I live in a 65-square-meter apartment in Singapore that costs $350,000. Is it cheap? No. Is it affordable? Yes. From my perspective, affordability is a function of the market we are in, and the market’s confidence allows us to stretch our dollar to what it deems is affordable.

Most market-based products are unattached to the cost of the good but driven by the buyers' ability and desire to pay for it. In the case of affordable housing, however, the cost of constructing the house is considered to be most overbearing. We seem to look for a market-based solution by ignoring the fundamental principle of what drives a market: affordability.

We become so focused on this cost that we start neglecting necessities of what makes a house. I found a prototypical $3,000 house in an affordable housing dossier that had no kitchen, toilet or even plumbing. Many such examples ignore structural safety, profit margins for material suppliers and contractors, management costs and taxes. The real cost of these houses is kept hidden, while the artificial cost is used to sell the dream.

Since the private sector can’t function on hidden costs, the affordable housing sector has always remained out of bounds. Governments can do this job since they have many legitimate instruments to hide their real costs, such as subsidies. Then there are nonprofits or charities that can cover their real costs in philanthropic and other donation-based instruments.

Habitat for Humanity, the largest housing nonprofit, for example, has incredibly complicated and yet highly successful financial models. In 2018, the organization helped build or rehabilitate houses for more than 87,000 individuals across the world, which is not an easy feat by any means. But, contrast this with the estimated 150 million people who are homeless worldwide. We would still need hundreds of organizations with the creativity and scale of Habitat for Humanity. Since Habitat for Humanity was founded more than 40 years ago, we haven't added many to this list. What makes us think that things will change now?

Read the full article about affordable housing by Prasoon Kumar at Forbes.