 In Iran, the urban population soared from 46 percent in the mid-1970s to 62 percent in the mid-1990s, mirroring the country’s high overall population growth rate. With housing .nance and other housing services slow to respond to this surge, urban centers experienced the swift development of new informal settlements—characterized by poor infrastructure and inadequate facilities—where one-fourth of the population now lives.
To formulate a more effective housing strategy, the Iranian government collaborated with the World Bank on a housing sector strategy report, which was completed in November 2002. The report addresses issues related to land availability, housing finance, construction sector incentives, and employment generation. It aims to help the poorest by promoting new approaches to partnerships, and providing a revised subsidy system to better assist those in greatest need.
“Together we’ve developed a sequence of housing policy steps for Iran’s future,” says Omar Razzaz, the World Bank’s task team leader for the strategy. “The Iranian government now has a strategy to make housing finance fully functional, better methods for poor people to acquire legal housing, and a more effective subsidy strategy.”
One breakthrough has been the government’s renewed focus on local participation to improve local infrastructure. In the southeastern city of Zahedan, for example, city councils are working with Civil Society Organizations (CSOs) on a street-widening program that has improved access for firefighting and emergency health services. Inhabitants contributed approximately 25 percent of their plots so streets could be uniformly widened, which has increased property values by as much as 100 percent in some locations.
Despite the fact the government has traditionally contributed about 3 percent of its national budget to support housing subsidies, qualifying low-income residents often failed to benefit. The revised subsidy system aims to shift administrative responsibilities to local authorities to make it more efficient. Moreover, hand-in-hand with a major overhaul of the energy sector, the government will use a portion of the savings from reduced energy subsidies to rejuvenate the revised demand-driven housing subsidy system.
For Iranians, the implications are potentially far-reaching: during the past decade, about 40 percent of total annual investment has been in the housing sector, generating more than 8 percent of GDP. By further revealing the housing sector’s potential for economic growth and job creation, the strategy promises to address the supply and demand constraints of the housing market, particularly meeting the needs of the urban poor.
Updated: November 2003
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