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Addressing the housing challenge in Sub-Saharan Africa TRENDS, CHALLENGES AND OPPORTUNITIES Roland White Global Lead: City Management and Finance East African Cities Forum 26 May, 2016 HOUSING IN AFRICA key facts 2 Estimated urban population living in slums, 1990-2030 millions 300 Sub-Saharan Africa 250 Africa is the only region in the world in which the slum population is projected to grow 200 150 East Asia & Pacific 100 South Asia Latin America & Caribbean 50 Middle East & North Africa 0 1990 1995 2000 2005 2010 2015 2020 2025 Europe & Central 2030 Asia World Bank calculations, based on United Nations “World Urbanization Prospects” (2014). 3 Housing investment as a percent of GDP Housing investment as a % of GDP Other middle income Africa is the most rapidly urbanizing region in the world… But investments in housing have not kept up with urbanization and growth. 9.1% SSA middle income 6.6% Other low income 4.9% SSA low income 4.1% 0% 2% 4% 6% 8% 10% Housing investment, % of GDP (average 2001-2011) Dasgupta, Lall & Lozano-Gracia (2014). “Urbanization and Housing Investment”, World Bank. 4 Africa suffers a chronic housing challenge, manifest in overcrowded, poor-quality and located dwellings and low levels of investment GHANA: recent estimates of new housing need per year Government of Ghana Bank of Ghana UN-HABITAT Amoa-Mensah Mahama and Antwi Thinking about this in terms of quantitative “backlogs” is of limited value in analysis and policy-making Karley 101,80 0 66,500 133,00 0 90,000 130,00 0 70,000 5 GNI per capita vs. costs of new formal housing In Africa, it costs 14x to 17x Cheapest Newly Built House 20,000 100,000 16,000 80,000 12,000 60,000 8,000 40,000 4,000 20,000 Affordability Range 0 0 Average Typically formal housing costs 3x to 5x average annual incomes… GNI per capita, US$ Cheapest newly built house by a formal developer in 2013 (US$) Seychelles Mauritius South Africa Botswana Namibia Angola Swaziland Nigeria Zambia Ghana Lesotho Cote d'Ivoire Cameroon Kenya Senegal South Sudan Zimbabwe Tanzania Benin Burkina Faso Rwanda Mali Uganda Mozambique Gambia Togo Central… Ethiopia Niger Malawi Burundi Rapid urban growth + low incomes + high costs = extensive informal housing GNI per capita, 2012 (US$) Centre for Affordable Housing Finance (2014). “2014 Yearbook: Housing Finance in Africa”. 6 HOUSING IN AFRICA trend-drivers 7 % urban population 100% GDP per capita in the first year with an urban majority 80% Africa is urbanizing rapidly, but late and at low incomes 60% 2012 40% 1961 1981 2009 LAC MENA EAP SSA 20% 0% 0 1000 2000 3000 4000 5000 6000 GDP per capita (constant 2005 USD) 8 In SSA only 10% of total land is registered Land tenure, management and administration systems drive up costs and disincentivize investment in housing stock In Cameroon, 70% of urban land is held without title The average cost to register property in SSA is 8.3% of the total value the highest in the world 9 Infrastructure deficits in Sub-Saharan Africa SSA Low-Income Other Low-Income Improved water (%) Infrastructure coverage is low, and declining as urban populations grow. Improved sanitation (%) Paved roads (km/km2) Mobile density (lines per thousand) Generation capacity (MW/million) Electricity coverage (%) 0 50 100 150 200 250 300 350 Foster (2008). “Overhauling the Engine of Growth: Infrastructure in Africa.” World Bank. 10 Low-cost formal housing averages: • $700/m2 in SSA • $350/m2 in India • $250/m2 in China The formal construction industry is relatively inefficient and costly A bag of cement in Nigeria costs twice that in the USA A warehouse building permit is 4x costlier in SSA than the OECD Second only to South Asia 11 UGANDA: incomes and access to housing finance >1M UGX per month 0.7% Housing finance products are not available to most SSA urban households 100,000 to 1M UGX per month 37% <100,000 UGX per month 62.3% Access to mortgage loans from commercial banks Access to credit from MFIs and savings groups No access to commercial banks, MFIs, or savings groups 12 CAMEROON: house price-to-income ratio for government social housing And government subsidies for housing have done little to promote wide-scale access Price (USD) Average house price Price-toincome ratio 60 Price-to-income ratio $60,000 $50,000 50 49 44 $40,000 40 $33,472 $30,001 $30,000 30 $20,000 20 $10,000 10 $680 $0 0 Annual income Yaoundé (Olembe) Douala (Mbanga-Bakoko) 13 RECOMMENDATIONS targeted interventions for an inclusive housing sector 14 upper income Complementary interventions across the value chain, which address distinct needs of different income groups formal finance MFIs no housing finance middle income formal construction affordable informal housing Expanding access to finance: Liquidity & long-term capital Regulatory framework for lending Underwriting Cross-cutting areas: Land administration Planning & building standards Construction sector & materials Rental markets lower income Upgrading informality: Basic infrastructure Incremental & self-construction Leverage existing savings 15 Rough illustration - simulated cost to bridge the gap with formal housing Ghana Angola Benin Burkina Faso Direct provision of formal housing is unaffordable for governments. Burundi Cameroon Central African Rep. Niger Senegal Tanzania Togo Zambia 0% 100% 200% 300% 400% 500% Percent of GDP (2014) Calculations based on data from World Bank (2015), UN (2015) and CAHF (2014). 16 Informality represents a spectrum of shelter locations, conditions, and tenure statuses. SLUM CONDITIONS • No improved water or sanitation Governments need to direct policy and resources at assisting households move incrementally up the housing quality spectrum • Unsound structure • Overcrowding • No tenure security PARTIAL UPGRADE • Basic infrastructure • Structure with a foundation or durable walls • Perceived tenure security SEMIFORMAL FORMAL HOUSING • Improved infrastructure • Piped water and sewer connection • Meets some building codes • Meets all building codes • Self-construction • Proof of ownership • Proxy for tenure 17 Upgrade existing informal housing » Extend basic infrastructure » Provide tenure security to promote investment » Support incremental and self-build upgrading Recent successes NAMIBIA Incremental tenure and community upgrading SENEGAL Conversion of temporary occupancy permits to permanent title deeds KENYA LESOTHO TANZANIA MAURITANIA Tenure regularization through bulk surveying and land use planning Provided serviced plots less than 1km from original house with community infrastructure and microcredit support 18 Recent successes Improve planning & building regulations » Strengthen public land administration » Improve city planning institutions » Adapt land use and zoning regulations » Incentivize density and infill RWANDA TANZANIA ETHIOPIA KENYA LESOTHO GHANA UGANDA Comprehensive land tenure reform Issued land titles with photomapping technology Surveyed all communal lands, registered 60% so far, at a cost of $500 per village Is building an urban legal cadaster in Addis Ababa which will eventually cover the entire country Streamlined land administration processes Reduced VAT on land Introduced land administration authority Reduced wait times and improved application turnaround Computerized land records Cut time to register property from 169 days to 34 Reduced property registration times from 227 days to 48 19 Strengthen the construction sector South Africa: industrial construction techniques • Plastic formwork to cast uniform walls and floor slabs • Reusable up to 50 times » Adopt performance-based construction standards » Develop an increasingly skilled labor force » Promote use of cheap local materials • Reduces costs for production time transportation Moladi formwork. Source: commons.wikimedia.org 20 Expand housing finance down market » Facilitate the development of the financial sector to expand access to formal mortgage products » Support development of non-mortgage lending products for informal or irregular incomes » Leverage remittances and community-based lending Savings methods among savers, selected economies ADULTS SAVING ANY MONEY IN THE PAST YEAR (%) Demirguc-Kunt & Klapper (2012). “Measuring Financial Inclusion: The Global Findex Database." World Bank. 21 CONCLUSION Work across the supply and demand sides of the housing delivery process and leverage the private sector to provide housing solutions for all income levels Supply Demand Strengthen land management Develop regulatory framework for banks Improve planning & regulations Increase access to long-term capital Upgrade informal settlements & invest in infrastructure Promote access to financial services Strengthen construction sector Create alternative ways to assess credit Reduce material costs Support MFIs, other non-bank lending Inclusive housing sector 22