Page 63 estimated at Rs.7,000-10,000 per household and yet the overall costs of the program remain manageable.

10. **Finally to sustain and build support for the SNP, civil society organizations and government may join in a public relations campaign to raise public awareness of the social and economic benefits of the new neighborhood upgrading project** .

# **Part Two: Addressing Structural Problems that Drive Up the Cost of Housing and Create Chronic Informality**

1. All over India, and in many other countries around the world, government is expected to take an active role in ensuring that affordable housing is built to meet the needs of lowincome groups. Economists would argue that there is no compelling need to subsidize housing, a purely private good. Income transfers, rather than housing, are seen as a better solution. **However this is not practical and most countries provide public housing or incentives for private developers, such as reservations for EWS/LIG**<sup>32</sup> . Ahmedabad is no exception. It has availed of central programs supporting construction of new formal homes, and the Ahmedabad Urban Development Authority (AUDA) has effectively presided over an expansion of public housing.

2. **In nearly all countries, however, government efforts in this domain fall well short of meeting needs.** Budgets are limited. When formal private housing is expensive, it is extremely difficult to target publicly provided housing to low-income groups only. It is particularly difficult to address the problem through public housing when formal housing is beyond the reach of a large share of the population. One must look beyond government programs to supply housing directly if the goal is to ensure all housing meets a decent minimum standard for a growing population.

3. The scope for solving the problem by building new government housing is very limited, first because the amount of additional supply that even efficient governments can provide in relation to the number of households living in substandard conditions is very small. Second, while governments may build new affordable housing on the one hand, on the other hand their policies, investment programs and administration of land often make it difficult for anyone in either the public or private sector to provide legal formal housing with good infrastructure services on large scale. Put otherwise, government’s indirect impact on the operation of the market far outweighs their direct impact on supply by building houses.

**4.** This is the case in Ahmedabad. **About one third of households live in slums and challis, and the number of households living in slums has increased by 18% over the last ten years** . This has happened even though the city economy is thriving and median income in Ahmedabad has increased to 2.7 times what it was in 2001. Median household expenditure based on National Sample Surveys has increased in real terms by over 5 percent annually from 2004/2005 to 2009/2010. But available data indicate that formal housing prices have increased by 70 percent in the last four years, more than double the rate of increase of prices in the state (as calculated using the GDP deflator). So affordability remains a problem even in an economy of relative prosperity. **Today, roughly half of the population could not afford to buy a well located new formal home.**

32 Economically Weaker Sections and Low Income Groups