Habitat for Humanity: Proving that the world’s housing crisis has a financial solution Habitat for Humanity:

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Proving that the world’s housing crisis has a financial solution

The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.

For decades, access to affordable housing finance has been a significant barrier for millions of low-income families who are shut out from traditional mortgages. Lenders believed the market to be unviable and viewed housing loans to these communities as too risky, difficult to scale, or simply commercially unattractive. The scale of the unmet need is vast. According to UN-Habitat, 96,000 affordable homes must be built every day to accommodate the 3 billion people who will need adequate housing by 2030. That number equates to 40% of the world’s population. Responding to a shortfall of that scale, say housing experts, will require a systemic solution. Habitat for Humanity International—the world’s largest international NGO solely focused on addressing the global affordable housing crisis—set out to challenge that assumption with MicroBuild®. That demonstration fund has since expanded into a wider systems-change initiative. MicroBuild Fund 1, the first investment fund of its kind focused on housing, was launched in 2012 to bridge the financing gap by partnering with microfinance institutions to develop and deploy housing loan products that reflect the realities of the people they serve. “Financial services, particularly for low-income communities, are absolutely vital if any of the kind of home building that we need to see happening is going to happen,” says Roland Pearson, Vice President and Executive Director of the Terwilliger Center for Innovation in Shelter, Habitat for Humanity International’s unit that mobilizes capital into the affordable housing sector.

At a moment when housing solutions are needed more than ever for 3 billion people, Habitat for Humanity’s MicroBuild Initiative is proving to the market that extending housing finance for some of the world’s poorest communities delivers results.

Person standing in a doorway beside a turquoise wall, illustrating a housing and community setting.

Person holding an informational leaflet containing housing and community survey details.

Two people reviewing notes and discussing plans in a rural community setting.

Residential alleyway lined with colorful homes and buildings in a densely populated neighborhood.

2.5bn

Population growth of the  world’s cities by 2025

68%

Urban share of the world’s population in 2025

37%

of global carbon emissions created by the construction industry

A new model for affordable housing

MicroBuild’s solution is to channel capital and housing expertise to small- to medium-sized finance institutions, who in turn disburse housing loans to individual borrowers. The success of that model has exceeded its initial targets, Pearson says. Starting with $100 million in investible capital, the first fund ultimately deployed more than double its original capital base—between 2012 and its scheduled end in 2025, the fund disbursed $230 million across 33 countries, generating credit for more than 236,000 families and benefiting an estimated 1.18 million people. “We started out hoping to reach 100,000 low-income households through the first MicroBuild Fund,” says Jacqueline Innocent, former chair of the board of directors for MicroBuild 1 LLC—the entity behind the first fund. "When we’d already met that goal halfway through the fund’s life cycle, we knew we were onto something."

One of the pillars of MicroBuild’s market systems approach was to attract private investment into a sector that had been long overlooked. With the scale of the housing challenge far exceeding the resources of governments and aid organizations alone, the World Economic Forum has described private capital as “indispensable” to closing the gap. Supported by housing loan repayment rates that matched or exceeded those of small business loans, the first MicroBuild Fund’s financial institution partners leveraged the fund’s initial investment to crowd-in an additional $1.2 billion in new capital for housing. Even with a global pandemic and market volatility, the housing loans supported by the Fund achieved a 25% compound annual growth rate at partner institutions. Those were crucial data points for demonstrating to the financial sector, capital markets, investors and regulators that affordable housing was a viable asset class. “This need not be a charity operation. Financial institutions can make good loans to low-income families for building and improving their homes and get those loans back at reasonable rates of interest,” Pearson says. The first fund lent to 62 institutions in 33 countries across the world’s largest emerging markets and “we found, almost without exception, that the housing portfolios that we helped start or expand performed better than their broader lending portfolios.”

When we’d already met that goal halfway through the fund’s life cycle, we knew we were onto something.

“You need an initiative that’s bold—that’s large—to create a point of leverage. The problem is still massive, and we need to bring in larger systemic actors into this endeavor,” says Roland Pearson, Vice President and Executive Director of Habitat’s Terwilliger Center for Innovation in Shelter. After leveraging US$ 1.2 billion for MicroBuild 1, the organization is seeking to crowd-in US$ 5 billion for its second fund, while expanding technical assistance to microfinance institutions. Photo: Habitat for Humanity | Ted Pio Roda

Prior to MicroBuild, there was broad skepticism of the need for dedicated finance products for affordable housing. Seen as risky and difficult to scale, it made up less than 2% of total microfinance portfolios in 2011, according to a joint analysis by Habitat for Humanity International, philanthropic investment organization Omidyar Network, and World Bank dataset MIX Market, despite a handful of pioneers showing rapid growth. In fact, many finance institutions were already engaged in lending for affordable housing—they just didn’t know it. “We went back to the financial institutions and said, ‘You’re actually doing housing lending; you’re just not doing it intentionally,’” Pearson says. “Routinely, we were seeing that at least 20% of general loans were being diverted by families to address urgent housing needs. If you have the right product for the right purpose, you’re going to get better performance.” A key differentiator of MicroBuild has been its ability to build the market from the ground up, at a time when affordable housing finance was still unfamiliar to many institutions serving low-income households. The fund worked closely with local lenders to address capability gaps and build confidence through support in product design, market research, client education and capacity building, including access to technical housing expertise. When the first fund started, more than 80% of investees lacked housing product expertise. Over the course of the fund’s life cycle, that figure dropped to just 4%. For many of those institutions, housing has now become a flagship offering, reflecting both strengthened capabilities and growing demand for housing-focused financial products.

Making housing lending explicit

The rise of affordable housing finance also underscores the limitations of conventional housing finance models in low-income markets. Traditional mortgages are typically inaccessible for most households, particularly those without formal land ownership or predictable income streams. In these markets, housing construction tends to be incremental, with households upgrading or adding rooms as needs change and resources allow. The incremental construction that MicroBuild supports has only become more urgent as the effects of climate change have intensified. More frequent and more severe storms, wildfires, floods and droughts are exposing how ill-equipped much of the world’s existing housing stock is for a rapidly changing climate. The UN’s World Meteorological Organization says 800,000 people were displaced in 2024 alone, the highest figure since records began. MicroBuild funding has enabled families to upgrade homes from wood or sheet metal to concrete, mitigating exposure to the extreme weather events the World Meteorological Organization warns are becoming the new normal, and that low-income communities are already navigating on the front lines. Other home modifications reduce indoor temperatures, protect from the cold, lower energy costs, improve ventilation or reduce transmission of disease—all of which demonstrably lead to improved health and well-being for low-income families.

Access to affordable housing finance is increasingly viewed as a powerful catalyst for broader social and economic development. For low-income households, the home is where exposure to extreme weather, disease and financial instability converges, often disproportionately affecting women, children and the elderly. Evidence is building that targeted housing investment generates measurable upstream returns. Safer construction materials, reduced overcrowding and access to clean energy and water, sanitation and hygiene infrastructure are associated with better health outcomes, greater educational attainment and improved household productivity. For organizations like Habitat, housing functions not only as a social good but as an enabler of economic resilience. The need remains vast. According to the United Nations, more than 1.1 billion people globally live in slums and other informal settlements, where women face disproportionate barriers to education, healthcare, safety and economic opportunity. Emerging research from Habitat for Humanity shows that better housing conditions, including tenure security and access to basic services, can significantly improve health outcomes for women and girls. “The attendant effects of inadequate housing are deep and pervasive. It’s not just a housing problem; it’s a livelihood problem,” Pearson says.

Housing as social catalyst

Taken together, the evidence is shifting how affordable housing finance is perceived, from fragmented social intervention to an investable solution with clear links to risk mitigation and long-term value creation. As proof points accumulate, Habitat’s focus for MicroBuild is now turning from validation to expansion. Over its 13-year lifespan, the first MicroBuild Fund demonstrated that affordable housing finance is a powerful, scalable tool for tackling the global housing deficit. Now, with the launch of the MicroBuild Initiative, including a second MicroBuild Fund, Habitat for Humanity is looking to expand dramatically: a capital base of up to $500 million targeting 2.5 million people over a period of 10 to 15 years with a $5 billion leverage goal and at least 20% of new capital directed toward climate-focused housing products. Bigger ambitions mean not only a larger fund with a dedicated fund manager, but more robust support systems around it. “Through an ‘Impact and Innovation Hub,’ the MicroBuild Initiative will be able to provide more than technical assistance. It will also introduce an innovation catalyst, an off-balance sheet risk mitigation facility, and a comprehensive research, learning and influence agenda,” Pearson says. Furthermore, a key reason for engaging Symbiotics, a global impact investing leader, as the fund manager is to engage private investors, pension funds and large asset managers, giving them direct exposure to the asset class. “So they can experience what it’s like investing in this asset class.” Habitat for Humanity is also targeting a different way of attracting donors, particularly in the technology space, not just for funding but for partnership in building long-term solutions with emerging technologies like AI. Through MicroBuild’s Impact and Innovation Hub, the organization plans to develop cutting-edge platforms for the new fund’s network of partner institutions, from AI-enabled underwriting and risk management to using satellite imagery for lenders to assess construction remotely. Ambitions for the second fund extend beyond Habitat’s own programs, reflecting a broader strategy permanently to embed affordable housing finance in the global financial system. That means taking the evidence accumulated over 13 years directly to the institutions that shape the operating environment: central banks, multilateral lenders and policymakers. The goal is not only a larger fund, but a market that no longer needs to be convinced. “The MicroBuild Initiative continues to be a global effort,” Pearson says. “You need an initiative that's bold—that’s large—to create a point of leverage. The problem is still massive, and we need to bring larger systemic actors into this endeavor.”

The next phase

Person seated outside a turquoise-painted home, with a white dog in the foreground and household items visible on a porch.

Small single-story brick house with barred windows, surrounded by tropical vegetation and neighboring homes.

Speaker addressing an audience at an indoor event, with attendees seated and listening in a conference room.

Person wearing a motorcycle helmet and jacket while seated on a motorbike outdoors near a residential building and trees.

Juan Orlando, a loan officer with FUNDEA, visits clients to support them in their housing journeys. With a US$1.5 million loan and technical assistance from MicroBuild in 2022, FUNDEA strengthened its housing loan product, CrediVivienda, by adjusting loan terms, introducing consumer education materials, expanding promotional strategies and building staff capacity. MicroBuild also helped FUNDEA develop partnerships with local hardware stores to improve clients’ access to quality construction materials. Photo: Habitat for Humanity | Lucía Zúñiga

Family standing outside a home near a blue front door and arched doorway.

Edgar and his wife Norma live with their two children, 5-year-old Elizabeth and 18-month-old Yoslin, in a home they are building on land owned by Edgar’s family. By partnering with FUNDEA in Guatemala for a housing improvement loan, they were able to accelerate construction of their first rooms. Access to a loan has helped them make steady, month-by-month progress, motivating them to keep building. The visible improvements in the house have drawn praise from neighbors. Photo: Habitat for Humanity | Lucía Zúñiga

It’s not just a housing problem; it’s a livelihood problem.

Small mud-brick house with a thatched roof and a simple doorway structure, located in a dry rural landscape.

Homes like these in Zambia highlight both the urgent need—and the opportunity—to expand housing finance across Africa. Many substandard houses are built with mud bricks that weaken during the rainy season, swelling with water and often collapsing, putting families at risk. Through housing loans, families can upgrade their homes with more resilient features, such as concrete bricks, stronger roofs, and improved water and sanitation facilities. MicroBuild Fund 1 invested in 33 countries, but only two were in Africa: Kenya and Zambia. Expanding local-currency lending has been limited by foreign exchange risk, a challenge the Impact and Innovation Hub aims to address as MicroBuild Fund 2 takes shape, unlocking access to improved housing for more families across the continent. Photo: Habitat for Humanity | Annalise Kaylor

Two people standing in front of a residential property with a metal gate and covered entrance.

In Indonesia, nearly one in three people (about 22 million households) live in homes with substandard features, according to the World Bank. In West Java, Sani and her husband Ace saved for five years to improve their home, but progress stalled as leaks and fragile walls required constant repairs. In March 2022, an affordable housing loan from KOMIDA, a MicroBuild partner, allowed them to repair the roof, strengthen the walls, and complete their kitchen and bathroom. Photo: Habitat for Humanity | Joshua Devon Kharismananda

Person standing inside a home next to a light-colored wall and staircase, with part of a red sofa visible in the foreground.

Person standing in a home kitchen beside large water containers, with shelves stocked with cookware, utensils, and household supplies.

For more on MicroBuild, visit Habitat.org/MicroBuild.

Disclaimer: The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters. To work with Reuters Plus, contact us here.

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80%+

reported growth in their housing-finance portfolios

89%

reported housing portfolios that performed as well as or better than their general lending portfolios

Source: MicroBuild Fund 1 End-of-Fund Survey. Results reflect responses from participating financial institutions; response totals varied by question.

reported limited expertise in housing-product design, down from 81% before MicroBuild support

The MicroBuild Fund 1 End-of-Fund Survey found that amongst participating financial institutions:

Source: UN Environment Programme

Habitat’s MicroBuild Fund is the first housing-focused investment vehicle dedicated to helping low-income families access safe, decent and durable homes. MicroBuild’s work highlights the close connection between affordable housing, gender equality and climate resilience. Through investments in institutions that promote gender-responsive lending and greener home construction, MicroBuild aims to help build a more inclusive, affordable and sustainable housing ecosystem, where energy-efficient renovations, upgrades and retrofits support higher-quality, more disaster-resilient homes. Photo: Habitat for Humanity | Selvaprakash Lakshmanan

Person standing on a covered balcony overlooking a residential neighborhood with houses and trees in the background.

Climate change has become an increasingly important focus of MicroBuild’s work over the past decade, particularly in the Western Balkans, where the residential buildings sector accounts for 30% to 60% of total energy use. Despite this, low-income households and the institutions that serve them often remain disconnected from national climate efforts. To help bridge this gap, MicroBuild invested in Mikra to develop a dedicated energy-efficiency housing loan product with lower interest rates and longer loan terms, while also supporting staff training and consumer education on energy-saving behaviors and products. Photo: Habitat for Humanity | Ela Bacon

MicroBuild’s investment enabled housing loans for 3,000 SUNRISE clients in Bosnia and Herzegovina. Today, MicroBuild partner institutions continue to offer affordable housing finance, often keeping it as a strategic priority even after fully repaying their loans and completing technical assistance. For families like Belma’s, who lived with her husband, and their two children in a single 260-square-foot room for 23 years, this support has been life-changing. Their situation began to change when Belma’s then-adult daughter, Enida, was able to take out a SUNRISE housing loan to complement the family’s savings. That loan uplifted the entire family, allowing them to gradually build a safe, dignified home of their own. Photo: Habitat for Humanity | Ela Bacon

Photo: Habitat for Humanity | Iya Forbes.