Lessons for Housing Developers from World Bank Report

Published: Monday, October 22nd, 2018 by Arman Smigielski

Africa’s Cities: Opening Doors to the World,” published by the World Bank Group, is one of the best recent thorough examinations of the barriers to growth facing cities in Sub-Saharan Africa. One of its main topics is how costly African cities are for residents and businesses. For residents, housing, food, and transport drive high costs. As a result, the lack of affordable housing within these cities acts as a stop on growth.

High rents increase labor costs, making African businesses less competitive. As a share of per capita GDP, Africans spend 55% more than other regions. With the number of people living in Africa’s urban areas expected to double within the next 25 years, affordable housing is necessary to ensure sustainable and higher growth. In fact, the report points out that the most severe deficit in capital investment in African cities is in housing, citing Nairobi as an example. In that city:

“Commercial and industrial structures explain 55 percent of the total value of building stock — even though these structures occupy just 4 percent of the city’s area. Residential development is urgently lacking.”

Land is available for development too – in major African cities such as Harare and Maputo, more than 30% of the land within five kilometers of the city’s central business district remains unbuilt.

What lessons can affordable housing developers learn from the report?

  • Work with local governments to coordinate infrastructure development with residential development – a win for both developers and municipal governments. Building infrastructure before a population influx is cheaper and easier than building or upgrading infrastructure once a large population already exists.
  • Negotiate with governments when building on low-residency or vacant land to ensure that infrastructure is developed in concert with it.
  • Lobby governments to amend land use laws to make them more transparent, simple, and enforceable to ensure developers can securely and accurately find and purchase land to build affordable housing on.
  • Break the investor expectations trap with sunk investments in critical infrastructure to send a strong signal that there is a potential for growth and encourage further residential development.

Planning should drive higher property values for developers and more tax revenue for future development for the city, while developing amenities for residents and businesses.

With the United Nations Office for Project Services recently announcing plans to help construct 100,000 affordable homes in Ghana and Kenya, it’s clear that there is both a large demand and opportunity to create affordable housing.