The inadequacy of Africa’s urban housing markets is evident across the continent, expressed in the cost and scale of housing being delivered, and visible in the very poor housing circumstances of the majority. That over 60% of urban dwellers live in slum conditions is in part a consequence of income, but more significantly one of an inefficient housing ecosystem in which neither price nor scale is achieved. In 2018, the cheapest newly built house delivered by a private developer was unaffordable to the majority of the urban population in 46 of Africa’s 55 countries, even with finance. The cheapest privately developed unit on the continent was in Kenya: a 15m2 bedsitter unit on the outskirts of Nairobi, priced at US$11,200. Given prevailing mortgage rates, this unit was ostensibly affordable to 51% of the urban Kenyan population. Only 85 of these units were built, however.
The challenges in Africa’s urban housing markets are found along the value chain. (See Figure 1.) From the high cost of land, to backlogs in land registry systems, to the inability of local government to deliver bulk infrastructure, to very limited number of contractors and developers who can build consistently at scale, to underdeveloped mortgage markets and limited market information to support buyers and sellers of property, to the lack of appropriate finance to support new players in the industry and informally employed households, and so on, the housing value chain is riddled with very weak links. In the meantime, households get on with their lives, developing sometimes innovative strategies to navigate the market as best they can. In the context of rapid urbanisation, the inevitable densification of African cities, and the myriad of associated pressures, however, the informal housing responses that have sustained the urban poor are increasingly inadequate.
Figure 1: Housing delivery value chain
Housing sector practitioners, whether in the public or private sectors, are well versed in the issues and are clear on both the urgent need to address the poor housing conditions that persist, and the growing opportunity for a market-based response. We are at a fascinating moment in which the confluence of efforts to promote financial inclusion, urban resilience, infrastructure investment, and macro-economic policy attention create a uniquely enabling environment for the growth of housing in particular. Innovation is being found along each link in the housing value chain.
Lenders, investors, builders and suppliers are getting much better at identifying and targeting niche markets. If not yet a move away from the attraction of large-scale, massive developments, we can see increasing attention in the opportunity to be found in the connected results of many small projects and initiatives at the local level that together add up to something big. Practitioners are also getting better at aggregating demand, while they disaggregate their services, making them fit for purpose for a lower income or informally employed target market.
For example, in South Africa, a number of players are developing hybrid finance and business support products that seek to recognise the investment potential of backyard rental and inner city refurbishment as viable housing supply streams. In Zambia, a mortgage lender has developed a product to support incremental housing construction for the very many households who would otherwise have to finance their own housing construction with savings, taking years for what a financed process would achieve in months. In Mozambique, a developer has negotiated with the city of Maputo for development rights to work with residents in an informal settlement, whereby each informal dwelling is replaced by two formal dwellings. This approach reduces the per plot land prices and allows the developer to sell the new dwelling for a highly reduced price to the incumbent resident, while realising a market-based return in the sale of the second unit on the open market. In Ghana, an entrepreneur is exploring the use of blockchain technology to improve titling efficiencies.
Mortgage lenders in Nigeria, Morocco and Algeria have adopted uniform underwriting standards for borrowers in the informal economy, enabling them to engage with a much wider population that would otherwise not be eligible for secured credit. In Kenya, the potential capacity of the savings and credit cooperative sector was recently highlighted as an explicit opportunity to aggregate small scale savings into a lump sum against which private capital could be leveraged and on-lent to SACCO members seeking housing loans. Various models and approaches to housing micro finance are being piloted and expanded upon in Uganda, Kenya, Zimbabwe, Zambia, Angola, Ghana, South Africa and Côte d'Ivoire, and the experiences from these are contributing towards a track record that is building both investor and municipal confidence in incremental housing processes.
Meanwhile, governments are increasingly engaged. The impact of housing on the economy – on macroeconomic growth and job creation, as well as on the potential for financial intermediation and the ongoing sustainability of cities – is as significant as the very clear need to address the poor housing and slum conditions that persist for the majority of urban residents. In Kenya, housing has become part of the current President’s “Big Four” plan for his term of office. President Uhuru Kenyatta has committed to increasing housing supply, with a promise of 500,000 affordable housing units by 2022. Similar attention is being given to housing by governments in South Africa, Tanzania, Ethiopia, Nigeria, Côte d'Ivoire – indeed, in very many governments, housing is becoming a subject of attention not just by the housing department, but by the Central Bank.
A key challenge facing all practitioners is the paucity of data. Very basic indicators regarding the performance of each link in the housing value chain are missing. This is something that the Centre for Affordable Housing Finance in Africa (CAHF) has been focusing on, and seeks to address in the publication of its yearbook on Housing Finance in Africa, and in its other work as part of its broader Data Agenda. Innovation along the housing value chain is clearly evident, expressed in local niche markets and across the continent. We can leverage this experience and replicate it in other contexts if we track it, creating baseline information that highlights new opportunities for the investor interest that is clearly there. This is a job for the entire housing sector.
 Source: Centre for Affordable Housing Finance in Africa (2018) Housing Finance in Africa. A review of Africa’s housing finance markets. Johannesburg: Centre for Affordable Housing Finance in Africa, p. 18.