Housing challenges, not only in Zimbabwe but throughout Africa, have attracted attention for the past decades. We have repeatedly heard from the World Bank, International Housing Finance Experts, Academic Researchers, Activists and Consultants, that Governments are not doing enough to provide housing for the needy and that investment in low-cost housing must be a priority as it is a low hanging fruit whose impact on economic growth is immediate.
Despite these calls and economic activity supporting the need for accelerated investment in housing, African cities remain burdened by lack of affordable housing.
The continued migration of the rural poor to urban centres in search of opportunities has not only added pressure on housing demand but also on existing infrastructure in most cases not upgraded since the departure of colonialists. In South Africa for example, the issue of service delivery invariably referring to housing provision has often led to deadly riots resulting in loss of lives. Low-cost housing discussion is bound to be emotive as it touches on very disadvantaged urban poor.
The purpose of this article is to retrace low-cost housing development achievements in the immediate post-colonial era. The reader is expected to get insights and be enlightened on collaborative initiatives which gave impetus to unprecedented affordable housing construction throughout Zimbabwe. The article will also draw attention to hard data pertaining to low cost housing affordability challenges and how this has forced desperate house seekers to be preyed on by land middlemen.
In the main, we hope that Housing policy makers and other stakeholders will take initiatives, borrow a leaf from the past and craft strategies to surpass previous low cost housing achievements, albeit under changed socio-political and economic conditions.
Low-cost housing is often interchangeably used to mean affordable housing, causing misunderstanding in the process. According to a GroundUp article, the term “affordable housing” is used by Government officials, Activists and Politicians, but its explanation remains vague. Staying in a shack is better than sleeping under a bridge, and while a shack can be affordable it certainly is not low-cost housing in its proper description.
A generally accepted definition is that which views low-cost housing as construction aimed at improving the living conditions of certain sectors of the population, particularly those regarded as homeless or residing in backyard shacks. In Zimbabwe, the definition of low-cost housing has tended to take a descriptive two dimensional approach.
First it is based on income and location where the beneficiary for a mortgage loan qualifies to buy or construct a dwelling unit. This has resulted in three categories of residential urban suburbs viz: high density associated with low income and hence low-cost houses. The second category is medium density for medium income earners and lastly low density for high earners. In this context, affordable housing generally refers to high density dwellings.
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The second dimension is based on size of stand on which the housing unit is constructed. Units on 300 square meters or less fall in high density category, while between 300 and 500 square meters are medium density, with anything above 500 square meters considered the low-density category. These dimensions though not water-tight have been conveniently used by local Government and mortgage finance houses for planning and lending purposes respectively.
From 1981 through to 1999, the unity of purpose between the Zimbabwean Government on one side and Multilateral Agencies, Municipalities, Local Financial Institutions and Corporates on the other resulted in an annual low cost (High Density) affordable housing production of between 15,000 and 20,000 units across the country.
The multiplier effect of investing in housing had a huge impact on economic growth
and raised standard of living. The targeted beneficiaries for housing schemes across the country were the self-employed in the informal sector, basically who did not have a pay slip. This wasthe condition set by one of the key participants USAID. Any Building Society whichviolated this loan eligibility criterion was to be disqualified from participating inscheme administration.
The Building Societies who issued mortgages in respect ofthe schemes did not report any defaults or foreclosures. It is further estimated that 90% if not more of the original core houses built across the country under the programme have since been extended to 5 or more rooms. What this demonstrates is that the Zimbabwean low-cost house seeker has a positive entrepreneurial attitude unlike the South African counterpart.
The South African low-cost housing model which is currently a subject of debate had created a dependency syndrome in that the beneficiaries were now relying entirely on Government for housing provision. This rendered it susceptible to massive abuse to the detriment of targeted groups given their freebies mentality.
In Zimbabwe, housing seekers actively participate in delivery and are aware that nothing is for free.
From the year 2000, the environment shifted as demonstrated in the graph and the momentum in low-cost housing production slowed down dramatically. Several factors contributed to the Program’s demise.
First and foremost, Multilateral Agencies withdrew financial support and consequencely both Government and Local Authorities became cash-strapped and ceased the role of servicing land and other housing delivery value chain support initiatives.
Long-term funds suitable for mortgage lending became unavailable and with cost of funds at ±15% per annum, Building Societies were unable to lend due to affordability constraints.
The general liquidity crunch which prevailed forced Corporates to enter survival mode and became incapacitated to set aside funds to support employee housing schemes.
With these developments in the background, the land reform programme was carried out and took centre stage. According to some researchers, this provided opportunities for land-middlemen in urban areas and gave rise to get rich quick land barons.
Local Authority land fell in the hands of speculators and genuine developers were forced out. The desperate low-income house seekers, whose numbers kept swelling as migration from rural to urban accelerated became the victims. Corruption in housing delivery impacts on the poor and most marginalized.
Failure to allocate land to vulnerable people meant they became prey to land barons linked to the powerful city inspectorate. This became the very antithesis of service provision; it is poverty reduction through ‘perverse planning’.
Land barons themselves provide next to nothing services along the housing delivery value chain, thus contributing to significant barriers to economic development. The ensuing high interest rates coupled with the increasing cost of servicing residential land post year 2000 pushed low-cost housing affordability out of reach of previously targeted groups.
Affordable housing is a term used to describe dwelling units whose total housing costs are deemed ‘affordable’ to those that have a low income, that is, equal to but not more than USD300 per month, and would not ordinarily qualify for a mortgage offered by a financial Institutions. It has been established that these low income groups (LIGs) spend more than 30% of their income on house rent.
A level of overhead cost that puts them in a “core housing need” category. This then becomes one of the important issues which needs to be addressed by those tasked with delivering low cost housing. The successful programme which saw the construction of core units across the country was based on this observation.
Closely linked to affordability is the concept of affordability gap. McKinsey Global Institute (MGI) defines the affordability gap as the difference between the cost of an acceptable standard housing unit (which varies with location) and what households can afford to pay using no more than 30% of their monthly income.
Costs related to housing delivery value chain, that is, land, environmental management fees, land preparation charges, land servicing (water, sewer, and roads installation) architectural charges, construction materials, labour, conveyancing and governance, all impact on the affordability gap.
In addition, mortgage rate structure i.e., interest rate and loan tenure also weigh heavily on affordability gap. Land barons’ business model assumes there is no affordability challenge, and this attracts the gullible.
Un-serviced land is then sold to desperate house seekers who have no chance of accessing title. The targeted urban poor unfortunately end up in running battles with Local authorities’ law enforcement agents.
The affordability gap is a moving target, calculated at a given point in time. The costs of materials and other services in the housing delivery value chain are not uniform across urban centres and growth points.
What this entails is that the affordability gap varies by location and is also influenced by demand.
At the current affordability gap value of USD87 billion, the demand for Zimbabwean low-cost housing surpasses the supply rendering the market non-competitive.
Market share for any participant is determined by risk considerations and availability of funding.
What this entails is that the Government must adopt the role of programme anchor while a collaborative approach encompassing all service providers in the housing delivery value chain is a prerequisite to achieving maximum production output.
Proposed recommendation
Overall, the recorded 1981 – 1999 Low cost housing development success provides a broad template which can be replicated, albeit under new macro-economic conditions. Holistic consideration should also align to the following interventions.
The Zimbabwe Banking sector has gone through turmoil.
Corporates and the public need faith in any new financial instruments which by necessity must be developed to offer mortgage liquidity facilities.
The following can be adopted,
Land to be given to genuine developers,
Long–term savings instruments to support residential development must be established,
Creation of Low-cost housing board
Support micro-financing for housing, and
Public/Private partnership to set up a mortgage refinancing company. This will focus on mobilizing long term funding on capital markets locally and internationally.
Educate the market and move the consumer mindset from expensive brick and motor housing construction to low cost technology based materials.
- Ratsauka is an advisor in property development and structured mortgage finance. — +263 772 225471 or email: [email protected]
