The "Cost" of Being Poor

A few weeks ago the Haiti $300 House team had a research call that got us thinking about the "cost" of being poor; it left us with both concern and hope for those at the bottom of the pyramid.  In this conversation, we learned that the majority of Haiti's slum dwellers pay rent - perhaps more than 80% of them.  This is often a payment made to middle-/upper-class landlords and/or gangs.  They also pay for their water, which has to be brought in by truck or purchased in bottles.  When you consider this, plus the costs of medicine needed due to unsanitary conditions, you start to realize how truly expensive it is to be a poor Haitian.

As you step back and think about it, this is not a unique phenomenon.  Here in the U.S., there are similar high "costs" for the poor.  If for example a low income family needs medicine, they might put it on a credit card and incur 20% interest until it is completely paid.  In contrast, someone with more income might charge it then pay it in full, earning 1% cash back from the same credit card provider.  The pattern holds true for purchasing staples as well: a relatively wealthy person can buy paper towels in bulk at a lower cost, while a low income person can only afford to buy paper towels in the more expensive single-package form.  So across the globe it appears that the cost of everyday life is actually higher for the poor.

It is easy to see this "cost" of being poor as an insurmountable problem.  After all, how can we help the bottom of the pyramid pay for all of the "costs" they are facing?  But these costs are exactly what make the $300 House concept feasible.  What if rather than subsidizing the bottom of the pyramid to help them meet the high costs, we reduce the costs by offering cheaper alternatives?  If the slum dwellers in Brazil are paying $8 per week for housing - as I recently learned from a documentary - why couldn't they spend the same for a mass produced shelter with built in water purification?  If this shelter cost $300, it would take less than one year to pay for it in full.  With micro-financing over a longer period, the cost of housing could be greatly reduced for slum dwellers.

The $300 House idea is appealing to us because it is self-sustaining.  Profit seeking businesses would be interested in it for its potential revenue streams: 1.) selling the house, 2.) selling add-ons (accessories, water purifiers, solar panels, etc.), and 3.) developing a market by improving health/sanitation, leading to greater consumer spending power.  While it is difficult to show a business the impact of a healthier market with greater spending power, it is relatively easy to demonstrate the immediate revenue opportunity from selling the house.  If a business can provide a safe, healthy living environment that is priced below slum dwellers current "costs", it can take the slum dwellers' rent payment away from current landlords (who often care very little about the conditions of their property and tenants).  The business makes money by shifting and perhaps even lowering the cost burden of the poor, and in return slum dwellers pay the same or less for much improved conditions.  The current "costs" for the poor are therefore an opportunity for businesses to improve the lives of those at the bottom of the pyramid.      

When looked at in this light, the "cost" of being poor can also be seen as an opportunity and entry point for improvement.  So, while it concerns us, it also brings us hope.