Some Possible Unintended Consequences of Land Use and Housing Policies: THE CASE OF ACCRA, GHANA

Some Possible Unintended Consequences of Land Use and Housing Policies: THE CASE OF ACCRA, GHANA Robert Buckley Ashna Mathema Urban Land Use and Land Markets: Urban Symposium The World Bank May 14, 2007

INTRODUCTION THEME OF TALK Without effective land market policy it is difficult to achieve effective financial and fiscal policy. Indeed, in many countries land policy is a basic constraint on sustainable, equitable growth. But, for land reforms to succeed 2 nd Generation Reforms are often needed to realize the full benefits of broader economy-wide reforms. We use the example of Ghana as an example of a successful reforming economy which could benefit from such 2 nd Generation Land Market Reforms.

INTRODUCTION STRUCTURE OF THE TALK First, we trace through some of the linkages between reforms and the broader development processes. Then, we focus on the role land market policies play in constraining the benefits of broader economic reforms. Finally, we discuss the sorts of 2 nd Generation land reforms which can make land market policies both more self-sustaining as well as able to help realize the gains of the broader, first generation reforms.

THE BROADER DEVELOPMENT PROCESS 100 GHANA (1960): MOST URBANIZED 80 World y = 18.695Ln(x) - 109.62 R 2 = 0.5415 urban pop% 60 40 20 GHA NGA CIV CPV Africa y = 7.9762Ln(x) - 42.77 R 2 = 0.2951 0 BEN 0 2000 4000 6000 8000 10000 12000 14000 GDP BUT ONE OF THE LEAST DEVELOPED

THE BROADER DEVELOPMENT PROCESS 120 GHANA (2000): AMONG THE LESSER URBANIZED 100 y = 14.92Ln(x) - 72.665 urban pop% 80 60 40 LBR NGA GHA BEN SEN CIV World Africa R 2 = 0.5705 y = 8.0343Ln(x) - 24.847 R 2 = 0.2233 20 0 0 2000 4000 6000 8000 10000 12000 14000 GDP BUT ONE OF THE MORE DEVELOPED

THE BROADER DEVELOPMENT PROCESS THREE QUESTIONS I. What happened, and why? That is, how did Ghana become one of the fastest growing, slowest urbanizing countries in Africa? II. What role did land market policy play in this change? And finally, III. What s next?

THE BROADER DEVELOPMENT PROCESS THE BROADER, FIRST GENERATION REFORMS Ghana has 1. one of highest and most improved growth rates It eliminated urban bias and opened up markets and the economy.

THE BROADER DEVELOPMENT PROCESS High turnaround in growth rates Per capita income (2004) Per capita growth (1975-84) Per capita growth (1990-2003) Benin 450 1.1 1.9 Ghana 380-3.8 1.9 Nigeria 430-3.8 0.8 Senegal 630-0.8 1.0 Liberia 120-3.1 - Cote d Ivoire 760-1.7-1.5 Sub Sahara 601-0.5-0.1

THE BROADER DEVELOPMENT PROCESS Low primacy index % Urban 2004 Benin 37.1 Ghana 46.6 Urban growth (1990-2003) Primacy Urban poverty 28 17.3 Nigeria 49.6 4.4 16 59.0 Senegal 65.7 5.8 43 - Cape Verde 46.3 3.4 - - Liberia 44.5 4.8-23.2 Cote d Ivoire 44.9 3.8 45 59.0 Sub Sahara 34.6 4.3-36.0 5.1 3.2 24 30.4

THE BROADER DEVELOPMENT PROCESS

THE BROADER DEVELOPMENT PROCESS THE BROADER, FIRST GENERATION REFORMS Ghana has 1. one of highest and most improved growth rates 2. one of the best distributions of population across cities 3. a greatly improved macroeconomic context including massive remittances, and sharp improvements on inflation

THE BROADER DEVELOPMENT PROCESS Improved macroeconomic context Remittance (billion US$) 2001 Benin - Ghana 4000 (12% GDP) Economic growth 1990-2004 Financial sector development (2004) Nigeria -.8 15.6 Senegal 190 1.0 21.2 Cote d Ivoire 110-1.5 14.4 - (<0% GDP) 1.9 1.9 15.2 13.1 Sub Sahara -0.1 67.0

THE BROADER DEVELOPMENT PROCESS 100 80 Urban Sanitation (% population with access in 1990 and 2002) 74% 54% 60 40 20 0 Benin Ghana Nigeria Senegal Liberia Cote d Ivoire Sub Sahara

THE BROADER DEVELOPMENT PROCESS 100 Urban Water (% population with access in 1990 and 2002) 78% 70% 80 60 40 20 0 Benin Ghana Nigeria Senegal Liberia Cote d Ivoire

THE BROADER DEVELOPMENT PROCESS Macroeconomic Improvements Ghana has 1. one of highest and most improved growth rates 2. the best distribution of population across cities 3. a greatly improved macroeconomic context including massive remittances 4. significant improvements in the provision of housing-related infrastructure, BUT

THE BROADER DEVELOPMENT PROCESS. IT APPEARS NOT TO BE ABLE TO FULLY EXPLOIT ITS GAINS. Its relative growth rate is declining Even though the urban-rural wage gap is increasing, urban growth is low

THE BROADER DEVELOPMENT PROCESS Urban-Rural Income Ratio Ghana 1.6 Developing countries 1.4 England during the Industrial Revolution 1.3 Accra versus other cities 1.2

THE BROADER DEVELOPMENT PROCESS. IT APPEARS NOT TO BE ABLE TO FULLY EXPLOIT ITS GAINS. Its relative growth rate is declining Even though the urban-rural wage gap is increasing, urban growth is low Its housing conditions for the urban poor are worse than those in countries with lower income Not much decentralization has occurred

THE BROADER DEVELOPMENT PROCESS Less decentralized than other countries Decentralization index 4 3 2 1 0 UGA KEN GHA ZAR MOZ CM R Decentralization and GDP (1995) ZAF y = 0.4429Ln(x) - 1.9608 R 2 = 0.2 3 55 0 5000 10000 15000 20000 25000 GDP

LAND MARKET POLICIES A WELL-FUNCTIONING VERSUS CONSTRAINED HOUSING MARKET Price Price Sc Pe Se Pc D D Qe Quantity Qc Quantity

LAND MARKET POLICIES A WELL-FUNCTIONING VERSUS CONSTRAINED HOUSING MARKET Price R Price R Sc Pe Se Pc D D Qe Quantity Qc Quantity Remittances shift the demand curve to the right

LAND MARKET POLICIES. IT APPEARS NOT TO BE ABLE TO FULLY EXPLOIT ITS GAINS. Its relative growth rate is declining Even though the urban-rural wage gap is increasing, urban growth is low Its housing conditions for the urban poor are worse than those in countries with lower income Not much decentralization has occurred The flow of remittances may actually be increasing the gap between rich and poor by bidding up the price of housing Shelter conditions in large parts of Accra are deprived and expensive

LAND MARKET POLICIES Indicators highlighting the housing supply constraints Landlords can demand 3-6 years rent in advance without any obligation to provide basic services like water and sanitation Prime locations like Jamestown comprise low-rise (1-2 story) family houses with low level of services and high room occupancy rates. Despite overcrowding, people don t build up, and little / no gentrification or mixed-income development has occurred. Cost of utilities is high: upto 20 percent of total household expenditure on water and sanitation alone As a result, titled and/or serviced property fetches a very high price.

LAND MARKET POLICIES So, how do land and housing markets affect the economy? It has long been noted that most land is managed by traditional and less responsive owners who are less responsive to demand Unclear titles/ lack of titles; multiple sales and multiple claims to property Multiple de facto ownership (in traditional family houses) Regulations make development too expensive resulting in a rapid horizontal spread of the city with low plot densities. [minimum plot area: 450 sq.mt.; recommended plot size in high density areas: 18x24 mt]

LAND MARKET POLICIES 1985 2001 -Leapfrogging development

LAND MARKET POLICIES Old fabric (Jamestown) versus new peri-urban development

LAND MARKET POLICIES At the same time that the city spreads, conditions of the existing housing stock in the inner city areas are deteriorating Overcrowding (high room occupancy) Services: Poor quality, and very expensive (sanitation in particular) Compared to 3 other cities (Addis Ababa, Nairobi, and Dar es Salaam), the living conditions of the urban poor in Accra appear to be the worst, despite the fact that most of this housing is not illegal.

LAND MARKET POLICIES INFORMAL SETTLEMENTS Income per capita per month (USD) Income per capita per month (USD PPP) Exp on house as % of income Exp. on house + services as % of income House condition rating (1-5) Floor area per person (m2) Exp. on sanitation as % of income Sanitation rating (1-5) Exp. on water as % of income Water rating (1-5) ACCRA Mean 46 240 5.9 22.1 2.5 4.6 5.0 2.7 7.4 2.8 Median 36 186 0.2 19.7 3.0 3.0 3.9 2.0 5.8 2.0 ADDIS + Mean 32 83 9.5 21.9 2.7 6.1 0.1 3.2 8.4 2.8 NAIROBI + DAR Median 16 46 0.6 14.3 3.0 5.0 0.0 3.0 5.1 2.0

LAND MARKET POLICIES Sanitation A large number of households--in the unplanned settlements and in old Accra--do not have toilets of any kind, or baths. Landlords typically do not provide sanitation (or water) facilities, and have no incentive to do so, probably because demand for cheap housing is so high and supply very limited. Some even converting old toilets into rooms for rent. Public toilets/ baths built and run by AMA and private entrepreneurs: - Very expensive 400-1000 cedis per use: 5-10 percent of the household expenditure (compared to 2 percent for HHs with their own toilets) - Inadequate in number, hence typically overcrowded - Monopolistic in nature

LAND MARKET POLICIES A public toilet in Accra

LAND MARKET POLICIES A wall in an alleyway in Jamestown

LAND MARKET POLICIES Beach front in Mamponsa

LAND MARKET POLICIES Wastewater and Solid Waste Disposal systems are often lacking even in places like Jamestown where the trunk infrastructure exists

LAND MARKET POLICIES Open drains in Jamestown

LAND MARKET POLICIES Solid waste and wastewater in Sodom and Gomorrah

LAND MARKET POLICIES Water Supply Mostly shared connections Bought from neighbors or vendors for several times the price of the service provider: 5-10 percent of household expenditure

LAND MARKET POLICIES Roads and Drainage Very poor condition flooding is a very common problem, causing house damage and pools of stagnant water (breeding ground for malaria and cholera)

WHAT S NEXT? SECOND GENERATION REFORMS The process of reform of land and finance is well underway, but there is a need for development of housing and land markets to promote economic development. For instance, Incentives for improved land usage are weak Local government ability to deliver and maintain infrastructure is very limited Leapfrogging and radial spoke development are the norms Finance and subsidies are convoluted and badly-targeted: SSNIT is a developer, owner, and financier of housing and land.

WHAT S NEXT? The result Illiquid, expensive, low quality and ultimately misallocated housing stock Many of the private sector generated gains from reforms are not realized

WHAT S NEXT? SEQUENCING ISSUES First, improve housing conditions, particularly for low income This involves: Providing incentives for private developers to undertake upgrading, home improvement and expansion/renovation projects, particularly in prime historic areas (some work in this direction is already on-going through local community initiatives) Revising regulations that constrain low-cost high-density development Promoting micro-lending for home improvement building on HFC s model which links microfinance with mortgage and home improvement/ completion loans through establishment of credit history and economic development

WHAT S NEXT? Then, move to Make land allocation more accountable, and tax it Expand the housing finance system Improve local government infrastructure delivery and maintenance

WHAT S NEXT? CONCLUSION Accra is a high productivity city that is constrained by: Unresponsive land and housing markets Absence of finance, and Subsidies that mix functions of developers, lenders, and infrastructure providers Making the city s real estate markets more flexible will help the economy and improve the situation of the poor.