Housing deprivation in rapidly urbanizing regions: evidence from functional urban areas in Sub-Saharan Africa, South Asia, and Southeast Asia

Rapid urbanization in Sub-Saharan Africa, South Asia, and Southeast Asia is characterized by diseconomies of scale, particularly congestion costs reflected in housing deprivation. This study investigates the relationship between urban rates and housing deprivation in contexts where urban expansion has historically outpaced economic growth. Methodologically, we employ a two-step multilevel econometric model to analyze cross-sectional microdata on households and aggregated regional data. We draw on Demographic and Health Surveys for household characteristics and use the population of Functional Urban Areas to measure urban population. These functional areas, consist of at least one densely populated urban core and its hinterland. Our regional-level results indicate that, on average, a higher urban rate is associated with improved living conditions (i.e., reduced housing deprivation). However, we also find evidence of a U-shaped relationship between the urban rate, based on the hinterland, and housing deprivation. This suggests that initial urbanization in the hinterland improves living conditions up to a certain threshold. Beyond this point, further urbanization reverses the trend and leads to increased housing deprivation. These findings highlight the importance of understanding dynamics within the urban hinterland and the need for policies to improve its living conditions.