“Shelter from the storm: Upgrading housing infrastructure in Latin American slums” (Sebastian Galiani)

What are the welfare impacts of providing urban slum-dwellers with decent, basic houses? In this session, Sebastian Galiani present results from an impact evaluation conducted in El Salvador, Mexico, and Uruguay, which aimed to answer this question.

The house contruction was led by the NGO “Un Techo Para Mi Pais”, or “TECHNO”, which held a lottery for slum dwellers, and provided ‘winners’ with simple, 18 square meter, houses. The houses had no indoor bathroom or kitchen, but were a step up in terms of hygiene, comfort, and durability.

The researchers measured slum dwellers’: satisfaction with physical features of their houses (floor, walls, roof, protection against rain, etc); health indicators (respiratory diseases, diarrhoea instances, etc); economic activity; and life satisfaction. First measurements were taken at baseline, second immediately after residents moved into the homes, and thirdly eight months after residents moved into the houses.

Effects on health were mixed- no impact on respiratory diseases was identified, but in El Salvador and Mexico there were apparently large impacts of instances of diarrhoea (a 30% decline overall, but which was insignificant in regressions at the country level). No impact on employment or income was found. Perhaps most interestingly, the study found large positive effects on the treatment group’s satisfaction with their houses, and life satisfaction, in the first post-treatment survey, but 60% of these gains had been lost by the time of the follow-up study 8 months later; the researchers hypothesise that this is due to hedonistic adaptation, a fairly well-documented phenomena in which people appear to ‘get used to’ material improvements in their lives (e.g. a new house, car, jacket, lottery win), causing any initial, post-purchase, spike in happiness or satisfaction to recede fairly quickly, and life satisfaction levels to return to pre-purchase levels after (usually) a few weeks or months.

The study also uncovered additional, note-worthy, cross-country difference in the lives and preferences of the urban poor. Firstly, whereas in Mexico and Paraguay, the slum-dwelling poor were richer than the urban poor, in El Salvador (by far the poorest country of the three) this pattern was reversed. Secondly, slum-dwellers in Paraguay endured lower quality housing than those in Mexico or El Salvador, but to counter this, receive higher wages despite lower levels of education. In Mexico, some lottery winners moved out of their free TECHNO houses, despite the fact that they would receive land titles if they resided there for five years.

Discussants suggested the author provide figures on the cost-effectiveness of the housing provision, in order that it can be compared with ‘sites and services’ approaches (in which the government provides neighbourhood plans and basic infrastructure); ‘sites and services’ methods are generally perceived to be more cost-effective and scalable than direct provision of houses.

By Sally Murray, Country Economist, IGC Rwanda