraints, such as land-hoarding and politicization pushing up pressures for speculative gain. Often the supply of shelter does not respond efficiently to market signals, even when the demand is effective. Although "it is the poor who are most disadvantaged by poorly-functioning housing markets" (World Bank 1993, p. 2), the reality is that most markets have never functioned efficiently. This is one of the reasons why simple market empowerment shelter strategies do not work. As a recent United Nations Centre for Human Settlements (UNCHS) (Habitat) report concludes, "the poor cannot afford to rely on the market and private contractors to cover their needs for adequate shelter". This is especially so where supply is so constrained that criminal intermediaries start to play a key role in allocating land and dwellings, as has happened in Mexico City and Bombay. (UNCHS 1994, p. 62).

13. Accurate figures on the proportion of low-income shelter produced by owner-builders, extended families, small-scale landlords and individual entrepreneurs as well as firms in the informal sector are hard to come by, and vary from city to city. Turner's estimate (1988, p. 8) of between one-half and three-quarters of the total low-income housing stock can, however, serve as a reasonable guide. The informal sector, broadly defined, is the major producer of shelter for the urban poor. Some of these producers, such as housing cooperatives and social housing associations, are explicitly non-profit making. Their case is dealt with alongside other community-based organizations in chapter III, though it is worth noting that the record of such organizations in producing housing is, by and large, disappointing. They have, however, had more success in developing infrastructure and services at the community level.

14. Consistently, the building and marketing of individual dwellings is best undertaken by the private sector, where the incentives to be efficient are strongest. It may appear unusual to include individual owner-builders as part of the private sector, since - although they may profit when they sell or rent their dwellings - they are primarily interested in improving shelter for their own use. Yet pure self-help housing was always a myth. There was usually paid help. Intermediaries, such as "pirate" subdividers in Bogota and small firms in the informal sector, were usually involved at some stage in land assembly, service-delivery, credit-provision and construction. Owner-builders themselves respond rationally to market signals and the demands of family life, such as letting a room when rental demand is high, for example, or building a second storey when children are married. In this way, they expand the supply of affordable shelter incrementally, but usually with some involvement from informal-sector businesses as builders, financiers, subdividers, or suppliers of materials or labour. Official support to this process is the key to releasing bottlenecks in the low-income housing market, and, as shown in box I, can be extremely effective in boosting supply.

15. While informal-sector producers are good at construction and marketing of housing, there are other aspects of shelter production in which informal-sector involvement tends to lead to the poor paying more than they would through alternative providers for a lower quantity and quality of service. The most obvious of these areas are essential infrastructure and services like roads, schools and health centres, water and sewerage, electricity connections, and so forth, as well as finance.

16. It is well known that interest rates among moneylenders are very much higher than even formal-sector financial institutions. Similarly, the poor pay much more for water delivered by donkey-carts and other small operators than by a proper piped water system. Informal water supplies cost twice as much in Onitsha (Nigeria), five times more in Abidjan (Côte d'Ivoire), and ten times more in Dar-es-Salaam (Tanzania) (UNCHS 1993a, pp. 98-9), than the cost of water which is piped into peoples' homes. It is in such areas, where low-income residents are both excluded from formal markets and penalized by informal suppliers, that help is needed from non-governmental organizations, community-based organizations and local governments. As described later in this report, non-governmental organizations and community-based organizations can support people to develop and operate, excluding certain sectors, their own services both equitably and efficiently, reducing the dangers of excluding certain sectors like the poorest, for example, and exploiting others, like unpaid female labour. They can also connect community groups to other institutions, such as banks, which can supply resources on a sustainable basis.

17. There are, however, some services where informal-sector operators can have a comparative advantage, bearing in mind the need to ensure coordination, minimum standards and safety, as noted above. Urban transport, for example, often works best where there are large numbers of small operators who can keep fares low, as with Calcutta's buses, Manila's "jeepneys", and Nairobi's "matatus". Support for labour-intensive options like this also has a greater impact on urban poverty by creating more jobs. The same principle is true for construction materials, especially bricks and roofing sheets, as well as construction techniques. By facilitating access among informal-sector producers to affordable credit, skills training and technology, non-governmental organizations and governments can promote broad-based, labour-intensive growth, which stimulates the urban economy, while simultaneously attacking urban poverty. This may be even more important in years to come if the current trend towards the increasing informalization of urban economic activity continues. In Bombay, for example, there are already three times as many workers in informal-sector textile plants as in the formal sector (Harris and Fabricus 1996, p. 7).

18. More broadly, the role of the Government in relation to the informal sector is to ensure minimum standards, facilitate the transparent and equitable functioning of land and credit markets and to maintain overall coherence in the extension of the city's social and economic infrastructure. For both owner-builders and small firms in the informal sector, the key policy intervention is the same, namely, to make their job easier in a number of important ways. Constraints should be relaxed in the supply of secure, serviced land, affordable credit should be tailored to low and unstable incomes and appropriate construction materials promoted. Rigid rent controls and bureaucratic red tape, such as elaborate building standards, lengthy procedures for land registration and construction licences, should be removed. They invariably act as disincentives to small operators with little capital or liquidity to fall back on. Most informal or illegal land and housing markets work well when set against the consistent failure of formal markets to supply enough affordable shelter to the poor. They should be opposed only where they produce shelter which is clearly unsafe, or involves criminal activities and coercion. It is far better to work with informal markets to facilitate supply, while intervening only to ensure minimum standards in infrastructure, services and construction. In the cities of most developing countries, for example, the low-income rental market supplies over 50 per cent of all shelter. It is almost entirely made up of small-scale, unregistered landlords, but still manages to supply accommodation at reasonable cost and standards (UNCHS 1996c). A number of options are available. One is guided development, where low-income settlements are spread out along bus routes to reduce transport costs to work, as has happened in Curitiba, Brazil. Another option is incremental development, where people are allowed to settle on unserviced land while infrastructure is installed gradually, as has taken place in Hyderabad, Pakistan. Incentives to informal producers are better than penalties, which are usually unenforceable.

B. Formal-sector producers

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19. As a result of the needs-demand gap noted above, the involvement of joint-stock companies and other formal private-sector enterprises in low-income shelter delivery is limited. It is, nonetheless, continuing to grow under the influence of policy initiatives such as public-private partnerships and ideologies favourable to privatization, especially in service provision. Operationalizing these policy initiatives has, however, proved more demanding than anticipated, especially in African cities, where the commercial sector is generally weak. The formal private sector has a demonstrated comparative advantage in the production and marketing of housing units for middle and higher-income households. This is based on a competitive private construction industry using industrial methods, standardized building materials and the mobilization of domestic savings in a private housing finance market to promote mortgage lending. Success in this sector reduces pressures on downward filtering in the housing market, and helps to alleviate supply constraints at lower levels of demand.

20. It is important that Governments use their legal, fiscal and regulatory framework to encourage commercial construction and financial institutions, and thereby maximize this effect, but its direct impact on delivery for the urban poor is limited. Although attempts have been made to enlist commercial involvement in housing production, such as the Philippines Joint Venture Programme described in box 2, such attempts have usually foundered on the size of the needs-demand gap and the difficulty of making formal-sector housing or loans accessible to those in the bottom 50 per cent of the income distribution (UNCHS 1993a). State housing agencies in Colombia have made resources available to private developers from an indexed savings system, in exchange for a commitment to build units for low-income groups. Côte d'Ivoire, through the Société d'Equipement de Terre Urbaine, has had some success in encouraging firms to assemble land and basic infrastructure and lease the lots to low-income purchasers (UNCHS 1993a). Wherever such schemes have been tried, however, the contribution of such initiatives to total shelter needs among the urban poor has been very limited. Spending large amounts of time and money on encouraging them is not a sensible policy option.

21. A more interesting area for public-private partnership of this kind lies not in housing production and marketing, or even in housing finance, where the affordability criterion also applies, but in some areas of infrastructural development and service-provision.

22. Many commentators, headed by the World Bank and, to a lesser degree, UNCHS (Habitat) have cited the potential cost and efficiency advantages of involving commercial companies more widely in urban transport, including road construction and ownership, electricity supplies, water and sewerage. Although Governments play the central role in coordinating infrastructure and services, with the aim of ensuring equity in access, quality in standards, and coherence overall as the city grows, the most efficient mode of provision and maintenance varies between cities, income groups, and types of service. Where consumers can be charged separately and where competition between providers is possible, commercial, i.e., private provision, may be better than public provision, as long as the Government intervenes when necessary to safeguard standards. An obvious example is urban transport and, in some circumstances, refuse-collection is another. Where monopolies are likely, as in water supply, sewerage and electricity, the success of contracting out depends on the existence of competitive market conditions and the Government's willingness to enforce them. Experience shows that shifts from both public to private provision, and from private to public provision, can produce beneficial results.

23. Where incomes are low, however, and competitive conditions are impaired, as in the cities of developing countries, complete privatization is a dangerous option. Some form of public-private partnership is a better response, particularly, with non-governmental organizations and community-based organizations involvement as well (see chapters II and III). The precise modalities of such partnerships, and the depth of involvement awarded to commercial firms, vary enormously, but it is usual for Governments to oversee the terms and implementation of tendering for contracts, for non-governmental organizations and community-based organizations to promote special terms for low-income consumers and for commercial firms to manage direct operation and maintenance. Some of the most successful examples of private-sector involvement in urban services come from the water sector, a few of which are summarized in box 3.

24. Partnerships such as these are not a panacea for service-provision in cities, as their reach is often limited to lower- and middle-income groups at best and they require a well-functioning municipal administration to oversee implementation and guard against abuses. They may have employment effects that are more severe than predicted and they cannot finance the essential capital investments in basic infrastructure necessary to stimulate private-sector construction (Batley 1992; Cook and Kirkpatrick 1988, 1995). Many experiments with privatization have been disappointing. The Gambia, for example, entered into management-leasing arrangements with private companies for the operation and maintenance of urban services, including billing and revenue collection, but terminated the agreement after only two years because of their unsatisfactory performance (UNCHS 1996c, p. 309).

25. On the other hand, where conditions are right, involving commercial companies as partners alongside local government and non-governmental organizations can bring real efficiency gains without compromising equity. This is particularly the case where companies have a prior commitment to social objectives or community service. Although in developing countries this is rare, examples such as the Fundación Carvajal in Colombia, which funds settlement upgrading and small-enterprise development and the Dayton Mining Company in Chile, which supports "banks" of construction materials, show that it is possible to combine profit motives with wider goals, to the benefit of low-income neighbourhoods (Arrossi et al. 1994). Often, the key in such situations is to reduce the risks taken by private companies when they increase their involvement with low-income consumers. When the Government or a non-governmental organization, for example, guarantees a credit fund to be disbursed by a commercial bank for a limited period, risks are reduced. This worked well in Villa el Salvador in Lima during the 1980s. Alternatively, planning regulations may be relaxed in return for commitments to extend coverage to the poor, as happened in São Paulo, or else ensures concrete benefits in exchange for investment in public goods or low-income shelter. This took place in Mumbai, India, where 100,000 slum dwellers have been rehoused in the last few years under a scheme which allows property-owners to redevelop their land at higher densities so long as they agree to legalize tenure among the original residents or rehouse them elsewhere. In all these schemes, it is important that private companies are not allowed to avoid legitimate risks in order to reap substantial gains, as often happens when upgraded land is commercialized. In all partnerships, risks as well as rewards must be shared.

26. In summary, policy-makers must be clear and explicit about what is best carried out by informal-sector operators and by commercial firms. Generalizing about the private sector or privatization can be misleading. It is true that both formal and informal-sector operators have a comparative advantage over the public sector, community-based organizations and non-governmental organizations in terms of producing and marketing most components of urban shelter. They can also play key roles in job creation, and raising finance, as well as the provision, operation and maintenance of certain services. The relevance and appropriateness of these roles, however, varies according to the target-income group. Top priority must go to making markets work for the benefit of the urban poor by attacking supply constraints, especially in serviced land and affordable credit, strengthening demand by supporting labour-intensive industry and services and removing regulations except where health and safety are at risk. Supporting informal-sector producers is much more important than encouraging commercial involvement. In most cases, successful partnerships with either the formal or informal private sector require the presence of non-governmental organizations and community-based organizations to address problems of equity and access. These actors are the subject of the next two sections of the report.

II. Facilitating equity in shelter delivery: the role of non-governmental organizations

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27. The rise of non-governmental organizations as major actors on the world scene is a comparatively recent phenomenon, with a particularly rapid growth in number, size and influence over the last ten years (Edwards and Hulme 1992, 1995). There are no comprehensive figures covering the number of non-governmental organizations active in shelter delivery in developing countries, but the total must run into the thousands. There are more than 25,000 registered non-governmental organizations active in development work worldwide, and many more which are not formally registered, all contributing to what one commentator has called an associational revolution of profound importance to the future of the city (L. Salamon, cited in Edwards and Hulme 1995, p. 2). Non-governmental organizations are an extremely heterogeneous category of organization, embracing mainstream social-service providers, especially in health and education, welfare organizations, semi-commercial or not-for-profit consultancy groups, credit agencies, lobby groups, and organizations that focus on research, institutional development, capacity-building and grass-roots education and awareness-raising. As in the case of the private sector, this makes generalization dangerous, and the roles and competencies of non-governmental organizations vary greatly according to context and circumstance. All have in common, however, their position as intermediaries between poor people and the institutions of State and market. As these institutions are often inaccessible, unaccountable and unresponsive to the needs and demands of low-income groups, it is difficult for poor people to participate in them directly, without additional assistance and mediation from a supportive organization. All partnerships require mediation of this sort. Such assistance may come in the form of advice and information, extra resources, organizational capacity, links with other institutions, experimental approaches and projects, technological innovation, legal education, temporary subsidies or the direct provision of services. All these are aimed at building the confidence, skills, opportunities and economic weight required to enter effectively into market exchanges or negotiations with bureaucrats. The general function of non-governmental organizations is, therefore, to help equalize fundamentally unequal relations between powerful institutions and the urban poor by facilitating contacts and exchanges in ways which benefit those with less market power and political voice. As they are the intermediaries and not the organizations of the poor, non-governmental organizations cannot represent poor people's interests directly, nor do they have any comparative advantage in the production of shelter. Yet, by acting as a bridge between the grass-roots and other levels of the urban economy and governance, they play a fundamental role in assisting poor people to advance their interests by facilitating access to essential inputs, mediating economic and political exchanges and communicating experience from the bottom upwards, in order to influence official policy.

28. Non-governmental organizations are often ascribed a range of comparative advantages which underpin their increasing role in shelter delivery. These include, inter alia, closeness to the poor, flexibility and innovation, cost-effectiveness, strong accountability mechanisms, honesty and transparency and independence from sectional interests. Over the last few years, new research has shown that these strengths are often compromised in practice and that non-governmental organizations are often not as effective as once thought (Edwards and Hulme 1995). There is nothing very disturbing in this evidence, however, as it is simply a reflection of the problems and compromises that beset all institutions in the real world. Nonetheless, it is important to recognize that non-governmental organizations face many difficulties and limitations in their work which affect what they can achieve. Chief among these limitations are their coverage, scale and sustainability, as most non-governmental organization innovations are small, dependent on external subsidy and often exclude the poorest. There is sometimes an unwillingness to cooperate with government and market-based institutions, even where such exchanges would be beneficial to the poor and there may exist a state of confusion about identity and roles, with non-governmental organizations trying to mix too many different activities together, some of which - such as service-delivery and institutional development - may be incompatible. There may also be dependence on foreign donors and the agendas they introduce. They can also be affected by weak performance-assessment and accountability mechanisms, especially downwards to poor people, together with a tendency towards bureaucratization especially if they grow too quickly (UNCHS 1992a-d). The experience of OXFAM United Kingdom and Ireland in failing to reach the very poor, especially women, in its "Zabbaleen" small industries promotion project in Cairo, could be replicated many times over (Hall et al. 1996). In part, these problems stem from the ambiguous position of non-governmental organizations in wider debates about development strategies and the public-private mix. Some see non-governmental organizations as society-based institutions defending certain values, rights and interests, while others see them as market-based institutions providing services at lower cost. Many non-governmental organizations themselves see truth in both definitions, and try to retain their flexibility to respond in different ways, according to the situation at hand. It is important to bear these issues in mind when considering the role of non-governmental organizations in shelter delivery and to be realistic about the potential contribution that non-governmental organizations can make.

29. Non-governmental organizations are perhaps best known for their roles as facilitators in the supply of essential shelter inputs to poor people and community organizations, by mediating between low-income households and the institutions which control the supply of land, credit, construction materials and services. Non-governmental organizations can also provide the extra assistance that is often the key to unlocking supply constraints in urban markets. Examples of this role are given in boxes 4 and 5. Although the details vary from one situation to another, the role of non-governmental organizations is to help people with less market power to address the barriers and obstacles which reduce access to their needs. Such problems as prohibitive interest rates on loans, for example, or the unwillingness of landowners, or local authorities, to allow legalization of tenure may be dealt with by the non-governmental organizations. Many of the classic examples quoted in the literature concern the ability of non-governmental organizations to demonstrate that the poor, though not the very poorest, are bankable. In Bangladesh, both the Bangladesh Rural Advancement Committee and the Grameen Bank, in India, the Self Employed Women's Association and the Working Women's Forum and in Indonesia, Bina Swadaya, as well as many others, have all proved conclusively that low-income borrowers can repay their loans and invest them productively.

30. Facilitating shelter delivery in this way can be both direct - with non-governmental organizations acting as a channel for affordable inputs as above - or indirect, with non-governmental organizations building the capacity of poor people and their organizations to make claims in markets or on local government, develop and operate their own services (see Box 5), or defend their interests when under threat, for example, if faced by eviction. Such capacity-building roles are difficult to implement, requiring great skill and sensitivity, large amounts of time, and the willingness to move slowly, although these are conditions that many donor agencies are reluctant to allow. Yet these efforts can make the difference between a weak and divided community, and a strong and united organization with the confidence and skills to negotiate effectively. Moral and technical support from non-governmental organizations is often an essential ingredient in successful upgrading or resettlement, and the rehabilitation of rental tenements (UNCHS 1993a, p. 57). Training community groups in bargaining skills and educating them about their legal rights in shelter is very important here. Some examples are given in chapter III, below. In all these activities, non-governmental organizations can play a particular role in ensuring that women, and other excluded groups, are included in community associations, negotiations over programme priorities and training programmes.

31. In addition to their role in facilitating access to shelter inputs, non-governmental organizations are important actors in helping to shape the wider environment in which successful shelter delivery to the urban poor can take place. They do this by disseminating knowledge about innovatory approaches, using the lessons of their experience to influence the official policy framework, banding together to exert pressure on decision-makers and speaking out in defence of the rights of the urban poor. In doing so, they can increase the impact of their limited resources beyond a small number of projects or a single neighbourhood, a problem that has bedevilled the non-governmental organization sector for many years. Even if current growth rates, which are probably over-optimistic, are projected into the future, there will never be a sufficient number of non-governmental organizations to deliver services or give support and advice to every low-income community. It would be far better to use grass-roots experience as a lever for wider changes in the policies, attitudes, resource flows, systems and structures which determine the shelter options of the poor. These include property rights, tenure, distribution of government expenditure, plus lending policies in the formal financial system, and others. International recognition of the right to adequate shelter, for example, came largely as a result of pressure from non-governmental organizations and the sophisticated use by them of international law and treaty obligations on the part of Governments (UNCHS 1996c, p. 350). In the aftermath of the International Year of Shelter for the Homeless in 1987, non-governmental organizations also played an important role in garnering support for the enabling approach to shelter and its advocacy of popular participation, gender equity and sustainable development. Although community groups have an important direct role to play in influencing such changes (see chapter III), they often need the help of non-governmental organizations to mediate their interests in the face of hostile or unresponsive elite groups.

32. The most important of these policy-related actions by non-governmental organizations take place at the local level, although increasingly such local efforts are tied in with non-governmental organizations and their activities at national and international levels. This increases their impact still further by facilitating the exchange of ideas and experiences across national boundaries, and building mutually-supportive networks and coalitions to underpin action on a larger scale. The Intermediate Technology Development Group (ITDG), for example, which is based in the United Kingdom, supports the Shelter Forum in Kenya, a network of local shelter-related non-governmental organizations which has had some success in lobbying against restrictive building standards and which now has a seat on the Kenyan Government's regulatory review body (Hall et al. 1996). Shelter-related non-governmental organizations in India, South Africa and the United Kingdom of Great Britain and Northern Ireland have formed their own network which facilitates the exchange of experience and personnel between different organizations. In this way, innovations from South Africa, such as community-driven shelter training, have been cross-fertilized with the experiences of the National Slum Dwellers Association and other urban non-governmental organizations in India, enabling all the members of the network to strengthen their work and avoid always "reinventing the wheel" (Hall et al. 1996). Regional networks of shelter non-governmental organizations, such as the Asian Coalition for Housing Rights and the International Institute for Environment and Development (IIED)-Latin America, have played a key role in disseminating experience more widely and have achieved a high level of credibility in policy circles. This sort of activity was further legitimized at Habitat II in Istanbul, leading to an extensive debate between non-governmental organizations and official delegations, which, while often difficult to manage, is the hallmark of a healthy interaction.

33. One role of non-governmental organizations which is often neglected is their importance as a source of information. They are important at analysing and documenting the lessons of development experience, disseminating good practice guidelines and case-studies, and experimenting with new ways of doing things. All the models of credit-delivery to the poor now being replicated across the world stemmed from experiments carried out by non-governmental organizations in South Asia and Latin America. The participatory techniques for appraisal, research, monitoring and evaluation, central to the process approaches to slum upgrading which are now being successfully consolidated in India and elsewhere, were originally developed by non-governmental organizations working in concert with a small number of universities in Thailand. The influence of successful programmes supported by non-governmental organizations such as the Orangi Pilot Project described in box 5 has had a profound influence on shelter policy and practice everywhere. The impact of investing even small amounts of time, energy and money in this form of learning-for-leverage can be spectacular but, to play this role effectively, non-governmental organizations must have the capacity to learn and the time and resources to make learning and dissemination a priority over service-delivery and the day-to-day demands of regular programme work. This is difficult to do when mounting pressure from donors is placing more and more demands on them, with increasing calls for accountability and short-term measurable results.

34. The challenge for non-governmental organizations is to find ways of protecting their core functions of learning and institutional development, raising more of their own resources, so as to reduce their vulnerability to external agendas, and of maintaining a clear identity and sense of direction when the demands being made on them from different directions are so great. Raising more income from local sources is crucial to the promotion of the sustainability of the activities of non-governmental organizations. The Bangladesh Rural Advancement Committee, for example, already raises over one third of its total budget from management fees, commercial operations and local donations. At the same time, non-governmental organizations themselves must face up to the challenge of investing more seriously in their own capacity for learning, influencing, performance-assessment and accountability to all their multiple stakeholders. This includes a more collaborative, congenial stance towards other non-governmental organizations, different levels of the Government and organizations in the private sector, with whom relations have often been antagonistic. Only by forging closer links of this sort will non-governmental organizations be able to increase their impact on the forces which really drive the city.

35. Non-governmental organizations cannot do all these things by themselves, however. Donors, Governments and other decision-makers must face up to their responsibility to create legal, fiscal and regulatory frameworks which are favourable to the activities of non-governmental organizations, make more resources available for investment in their capacity-building efforts and widen opportunities for linkages between non-governmental organizations and other institutions. The best place to start is to recognize the autonomy of non-governmental organizations and their right to pursue their activities unhindered by political interference or unnecessary bureaucratic restrictions, such as within the law as it relates to fraud, criminal activity and security. Experience shows that the most successful interactions are those that take place in the context of an independent and well-equipped non-governmental organizations sector and a strong and progressive administration by the Government. Clearly, detailed laws, regulations, and fiscal incentives covering non-governmental organizations will vary with culture and context, but it is impossible anywhere to reap the benefits of their comparative advantages if these frameworks are too constraining. Successive United Nations shelter-policy documents have recognized these fundamental points:

• (a) Governments must recognize the autonomy of non-governmental organizations and community-based organizations; respect, support and enable the initiatives of local cultures and groups; maintain an attitude of openness, transparency, objectivity, consistency and impartiality in their dealings; and increase funding for the activities of non-governmental organizations in ways which preserve and support their strengths and independence (Commission on Human Settlements 1993b);
• (b) Governments should review and adjust legal and regulatory frameworks in order to recognize and stimulate the diverse forms of organization engaged in the production and management of land, housing and services and support capacity-building, education and training programmes, and fiscal measures designed to make non-governmental organizations efficient and competent partners in the implementation of national plans of action (UNCHS 1996b, paragraph 76).

36. The key word here is partnership, which is a relationship in which there is genuine dialogue, flexibility and room to manoeuvre, if not complete equality, because of differences in power and resources. Without proper safeguards, there is a danger that non-governmental organizations will become instruments of government or external donor agencies, rather than independent organizations with their own social mission to pursue, promoting equity in all aspects of shelter delivery. Excessive interference is bound to hinder the ability of non-governmental organizations to remain true to their long-term goals and there is evidence of this already from research on non-governmental organizations around the world (Hulme and Edwards 1996). A recently-published review of The Urban Opportunity: the Work of Non-Governmental Organizations in the Cities of the South provides evidence of quality being compromised as a result of pressure from donors to adopt minimalist approaches to credit-delivery (Hall et al. 1996). These are approaches that reduce the impact of the social and institutional elements of such work and evaluation methods that focus too much on short-term, material results. It would be far better to support capacity-building activities which can leave non-governmental organizations free to choose whatever roles suit them and their circumstances best, as IIED-Latin America is doing through its programme for the institutional strengthening and capacity-building of non-governmental organizations, funded by the World Bank and bilateral aid (UNCHS 1996c, p. 332). Donors should also provide support which gives non-governmental organizations more security and space to confront and address the weaknesses they undoubtedly have, especially in terms of systems for learning and dissemination, performance-assessment and accountability. Non-governmental organizations should be encouraged to focus on measures which are demand-based rather than supply-based, in other words, which respond to genuine local initiatives rather than tempting non-governmental organizations to accept whatever is on offer from well-resourced donor agencies.

III. Organization, representation and cooperation in the city: the role of community-based organizations

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37. Like non-governmental organizations, community-based organizations constitute a very diverse category, including special-interest associations, women's groups, neighbourhood associations, grass-roots committees and social movements. Community-based organizations are usually small, covering a single community or a group of individuals within it, yet, when they federate together, they can be powerful actors at the level of the city or the country. They often suffer by comparison with their larger, better-resourced and higher-profile non-governmental organization partners, but community-based organizations are the glue that holds grass-roots action together. Without them, it would not be possible for low-income groups to participate effectively in markets or political decision-making; nor could any of the innovations in shelter-delivery outlined in this report be put into practice. Community-based organizations are the basic building blocks of sustainable development and the liveable city: there are, for example, 1,300 neighbourhood associations in São Paulo alone. There is an even larger number of women's groups running feeding programmes and other welfare activities in the slums of Lima and millions of similar organizations and committees across the cities of developing countries. They are all distinguished from non-governmental organizations because they are formally rooted in the communities they represent, being made up of members rather than clients or partners, and they are directly accountable to their constituents. Community-based organizations are organizations of the poor, not for the poor. This does not mean of course, that they are always democratic. Community-based organizations and non-governmental organizations are often confused or conflated but their differences are important, because community-based organizations have a legitimacy in representing their members' interests that non-governmental organizations do not have. This gives them a comparative advantage in mobilizing low-income groups to defend and advance their concerns and a natural role in the formal processes of urban governance.

38. In addition to these roles, community-based organizations play a vital part in fostering the emergence of cooperative values and attitudes, what has come to be known as social capital. Although little research has been done on social capital in urban areas and it has previously been ignored in favour of the competitive processes that were assumed to underlie economic growth, its importance has now been recognized. It is a crucial element in both the efficient functioning of markets, where trust and honesty are essential, and in nurturing the capacities required to support negotiated solutions to problems, relationships of caring and mutual support, and the successful combating of crime and violence. Social capital is therefore vital in achieving broader social, political and environmental goals, such as equity, conservation, non-discrimination and safety, which, in turn, are central components of a liveable city. Recent research in Lusaka, Zambia, and Guayaquil, Ecuador, has shown how norms and networks of reciprocity and solidarity have been instrumental in keeping essential services going and in supporting poor people through difficult periods of economic adjustment during the 1980s and early 1990s (Moser 1996). These norms and networks cannot simply be assumed. They have to be nurtured in concrete terms within families, communities and associations and community-based organizations are the only institutions capable of doing this. Neighbourhoods are the places where all solutions to the problems of the city begin and end. They are, in fact, the foundation for setting the principles of sustainable development in operation. Clearly, then, the importance of community-based organizations extends much further than their role in shelter delivery, yet that role is in itself an important component of the broader movement towards more equitable development.

39. Like non-governmental organizations, community-based organizations play an important role in facilitating access among low-income groups to essential shelter inputs, especially affordable credit, land, construction materials and technical advice. Unlike non-governmental organizations, however, community-based organizations can represent people directly in negotiations with banks, local authorities and donors and can take on the actual management of upgrading communal services and the delivery and monitoring of loans or grants. This is the function of the lane organizations in the Orangi Pilot Project referred to in chapter II, and further examples from Namibia, Thailand, India and the Philippines are provided in boxes 6 and 7. If they have the right training and sufficient capacity, community-based organizations can be viable alternatives to market mechanisms for the delivery of credit repayment rates, which, in such schemes, are often as high or higher than those in commercial operations (UNCHS 1994). Clearly, however, to go to scale and be sustainable in the long-term, borrowers must be integrated into financial markets at some stage. The role of community-based organizations is to provide temporary help to those who are excluded by markets where market mechanisms by themselves are incapable of solving the problems of exclusion.

40. In examples like these, community-based organizations normally steer clear of the actual production of dwellings, for reasons given above. Their record in this respect is not encouraging, since there is little incentive for households to invest time and energy in building other people's houses. The opposite is true for communal services and infrastructure, where it is in everyone's interest to participate in the collective improvement of water and sewerage, roads and schools. Although there are some housing cooperatives which have been able to produce affordable housing on a small scale, this often turns out to be a second-best solution. They may produce dwellings which are more expensive and over-standardized, even though working together in this way may pass on important skills to participants and leave behind a legacy of cooperation which can be used for other purposes (UNCHS 1989). Even successful shelter programmes like the Mexican Popular Housing Fund (FONHAPO), have found that social housing production rarely works. As chapter I concluded, informal-sector firms and, under certain controlled conditions, even commercial operators, are much better at this task (UNCHS 1996c, p. 380).

41. Rather than producing shelter, community-based organizations are better at organizing poor people to develop and manage communal facilities or to bargain for a better deal in terms of their shelter options. This can take the form of negotiations with landlords, landowners, estate agencies, banks and donors (as in the cases described in box 7). Alternatively, they can be more overtly confrontational, as when a community organization marches on city hall to protest against the threat of eviction or the poor performance of urban services. Community-based organization leaders can also counteract the influence of criminal intermediaries, who increasingly act as gatekeepers to land and other shelter inputs in the highly constrained housing markets of cities of many developing countries. In Mexico City, for example, Mafia-like gangs called "coyotes" demand protection payments from those they assist in locating land for invasion or illegal subdivision. In such cases, strong community-based organizations can provide a powerful source of protection and representation of their own in these circumstances, though many low-income families are not members of community-based organizations and are therefore more vulnerable to coercion and exploitation of this sort.

42. These examples show how influential community-based organizations can be when they join together in coalitions and federations, to exert pressure from the bottom up, on both private-sector institutions and local government. The successes of the National Campaign on Housing Rights and the Slum Dwellers Federation in India, together with the community-based organizations CONAVIP in Colombia and CONAMUP Mexico, have all been well documented (UNCHS 1993a, pp. 116-8). CONAMUP has over one million members, whom it represents in debates over shelter policy at the highest levels. Encouraged by political decentralization and democratization in Colombia, the four federations that constitute one large community-based organization have played a leading role in the development of the new Colombian social housing policy (UNCHS 1993a, p. 117). A consistent theme in shelter policy over the last ten years has been the centrality of improvements in urban governance. The publication An Urbanizing World: Global Report on Human Settlements 1996 goes so far as to say that the "quality of urban governance determines the extent to which the city is able to harness the advantages of urban living, while counteracting the disadvantages." Transparent and accountable local government is vital to effective shelter delivery for low-income groups, but means little unless poor people are organized and represented in such a way as to be able to hold the authorities to account in a meaningful fashion. Non-governmental organizations cannot do this, since they are not membership bodies and have no legitimacy in representing the voice of the poor in the formal political process. Community-based organizations, however, can do this very effectively.

43. What, then, needs to be done to strengthen and secure the role of community-based organizations outlined above? How can community organizations be made even more effective, and how can they deal with their weaknesses, such as poor internal democracy, exclusion of those with no voice at all, and a tendency towards fragmentation and politicization? As with non-governmental organizations, the first priority is to create and cement a legal and regulatory framework which is favourable to grass-roots organization and the participation of community-based organizations in those aspects of shelter delivery where community groups have a comparative advantage. This means legal recognition and protection for the right to organize, associate, and demonstrate; a representative system of urban governance to institutionalize the participation of community-based organizations in local government and the removal of unnecessary regulations and bureaucratic requirements which hinder the involvement of community organizations in shelter delivery. For example, financial systems should be able to recognize organizations as credit holders and accept collective collateral and guarantees. Community-based organizations should also be allowed to hold collective titles to land and property, while leasing individual plots to members, and full negotiating status should be granted to community groups who demonstrate that they are genuinely representative of their constituencies in upgrading and resettlement programmes. The participation of community representatives on the boards of utility companies, as in Bogota, and in the decision-making processes of low-income shelter programmes, as in the Sri Lanka Million Homes Programme and slum upgrading projects in Indian cities, can transform previously hostile relations between officials and residents and generate very significant gains in cost and efficiency. This is an excellent way to promote real accountability and responsiveness in urban services and other shelter agencies, thereby building support and sustainability in the future (UNCHS 1995, p. 30).

44. To represent their members and negotiate effectively, however, community-based organizations must have genuine legitimacy, be fully accountable and have the necessary capacities for planning and analysis. These are often problematic areas, since, despite their popular image, many community-based organizations are no more democratic and accountable than other public or private organizations. Manipulation by interest groups, a tendency towards authoritarian leadership and the exclusion of particular groups and voices, especially women, are all common. What has been termed the "iron law of oligarchy" is no respecter of reputations (Edwards and Hulme 1995) There is little point in generating more space for participation by community-based organizations if these organizations themselves place more emphasis on hierarchy within themselves. Governments and non-governmental organizations can help here by supporting institutional development among community-based organizations, building their capacities for identifying and solving problems, strengthening internal systems for planning and accountability and recognizing when larger-scale funding or the taking on of more responsibilities is likely to damage the strengths of community-based organizations or erode the relationships between members and office-bearers Indeed, this is a classic area of activity for non-governmental organizations and one which should be prioritized highly. In urban Senegal, for example, the OXFAM United Kingdom and Ireland started out by supporting the Programme des Femmes en Milieu Urbaine (PROFEMU) to deliver subsidized credit direct to women's groups in low-income areas but, over time, recognized that this was doing little to build strong grass-roots institutions with the capacity to run their own affairs. Accordingly, the emphasis of the programme moved away from credit to capacity-building among the groups and most recently, to giving support to the emerging federation of urban women's organizations which has grown out of the programme. These associations are now able to lobby on the wider stage for changes in the framework for credit-provision in general (Hall et al. 1996).

45. Finally, like all institutions, community-based organizations must make strong connections with other community groups, with different tiers of local government, with the financial system, with official shelter agencies and with non-governmental organizations. This is crucial to their wider impact and longer-term sustainability. In growing closer to institutions like these there is always a danger that community-based organizations will lose some of the qualities that make them such an effective advocate for the poor, but this is a necessary price to pay for an expanded role in shelter delivery and can be mitigated by proper arrangements for protecting the autonomy of community groups as part of the framework for public-private partnership. For example, the Luganda Residents Association, a community-based organization in Natal, South Africa, developed a threefold structure to separate different functions and insulate them from potentially damaging interactions. These were civic organizations to represent political demands, a trust to take financial and technical responsibility for project implementation and a working committee and mass meetings to provide a vehicle for democratic decision-making (Abbott 1996).

IV. Synergies and linkages: making partnerships work for the urban poor

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46. One of the most striking lessons of experience in shelter delivery for low-income groups, and a recurrent theme in this report, is that real success comes only when the contributions of all the actors in the city are harnessed in a complementary and mutually supportive fashion. Non-governmental organizations can do little without strong community organizations at the grass-roots level, whereas community-based organizations must cooperate with local government and the private sector if they are to generate sustainable improvements in the lives of their members. Governments themselves need the private sector to produce and market shelter and to underpin a dynamic economy, on which revenue collection and infrastructural investment depend. As recent experiences in South African townships demonstrate, merely creating legitimate and accountable political structures is no guarantee that the basic needs of cities will be satisfied. At the same time, dialogue about planning must be accompanied by decisions about how service improvements will actually be paid for (Abbott 1996). Each of the sectors studied in this report depends to a significant degree on its relations with the others and effective shelter delivery rests on finding the right mix between public, private and community action at each point in time. By focusing on comparative advantages, partnerships provide a mechanism for maximizing the strengths of different institutions, while simultaneously addressing their weaknesses. Thus, the key is to find ways of strengthening linkages and exploiting synergies, in order to harness the productive power of markets and private enterprise to wider social and environmental goals. It is necessary to bring together the facilitating role of non-governmental organizations and the organizing role of community-based organizations with market processes so that those with less market power - the urban poor - are able to participate effectively, and do all this within a framework set by the Government, so that shelter delivery becomes a coherent process which avoids undue costs at the level of the city as a whole. This is a difficult thing to do, especially in cities which are growing rapidly, despite a background of highly-constrained land and housing markets and a weak public administration.

47. The reality is that expanding the role of the private sector and of non-governmental organizations in shelter delivery generates costs as well as benefits, plus conflict and disagreement as well as synergy. Public-private partnerships are always imperfect and careful action has to be taken, usually by the Government, to manage the problems and tensions that arise along the way. This section of the report looks at how this can be done, focusing on the role to be played by the "enabling State" and then at the two options that the State can employ to lever change: manipulating the legal, regulatory and fiscal framework to deter costs and encourage cooperation, as well as transcending these costs and conflicts through new institutions which are neither fully market-oriented nor wholly driven by social objectives.

48. It is not the case that innovations by non-governmental organizations and community-based organizations are scarce, although successes involving the commercial private sector are rare in shelter delivery for low-income groups, for reasons set forth in chapter I above. Only the barest details of such innovations have been provided in this report but many more accounts are available in the literature. Rather, the problems that arise are those of scale sustainability, exclusion and discrimination. They include the unwitting erosion of the strengths and values of non-governmental organizations and community-based organizations and an inequality in the benefits derived from partnership by different sides. A consistent finding of evaluations in the shelter sector is that successes tend to be small in scale and often dependent on continued subsidies or injections of resources from the outside (UNCHS 1993a).

49. Alternatively, especially in credit programmes, sustainability may be achieved at the expense of coverage, with the poorest groups being excluded by the conditions imposed on borrowers, even when these are relaxed in comparison to those imposed by the commercial sector. Programmes may often discriminate against women, the young and the elderly, or people with disabilities. Women may not be allowed to register property in their own names, for example, and upgrading programmes may ignore both the constraints imposed on women's participation by the demands of their daily schedule, and gender-specific priorities in the design and location of housing, services and infrastructure.

50. Involving non-governmental organizations and community-based organizations in shelter delivery is a key component of strategies designed to combat discrimination and promote equity. The examples given in chapters II and III show how additional help provided to marginalized groups by these institutions can strengthen both their market power and their political voice, enabling women and others to achieve a better deal in shelter delivery. Yet, involving non-governmental organizations and community-based organizations is no guarantee of success. Women and, perhaps even more so, people with disabilities, the young and the elderly can be excluded or discriminated against in the programmes of non-governmental organizations as well, partly as a result of a common gap between rhetoric and reality in relation to gender awareness and other issues of difference. Achieving both scale and sustainability without excluding certain groups is a goal that has eluded nearly all attempts to promote the involvement of non-governmental organizations and the private sector in shelter delivery for low-income groups.

51. This is a reflection of the wider tensions which exist between the different sectors. Although the objectives of private firms and non-governmental organizations may coincide in certain areas, it remains the case that the former have a primarily commercial agenda while the latter do not. In some cases, commercial interests appear to be gaining more from their increasing involvement in enabling strategies than the poor. If large landowning interests, for example, are allowed to capture rising property values as a result of land-sharing deals or the valuation of land which is serviced by non-governmental organizations and community groups (UNCHS 1996c), commercial companies may benefit. These tensions and differences need to be acknowledged openly as the basis for reaching some sort of compromise, with action being taken to strengthen the capacity and bargaining position of non-governmental organizations and community-based organizations so that the risks of profiteering or domination are reduced. Despite these tensions, strengthening linkages between different sectors remains the best way to address problems of scale and sustainability. There is no future for non-governmental organizations or community-based organizations if they are isolated from both government and markets.

52. The first step in maximizing synergies and linkages in shelter delivery for low-income groups is an enabling State. It is a popular misconception that the enabling approach automatically implies a reduced role in shelter delivery for Governments. The reality is that a strong, efficient and accountable Government remains the key to success. In a redefined set of roles and responsibilities, however, the State must focus on what it does best, and can only do, namely, those areas in which the private sector, non-governmental organizations and community-based organizations have no comparative advantage. These include setting and enforcing an enabling legal, fiscal and regulatory framework within broad macroeconomic and social policies which favour both market efficiency and broader equity goals. It also involves bringing different actors in the city together in a dialogue to facilitate negotiations and legitimize public-private partnerships, attacking supply constraints in land, housing and financial markets and intervening to deter speculation. It must also recognize the legal claims of the poor to adequate shelter and grant secure tenure wherever possible, act as a watchdog to protect the shelter options of marginalized groups through special measures and coordinate the whole process of shelter delivery at city level, so that services and infrastructure are developed in a coherent and cost-effective manner. In maximizing the benefits that can be derived and minimizing the costs that can be incurred from increasing the involvement of private-sector and non-governmental organizations in shelter delivery, the following three areas of Government action are important.

(a) Representative urban governance

53. Successful cities demonstrate the positive power of Government when harnessed to private initiative and social action, mediated through structures which allow all sectors of society a voice in debate and decision-making. Democratic, accountable and transparent local government is a prerequisite of successful partnerships, because there is no other forum in which different interests can be articulated fully and fairly and in which the key decisions that ultimately determine who benefits from increasing private-sector or non-governmental organization involvement reflect the views of those with less power and fewer resources. In South Africa, for example, the Metropolitan Chamber has been successful in bringing different actors together from the Johannesburg-Soweto conurbation to discuss key planning issues (Abbott 1996). New political coalitions are required to prioritize the needs of the city and its poorest residents above narrow sectional interests. The "Bombay First" initiative set up recently by business, local government and non-governmental organizations to promote reforms in financial services, land allocation and public transport is a good illustration of what can be achieved when traditionally antagonistic institutions decide to come together for the greater good (Harris and Fabricus 1996).

(b) Strengthening and safeguarding the role of non-governmental organizations

Partnerships work best where Government has a positive social agenda and non-governmental organizations and community-based organizations are strong and independent. This requires deliberate action to strengthen these institutions (through training and capacity-building), a commitment to give them more opportunities to represent their concerns and constituents in decision-making and respect for their autonomy. Partnerships need to be designed in which Government is aware of, but does not control, the activities of non-governmental and community-based organizations (UNCHS 1992a). Such attitudes have been enshrined in a large number of international shelter policies and strategies at the national level, but are not always respected in practice. India's national housing policy, for example, states that the "Government will devise and implement strategies which will enable the various agencies to complement the efforts of one another". This is paying off in the form of enhanced dialogue between non-governmental organizations and the Government and thus resulting in benefits for poor people in upgrading and resettlement schemes in Mumbai, Delhi and other Indian cities (UNCHS 1992d).

(c) Support to markets and businesses which protect the interests of the poor

Governments have a duty to manage markets for the benefit of all their citizens, to combat monopolies such as those in service delivery, to penalize corruption, to address externalities such as pollution and to intervene where required, to protect the interests of the poor and vulnerable. This has been achieved in cities such as Curitiba, Brazil, where there is service delivery provided by private companies within a framework set and monitored by a strong municipal administration (UNCHS 1995, p. 56). Measures to reduce risks to the private sector and open up more opportunities in shelter delivery are important, but must avoid giving unwitting encouragement to speculation or windfall gains. This means steering clear of complex regulations in land and financial markets, which often end up benefiting the rich and concentrating instead on attacking supply constraints. If development is guided along public transport corridors by making serviced land available, for example, it allows rising land values to be appropriated by residents as well as developers. Support for informal-sector producers both increases the supply of affordable shelter and contributes to poverty-reduction through labour-intensive growth. These are ways of making markets work for social as well as economic goals.

54. Against the background of an enabling State, there are two avenues for making partnerships work more effectively. One is to use the legal, fiscal and regulatory framework to manage costs and benefits and the other is to find alternative models which avoid these costs and generate new benefits. The first of these options is the one currently favoured by most Governments. The goal is to penalize inefficiency, inequity or pollution, and to create incentives for good performance, by manipulating laws, regulations, standards and taxation. The rigid regulatory framework for land transactions in Lusaka, for example, deters densification and encourages the emergence of a relatively high-cost rental sector, whereas the more flexible environment in Guayaquil enables low-income households to expand their dwellings, sell off part of their lots, or build elsewhere (Moser 1996).

55. As housing is an important productive asset, relaxing regulations in this way can help meet poverty-reduction goals as well as those of market efficiency. Equally, because private firms have little concern for equity considerations in markets, Governments cannot afford indiscriminate deregulation and need to ensure quality control in the provision of safe drinking water and other essential services. Alternatively, Governments can introduce market surrogates or performance agreements when contracting out services to private agencies, to promote competition while maintaining agreed minimum standards (UNCHS 1993, p. 96). Alternatively, they can use fiscal incentives to penalize polluters by using "green taxes" and also rewarding social responsibility by giving private firms in partnerships tax rebates, or increasing tax breaks in the incomes of non-governmental organizations. It is often better to use positive rather than negative incentives to lever change. By guaranteeing credit funds to low-income borrowers in order to reduce risks, or allowing private developers to build for high-income residential or commercial uses on part of the land released by land-sharing deals, for example, changes can be induced. These are all ways of changing the balance of forces when dealing with the private sector, or with non-governmental organizations, in order to reduce potential costs and increase potential benefits.

56. Manipulating the regulatory framework in this way has limitations, however, as commercial operators remain primarily oriented toward profit, although, they may take on more social responsibility if there are adequate incentives to do so. In the same way, non-governmental organizations and community-based organizations remain non-market actors with their own narrow constituencies. Penalties and incentives can encourage them to work more closely with the Government and the private sector but it is very rare to find any organization which successfully combines market disciplines with social objectives.

57. A second and intriguing possibility in trying to increase the involvement of private-sector and non-governmental organizations in low-income shelter delivery is to aim for new institutions and approaches which do achieve this sort of synthesis. John Turner (1992) has long been an advocate of this approach, contrasting the conventional "incorporation of community initiatives into corporate markets" with the more radical proposal to "transform markets through community initiative." The practical details and potential of such proposals remain somewhat hazy, and would in any case vary from one situation to another, but some interesting experiments are already under way, focusing on the development of community-based systems of production and exchange which avoid the exclusionary tendencies of private markets (see box 9). Some of the most interesting examples of private-sector involvement in low-income shelter, such as the Foundación Carvajal in Latin America, deliberately blend profit maximization with an explicit social conscience. Likewise, some of the most effective shelter non-governmental organizations are those which remain true to their values and principles, while encouraging community-based organizations and other partners to be successful in markets. These innovations may appear somewhat utopian at present, but they hold out considerable promise for the cities of the future.

58. Neither States nor markets are sufficient to ensure adequate shelter for all. What is needed is a new partnership of public, private and third sectors in order to transform shelter from an expensive commodity into an affordable social entitlement and a new set of values and relationships which prioritize equity over short-term gain. There are no panaceas for achieving these goals. It is a continuous process and progress is possible even when resources are scarce. The key and urgent task is to enhance good policies that will make a difference.

V. Issues for discussion

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59. In the follow-up to the Habitat II Conference, it has become common practice to call for increased involvement by the private sector and non-governmental organizations in shelter delivery for low-income groups. Increasing the involvement of these non-State actors in different forms of partnership in this process is a complex task and further research is needed to evaluate practical experiences with the diverse conditions prevailing in different countries and for the promotion of innovative approaches and good practice in this field. The Commission on Human Settlements may, in this context, wish to discuss the following points:

• (a) What are the fundamental issues at stake in defining the terms of the relationship between public and private sectors, between markets and non-market objectives, and between growth and equity?
• (b) In practical terms, how can the synergies which come from greater collaboration between different actors in the shelter delivery process be maximized?
• (c) What should be the role of external assistance in promoting shelter delivery for the poor, with specific reference to the contributions of the private sector and non-governmental organizations?
• (d) How can monitoring systems and actions, research to analyse, document and disseminate innovations and lessons of experience in this field be promoted?

Notes

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