Global housing shortage could cost $16 trillion by 2025

McKinsey Global Institute’s (MGI) study suggested 1.6bn people across the world- or one third of the urban population - could be living in substandard housing or foregoing essentials to pay for their home within 10 years.

It estimated the cost of rebuilding and replacing housing to be between $9 and $11 trillion - reaching $16 trillion with land included. Of this, $1 to $3 trillion may have to come from public funds.

MGI have produced a report suggesting four ‘levers’ which could be applied to deal with the problem.

It said unlocking unused land through tax incentives, reducing construction costs through modern methods and value engineering, improving operations and maintenance and offering housing finance to reduce costs for buyers and developers were the key policy areas in addressing the crisis.

‘Addressing the affordable housing challenge will take on increasing urgency as the number of affected households grows and the negative spillover effects multiply,’ said Jonathan Woetzel, Shanghai-based director of the MGI.  

‘For families lacking decent affordable housing, health outcomes are poorer, children do less well in school and tend to drop out earlier, unemployment and under-employment rates are higher, and financial inclusion is lower. But there are proven ways to narrow the gap.’