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Latin America and the Caribbean (LAC) is the second region in the world most exposed to natural disasters and the effects of climate change. Adapting to them is an urgent need for everyone, and very special for cities, where more than 80% of the population lives. Having the appropriate urban infrastructure for natural phenomena is one of the best ways to achieve this adaptation.
If we add to the above that the decent housing deficit in LAC reaches almost 50%, we obtain a scenario where the construction of resilient housing should be a priority for all countries in the region. This task is not easy or affordable, and for this reason, from the IDB Group we support the public and private sectors, in line with the objectives of adaptation and mitigation to climate change of our Vision 2025, to facilitate the financing of resilient housing throughout LAC.
In this blog post, which is part of a series on the 2022 Housing Forum organized by the IDB Group on September 29 and 30, 2022, we explain the challenges that climate change poses for the housing sector in LAC. Likewise, we present climate financing mechanisms, and concessional funds, to increase the production and supply of resilient housing, in line with the 2030 Agenda for Sustainable Development, the Paris Agreement and the New Urban Agenda.
The climate change challenge for housing
The increase in the global average temperature due to climate change is causing extreme weather events that increase the risks for housing and the people who live in them. Our region is no stranger to them and is mainly facing the impact of floods, storms, landslides and rising sea levels. Between 1998 and 2020, climate-related geophysical events caused the loss of 312,000 lives and directly affected more than 277 million people in LAC.
The impacts of climate change especially affect the most vulnerable population, precarious housing and informal settlements. Despite the efforts made in recent decades, at least 20% of the urban population of LAC lives in informal neighborhoods. These neighborhoods are usually located in risk areas and without basic infrastructure, which makes them especially vulnerable to inclement weather caused by natural and climatic catastrophes. The overlap between environmental and social vulnerability further complicates this problem, and makes it even more urgent to ensure the development of resilient and sustainable social housing throughout the LAC territory.
What is climate-resilient housing?
A resilient home is one that has the ability to resist, recover and adapt to adverse conditions of climate change or natural disasters. For this, housing projects must be located in such a way as to minimize exposure to possible threats from the environment. Likewise, they must be planned, designed, built, operated and maintained to reduce vulnerability to said threats. For this reason, adaptation strategies depend on the characteristics of the housing infrastructure and must be specific to the environment where they are located. For example, they will depend on the type of extreme climate change events, such as floods, landslides, etc., and on progressive changes, such as sea level rise, water deficit, etc.. Below is a summary of some recommendations to achieve resilience of the home in each of the five stages of the project.
1. Regulatory frameworks and institutional arrangements:
It is recommended to take into account the following aspects:
- Alignment of land use plans and construction codes in accordance with disaster risks and climate change scenarios.
- Implementation of an energy efficiency code and label for buildings and encourage green certifications.
- Encourage the development of the eco-technologies market necessary for sustainable housing programs.
- Promote joint work between multiple actors, to facilitate the mainstreaming of climate change considerations in the different sectors and levels of government.
2. Diagnostics and studies:
It is recommended to carry out disaster and climate change risk analysis and study of climate change scenarios to:
- That housing developments do not introduce new risks.
- Know the possible consequences of an extreme event or infrastructure failure.
- Develop a disaster risk management and monitoring plan.
- Develop contingency plans that indicate the actions to be taken in the event of natural and/or climatic disasters.
3. Design and construction:
It is advisable to consider the following constructive aspects:
- Use renewable energy sources such as solar panels.
- Specify strategies for energy efficiency.
- Include mechanisms for collecting and using rainwater for reuse and saving water.
- Use construction techniques and local materials with low embodied energy.
- Prioritize white paint or light colors in hot climates to increase reflectivity and decrease heat absorption.
- Include the strategic use of vegetation and green infrastructure.
4. Maintenance and Monitoring:
When carrying out home maintenance, it is recommended to:
- Develop a home maintenance plan with social support.
- Design a business continuity and/or contingency plan.
- Include early warning systems.
- Add financial protection schemes (including insurance) or constitute a combination of the previous aspects.
- Actively involve communities and their knowledge to increase future resilience, through better functionality of infrastructures and training of inhabitants.
How can resilient housing projects be financed?
To increase the production of new resilient housing, and to adapt existing housing to the climate and the environment, a high volume of financing is required. For this reason, climate finance resources play a key role in making mitigation and adaptation programs in the housing sector a reality. But what is climate finance?
According to the United Nations Framework Convention on Climate Change, climate financing is that of local, national or transnational origin, whether from public, private or alternative sources, which seeks to support actions to mitigate and adapt to climate change. The main climate finance funds are:
- Green Climate Fund
- GEF Special Fund for climate change
- Bilateral and multilateral climate finance funds, such as those of the IDB Group and the World Bank
In addition to these funds, innovative instruments have appeared at the forefront of climate financing to obtain additional resources and diversify the mechanisms for accessing financing. Here are some of the most relevant:
- Green bonds, which commit the use of funds for resilient housing
- Debt swaps in exchange for the development of mitigation and adaptation projects
- Guarantees in the framework of activities related to climate change
- Concessional loans with longer terms and lower interest rates to finance resilient housing
- Green mortgages; subsidies for resilient and low-carbon housing, and donations from different institutions.
Although it may seem complicated, the good news is that financing resilient projects is cost-effective. Resilient infrastructure represents a modest additional cost, from 3% to 10% of the cost of it. However, experts conclude that, for every dollar invested in adaptation, 3.5 dollars of material losses can be avoided. That is, the benefits of resilience and disaster risk prevention quadruple the costs and, at the same time, non-monetized social and environmental benefits are generated.
The IDB Group, a leader in green financing
In 2021, the IDB Group financed an all-time high of $6 billion in climate change-related activities benefiting LAC, reaching its goal of 30% of annual approvals. It did so through loans, non-reimbursable funds, technical cooperation, guarantees and capital investments. To further increase its contribution, the IDB has announced its commitment to provide $24 billion in climate and green financing over the next four years.
If you want to learn more about the challenges of the housing sector in LAC, and the important role that green financing plays for its resilient and inclusive development, do not miss the recording of the panel Access to financing and climate funds in housing solutions of the IDB Group Housing Forum 2022 that took place in Washington DC on Semtember 29th and 30th.
You can access the recording (in Spanish) here: