Weekend Argus (Saturday Edition)
Affordable housing uplifts society
Building homes is more than just a roof overhead as it creates a secure future for Africa
INNOVATION and collaboration are needed to provide more cheap, sustainable housing in Africa and stop the crippling backlog from getting worse.
Runaway housing prices and unsophisticated mortgage systems are hampering efforts across Africa to house its people – a situation that experts say is preventing many countries from reaping the social and economic benefits that housing security provides.
Going beyond a roof overhead, housing creates employment during t he development phases, a nd improves quality of life, social standing, health, financial position, security, social cohesion and access to education.
The latest Absa housing index shows that in South Africa the average price of small houses has risen from R660 953 in the first quarter of 2011 to R777 343 in the fourth quarter of last year. In the affordable segment, the average price rose from R292 790 in 2009 to R345 388 last year. In both cases, there has been a 17 percent increase. In Kenya, prices increased by roughly 76 percent between 2008 and last year.
According to Allan Kundu at the University of Witwatersrand, such numbers are common across the continent. He says there are two points of concern.
“The first is that housing is central to economies as capital assets contributing to production, savings, consumption, household income, employment, growth of other markets, social welfare, diversification and investment, and meeting a basic need.
“The second is that the high prices are likely to condemn many people to perpetual squalid living conditions because most citizens can’t afford decent homes,” Kundu says.
In trying to address this concern, governments are working to provide housing but a massive backlog exists throughout Africa.
This backlog must be prevented from growing, says Marja HoekSmit, director of the housing finance programme for sub-Saharan Africa at the UCT Graduate School of Business and researcher in urban, mass housing at St Catherine College, Oxford.
“The first step must be to prevent further backlogs and the spread of informal and squatter areas,” she says. “This is far from where we are now. We have to think of measures that need to be reinstated to get massive housing going for at least 70 percent of the population.”
To do this, Hoek-Smit says, innovative housing products must be developed that take the local social, economic and institutional contexts into account, and are also sound from a business funding, operational and risk management perspective.
“The focus must be on getting the private and public sectors to create as much new housing as possible to house new household formation,” she says. “And, this cannot be done by only building in the upper, uppermiddle income levels in the hope that housing will filter down to lowincome levels.”
For it all to happen, Hoek-Smit says, there is a need for finance at many different levels. Her main focus at St Catherine’s College is to understand the work and need of equity investors and how they may be enticed to invest in African housing.
She also looks at institutions that provide construction debt loans to developers, and what they require to go to scale and minimise risk. Other areas of focus are rental housing – an area almost non- existent in Africa presently – looking at who will provide rental investors with rental debt, longer-term debt and not just construction debt; and then understanding how mortgage lending can be expanded rapidly to ensure that developers have the clients with the mortgage to buy the developed stock.
According to Kecia Rust, co-ordinator of FinMark Trust’s Centre for Affordable Housing Finance in Africa, the mortgage market in Africa is tiny, but this means it has a lot of room to grow. The African Development Bank also estimates that 20 percent of the African population earns more than $20 (R196) a day, which is promising if mortgage systems become sufficiently sophisticated to make it more affordable for Africans to own their own home.
Rust says that one very interesting option emerging in Africa is housing microfinance.
“We work closely with microlenders to see how we can expand their scope so that we can have finance for low-income folk,” she says. “There is a need for non- collateralised loans from a variety of schemes for people who don’t have the steady income, employment security, and tenure security needed to secure conventional mortgage loans.
She says that micro-lenders are increasingly coming to the market, but there needs to be regulatory support to take their investments to scale. “What we really need is cheaper houses, and we need the government, lenders and developers to start talking across the continent to find ways to build cheaper homes in a sustainable way.”
Rust s ays p r i vat e housing finance institutions, government finance and housing agencies, academic and international development institutions from emerging and established economies need to understand all the key issues and concepts in housing finance. They need to understand the different contexts, the design of different housing products available and the business models needed to provide such products effectively and sustainably.
“We need to help people in the finance sector understand the full implications of the innovations taking place in housing finance, and provide them with the insights needed to ensure that creative and sustainable solutions are implemented perfectly in the sub-Saharan African context.
“If the system is to be sophisticated enough to eradicate housing problems, then everyone involved, from lenders to developers and even sales, need to be on the same page,” says Hoek-Smit.
“Affordable housing is more than just providing a basic need to the poor. It helps create a sustainable society that nurtures the growth and development of its people, where the quality of life and access to amenities that improve lives are developed. The population, rather than getting by, actually flourishes.”
The housing finance programme for sub-Saharan Africa at the UCT Graduate School of Business will be held from October 7 to 12. For more information, call Celeste Wilson on 021 406 1238 or send an e-mail to celeste.wilson@gsb.uct.ac.za.