Private capital is not a shortcut: Lessons from WUF13

Can private capital help solve the housing crisis? At #WUF13, Laura explores why financing needs strong cities, public investment and long-term partnerships.

On the first day of the 13^th World Urban Forum, the host city of Baku in Azerbaijan experienced rainfall with a volume of nearly 400 per cent above normal averages. This made for a sombre but important backdrop to the global conference, which is convened every two years by UN-Habitat as the key conference for urbanism worldwide.

“We need to be brave and cautious at the same time”, Ilhan Aliyev, President of Azerbaijan, said in his opening remarks. He welcomed over 45,000 registered participants to the second-biggest international event that Baku has ever held. He explained that we need to find a balance between acting bravely and with speed to achieve better housing and living conditions for people, while also being cautious to avoid mistakes.

“Housing the World: Safe and resilient cities and communities” was the topic of the WUF13. As Annalena Baerbock, President of the United Nations General Assembly, said in her video address: “Without safe housing, health erodes, education is disrupted, insecurity deepens, violence hardens, and communities become more vulnerable to shocks and disasters.” Housing, however, cannot be addressed in isolation. Both the Doha Political Declaration to eradicate poverty and the Pact for the Future on 21^st-century challenges recognise that housing needs to be connected with infrastructure, resilience, financing, and inclusive planning, in a process based on broad participation.”

Anacláudia Rossbach, UN-Habitat’s Executive Director, asked the key question that guided the entire World Urban Forum: How, in this era of uncertainty, instability, and destruction, can adequate housing be made available to all?

Public money alone is not enough

Financing was one of the important answers discussed at WUF13. As cities worldwide are implementing the New Urban Agenda and tackling the housing crisis, eyes are turning towards private finance as an accelerator and complement to public funding.

Birgit Pickel, BMZ’s Director-General for Sustainable Development and Climate, spoke at an event co-organised with the Asian Development Bank, the World Bank and UN-Habitat. She affirmed that, given the high costs of meeting housing goals, while also facing shrinking ODA globally, public budgets cannot do it alone.

“We haven’t done so well with the mobilisation of private capital for the improvement of cities globally so far”, she admitted. But from Germany’s perspective, a more systemic approach that goes beyond project-based finance is promising. “We need to be comprehensive in our approach, focus on enabling environments in cities, which includes fiscal decentralisation and transparency”.

One example of how this can look is the SCALED initiative that manages local budgets, including credits, by enabling public-private cooperation in blended finance.

Speaking as a banker, Srinivas Sampath from the Asian Development Bank asked what we can do to create the right operating environment for private finance in cities. The challenge, he argued, is a “bankability gap” with only very few cities that can stand on their own financially. “Bankers need comfort around revenue streams to pledge and raise private capital”, he explained, citing properly structured PPP contracts as a good option for procurement.

Other private funding options, such as municipal bonds and green bonds, can also play a role – provided cities can offer stable and reliable conditions for investors. These can complement but not replace public funding.

Elzeba Busienei, City Manager of Eldoret in Kenya, explained her city’s success in leveraging public and private financing: “We partnered with private partners to grow the city by strengthening and de-risking the environment. We invested heavily in public infrastructure, with public resources, which gives private investors an opportunity to come and invest in our city with confidence.”

Her example highlighted: attracting private capital often starts with public investment. This kind of financial preparedness, when paired with an enabling environment and capacities at the municipal level, will create mutual trust.

“Private capital is needed, but it is not a shortcut”, Birgit Pickel summed up the discussion. “Cities with a credible plan, sound public financial management and a good understanding of their assets, revenues, and risks show their creditworthiness.”

True solidarity for recovery and resilience

Given the multiple crises and conflicts around the world, resilient housing was another key topic at the WUF13. Ukrainian cities offered examples of how municipal social housing can strengthen the sector and make it even more resilient. In the country, around 14 per cent of the housing stock has been damaged or destroyed since 2022, with estimated losses of almost 90 billion USD. In addition, the wave of privatisation of the housing market after the collapse of the Soviet Union has left countries like Ukraine with a struggling housing market and little to no affordable housing.

Since 2014, BMZ has been supporting the provision of housing for Internally Displaced People (IDPs) in Ukraine, for example, by creating municipal housing establishments. One example is the partnership between Mykolaiv and Hannover. Drawing on Hannover’s experience with municipal social housing, the two cities are creating a municipal housing development strategy with a new master plan for Mykolaiv. The challenges remain considerable: budget shortfalls, the ongoing threat of new destruction and growing numbers of IDPs all complicate long-term planning. “We are not just a recipient of aid”, Dmytro Falko, Secretary of Mykolaiv’s City Council, stated. “We are also a living laboratory, gaining experience every day for surviving in severe conditions, for resilience, for decentralising, and for energy systems. We are ready to share these lessons with you. True solidarity is about building an urban future together.”

Learning from partner cities

Municipal partnerships emerged at WUF13 as another important pathway for improving housing. Hannover’s mayor Belit Onay, pointed out that at the end of the Second World War, 90 per cent of Hannover was destroyed. “We remember the support we received in rebuilding our city”, he said, which underlines the reason to support long-term reconstruction in partner countries like Ukraine.

In a session on the social and economic power of housing, Birgit Pickel focused on Germany’s strengths: “Germany does not come with ready-made answers, but we can offer experience with how to address housing at the municipal level and how to make decisions like building permissions on the ground. […] Housing cannot be solved by policy alone but needs a more comprehensive approach”, she said.

The city partnership between Dortmund and Kumasi, Ghana, shows what this kind of exchange can look like in practice. The two cities have been partnered since 2011, focusing first on climate change, economic innovation and education, but also integrating the challenge of housing where possible.

“We can learn from Kumasi with its 0.5 million inhabitants (Dortmund has 0.6) – it is one of the biggest cities in Western Africa because around 4 million people a day pass through”, Martin van der Pütten, Dortmund’s head of international relations, said.

“Capacity-building of the city management has really helped the city of Kumasi”, Joshua Tetteh, planning director, added. “Kumasi has also set up a revolving fund for housing amenities and a fund to assist almost 200 homes, providing housing and services to around 3,000 residents together with the city of Dortmund.”

The examples from WUF13 show that there is no single blueprint for housing a rapidly urbanising world. But they show that cities that are empowered, financially prepared, and connected to partners have the best chances. As Dmytro Falko from Mykolaiv put it: “True solidarity is about building an urban future together.” That means being, as President Aliyev said at the opening, both brave and cautious – but above all, willing to turn commitments into action.