Housing crisis and solutions for sub-Saharan Africa

Africa is on the brink of a major housing crisis unless it can carve a targeted approach to housing, lending and land policies. Estimates suggest that by 2050 Africa’s population will have doubled reaching 2.4 billion which will stretch the cities to beyond breaking point due to inadequate housing and associated infrastructure needs such as roads and clean water. One just has to visit any major urban center in Africa to be met by roads that are chocker blocked with traffic, water rationing and the ever present power cuts.

One of the key results of Africa’s housing crisis is the degradation of human dignity as the population is pushed to the informal settlements where water and basic necessities are scarce. These young urbanites have in recent years become restless resulting in flare-ups and clashes that can be in part attributed to frustrations at their living conditions.

Few people disagree that Africa is entering the throes of a housing crisis as demand for decent housing far outstrips supply. This situation is as a result of a bludgeoning population which has been exacerbated by a high migration of the population to urban centers.

The result of the combined influences of a ballooning population, housing deficit and urbanization have created what some would call a perfect storm which if not curbed could result in a reversal of economic gains in the decades ahead because quality of life is intrinsic to economic development.

 Five key messages emanate from my research. First, Africa is facing a looming housing crisis as the affordable housing supply dwarfs demand, particularly in the formal sector. This annual shortage is adding to the existing large deficits observed in many cities across the continent. This has led to the proliferation of slums.

Second, while addressing the affordable housing shortage will be a huge challenge, it also presents an opportunity for structural transformation and inclusive growth in Africa.

Third, creating an enabling environment for the supply of affordable rental housing should be part of any national housing strategy.

Fourth, strong political leadership is crucial for transforming the sector. Governments need to effectively implement their role as regulators, input providers, and facilitators. Last but not the least, we argue that development financial institutions have a catalytic role to play by assisting governments in fulfilling their various roles, as well as provide long-term financing needed for the development of affordable housing finance markets.

Several factors explain the large housing deficits observed in the continent. Rapid urbanization fueled by rural to urban migration and endogenous population growth is raising the demand for housing. However, the supply of housing has been insufficient for several reasons.

First, poor urban planning is hampering urban expansion through limited supply of land and infrastructure. Second, multiple land tenure regimes, and inadequate land administration and governance systems contribute to land tenure insecurity and the high costs of urban land.

Third, high construction costs make housing unaffordable to the majority of low and middle-income households.  Furthermore, underdeveloped housing finance markets imply that most Africans can only rely on self-financing and incremental construction mechanisms to acquire housing.

In order to address the housing challenges, a number of possible approaches have been put forward. The need for integrated solutions to affordable housing problems is key. The relevant government institutions, financial institutions, developers, stakeholders and community representatives need to collaborate and discuss the unique needs and possible solutions relevant for cities and rural homesteads.

Possible solutions should take into account country specific challenges. However, comprehensive policies should simultaneously address constraints on the supply and the demand sides. The challenge on the supply side is how to increase the availability of affordable housing. Actions that will have great impact include updating urban plans, taking into account recent socioeconomic developments; reforming land administration and governance systems with the aim of improving tenure security, increasing the supply of well-located plots and lower overall land costs; and lowering construction costs.  On the demand side, financing mechanisms, including guarantees, are needed to enable households to undertake the acquisition of housing overtime

Various housing strategies have been implemented over the years to ensure that the poor and middle class have access to finance for affordable housing. Unfortunately, housing subsidy programmes have barely been able to meet the rising need for housing. The 2015 #WorldBank report points out that most subsidy programmes are extremely costly to the government, are generally out of reach for the poor, and have not significantly increased the amount of affordable housing being delivered.

Recommendations have also been made that governments should rather consider reviewing the various policies and National Development Plans to set up working regulations that support affordable housing delivered by the private sector. Land tenure polices, taxation regulations, land servicing, infrastructure development, and planning regulations are some of the key areas to be focused upon, all of which would encourage greater private sector participation in low-income markets.

While there is substantial debate around mortgages, more still needs to be done to make mortgages accessible to majority of the poor and middle-class population in Sub Saharan Africa. According to the #WorldBank report 2015, only 15 % of adults in Sub Saharan Africa are eligible to apply for formal financing and in 2014, only 5% of adults managed to secure a mortgage loan from a formal bank. Majority of the poor and middle class are informally employed which makes it difficult for the current mortgage systems to consider their application as they would not meet the standard formal requirements of the system. More consideration, deliberation and innovation regarding lending to the informal borrowers needs to be considered. Most low-income households have resorted to self-construction and incremental housing in Sub Saharan Africa which strive more when backed by affordable housing micro financing products.

Recent case studies of the impact of Housing Micro financing products in countries like Kenya and Uganda support the need to for more scale of such products which seem to be unlocking access to housing finance and contribute to improving the quality of houses of low-income households. Innovation in housing finance systems which are customized to the unique housing problems across Sub-Saharan Africa will contribute greatly to solving the current situation.

The financing of affordable housing projects remains a major challenge, given the low levels of income of a significant part of the population in many African countries. Developers and governments should therefore look at designing innovative schemes to finance affordable housing projects. Public-private partnerships are one way to address the challenge, but the devil lies in the detail. What is problematic from the perspective of the private developers is that they do not always trust the governments to abide with the agreed upon arrangements. Having said that, however, it is clear there is a trend that shows that the middle class is growing steadily, which creates a grouping of African consumers that would be able to fund their own housing. The challenge again lies with the large group of consumers at the bottom of the pyramid who cannot.

As Sub-Saharan African population rapidly grow, and income per capita and industrial growth remain low, serious deliberations around understanding the unique and complex housing crisis must be prioritized. Productive collaboration between the politicians, private and public sectors, financial systems representatives, service providers and the community representatives is crucial. Most African cities need to reflect not only on the possible solutions to address the housing crisis but also ways of upgrading the infrastructure and improve city planning to ensure that African economies benefit from urbanization.

Africa could look at the Singapore model, where affordable housing is one of the central tenets of a stable society, politically and economically. The Housing Development Board in 1964 introduced the Home Ownership for the People Scheme to give citizens a tangible asset in Singapore and a stake in nation-building. In 1968, to help more become home owners, the government allowed the use of Central Provident Fund (CPF) savings for the down-payment and to service the monthly mortgage loan installments.

This, together with other schemes and grants introduced over the years, has made home ownership highly affordable and attractive. Over the years, various CPF housing grants, such as the Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG), have also been introduced. These housing grants ease the financial burden of low-income and middle-income households in buying their first apartment. The challenge is obviously how to apply this model to Africa.

There is dire need for a clear understanding of the unique challenges faced by all stakeholders involved in the value chain. It is important to understand the challenges which developers in Sub Saharan Africa face, including land tenure, the availability of serviced land, excessive taxation, tedious administrative processes, and the high cost of developer funding. Perhaps this is a call to take a step back and deliberate on possible solutions to ease these challenges if ever the housing problem is to be solved soon. 

By recognizing what is working, empowering at the grassroots and finding ways to mobilize existing resources to scale these successes, we can ensure that Africa makes progress towards meeting the UN’s #SDG11 (Make cities and human settlements inclusive, safe, resilient and sustainable) and achieve inclusive growth.

In my final view, creating a conducive enabling environment, adopting and implementing a comprehensive housing strategy, as well as the existence of strong political will are prerequisites for addressing the continents housing crisis. #BetterHousing #SustainableCities #Sustainability #HousingSolutions #Safe #Inclusivity #SDGS #SDG11 #BetterLivingforAll