The housing ladder remains out of reach for many
ETHIOPIA’S flagship social-housing programme is probably the most ambitious in Africa. But for most locals the houses are still barely affordable. The poor cannot afford the down payment for even the most subsidised units. And those who can often struggle to meet repayments, opting instead to rent out the houses and move elsewhere. In this respect, though, Ethiopia is hardly alone in Africa. Take Angola, where a recent $3.5bn social-housing project on the outskirts of Luanda, the capital, offered apartments from $84,000, in a country where incomes per person are just over $4,000. Or Cameroon, where the government’s social-housing scheme is out of reach to 80% of the population, according to the World Bank. In Ethiopia the state has spent over a decade building cheap homes on an almost unprecedented scale, but supply still fails to match demand. Why?
High costs and expanding populations mostly put an end to the kind of government housing provision that was common in much of Africa during the early post-colonial years. With its state provision, Ethiopia is an outlier. The majority of countries rely instead on a subsidised private sector to deliver cheap homes. But across the continent governments and builders are hobbled by the wider construction industry. This is often underdeveloped and uncompetitive, constrained by poor infrastructure and a lack of both skilled labour and cheap materials. Cement in Africa is typically around three times the world price. Construction can be painfully slow. The largest house-building firm in Ghana claims to have finished a mere 3,500 units in the past decade.
Inappropriate regulations drive up costs further. Local materials are often prohibited in favour of more expensive imports. In some countries strict minimum-lot sizes—many dating back to the pre-independence era, when urban populations were smaller and the average inhabitant wealthier—price all but the richest out of the formal market. Most urban Africans simply build for themselves, which means the vast majority languish in informal slums. In Malawi, the least expensive formal house is almost 60 times more expensive than the typical informal alternative.
Look more closely, though, and the problem is a more fundamental one: land. Urban land markets in Africa are thin—only 10% of the continent’s land is registered and marketable—and prices are often wildly inflated. For example, in Addis Ababa, the Ethiopian capital, a 99-year lease in the commercial centre can now cost as much as $15,000 per square metre. Private developers thus cater almost exclusively to the rich. So do banks. The lack of secure and enforceable land rights crimps the market for cheap housing finance, hurting both firms and households. “Affordable” mortgages in Africa typically have interest rates of more than 20%, which puts formal housing even further out of reach for the average city-dweller.