The housing delivery value chain is as strong as its weakest link. From land assembly through to the development of the necessary social and economic infrastructure, blockages exist that impact on the time and cost of housing development, as well as on the capacity of the players to participate. Context specific blockages exist in each city, but across the continent, there are also familiar constraints. These deserve specific attention, with interventions sometimes by national level policy, but more often through local level practice. They also provide potential market opportunities for housing financiers and suppliers, and other financial sector players, to address. Figure 3 The housing value chain Key challenges along the housing value chain, and their implications for affordable housing delivery, are outlined in the table below. Land assembly /acquisition Title/ tenue Bulk Infrastructure House construction Offtake: Sales & Rental Maintenance & ongoing improvements Social and economic infrastructure 14 The State of Urban Governance in Africa
- AFRICA’S AFFORDABLE HOUSING MARKETS LINK IN THE VALUE CHAIN LAND ASSEMBLY KEY CHALLENGES IMPLICATIONS
- Identifying and securing unencumbered rights to land takes significant time; information asymmetry undermines efficient transactions. • Public land registry and transactions are not transparent, creating confusion (and risk) and reducing replicability. • No incentives to amalgamate small private parcels of land for more effective housing delivery • Land assembly is substantially dependent on local government capacity, as well as easy regulatory frameworks that reduce transaction costs. There is no broad marketenabling intervention in this regard, and lack of transparency makes the space politically fraught. While land is often visibly available, and while high densities can make the land contribution per unit feasible, the underlying rights and encumbrances still undermine its accessibility. Government efforts to provide land explicitly for affordable housing may help, but the lack of transparency undermines replicability, and significantly increases risks. The time to realise unencumbered land adds to project cost, undermining affordability. Large scale, greenfields housing developments are therefore unable to target very low income earners despite economies of scale. Title / tenure • Administrative barriers to creating ‘first root title’ for un-demarcated land • Poorly trusted deeds registry: fraudulent titles, paper-based systems, create risks and undermine the overall system. In some economies there has been lending on ‘valid titles’ which are later declared invalid • Long delays in land transactions – especially in conversion from mother title to sub-divided land (developers and SACCOs / Housing Co-ops)
- • Corruption and mismanagement at various levels of government: national, state, municipal • Ability to foreclose constrained by political interference or lengthy/unimplemented processes A working title system is critical for a strong housing system. This may explain why African countries have so few mortgages and such low ratios of mortgages to GDP. When the titling system doesn’t work, it is only the highend formal developers and wealthy households who are able to secure the rights they need. Lack of tenure security is also a critical to promote investment in better housing conditions for a nonmortgage target market – that is, people living in informal settlements. This is a highly contested and political space. Infrastructure • Municipal incapacity to deliver infrastructure on time – insufficient municipal budgets and human resources • Poor or insufficient water and sanitation systems • Rapid city expansion beyond infrastructure grid • Poor infrastructure maintenance • Time and cost of infrastructure provision key barrier to affordability Dependence on municipal delivery of infrastructure delays projects, or pushes developers to find their own approaches, both of which increase costs for the enduser and makes entry level, developerdriven housing unaffordable for the majority. Developers can only access finance after infrastructure approvals are in place, therefore, long approval durations hurt development feasibility. Construction • Lack of developers with track record • Insufficient construction labour skills. Inefficient procurement. Poor health and safety. • Limited innovation in the delivery of quality affordable units.
- • Municipal capacity constraints and rent seeking behaviour in the delivery of timeous development approvals; developers often have to obtain several parallel or subsequent approvals, which is lengthy and expensive. • In practice, private developers’ ability to access whatever incentives may exist is limited. • Developers struggle to realise profit in lowmargin, affordable housing (returns
