Sites and Services—and Subsidies: The Economics of Low-Cost Housing in Developing Countries

Abstract

Sites and services projects represent a major innovation in shelter policy in developing countries and have been sponsored by international aid agencies for somewhat more than a decade. Such government projects deliver a package of shelter-related services, the standards of which depend on the ability and willingness to pay of intended beneficiaries. Typically, such projects represent a sharp break with preexisting government shelter policies in that they attempt, in principle, to focus directly on lower-income groups and to deliver shelter and services with small or no subsidies. This article describes the background of the sites and services concept; reviews recent evaluations of sites and services projects; presents an analytical model of the sites and services paradigm (which is used to examine how major project outcomes are influenced by project design); summarizes recent research on housing demand in developing countries (which is relevant to designing appropriate sites and services projects); reviews planning assumptions used in World Bank sites and services projects; compares these assumptions with empirical evidence on willingness to pay for housing; and examines project experience in light of contrasts between actual planning assumptions and empirical research on demand for shelter. The article concludes with suggestions for ways to improve the project design process and reform housing sector policies to increase the efficacy of the sites and services paradigm.

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