Sites and Services--and Subsidies: The Economics of Low-Cost Housing in Developing Countries

Sites and services projects represent a major innovation inshelter policy in developing countries and have been sponsoredby international aid agencies for somewhat more than a decade.Such government projects deliver a package of shelter-relatedservices, the standards of which depend on the ability and willingnessto pay of intended beneficiaries. Typically, such projects representa sharp break with preexisting government shelter policies inthat they attempt, in principle, to focus directly on lower-incomegroups and to deliver shelter and services with small or nosubsidies. This article describes the background of the sitesand services concept; reviews recent evaluations of sites andservices projects; presents an analytical model of the sitesand services paradigm (which is used to examine how major projectoutcomes are influenced by project design); summarizes recentresearch on housing demand in developing countries (which isrelevant to designing appropriate sites and services projects);reviews planning assumptions used in World Bank sites and servicesprojects; compares these assumptions with empirical evidenceon willingness to pay for housing; and examines project experiencein light of contrasts between actual planning assumptions andempirical research on demand for shelter. The article concludeswith suggestions for ways to improve the project design processand reform housing sector policies to increase the efficacyof the sites and services paradigm.