Affordable Housing Innovations 07: What is a strategy? Part 1, for governmental bodies

By David A. Smith

April 15, 2013

Everyone talks about the weather, but nobody does anything about it. – attributed to Mark Twain

Government bodies and Mission Entrepreneurial Entities[1] complement each other

Everybody in housing talks about strategy, because it's such a lovely term: Nearly every entity says it has a strategy, often extensively described and documented in plans, regulations, or laws. Too often these are normative expressions of goodwill or desirable outcomes with no plan for how to achieve the hoped-for state. Hope is not a plan: proper and rigorous strategy is a guide for action – what to do, how to do it, with whom, and what not to do. Creation of strategy is an exercise not in wishing but in choosing actions and then committing efforts and resources (time, money, political and personal capital) to make it happen.

Because sustainable quality affordable housing does not exist in economic nature, its creation requires two distinct species of actors:

  • Policymaking governmental bodies set the rules and provide the resources (monetary or monetizable incentives).
  • Operating Mission Entrepreneurial Entities (Mees) act as program participants and do business that achieves economic and social ends.

These two are complementary, like yin and yang; government bodies provide resources and seek outputs and impact; Mee's consume resources and turn them into outputs and impact. Each needs and uses the other. Strategy thus comes in two forms:

  • Government-body strategy is about policy expression: channeling and managing government resources to convert policy and political goals into achievable delivery objectives.
  • Mee strategy is about resource capture and risk mitigation: using government resources, market resources, and the Mee's expertise, to deliver the government's outputs.

[1] AHI coined the phrase Mission Entrepreneurial Entity (Mee, rhymes with bee, as in busy) to identify businesses that operate both as autonomous enterprises (they cover their costs) and as impact-oriented actors (they do their work to make positive change). Our book, Mission Entrepreneurial Entities: Essential Actors in Affordable Housing Delivery, is available free on the AHI Web site or by emailing dsmith@affordablehousinginstitute.org.

What's our strategy, and who's in charge? (Cingapura public housing, São Paulo, Brazil)

Strategy for a governmental body

A government body's strategy includes these elements:

  1. Goals. Government needs to know why it wants to stimulate and shape the housing sector. Typically this is expressed as a standard of living, such as in the US's 1949 National Housing Act making it national policy to secure a "decent, safe, sanitary and affordable home for every American family."
  2. Objectives. Goals are abstract; objectives are concrete – production, affordability, inclusion? – and only one can be primary. Government needs to orient its metrics and management around the primary objective, else the program's design, resources, management, and evaluation will all be hopelessly muddled.
  3. Eligibility. No government can house everyone in the country. Some people are ineligible, and in that definition lie very fundamental issues of national politics.
  4. Priority. Even if government declares everyone eligible, not everyone can be served at once: priority ranking will be explicit, implicit or emergent. In many situations, if one is not priority, one might as well be ineligible.
  5. Resource levels and types. Because quality urban affordable housing always has a cost-value gap (more expensive to create than its economic value when delivered to the target poor household), it runs on government resources: some are cash, some non-cash (e.g. land, upzoning). All are finite. Government needs to know how much it is committing annually, from where, and whether the funding is evergreen, fluctuating, or time-limited.
  6. Supply side, demand side, or both. Housing affordability combines two core concepts: supply of housing, how many and where and what quality homes; and demand for housing, meaning ability to pay. Either side may be stimulated or regulated; most developed countries do a bit of both.
  7. Roles in the value chain. Both new homes (supply side) and affordable loans (demand side) are outputs of complex value chains that have at least eight material steps apiece. A broken or weak link anywhere disrupts the whole value chain and often renders other resources or programs ineffective. Government needs always to have knowledge of both value chains so that its programs and resources are directed where they will do the most good.
  8. Dynamic adjustments. Governments have a tendency to presume that what works today will work in all our tomorrows. But markets change much faster than government can react; any new program creates its own markets, constituencies, and fierce defenders, all of which change the ecosystem. Every program needs periodic updating, modification, or elimination, else the breakthrough innovation of a decade ago becomes today's bottleneck.
  9. Which level of government does what. Most governments operate at multiple levels – national, state or province, and local. Macroeconomic and interest rate policy are national, land use is local, and metropolitan economic growth is usually provincial or state. As housing value chains span multiple levels of government, government policy must coordinate who does what, lest national imperatives be thwarted by local intransigence. This is harder than it looks.
  10. Essential versus technical functions. Government sets the game's rules and Mee's play it, so each program finds its expression in bilateral contracts (government as commissioner and client, private Mee as operator and profit-seeker). These activities divide into technical (can be described by a clear procedure), usually contracted to the Mee, and essential (involving elements of policy choice or political sensitivity), usually done directly by government.
  11. Rules to convert socially desirable outcomes into numerical results. Via contracts, we keep score in money; affordable housing, having a double bottom line goal (both viability and impact), keeps score partly on improved societal and family outcomes. To get desired Mee behavior, government needs to convert observable social outcomes into point scores and into monetary rewards and penalties.
  12. The boundaries of housing's mission. Though government administration operates in sector-specific silos, housing cuts across ministries of finance (loans), law (entitlement), health (sanitation), education (children), public works (roads and water/ sanitation), and municipalities (local zoning and slums). Defining housing's limits as a governmental objective also defines the housing ministry's natural governmental counterparties, and implicitly defines the burdens to be borne by those policy-abutting ministries.

Then what do we need Mee's for?

With all these imperatives, a government body could be forgiven for thinking it could be self-sufficient and self-contained … and it would be wrong to think so. Government bodies need Mee's as flowers need pollinating bees. Our next Affordable Housing Innovations will cover why and how Mee's fit in, and what their strategy should entail.