Financial crisis response must tackle housing: U.N.

LONDON (Reuters) - Governments must address problems in the housing sector if they are to solve the global financial crisis, a top U.N. official said on Wednesday.

The credit crunch rattling the world's banking sector should be seen as a "housing finance crisis" leaving the poorest to fend for themselves, Anna Tibaijuka, head of the United Nations Human Settlements Program (UN-HABITAT), said.

"Clearly you cannot have a harmonious society if people are not secure in their homes," she said at the launch of the U.N. agency's State of the World's Cities 2008/2009 report.

"The financial crisis we are facing today cannot be seen as an event -- it is a process that has been building up over time and this process now has bust."

Tibaijuka said governments should do more to provide cheaper homes for those on lower incomes because the supply of affordable housing could not be left entirely to the market.

The U.N. report revealed that major U.S. cities including Washington, New York and Miami, have levels of income inequality as high as some cities in African and Latin American countries, like Nairobi, Santiago and Buenos Aires.

It said that for the first time in history half the world's population lives in urban areas, confirming U.N. predictions earlier this year.

U.S. cities have lower levels of poverty than many developed-world cities, but disparity in income has risen above the threshold "at which cities and countries should address inequality as a matter of urgency," the report said.

It singled out race as one of the most important factors determining inequality in Canada and the United States.

Tibaijuka warned the proportion of people living in slum conditions in wealthy nations could rise because of the credit crunch.

While one in three people in developing-world cities lives in a slum, the figure for developed countries is much lower at around six percent, UN-HABITAT said.

"I would not be surprised that, if we did another global survey on people living in slum conditions without security of tenure, this number will have increased in developed countries as a result of this (financial) crisis," Tibaijuka said.

She said inequality in cities was a "recipe for riots, for social upheaval," but said the extent to which financial turmoil might lead to unrest in rich nations would depend on how many people ended up losing their homes.

"I'm not surprised world leaders are now seizing on the matter because without leadership, without governance, it is a clear test of social tensions," she said.

(Reporting by Megan Rowling; editing by Michael Roddy)