Stocktaking of the housing sector in Sub-Saharan Africa CHALLENGES AND OPPORTUNITIES

Stocktaking of the housing sector in Sub-Saharan Africa CHALLENGES AND OPPORTUNITIES

» Why housing matters» Housing in Africa: key facts» Housing in Africa: trend-drivers» Recommendations for an inclusive housing sector 2

WHY HOUSING MATTERS 3

Better health outcomes Effective housing delivery: Reduces poverty Creates household wealth Contributes to national economic growth Reduced poverty Wealth creation Reduced overcrowding Improved labor mobility 50%+ of households tangible assets Improved access to credit Economic growth Housing represents 5-13% of GDP 5 jobs created per housing unit built 4

HOUSING IN AFRICA key facts 5

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 6

millions 300 Estimated urban population living in slums, 1990-2030 250 Sub-Saharan Africa Africa is the only region in the world in which the slum population is projected to grow 200 150 100 50 East Asia & Pacific South Asia Latin America & Caribbean Middle East & North Africa 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Europe & Central Asia World Bank calculations, based on United Nations World Urbanization Prospects (2014). 7

Other middle income Housing investment as a percent of GDP Housing investment as a % of GDP 9.1% Africa is the most rapidly urbanizing region in the world SSA middle income 6.6% But investments in housing have not kept up with urbanization and growth. Other low income SSA low income 4.1% 4.9% 0% 2% 4% 6% 8% 10% Housing investment, % of GDP (average 2001-2011) Dasgupta, Lall & Lozano-Gracia (2014). Urbanization and Housing Investment, World Bank. 8

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 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 10

GNI per capita vs. costs of new formal housing Rapid urban growth + low incomes + high costs = extensive informal housing for the foreseeable future GNI per capita, 2012 (US$) 20,000 16,000 GNI per capita, US$ Cheapest Newly Built House Cheapest newly built house by a formal developer in 2013 (US$) 100,000 80,000 Typically formal housing costs 3x to 5x average annual incomes 12,000 8,000 4,000 In Africa, it costs 14x to 17x 0 0 Seychelles Mauritius South Africa Botswana Namibia Angola Swaziland Nigeria Zambia Ghana Lesotho Cote d'ivoire Cameroon Kenya Senegal South Sudan Zimbabwe Tanzania Benin Burkina Faso Rwanda Mali Uganda Mozambique Gambia Togo Central Ethiopia Niger Malawi Burundi Average 60,000 40,000 20,000 Affordability Range Centre for Affordable Housing Finance (2014). 2014 Yearbook: Housing Finance in Africa. 11

HOUSING IN AFRICA trend-drivers 12

% urban population 100% GDP per capita in the first year with an urban majority 80% Africa is urbanizing rapidly, but late and at low incomes 60% 40% 2012 SSA 1961 1981 2009 LAC MENA EAP 20% 0% 0 1000 2000 3000 4000 5000 6000 GDP per capita (constant 2005 USD) 13

In SSA only 10% of total land is registered Land tenure, management and administration systems drive up costs and disincentivize 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 Cameroon, 70% of urban land is held without title 14

Infrastructure deficits in Sub-Saharan Africa SSA Low-Income Other Low-Income Improved water (%) Infrastructure coverage is low, and declining as urban populations grow. Improved sanitation (%) Paved roads (km/km2) Mobile density (lines per thousand) Generation capacity (MW/million) Electricity coverage (%) 0 50 100 150 200 250 300 350 Foster (2008). Overhauling the Engine of Growth: Infrastructure in Africa. World Bank. 15

Low-cost formal housing averages: $700/m 2 in SSA $350/m 2 in India $250/m 2 in China The formal construction industry is inefficient and costly, relative to other regions A bag of cement in Nigeria costs twice that in the USA A warehouse building permit is 4x costlier in SSA than the OECD Second only to South Asia 16

CAMEROON: house price-to-income ratio for government social housing And government subsidies for housing have done little to promote wide-scale access Price (USD) $60,000 $50,000 $40,000 $30,000 Average house price 49 $33,472 Price-to-income ratio 44 $30,001 Price-toincome ratio 60 50 40 30 $20,000 20 $10,000 10 $0 $680 Annual income Yaoundé (Olembe) Douala (Mbanga-Bakoko) 0 17

UGANDA: incomes and access to housing finance 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 >1M UGX per month 0.7% 100,000 to 1M UGX per month 37% <100,000 UGX per month 62.3% Access to mortgage loans from commercial banks Access to credit from MFIs and savings groups No access to commercial banks, MFIs, or savings groups 18

Matrix of housing finance and construction based on tenure and income status Formal tenure Informal tenure Tenure and income characteristics influence housing finance and construction options Most people have informal income sources and/or informal tenure Limits collateralization for mortgage Formal income Informal income Developers Mortgages Contractors Non-Bank Financial Institutions Housing MFIs Cash Contractors Employer Non-Bank Financial Institutions Cash Self-improvers Housing MFIs Tontines 19

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 20

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 Region Active Borrowers and Gross Loan Portfolio for MFIs, by region, 2014 Active Borrowers Gross Loan Portfolio (US$) Average amount loaned per borrower (US$) Sub-Saharan Africa 4.5 million 7 billion 1,555 East 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 21

RECOMMENDATIONS targeted interventions for an inclusive housing sector 22

Complementary interventions across the value chain, which address distinct needs of different income groups formal finance MFIs no housing finance upper income middle income lower income formal construction affordable informal housing Expanding access to finance: Liquidity & long-term capital Regulatory framework for lending Underwriting Cross-cutting areas: Land administration Planning & building standards Construction sector & materials Rental markets Upgrading informality: Basic infrastructure Incremental & self-construction Leverage existing savings 23

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 24

Informality represents a spectrum of shelter locations, conditions, and tenure statuses. SLUM CONDITIONS PARTIAL UPGRADE SEMI-FORMAL FORMAL HOUSING 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 No improved water or sanitation Unsound structure Overcrowding No tenure security Basic infrastructure Structure with a foundation or durable walls Perceived tenure security Improved infrastructure Meets some building codes Self-construction Proxy for tenure Piped water and sewer connection Meets all building codes Proof of ownership 25

Identify and target specific bottlenecks in the housing value chain either on the supply side or the demand side. city planning & building regulations infrastructure & services subsidies end-user finance access to land construction & building materials sectors developer finance Calculations based on data from World Bank (2015), UN (2015) and CAHF (2014). 26

Improve planning & building regulations» Strengthen public land administration» Improve city planning institutions» Adapt land use and zoning regulations» Incentivize density and infill RWANDA TANZANIA ETHIOPIA KENYA LESOTHO Recent successes Comprehensive land tenure reform Issued land titles with photomapping technology Surveyed all communal lands, registered 60% so far, at a cost of $500 per village Is building an urban legal cadaster in Addis Ababa which will eventually cover the entire country Streamlined land administration processes Reduced VAT on land Introduced land administration authority Reduced wait times and improved application turnaround city planning & building regulations infrastructure & services subsidies end-user finance GHANA Computerized land records Cut time to register property from 169 days to 34 UGANDA Reduced property registration times from 227 days to 48 access to land construction & building materials sectors developer finance 27

Upgrade existing informal housing» Extend basic infrastructure» Provide tenure security to promote investment» Support incremental and self-build upgrading NAMIBIA SENEGAL Recent successes Incremental tenure and community upgrading Conversion of temporary occupancy permits to permanent title deeds KENYA LESOTHO TANZANIA Tenure regularization through bulk surveying and land use planning city planning & building regulations infrastructure & services subsidies end-user finance MAURITANIA Provided serviced plots less than 1km from original house with community infrastructure and microcredit support access to land construction & building materials sectors developer finance 28

Strengthen the construction sector» Adopt performance-based construction standards» Develop an increasingly skilled labor force» Promote use of cheap local materials South Africa: industrial construction techniques Plastic formwork to cast uniform walls and floor slabs Reusable up to 50 times Reduces costs for production time transportation city planning & building regulations infrastructure & services subsidies end-user finance Moladi formwork. Source: commons.wikimedia.org access to land construction & building materials sectors developer finance 29

Expand housing finance down market» Facilitate the development of the financial sector to expand access to formal mortgage products» Support development of nonmortgage lending products for informal or irregular incomes» Leverage remittances and community-based lending ADULTS SAVING ANY MONEY IN THE PAST YEAR (%) Savings methods among savers, selected economies city planning & building regulations infrastructure & services subsidies end-user finance Demirguc-Kunt & Klapper (2012). Measuring Financial Inclusion: The Global Findex Database." World Bank. access to land construction & building materials sectors developer finance 30

CONCLUSION Work incrementally across the value chain and leverage the private sector to provide housing solutions at all income levels Rwanda: developing an inclusive housing market 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 city planning & building regulations infrastructure & services subsidies end-user finance» Assistance for the construction sector through workforce development and materials suppliers» Alternative strategies for housing finance products access to land construction & building materials sectors developer finance 31

Thank you! 32