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Africa’s social housing: Homes for all

By Kissy Agyeman-Togobo in Accra, Nana Adu Ampofo in Lagos and Nicholas Norbrook in Rabat
Posted on Wednesday, 2 October 2013 15:08

Shantytowns, slums, squatter set­tlements – everyone has a word for it, but solutions are less easy to come by. Booming African cities and towns are drawing in rural migrants eager for jobs.

Urban dwellers are sett­ ling down and starting families. Often based on colonial­ era plans and infra­ structure, African cities are struggling to cope. Informal settlements flourish both beyond the city limits and tucked within established urban architecture: under bridges, next to highways and in marketplaces.

African leaders have not always been receptive to the plight of the poorly housed – the view from the windows of State House is often of manicured gardens rather than plastic­strewn, open­gutter tenements. But the North

African uprisings have focused minds at the highest levels. Though by no means the only factor, it is pertinent that the Moroccan government, which survived protests by angry citizens, has the most active social housing policy in the Maghreb.

Increasingly, companies are seeing rapid rates of urbanisation as an op­portunity. Alliances, a Moroccan con­struction group also involved in luxury real estate and golfing resorts, says that the social housing segment is what helped get it through the recent eco­nomic downturn.

Groupe Addoha, a competitor, has turned its sights on the continent’s demand for slum upgrades. “The potential of the African market is immense,” says Anas Sefrioui, chief executive of Groupe Addoha.

The demand stretches across the continent. “Everyone needs housing,” as Abraham Otabil, public relations officer at Ghana’s housing ministry, put it. But with Ghana’s housing deficit estimated to reach 2m units by 2020 according to UN-HABITAT, not all needs are being met.

In Ghana, where a population of 22.8 million people in 2008 has reached 24.7 million today, population growth is faster than the government can keep up with. Housing is high on the development agenda.

In late June, the European Investment Bank provided €15m ($19m) in funds to Kenya-based mortgage financier Shelter Afrique to enable it to expand its activities.

The African Development Bank is also backing Shelter Afrique’s Pan-African Housing Fund (PAHF), a private equity vehicle that targets investments in the low-cost housing sector in Kenya, Uganda, Rwanda, Tanzania, Mozambique and Zambia.

The PAHF raised $41.5m in its first closing at the end of last year and plans to raise $100m by its final closing at the end of 2013.

In December 2012, the United Kingdom-based CDC, a development-finance institution, put up $20m for social housing investments in Eastern and Southern Africa. It says that the investments will create 7,500 homes and more than 20,000 jobs.

In Nigeria, power-sector reform is perhaps the sig- nature feature of medium-term development strategy. However, the need to fill unmet housing demand – currently 12-16m units, according to a World Bank estimation – is also generating significant energy among policy-makers and the private sector alike.

Both are fired up by the implications of Nigeria’s population of 162 million growing at 2.5% per annum, with urbanisation more rapid still and real estate underrepresented as a proportion of gross domestic product (GDP). It is less than 4% of GDP, compared to almost 5% in Kenya and 8% in South Africa.

In Europe, social housing can often bring to mind less successful ventures into city planning. Sefrioui argues that ownership is key.

“French real-estate promoters have come to study our model,” he says. “In France, social housing means ghetto. Why? Because the inhabitants of these tower blocks are not in their own home. Whereas with us, as home-owners, they maintain their building impeccably. They are happy to have bought and leave something to hand down to their kids, something that has acquired two to three times its initial value,” Sefrioui explains.

A penchant for bubbles

The term ‘affordable housing’ is a relative concept. In a country like Gabon, known for being one of the world’s leading champagne importers, it is easy to lose sight of what is affordable.

“Gabonese people spend more than they earn,” says to the director-general of the Banque de l’Habitat du Gabon (BHG), Bruno Otah Ondounda.

BHG lends to both businesses and individuals, helping fund social housing projects and the purchase of inputs for construction projects. Finance is absolutely critical. Ondounda says “People don’t save,” which in turn lowers lending institutions’ confidence in providing loans, particularly to individuals.

In Morocco, the government has decided to stand as guarantor. The borrowers might not get a particularly low rate – often around 6%, compared to 3-4% for high-income borrowers who already have collateral – but the banks, with the government underwriting the risk, are happy to lend.

This is not yet the case in Libreville. There are development and housing banks that are meant to provide credit for housing but on average the interest rate is around 18%.

A young Gabonese professional couple tried on a number of occasions to get a mortgage but said they finally resorted to setting up a company to apply for a loan because they think they “stand a better chance”.

Another Gabonese professional says that “people tend to stay at home until later in life or build their houses themselves bit by bit because accessing credit is not easy.”

At a Nigeria Development and Finance Forum in June, Pison Housing Company president Roland Igbinoba described the challenges to growth: regulatory measures, infrastructure, supply chains, skilled labour and finance.

Governments are making the most progress in terms of finance. For example, the Federal Mortgage Bank of Nigeria (FMBN) and its National Housing Fund are providing access to loans through cooperatives.

The FMBN says that Nigeria’s home ownership rate is just 25%, while it is 56% in South Africa. The bank raised N22bn ($145m) in mandatory contributions from workers in 2012, up from N17bn in 2011.

In March, the central bank published regulations for the Mortgage Refinance Company, which would promote secondary mortgage market activity and the availability of long-term finance.

Credit ratings agencies such as CRC Credit Bureau are helping to extend coverage for those in the formal sector by enabling banks to better understand risks in the market.

The secret of the Moroccan model is the government intervention to solve the market failure.

There are enough people in Lagos, for instance, who are paying rent equivalent to the monthly cost of repaying a 20-year mortgage. However, there are few financial institutions that can lend money for 20 years.

One solution would be the creation of a secondary market for home loans. Emmanuel Asamoah, executive secretary of the Ghana Real Estate Developers Association and partner at FBM Group – a Ghanaian financial and investment company – believes this would help.

“Mortgages thrive on long-term sources of funding,” he says. If Ghana had a secondary market, he continued, it would make mortgage loans much cheaper.

For instance, Fidelity [Bank] charges 27% for a 15-year loan, but if Fidelity had another source of funding then the interest would be lower.

Incentives for developers

The state could play a bridging role here too, an adviser with Ghana Home Loans says: “Ghanaians are tired of renting, it’s too expensive.” But the reality is that 80% of the population earns less than $600 a month and on average they spend one-third of their income on housing.

This means that someone within this income bracket is unlikely to be able to afford property above the $20,000 mark. This is significantly lower than what a property developer can afford to build for, on average around $30,000 per unit.

The key is to find a way around conflicts between property developers and government: the government wants the developer to focus on cheap housing, and the developer seeks to make money.

“By providing social housing, the real-estate developer must have some sort of incentive,” says Asamoah. “Why would you want the real-estate developer to cut [its] profit to do your work?”

Asamoah points to instances where the government expects the private developer to build in areas where there is no electricity or water, which he says is not realistic. The upshot is that “the government [ends up blaming] the real-estate developer for the housing deficit.”

Here again, Morocco has used government intervention. Property developers receive large tax breaks and access to land – but only if they deliver two-bedroom apartment units at $25,000 – closer to the figure that an average Ghanaian family might be able to afford with a longer mortgage.

Replicating the model would require strong political leadership.

A source at the Gabon’s urbanisation ministry said the government is targeting “those who are the most disenfranchised” by constructing 35,000 homes by 2017.

For Ondounda, there was “no consultation” over who should be covered by this policy. There had been “a certain level of laxity” in the implementation of this drive to start with, according to the ministry official.

A sizeable housing demand has seemingly spurred the government into action, with an estimated deficit of 200,000 housing units nationwide.

Not only that, Ondounda considers that the government has “imposed an urban style on people”, which a Gabonese taxi driver said does not reflect the traditional Gabonese family.

“We Gabonese like to sit outside so there has to be a terrace. But with these houses, there’s no outside space. Who would want to live here?” he asked.

In the Angondjé neighbourhood in Libreville, Turkish firm Renaissance Construction is building 564 houses. Country manager for the Middle East and Africa Nuri Egilmez says the company has developed nine types of houses, as specified by government, although he considers that for traditional Gabonese families these houses”are not ideal”.

According to the Agence Nationale des Grands Travaux, the cost of social housing units for public servants ranges from 13m CFA francs ($26,000) to 25m CFA francs, while for low-income residents, it hovers between 5m CFA francs and 10m CFA francs.

“If the state wants to create affordable housing, it must subsidise it,” Ondounda concluded.●

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