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HOUSING FINANCING -A PUBLIC-PRIVATE PARTNERSHIP – DEVELOPING HOUSING FINANCE IN AFRICA BY: SIMON WALLEY HOUSING FINANCE SPECIALIST WORLD BANK Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Center 8th to 10th of September 2009, Maputo - Mozambique Outline • • • • 2 Why Housing Finance ? How to Expand Housing Finance World Bank activities Challenges Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Challenges to provision of housing Demand for Housing • Availability of financing for end user •High interest rates •Lack of long term funds •Low levels of income •Lack of affordable housing Lack of effective demand Supply of Housing • Availability of financing for developers •Cost of building materials •Planning/building regulations •Cost of infrastructure •Lack of skills/capacity Lack of affordable supply Incremental Construction …expanding access to housing finance down-market and increasing the effective demand for housing Cash Purchase High Income Cash Purchase Mortgage Housing Microfinance Micro-credit/savings Current Situation Low Income Micro-credit/savings Objective Why Housing Finance? 5 • Urban development strategy: cities are also built the way they are financed (avoid slum proliferation) • Poverty reduction & social stability: empowerment, retirement, asset building, community strengthening • Integral part of the global financial sector liberalization (banks, non banks, bond markets, pension funds, etc.) • Housing is a sizeable and durable investment: needed market debt leverage Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique How to build inclusive and sustainable HF system? 6 • Sound foundations – Macroeconomic stability – Workable legal system (property titles, foreclosure) – Risk management and funding tools – Sound financial sector regulations – Competing and innovating private lenders • Affordable housing (multiple supply constraints) • Enabling role of the State – Less of direct lender/builder, rather build conducive market Conference and General Meeting of African Union for Housing Finance environment,Annual catalyst roleChissano to expand accessibility Joaquim International Conference Center 8th to 10th of September 2009, Maputo - Mozambique World Bank’s housing finance program – Growing scope 30+ countries & ambitious reforms – Broad range of policy reforms, new legislation, pilot programs, studies – Financed using IBRD loans, IDA credit or grants and trust funds – Global, regional, country conferences & training programs – HF flagship book published – Collaboration with Urban/Slum upgrading/Land projects 7 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique 8 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Case Study - Tanzania – Has had stability in its banking sector and macroeconomy – Undertaken legal reforms with new mortgage law, condominium law, program to formalise land ownership – World Bank providing support starting in 2010 by: • Creation of a liquidity facility, mortgage market development • Housing Microfinance Fund , capacity building for SACCOs • Several steps to expand supply of housing 9 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Mortgage Liquidity Facilities – Operating already in Egypt and Jordan – under discussion in Nigeria, Uganda and WAMU – Provides a solution to maturity mismatch issue and shortage of long term funds – First step onto secondary mortgage market without the risks associated with securitisation 10 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Mortgage Liquidity Facility A low risk institution acting as an intermediary between capital markets and primary mortgage lenders. Funding Grant Loan Borrowers Mortgage Collateral & Payments Lender Funding TMRC Sell with recourse or assign loan & Payments Investors Bonds & Payments Lessons for emerging market from US mortgage ‘meltdown’ • Focus on credit quality of borrower first then on collateral – not asset based lending • Government guarantees are real money and can be expensive • Importance of consumer protection – provision of information and prevention of predatory lending • Market transparency and accountability – originators should have some ‘skin in the game’ • Property markets never grow forever! 12 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Challenges – Further Urbanisation to come Cultural change adapt to city living, smaller houses/multi-family – Offering solutions across the income spectrum – Developing rental finance, housing microfinance, developer finance – Integrating urban policy with financial sector reform – Creating capital markets and a source of long term funds – Making Progress on Land issues 13 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique International Housing Finance Course – Run by Witwatersrand Business School with support from Wharton School, University of Pennsylvania – 2-7 November in Johannesburg – Aim to build an annual event for sub-Saharan Africa 14 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique HOFINET – Housing Finance Information Network – A portal website for sharing information on housing finance – Started a data collection exercise – Hosted and run by Wharton School, University of Pennsylvania with support from World Bank, IFC, FMO – Aim to have contributors/editors to the site from all over the world sharing knowledge and best practice 15 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique Housing Finance Policy in Emerging Markets – Published in June 2009, after 4 years in preparation 16 Annual Conference and General Meeting of African Union for Housing Finance Joaquim Chissano International Conference Center 8th to 10th of September 2009, Maputo - Mozambique