stocktaking of the housing sector in sub-saharan...

CHALLENGES AND OPPORTUNITIES

Stocktaking of the housing sector in

Sub-Saharan Africa

STOCKTAKING OF THE HOUSING SECTOR IN SUB-SAHARAN AFRICAChallenges and Opportunities


» Why housing matters

» Housing in Africa: key facts

» Housing in Africa: trend-drivers

» Recommendations for an inclusive housing sector

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WHY HOUSING MATTERS

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Reduced poverty

• Better health outcomes

• Reduced overcrowding

• Improved labor mobility

Wealth creation

• 50%+ of households’ tangible assets

• Improved access to credit

Economic growth

• Housing represents 5-13% of GDP

• 5 jobs created per housing unit built

Effective housing delivery: Reduces poverty Creates household wealth Contributes to national

economic growth

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HOUSING IN AFRICAkey facts

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METHODOLOGY

Macro studies of comparative trends» Per-capita GDP growth and housing sector investment

(country accounts)» Household expenditure on housing (harmonized household

survey)

Desk review of current research and databases

Three country case studies» Primary data collection by global experts and local consultants» Nigeria, Cameroon, Ethiopia

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Sub-Saharan Africa

Middle East & North Africa

Latin America & Caribbean

South Asia

East Asia & Pacific

Europe & Central Asia

0

50

100

150

200

250

300

1990 1995 2000 2005 2010 2015 2020 2025 2030

millions

Africa is the only region in the world in which the slum population is projected to grow

Estimated urban populationliving in slums, 1990-2030

World Bank calculations, based on United Nations “World Urbanization Prospects” (2014).

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Africa is the most rapidly urbanizing region in the world…

But investments in housing have not kept up with urbanization and growth.

Housing investment as a % of GDP

Dasgupta, Lall & Lozano-Gracia (2014). “Urbanization and Housing Investment”, World Bank.

4.1%

4.9%

6.6%

9.1%

0% 2% 4% 6% 8% 10%

SSA lowincome

Other lowincome

SSA middleincome

Other middleincome

Housing investment, % of GDP (average 2001-2011)

Housing investment as a percent of GDP

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Government of Ghana 101,800

Bank of Ghana 66,500

UN-HABITAT 133,000

Amoa-Mensah 90,000

Mahama and Antwi 130,000

Karley 70,000

Africa suffers a chronic housing challenge, manifest in overcrowded, poor-quality and poorly situated dwellings and persistent low levels of investment

Thinking about this in terms of quantitative “backlogs” is of limited value in analysis and policy-making

GHANA: recent estimates of new housing need per year

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Rapid urban growth + low incomes + high costs = extensive informal housing for the foreseeable future

Typically formal housing costs 3x to 5x average annual incomes…In Africa, it costs 14x to 17x

0

20,000

40,000

60,000

80,000

100,000

0

4,000

8,000

12,000

16,000

20,000

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Cheapest newly built house by a formal

developer in 2013 (US$)

GNI per capita, 2012 (US$)

GNI per capita, US$ Cheapest Newly Built House

Affordability Range

GNI per capita vs. costs of new formal housing

Centre for Affordable Housing Finance (2014). “2014 Yearbook: Housing Finance in Africa”.

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HOUSING IN AFRICAtrend-drivers

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LAC MENA EAP

SSA

0%

20%

40%

60%

80%

100%

0 1000 2000 3000 4000 5000 6000

% urban population

GDP per capita (constant 2005 USD)

1961 1981 2009

2012Africa is urbanizing rapidly, but late and at low incomes

GDP per capita in the first year with an urban majority

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In Cameroon, 70% of urban land is held without title

Land tenure, management and administration systems drive up costs and dis-incentivize investment in housing stock The average cost to

register property in SSA is 8.3% of the total value

the highest in the world

In SSA only 10%of total land is

registered

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0 50 100 150 200 250 300 350

Improvedwater (%)

Improvedsanitation (%)

Paved roads(km/km2)

Mobile density(lines per thousand)

Generation capacity(MW/million)

Electricitycoverage (%)

SSA Low-Income Other Low-Income

Infrastructure coverage is low, and declining as urban populations grow.

Infrastructure deficits inSub-Saharan Africa

Foster (2008). “Overhauling the Engine of Growth: Infrastructure in Africa.” World Bank.

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A bag of cement in Nigeria costs twice that in the USA

The formal construction industry is inefficient and costly, relative to other regions

A warehouse building permit is 4x costlier in SSA than the OECD

Second only to South Asia

Low-cost formal housing averages: • $700/m2 in SSA• $350/m2 in India • $250/m2 in China

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And government subsidies for housing have done little to promote wide-scale access

CAMEROON: house price-to-income ratio for government social housing

$680

$33,472$30,001

49

44

0

10

20

30

40

50

60

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Annual income Yaoundé(Olembe)

Douala(Mbanga-Bakoko)

Price-to-income ratio

Price (USD)Average house price Price-to-income ratio

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Formal housing finance products are not available to most SSA urban households

On average, estimates indicate that only 3% of households are eligible obtained loans for a formal financial institution

UGANDA: incomes and access to housing finance

Access to mortgage loans from commercial banks

Access to credit from MFIs and savings groups

No access to commercial banks, MFIs, or savings groups

>1M UGX per month

0.7%

100,000 to 1MUGX per month

37%

<100,000UGX per month

62.3%

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Formal tenure Informal tenure

Formal

incomeDevelopers

Mortgages

Contractors

• Cash

• Employer Non-BankFinancial Institutions

Informal

income

Contractors

• Non-BankFinancialInstitutions

• Housing MFIs

Self-improvers

• Cash

• Housing MFIs

• Tontines

Tenure and income characteristics influence housing finance and construction options• Most people have

informal income sources and/or informal tenure

• Limits collateralization for mortgage

Matrix of housing finance and construction based on tenure and income status

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Few people have mortgages• High interest rates (~20 percent)• Banks lack long term deposits

In Uganda, the least expensive mortgage required a minimum monthly salary of $400 which disqualified 99 percent of the population

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Microfinance loans are smaller and not securitized

Availability of microfinance for home improvement is growing, but rates are well below other regions

Microfinance markets vary widely from country to country• Kenya has 4 times as many MFIs as

South Africa, but half as much as the country’s total lending portfolio

Active Borrowers and Gross Loan Portfolio for MFIs, by region, 2014

Region Active

Borrowers Gross Loan Portfolio

(US$)Average amount loaned

per borrower (US$)Sub-Saharan Africa 4.5 million 7 billion 1,555East Asia and the Pacific

12.7 million 9.9 billion 780

Eastern Europe and Central Asia

2.7 million 12 billion 4,444

Latin America and the Caribbean

16.2 million 34.1 billion 2,105

Middle East and North Africa

1.6 million 1.1 billion 688

South Asia 47.3 million 8.5 billion 180

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RECOMMENDATIONStargeted interventions for an inclusive housing sector

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Complementary interventions across the value chain, which address distinct needs of different income groups

upperincome

lower income

middleincome

formalconstructionaffordable

informalhousing

Upgrading informality:Basic infrastructureIncremental & self-constructionLeverage existing savings

Expanding access to finance:Liquidity & long-term capitalRegulatory framework for lendingUnderwriting

Cross-cutting areas:Land administrationPlanning & building standardsConstruction sector & materialsRental markets

formalfinance

MFIs

no housing finance

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Meeting housing needs in Sub-Saharan Africa will require working across the housing value chain:» targeted interventions at

weak points» addressing informality» leveraging the private

sector

Supply

Strengthen land management

Improve planning & regulations

Upgrade informal settlements & invest

in infrastructure

Strengthen construction sector

Reduce material costs

Demand

Develop regulatory framework for banks

Increase access to long-term capital

Promote access to financial services

Create alternative ways to assess credit

Support MFIs, other non-bank lending

Inclusive housing sector

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SLUM CONDITIONS

• No improved water or sanitation

• Unsound structure

• Overcrowding

• No tenure security

PARTIAL UPGRADE

• Basic infrastructure

• Structure with a foundation or durable walls

• Perceived tenure security

SEMI-FORMAL

• Improved infrastructure

• Meets some building codes

• Self-construction

• Proxy for tenure

FORMAL HOUSING

• Piped water and sewer connection

• Meets all building codes

• Proof of ownership

Informality represents a spectrum of shelter locations, conditions, and tenure statuses.

Governments need to direct policy and resources at assisting households move incrementally up the housing quality spectrum

Leverage the private sector to expand finance models that are customized to this market condition

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Identify and target specific bottlenecks in the housing value chain—either on the supply side or the demand side.

Calculations based on data from World Bank (2015), UN (2015) and CAHF (2014).

city planning & building regulations

access to land

infrastructure & services

end-user finance

construction & building materials

sectors

subsidies

developer finance

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Improve planning & building regulations» Strengthen public land

administration» Improve city planning institutions» Adapt land use and zoning

regulations» Incentivize density and infill

RWANDA Comprehensive land tenure reform Issued land titles with photomapping technology

TANZANIA Surveyed all communal lands, registered 60% so far,at a cost of $500 per village

ETHIOPIA Is building an urban legal cadaster in Addis Ababa which will eventually cover the entire country

KENYA Streamlined land administration processesReduced VAT on land

LESOTHO Introduced land administration authorityReduced wait times and improved application turnaround

GHANA Computerized land recordsCut time to register property from 169 days to 34

UGANDA Reduced property registration times from 227 days to 48

Recent successes


access to land


end-user finance


sectors

subsidies

developer finance

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Upgrade existing informal housing» Extend basic infrastructure » Provide tenure security to

promote investment» Support incremental and

self-build upgrading

NAMIBIA Incremental tenure and community upgrading

SENEGAL Conversion of temporary occupancy permits to permanent title deeds

KENYALESOTHO

TANZANIA

Tenure regularization through bulk surveying and land use planning

MAURITANIA Provided serviced plots less than 1km from original house with community infrastructure and microcredit support

Recent successes


access to land


end-user finance


sectors

subsidies

developer finance

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Strengthen the construction sector» Adopt performance-based

construction standards» Develop an increasingly

skilled labor force» Promote use of cheap local

materials

• Plastic formwork to cast uniform walls and floor slabs

• Reusable up to 50 times

• Reduces costs for production time transportation

South Africa: industrial construction techniques

Moladi formwork. Source: commons.wikimedia.orgcity planning & building regulations

access to land


end-user finance


sectors

subsidies

developer finance

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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.city planning & building regulations

access to land


end-user finance


sectors

subsidies

developer finance

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CONCLUSION

Work incrementally across the value chain and leverage the private sector to provide housing solutions at all income levels

The 2015 National Housing Policy takes a broad view of housing provision and tenure type:

» Collaboration across ministries and engagement with the private sector

» Subsidies allocated through verifiable income data and detailed demand analyses

» Social housing provision directed at specific groups

» Dedicated fund for bundled infrastructure investment

» Zoning code incentives for density

» Assistance for the construction sector through workforce development and materials suppliers

» Alternative strategies for housing finance products

Rwanda: developing an inclusive housing market


access to land


end-user finance


sectors

subsidies

developer finance

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Thank you!

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