By Boniface Abudho
A major challenge that African markets face is the shortage of affordable housing. In Kenya, for example, the demand for housing is estimated at 250,000 units per year, while only 50,000 new units are being supplied annually, leading to an 80% annual housing deficit. The government’s Affordable Housing Programme (AHP) has not achieved its target of providing 500,000 units; only less than 10% of the intended units had been delivered by 2022.
In Egypt, more than 12 million people live in informal housing. This problem is not unique to Africa, a continent which has a population of approximately 1.4 billion people spread across 54 countries, but is more pronounced due to high Gross Domestic Product (GDP), limited job creation, high population growth, and rapid urbanization. However, policymakers are beginning to fill the gaps by developing supply and demand-side interventions to tackle one of the continent’s most pressing social and economic challenges.
The issue of housing provision is evident from demographic trends alone. While much of the world is experiencing a slowdown in population growth, the rate of demographic expansion in Africa continues to rise. According to UN estimates, the continent’s population will double by 2050. The sheer size of the population illustrates the challenges of providing adequate housing. Given that Africa already has the youngest population in the world, it will face a prolonged demand period for housing as graduates and young professionals plan on starting families.
Meeting this demand will require a new approach to delivering affordable units. Currently, the pipeline for public and private housing projects is insufficient. Most developers and investors focus on the high-end market, while private capital and investment funds focus on commercial real estate rather than the mass housing market. Residential holdings comprise only 2.5% of listed property funds in Africa, compared to 25% in other developing markets and 15% in developed countries.
As stated in the 2022/23 Africa Report published by the real estate consultancy firm Knight Frank, affordability continues to play a crucial role in unlocking the housing markets across Africa. The report notes that in several African urban areas, the demand for housing is gradually moving away from the city centers towards the suburbs, mainly due to affordability factors.
Low-income housing
The need for capital is significant, and there are obstacles to building low-income housing on a scale that would make it efficient and profitable for developers. Obtaining land on a sufficient scale is often challenging due to complex ownership patterns, inadequate local land management, and other factors. To address these challenges, several African markets have launched reforms to incentivize private sector participation, simplify land registration, and ease the bottleneck.
Other markets have also introduced affordable housing programs to fill the housing gap in their specific countries. For example, the Kenya Government launched the Mavoko Affordable Housing Project in Machakos County as part of the Kenya Kwanza Affordable Housing Program. This joint initiative between the government and private sector developers, supported by UN-Habitat, aims at delivering 5,300 housing units for low and middle-income earners to access decent housing.
According to the UN-Habitat’s Regional Office for Africa, the project seeks to address the housing deficit and marginalization of low and low-middle-income people from the Nairobi Metropolis through an innovative public-private partnership.
Mortgages:
Positive change
Notwithstanding the challenges of scaling up mortgage programs in Africa, there are indications of positive change in some markets, with increased accessibility and affordability of financing – it is advisable to ensure the availability of affordable mortgages that a wide range of consumers can easily access. Countries such as Morocco, Egypt, and South Africa have average mortgage interest rates below 10%. As affordable mortgage options become more prevalent throughout the continent, uptake is expected to increase. In Nigeria, the government has taken steps to address financing concerns and promote affordability through a public initiative. The National Housing Fund (NHF), which the Federal Mortgage Bank of Nigeria manages, provides subsidized loans of up to $75,400 at an interest rate of 2%.
These efforts can potentially enhance affordable housing options throughout the continent significantly. Increased investment by private capital in the affordable housing sector will be crucial in meeting the demand for housing in the years ahead, but it is not the sole solution.
Given the current housing shortage and the rapid pace of urban growth, various innovative interventions will be required to address housing needs. These may include government-supported home-building initiatives, improved regulatory frameworks for land registration and credit reporting, and expanded access to financing and microfinance. To effectively address the housing challenges of the future, a collaborative and sustained effort will be necessary from both the public and private sectors.
Writer is a researcher at Knight Frank
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