Allocation of post-disaster reconstruction financing to housing

Abstract

The allocation of a significant portion of post-natural disaster financing to housing reconstruction in poorer countries is examined. Many poorer countries are reliant on external assistance in the form of loans or grants to meet their post-disaster reconstruction needs. Today, half of all the post-disaster borrowing provided by the World Bank is earmarked for the reconstruction of housing. Should this high proportion of limited reconstruction funds be allocated to a fundamentally private sector need? Is such an allocation economically efficient? After exploring these questions, an alternative solution is examined for government funds to be allocated to high economic return projects (e.g. infrastructure) and to meeting the needs of the poor. The allocation of funding to housing, much of which is captured by the economic and social elite, seems a misallocation of scarce resources. This is particularly the case since the funding available for post-disaster reconstruction by the international financial institutions is constrained and unable to meet anticipated future demand.