The Failure of India’s Slum Housing Lotteries, and Why Those Who Win Always Move Back
By Mannaan Mubarak
Over the past 15 years, urban development across major Indian cities has been dominated by high-profile Indian slum clearance alongside housing lottery schemes. Under initiatives like the Slum Rehabilitation Authority (SRA) in Maharashtra, state agencies promise a clear path out of poverty. They hope to improve life for slum-dwellers through the replacement of informal settlements with concrete, vertical housing units awarded via public lotteries.
However, empirical studies which tracked relocated families over the past decade show a surprising trend. Instead of lifting households out of poverty, housing lotteries instead actually increase long term financial vulnerability.
The policy failure stems from a lack of fundamental understanding of urban economics. Housing programs view the existence of slums as a result of physical housing deficits. However, it fails to recognise the informal credit networks, social safety nets and local employment hubs that exist within these low-income settlements which almost all families depend on to survive.
In a research paper titled "Moving to Opportunity or Isolation? Network Effects of a Randomized Housing Lottery in Urban India", Erica Field, Sharon Barnhardt and Rohini Pande tracked low income lottery winners over a 14 year period in Ahmedabad.
Their findings challenge the core assumptions of the current urban policy:
Isolation from Informal Safety Nets: Low-income households in informal settlements operate without access to formal bank credit cards or traditional personal loans acquired from official financial institutions. Instead, they must rely on informal loans, where they borrow small amounts from neighbors through the reliance of local family networks. They often even get daily groceries on credit from small, local stores during periods of unemployment or illness, exclaiming the importance of these networks.
The net loss: The study found that 14 years after winning subsidized housing on the city periphery, lottery winners reported an increased isolation from family and community networks that they so heavily relied on. Now, with a significantly decreased access to informal financial support, ‘winners’ were less likely to have someone they could rely on for emergency loans or short-term transfers during economic shocks.
Beyond just social isolation, the relocation of slum dwellers miles away from city centers disregards the micro-economics behind urban life.
Most informal workers, such as domestic helpers, street vendors or drivers must rely on a close proximity to high-density commercial centers. Relocating them to the outskirts of the city introduces new, significantly higher commuting costs alongside overly long travel times which cut into their own daily wages
In major informal settlements such as Mumbai’s Dharavi, homes double as light industrial workshops for leather working, garment manufacturing and food preparation. Moving into new, strict residential high-rises makes running home based enterprises impossible and at risk of legal repercussions, wiping out these income streams.
High Exit Rates and the Rebound Phenomenon
Since government housing complexes are frequently built on inexpensive land which is far from central business districts, the economic cost of living in them often outweighs the benefits of a concrete roof rather than a thatched one.
After 14 years of winning the lottery, winning obviously improved physical housing conditions but resulted in no net gain in familial income, labour supply or human capital.
The negative effects of this dislocation and social isolation turned out to be so detrimental that 34% of lottery winners never moved into their assigned housing, where another 32% eventually abandoned or sold their units. In total, that adds up to around two thirds of lottery winners who exited the program to return back to their inner-city slums, where their jobs, family networks and safety nets persisted.
The empirical evidence from the past 15 years suggests one thing for sure; providing a family with a concrete roof over their head while destroying their community doesn’t solve their poverty, but isolates them instead. Rather than relocation, governments should instead prioritise the improvement of sanitation services and utilities where low-income communities already exist. This maintains their social and financial networks which are essential to their survival.
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