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When addressing the issues of institutional framework and financial management there are three major issues to be considered. These are analysed in the three following sections.

2.3.1 Institutional culture of public-sector agencies

One of the primary factors that influence the success or failure of shelter policies, programmes and projects is the institutional culture of the public-sector agencies involved. If these are positively disposed towards innovation and responsive to changing patterns of demand, the chances of success are considerably enhanced. Where agencies are reactive and inflexible, opportunities for progress will be correspondingly reduced. The first approach can be characterized as a management approach, in which resources are continually being redeployed in line with assessments of need, while the latter represents an administrative approach and is characterized by a preoccupation with implementing inherited, or received, norms, standards and procedures, irrespective of their relevance in the wider environment. Unfortunately, public-sector agencies in many countries have not yet shaken off the traditional administrative approach. This has particularly negative consequences for the shelter sector, since it is not the exclusive preserve of any one profession or discipline, and depends for success on the collaboration and sensitivity of many professions and agencies.

The introduction of new approaches to shelter projects under such conditions is greatly facilitated if political support is available at the outset. This has been the catalyst in many successful cases, of which the MHP in Sri Lanka is perhaps the clearest example. This was administered by a high-level committee representing 12 ministries, with the NHDA acting as the lead agency. Despite the enormous scale of the programme, the data show that the rural and urban sub-programmes achieved a high proportion of their targets (95 per cent in rural and 76 per cent in urban areas). The Ministry of Policy Planning and Implementation has indicated that the Programme was completed satisfactorily by the end of 1988. If this is correct, it was no doubt directly due to political commitment at the highest level of government and the very high levels of public investment involved.

Similar political commitment was largely responsible for the successful introduction of sites-and-services projects in Egypt (Davidson, 1984), and the expansion of the settlement-upgrading programmes in Indonesia and Zambia. Where such support is not available, the degree to which projects can be expected to achieve their internal objectives, let alone generate a multiplier effect, will be restricted. Innovative projects, such as those sponsored by international funding agencies, tend to remain as isolated project cells. More often than not, the concepts or methods that they were testing are never being absorbed into the mainstream of the parent agency’s activities.

2.3.2 Role of local government agencies

If local government agencies are excluded from the formative stages of project design and implementation, they may be reluctant to accept responsibility for maintenance. This problem resulted in the inability to consolidate innovative new shelter projects and recover project costs in Papua New Guinea (Payne, 1982b). The only solution to this problem is to ensure that local authorities are introduced to the underlying principles of innovative projects at the earliest stage in their development. Even then, it may be difficult for local authorities to undertake the tasks required of them, due to a lack of institutional capability, or cumbersome procedures. In Colombia, for example, administrative procedures concerning contract tendering require a minimum number of bids, below which tenders are not accepted and the whole process has to begin again, with a resulting delay and increase of costs. Given that large-scale contractors may not be too enthusiastic about undertaking projects for low-income groups in the first place, such a situation is not uncommon. To exacerbate this problem further, all contracts have to be approved by the Administrative Court, which functions independently of the district administration, but is considerably overloaded. This process alone can add 6-12-months to project preparation (Utria, 1990: 41). Similarly, in the Bolivar City project, it appears that inadequate attention was given to operational planning, or the implementation process. This necessitated changes to the project after implementation had commenced, resulting in further delays and increased costs (Utria, 1990: 48).

One reason for the limited capability of public agencies is the lack of adequately qualified and motivated professional staff. In the Zimbabwean projects, a shortage of land surveyors, together with inappropriately high standards slowed down site development and consequently raised project costs (Mutizwa-Mangiza, 1990: 46). Yet, the picture is not totally negative. In the MHP in Sri Lanka, the development of institutional mechanisms at the local authority level was an integral element in its success. These enabled NHDA to offer construction contracts to community groups rather than to private construction companies, thereby reducing administrative costs from 30 to 15 per cent (UNCHS, 1987:45), not to mention the other benefits of community involvement. It is not clear, however, if this includes the cost of technical assistance from project staff which placed considerable demands on staff resources. One major difficulty with the MHP is related to the financial terms, under which interest rates varied between 6 and 10 per cent in sites-and-services and other low-income projects. This represented a substantial subsidy, to which was added subsidies on land and land-development costs, the provision of basic infrastructure and community facilities. No mechanism for recovering the cost of land development and infrastructure was established under the MHP. The total cost of these elements has routinely been borne by the Government (Jayaratne, 1990: 43). The present value of the interest-rate subsidy alone in the rural programme is greater than the present value of the loan amount. Channels for obtaining housing loans are limited and not accessible to the poor because of collateral and deposit requirements.

2.3.3 Relationship with local community groups

A third major factor related to the institutional framework is the extent to which project agencies can develop positive relationships with local community groups. Administrative flexibility in Sri Lanka even enabled the local community in the Nagagahapura project to block out the land and prepare the site layout for a small (1 hectare) sites-and-services project and allocate plots among themselves. They then proceeded to formulate their own building regulations with official professional advice. This must be one of the most innovative approaches in terms of community-led new shelter development undertaken with official support, though it is by no means unique. In Zimbabwe, for example, the Kuwadzana project provided a model for local authorities. The project provided community orientation materials and developed cost and loan affordability calculation methodologies. Furthermore, it provided guidelines for legal agreements and guidelines on project staffing (see Mutizwa-Mangiza, 1990: 29).

A major innovation of the Kwekwe-Gutu project was its use of building societies to finance low-income housing, despite their normal reluctance due to problems with affordability and default (Mutizwa-Mangiza, 1990: 36). The arrangement involved substantial grants from the UNDP and USAID. The funds from USAID were used to set up revolving funds that would enable building societies to establish a financing system for low-income housing. As an alternative to deposits, an allowance was imputed for the value of self-help labour. The loan only required repayment of the cost of the building, however, and it appears that land, infrastructure and interest rates were largely subsidized.

The ability of urban authorities to ensure the provision of land, services and social facilities on a routine basis ultimately depends upon the revenue base they are able to generate. Efficient project management can contribute significantly to this by encouraging a sense of financial rigour in all sections of the population. Politicians and administrators seem to share a common tendency to regard projects as a welfare service, rather than a developmental investment This tendency militates against this approach and prevents adequate resources from being generated. The evidence from the case studies suggests that the opportunity to use projects as a means of increasing the urban revenue base has yet to be grasped.

One example from Sri Lanka exemplifies this issue. As was mentioned earlier, only one out of the 81 projects undertaken in Colombo pays property taxes to the Municipal Council. One reason for this poor performance is that although decision-making in projects has been decentralized to local levels, procedures for cost recovery are still centralized. Another reason is that the whole process of cost recovery within the MHP has been politicized. Before the Presidential elections in 1989, the Government decided to forgo collections of loan payments from all households with incomes below the official poverty line. Since most households in housing projects belong to this category this has been a major reason for the low level of cost recovery (Jayaratne, 1990: 106).