Room for Improvement: How to (Better) Integrate Housing and Labour Markets

Housing and labour are mutually dependent, but their connection is overlooked in economic policies most of the time. Edmundo Werna, Ramin Keivani and Youngha Cho argue that a closer look and a different understanding of how the two markets are linked will lead to more effective solutions and better housing and livelihood conditions, especially in the Global South.

Mr Fumanchu lives in the low-income neighbourhood of Toboba. He claims that he cannot get a proper job because of the housing market. He lives far away from good job opportunities. In addition, poor shelter and services affect his health and therefore his productivity. The fact that he lives in a low-income neighbourhood also makes potential employers suspicious that he may be involved with criminal gangs. As a result, he has difficulty making ends meet.

In the same neighbourhood, Ms Jubila claims the reverse, i.e. that she cannot get a proper housing unit because of the labour market. When she is employed, she receives low wages which are not enough to apply for a mortgage scheme. This is coupled with the fact that employment is not secure, and she needs to shift between periods of formal and informal or self-employment, and sometimes no job at all. In order to make a living, she is hardly at home and it is difficult to improve conditions in her living quarters in her limited free time.

Where is Toboba? It can be in many places. Who is Mr Fumanchu, who is Ms Jubila? They can be many people. These are given names to illustrate the plight of the urban poor in a wide range of low-income settlements in many countries, especially, but not only in developing countries.

In sum, housing affects labour and labour affects housing. Where do we start? We suggest to start in an integrated way, by looking at the connection between the two markets. This is particularly important in the context of the Global South since previous work has focused on the Global North and even then with a preponderantly econometric approach, looking at the impact one side on the other rather than considering the mutual interactions.

The Difficulties

Urban labour markets are complex. In a given city or town, there is at least a formal and an informal market. There are also many people who fluctuate between the two. There are those who shift between casual jobs or have more than one at the same time. There are others who are self-employed. There are those who shift between being an employer and a worker. There is seldom a common and integrated cluster of supply and demand for labour in any given city.

Housing, in its turn, is a basic necessity. Yet there are many people who have no access to adequate and equitable housing, especially in developing countries. Housing just as labour has multiple roles and values in overlapping contexts.

The tenure structure, which refers to the financial arrangements under which someone has the right to live in a housing unit, varies across countries. Whilst the most common forms of tenure are owner-occupiers and rentals (both public and private), more complex forms of intermediate tenures (such as low-cost shared ownership) are prevalent especially in more advanced economies.

Housing is usually the most expensive item for households and commonly comprises a major part of their wealth. A great amount of saving is required to buy or rent an adequate housing unit in a suitable place. Permanent or long-term income of households has also to be raised for keeping and maintenance. At the same time, owner-occupied housing could be a source of income, either through home-based businesses or through letting. As such, housing is a complex commodity and its adequate provision is rather complicated to address on an individual level as well as on a national level. It is true that no nation has been able to provide adequate housing for all its citizens.

There is plenty of research on housing markets and related policies and the same is true for labour markets. Yet, the combined literature on the connection between the two markets is still limited and tends to be focused on macro and micro econometric analysis and on developed countries. This is particularly insufficient in the context of developing countries, where the dynamics between the markets appear to be more complex than those of developed economies. Both markets are highly segmented; informal arrangements are the default and they face complex governance and management issues.

Missing Links Between Urban Housing and Labour Markets

The question remains: why have policies for housing and labour failed so often? Let’s have a look at selected missing links that need to be addressed to improve the situation:

• Lack of understanding of the pluralist market.

The argument so far has highlighted the complexity of the housing and labour markets in the Global South. Those markets are inherently complex and even more so compared to the Global North due to informality and resultant variations in modes of housing provision, employment and livelihood generation. Therefore, we are faced with mutually reinforcing pluralist markets that are particularly complicated due to the informal dimension. This complex plurality must be recognised more clearly in policy and practice domains.

• Lack of understanding of the direct linkage between the two markets.

In order to maximise the benefits of housing delivery, dynamics of the labour market, such as the employment structure, job creation, and skills requirements, income level and distribution as well as affordability, should be fully explored and understood.

• Limited information and knowledge on the markets.

Those issues are compounded by difficulties to access reliable data, especially for informal settings. In many cases, that would cause ill-informed policy making.

In Sub-Saharan Africa, for example, a large part of urban housing and labour markets lack official registration mechanisms. This impacts around 97-99 per cent of the housing market and 20-65 per cent of the labour market. This hampers accurate data availability on labour participation and movements between different categories.

Room for Improvement: Questions to Be Asked

“How to integrate housing with labour and employment?” should be the basic question for further research. Having this in mind, subsidiary questions are:

1. What are the different types of housing and labour markets for the urban low-income population?
2. Are there co-influences between housing and labour markets? If so what are they?
3. How are these different in formal and informal housing/labour markets?
4. What are the main benefits to better align the two markets?
5. What are the main barriers to their better alignment?
6. What can be done by public, private, and community sectors/actors to overcome challenges, particularly for the low income and marginalised communities?

Back to Toboba

This article started with the illustration of the fictitious low-income settlement of Toboba, where Mr Fumanchu could not get a proper job because of the housing market, and Ms Jubila could not get a proper housing unit because of the job market. The question posed was: where do we begin in Toboba, but also in real life? The article suggested that we start in an integrated way, by looking at the connection between labour and housing markets and by going beyond traditional econometric analysis and a traditional focus on the Global North.

For both scenarios it is fundamental to understand the nexus between housing and employment and that devising, upgrading, and implementing appropriate housing policies with employment would maximise the benefits of housing delivery. By expanding the scope of the analysis, ensuing policies are more likely to address the diversity of situations. Then, not only in a fictitious place, Mr Fumanchu and Ms Jubila will have more options and they will become indicators of successfully achieving SDG 8 (decent work and economic growth) and SDG 11 (sustainable cities and communities) and indeed of the New Urban Agenda (which are frameworks that still may be seen far away from their harsh realities).