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Despite advances in recent years, lack of access to basic infrastructure services continues to plague households in Latin America and the Caribbean. About 21 percent of the region's households lack access to some basic infrastructure services, such as electricity, potable water and sewage connections, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

Other problems affecting the region's housing situation shown in the figure are: 12 percent of households use poor construction materials in their houses and 11 percent lack secure title to their homes. As much as 6 percent of households in the region have dirt floors in their house and suffer from overcrowding, which can affect health negatively.

Latin America and the Caribbean have a high prevalence of slums when compared with countries with similar income. To improve living conditions, governments have embarked on comprehensive slum upgrading programs that have improved the lives of hundreds of thousands of poor people.

However, that approach is not an efficient way of providing basic infrastructure in the long-run, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

As shown in the figure, providing basic infrastructure in a slum can cost eight times more than providing it in a land that has not yet been developed. In order to be cost-effective, governments should also develop strategies and offer subsidies to increase the supply of affordable urban land and prevent the formation of slums.

Most of the population living in Latin America's biggest cities cannot access formal housing due to insufficient income, steep mortgage interest rates and high prices, as well as the inability to document their income, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

The figure shows that, when all those factors are taken into account, over two thirds of the households of Caracas, Machala, Santa Cruz, La Paz, Lima, Santo Domingo, Buenos Aires, San Pedro Sula, and Managua cannot afford formal housing.

Latin America is the second most urbanized region in the world after North America and the most urbanized region in the developing world. Some 80 percent of the population now lives in cities, according to “Room for Development: Housing Markets in Latin America and the Caribbean,” the latest edition of the IDB’s flagship publication Devel- opment in the Americas.

Housing demand in the region will spike in the near future because of a fast-growing urban population and the smaller size of households. The number of people living in the region’s 198 biggest cities will jump 21 percent to 315 million by 2025 while the size of the average household is expected to drop 18 percent, from 3.8 people per household in 2007 to 3.1 by 2025.

The figure illustrates the size of demand for some of the region’s major cities.

The cheapest dwelling offered by the private sector in Latin America without any construction subsidies averaged $24,000 in 2010, and families needed 21 months of full income to pay for them, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB´s flagship publication Development in the Americas.

The figure shows the average prices for the cheapest private-sector housing in large cities in Latin America. Caracas, Buenos Aires and Santiago are the region´s most expensive while La Paz, Managua and Guayaquil are the cheapest. Factoring in the level of income and the time that it would take a household to pay for the house, Buenos Aires, Caracas and Montevideo are the most expensive and Bogota, Guadalajara and San Jose are the cheapest.

Despite the strong economic performance Latin America and the Caribbean has enjoyed in the past decade, the lack of adequate housing for low income people remains a serious development problem for the region.

There are both an insufficient number of houses and qualitative shortages, including dwellings without clear ownership titles; walls made from discarded materials such as cardboard; dirt floors; and lacking connections to potable water and sewage systems, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

The figure summarizes the total deficit for the region. Over two thirds of the households in Nicaragua, Bolivia, Peru and Guatemala lack adequate housing.

Nearly one out of three households in Latin America and the Caribbean (32 percent) suffer from inadequate housing, and the housing deficit is growing, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

Rental housing could help address the shortage. The region, however, doesn't seem to be taking advantage of this opportunity. As shown in the figure, the proportion of tenant households in Latin America and the Caribbean less than half the euro area average.

Regulation in the construction industry aims to protect health and safety as well as to guarantee minimum housing and neighborhood standards. However, excessive regulation and red tape can increase costs for the formal construction industry, reducing the profitability of low margin projects —such as small-scale low-income housing—and the affordability of those developments for low-income families.

The figure shows that the legal costs associated with the construction of a single detached dwelling can be quite expensive in Latin American cities. On average, legal costs represent almost 5.6 percent of the property value, and it takes 2.1 months to land a construction permit, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

Almost two-thirds of the sales price of a new private dwelling in cities in Latin America and the Caribbean can be attributed to construction costs, according to "Room for Development: Housing Markets in Latin America and the Caribbean", the latest edition of the IDB's flagship publication Development in the Americas.

Materials alone account for nearly 40 percent of the total cost and labor for another 22 percent. Reducing these costs would go a long way to make formal housing more affordable to the estimated 210 million of people in the region who today live in informal settlements, such as slums.

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