Lessons on Doing Market Systems Development for Housing
This post was written by Habitat for Humanity's Terwilliger Center for Innovation in Shelter and was originally published on the Vikāra Institute's website.
In this introductory blog on lessons from applying systems thinking approaches to improving the urban housing system, TCIS frames how they have evolved to get better and better at probing, learning, and adapting. Of particular importance is the way TCIS uses multiple lenses to balance known elements of a change process that provide a general direction of change, with a clear understanding that each context is unique, requiring its own change process. In the next blogs, TCIS will dig into some of their experiences.
When we started working on improving the market’s ability to respond to the needs of those living in substandard housing (an estimated 1.6 billion people) way back in 2009, we thought we knew the best point of entry: access to housing finance. We thought if we could partner with private sector players in that sector alone, we could bring about significant changes in the system.
We were right and wrong.
Housing finance is the grease that keeps the gears moving and helps people to build more quickly, especially in urban settings; nevertheless, it doesn’t necessarily improve housing quality and other sectors potentially offered even bigger levers for improving the gearing of the housing system.
Since 2017 we have made a concerted effort to apply the strategies of market systems development to housing, increasingly in urban settings, which we first wrote about in 2017. The strategies that we use first emerged from development efforts in agriculture, and as such tended to focus on rural populations where markets are thinner and less complex, and especially on producers in the value chain. Adapting market systems development to housing means we have inverted that focus to the consumer in urban settings, where the housing need is most acute and where markets are more diverse. What have we learned?
Focusing on the consumer means helping them manage risk
By making the consumer our primary focus, we have come to understand the extent to which risk-management helps us demystify the housing market. The inclusiveness, or lack thereof, of a housing system can be discerned by observing how the system does or does not help households manage the risks associated with acquiring a home. In most of the markets we focus on, incremental homebuilders assume most of the risk in their housing journey. And two of their principal risk management strategies are relying on word-of-mouth referrals and price-conscious decision-making. But one consequence is that their decisions are most influenced by relational factors rather than quality of work.
Framing price-consciousness as a risk management strategy gives us pointers on how the housing system – and the retail distribution function in particular – could shift to enable incremental homebuilders to make better housing decisions. This could come from empowering incremental homebuilders as consumers, which can be thought of as how “loud and influential” their voice is in the housing system.
In the context of systemic programming, this focus has led us to explore how the system can evolve to deliver value to greater and greater numbers of low-income consumers, which we refer to as mass retail strategies. This has us looking most closely at the retail-distribution function, as we believe that changing the way firms approach incremental homebuilders can empower them to make better housing decisions, leading to better housing outcomes.
A further exploration of this can be found in our next entry in this series.
Focusing on urban systems means grappling with complexity
Urban systems programming is a difficult space to work within. Taking a broader, cross-cutting approach brings us into contact with two challenging dynamics: the private sector and civil society in urban areas are even more complex and pluralistic than rural areas, making them hard to map; and at the same time, it challenges us to deal with deeper issues, such as social norms, which are hard to shift, or regulatory change, which typically requires high-level change, for example by a government ministry or municipal government. To embrace this complexity, we have integrated systems thinking and design thinking, specifically human-centered design, into our implementation strategies.
Helping low-income homebuilders to improve the quality of their housing is a process that relates to the flows of information, materials, finances, and influence that drive their decisions. These flows in turn involve numerous entities, from government entities and community organizations to formal and informal construction service providers and materials suppliers. Recognizing the diversity of stakeholders in the low-income homebuilder’s housing journey, we are increasingly intentional about highlighting our work not just with the private sector but also the public sector and civil society. (This also applies to how we talk about our work, often using “housing system” instead of “housing market” given the popular assumption that market equals private sector). This move away from a hyper-focus on the private sector is in line with a broader focus on systems change in the development sector.
Focusing on the urban consumer means finding the right scale to view the issue
Moving beyond a focus on housing finance has taken us from a value chain approach (where we overly-simplified and zoomed out our view of the housing system) to a micro-focus on housing solutions (and subsequently getting lost in the details). We have since pulled back and are putting function first. We are still looking for points of entry in, for example, construction labor services or in end-user financing, but rather than seeking out individual firms with one product or service, we try to understand the most critical functions in the market, and tackle housing challenges at a deeper, more systemic level. The Change Wheel is a key tool for us (see figure 1) in keeping this complexity in mind without getting overwhelmed or lost in the detail.
Another way of describing this approach is to see it as bringing about systems change by facilitating behavior change in specific functions. This helps us to stay connected to our mission for innovation and systems change: if we hyper-focus on the newest “It” product or service, we are not helping the system learn to generate the next impactful solution. Instead, we might choose to focus on more inclusive behaviors in the retail function, such as manufacturers competing based on the value they deliver to incremental builders.
We are pragmatic and opportunistic in the strategies we adopt. One example is ensuring that emerging change leaders that we work with get noticed, and that this amplification attracts other actors to join them. We also tend towards partner self-selection, rather than us pitching, because this approach is more likely to attract partners who are motivated to push change in the system because they already recognize how it matches their interests.
We have a portfolio of stories that delve deeper into these learnings and will share more in subsequent entries. If there is one over-arching lesson from the successes and failures along the way, it is the realization that there is no single framework for urban, consumer-focused systems change programming. Instead, there are multiple frameworks to draw on, all of which require contextualization and constant discernment on whether they move us closer to the trifecta of sustainability, scale, and impact.