| Abstract | The objectives of the study were, firstly, to describe the general
behavioural characteristics of private developers in Bangkok and their
present role in low-cost housing provision. Secondly, it sought to
explain why their present role was as such . A third objective was to
prescribe policies to improve the ·developer ' s role. Finally, the study
aimed to generalize its findings for application to developing countries
in general.
Developer supply of low- cost housing was assumed to be
insignificant in terms of output relative to the size of the demand. To
explain this, a developer decision- making model was designed . From this
model, low-cost housing supply was hypothesized to be hindered by the
adverse effect of market and non- market impediments on profits. These
impediments were hypothesized to be in the form of unfavourable costs of
inputs {land, building materials, infrastructure, finance and labour)
and unfavourable overheads accrued to institutional and developer
{resource) constraints. They could also be in the form of unfair
competition from public sector housing , which affects sales rate, and in
the form of constraints to management (e . g. repercussions on the firm's
image and reputation) by being involved in low-cost housing development.
Working hypotheses were then formulated to test for the existence
of these impediments and their levels of significance . Sub hypotheses
were also deduced to test for relationships between these impediments
and certain selected developer characteristics (termed 'strata
variables'). These hypotheses and sub hypotheses were to be tested using
a 10 percent stratified sample of 100 developers (Group A) who did not
undertake low-cost housing development in the 1987- 89 period. The
reverse condition viz the absence of impediments was hypothesized to
enable low- cost housing development (termed 'enabling factors'). In
similar fashion, hypotheses and sub hypotheses on enabling factors were
deduced and were to be tested using a 50 percent stratified sample of 50
developers (Group B) who undertook low-cost housing in the 1987-89
period.
Results showed that the assumption of a present insignificant role
by developers in low-cost housing was correct. Testing of the
explanatory hypotheses revealed that the majority of developers in
Bangkok (Group A) could not profitably supply low-cost housing, to a
large extent, because of market impediments (especially those of land
and building materials) and, to a much smaller extent, because of nonmarket impediments viz institutional and developer constraints. A 10
percent minority of developers (Group B) could 'profitably' supply lowcost housing primarily because market impediments were absent,
especially that of land. The land impediment was absent not because of
favourable land market conditions but mainly because banked land was
used, probably resulting in suboptimal profits (although they were not
perceived as being so) . Other market impediments such as of building
materials, finance and labour were largely absent because of their
favourable market conditions.
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The finding that developers are able to produce low-cost housing if
market impediments are absent and profitability is improved indicate a
substantial potential role for developers if the removal of these
impediments can be brought about by efficient markets. The Group A
findings are as theorized by the market efficiency strategy which
describes market impediments as the main obstacles to the market
provision of housing . The Group B findings confirm that the market
efficiency strategy has a strong potential role in inducing developer
supply of low-cost housing. The 'market efficiency' strategy is
therefore empirically feasible.
When Group A and B sub hypotheses were tested, no relationships were
found between the strata variables (size and type of firm, level of
experience and market area of operation) with the developers'
perceptions of the level of significance of impediments/enabling
factors. The impediments/enabling factors pertaining to land and
building materials were highly significant to almost all developers,
irrespective of what strata they belonged to.
Tests to discriminate between Group A and B developer
characteristics showed Group B developers to be more localized spatially
and more specialized in the lower cost market . This could mean that they
were less knowledgeable of relative prices and profits in other market
areas or price ranges. This lack of adequate information, and possibly
professional skills as well, could have led them to underestimate,
miscalculate or overlook the opportunity cost of their banked land. The
variables of 'level of information' and 'level of professional skills'
are thus important variables for future studies.
The study also revealed the heterogeneous and diverse nature of
developer characteristics such as firm size, capital structure, level of
experience and target price range. There were however a few common
characteristics developers shared such as being concurrently involved in
other housing related businesses and being originally from fields
related to housing development . The diversity also meant that adequate
explanations of inter-relationships among developer characteristics
probably need to be multi-variate in nature .
The study revealed important findings on the physical, financial
and management features of low-cost housing and condominium projects.
Quantity of low- cost houses built were found to have varied with the
price of raw land bought . The cheaper, banked land contained more lowcost units than the expensive, unbanked ones. Quality of low-cost houses
built has been near to or at the lowest standard permissible. Lately,
the supply of low- cost houses has diminished and been replaced by lowcost condominiums, a form of housing which can absorb high costs of land
and building. The decrease in quality and quantity of low-cost houses
was the refore a cost-saving response by developers to rapidly increasing
prices of land and building materials.
It was argued that a large potential role for developers in lowcost housing can be realized if the removal of impediments can be
brought about by efficient markets, and efficient institutions and
developer firms. A policy on these lines should be based on improving
areas where inefficient, unfavourable conditions exist and maintaining
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areas where already favourable conditions exist. These areas were
identified by a review of market conditions and non-market factors that
prevailed in the housing (product and input) markets in the 1980 to 1989
period. It was found that except for land and building materials,
conditions in other areas such as the finance and labour markets and the
regulatory environment improved considerably in the 1987-1989 period (as
compared to earlier years) and were supportive of low- cost housing
development. It was also pointed out that developer · and development
characteristics in low- cost housing were reflective of the state of
efficiency of the housing market. Although they have improved over time
(e . g. the 'new product' of low-cost condominiums), there is still scope
for improvement (e.g. quality of low-cost condominiums).
This set the groundwork for the formulation of policies to generate
or maintain conditions favourable for low-cost housing development. The
strategy recommended was essentially a market model assisted by market- conforming interventions aimed at improving market efficiency (as
contrast to a total non-interventionist, laissez-faire system).
Supporting policies for improving social welfare, and institutional and
developer efficiency were also needed. A policy framework was then
designed in which the parameters and target areas were derived direct
from our study findings. Based on this framework, specific policy
recommendations were made in the following areas: improvement in
efficiency of i) product market; ii) input markets (land, building
materials, infrastructure, finance and labour); iii) institutions and
iv) developers, and improvement of social welfare or equity in housing .
An example of a specific policy recommended was that of a sound land
taxation system, which is an appropriate market-conforming policy to
improve land market efficiency (e.g. by discouraging land withholding).
It was concluded that the research had adequately achieved its main
objectives of describing and explaining the present role of developers
in low-cost housing provision in Bangkok, and in prescribing their
potential role. As an overall conclusion , it was generalized that the
developer 's role, ceteris paribus, in providing affordable and adequate
low-cost housing can be substantial in the long run but only if profits
from low-cost housing can be improved through the removal of market
impediments via increased efficiency in the product and input markets.
In Bangkok, improvements in market efficiency looks realistically to be
best achieved by the market model assisted by appropriate, market conforming interventions. In the absence of such efforts, impediments
will persist and the role of developers in providing low-cost housing
will be likely to remain insignificant. |