Innovative Financial Tools for Neighborhood Upgrading

In Latin America and the Caribbean, over 120 million people live in informal neighborhoods. The investment needed to address the housing deficit is around USD 1.4 trillion. This represents about 20% of the entire region's GDP, significantly exceeding the capacity for public investment. This is, public budgets, even with multilateral support, will always fall short of addressing the scale of demand.
Therefore, this Discovery Paper looks at innovative financial instruments and solutions, such as thematic bonds, use of catalytic capital, blended finance mechanisms, and outcomes-based payment schemes, that can scale-up housing and urban development solutions and improve program performance by increasing private capital engagement.
We present 14 cases that have overcome some of the typical barriers to private sector involvement in the sector and show potential for replication.
Then, we outline a series of key messages and recommendations for public sector representatives, multilateral and cooperation agencies, private investors, developers, entrepreneurs, professionals, and other experts committed to innovating at scale in response to one of the most pressing challenges of our time.