Theme Two: Financing for social housing

Mon 30 Jul 2012 at 2:00 pm to at 3:00 pm

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Moderator: Dr. Gordon Pirie, African Centre for Cities, Cape Town
Speaker 1: Kecia Rust, Director, Centre for African Housing Finance, Johannesburg
Speaker 2: Dr. Zhao Changhui, EXIMBANK, Beijing
Discussant: Sam Sternin, Development Innovations Group
Rapporteur: Dr. Diana Lee-Smith, Mazingira Institute



 Kecia Rust, Director, Centre for African Housing Finance, Johannesburg - African housing finance.

The two sides of African cities are strong growth and clear demand but very poor housing. There is insufficient employment or haphazard informal employment. Only 3% of the population can afford housing mortgage finance, and the lack of affordable housing means the proliferation of slums. There is a constrained housing delivery and finance system. Solutions include: One: Bring mortgages down-market, e.g. through cheaper (smaller) houses and cheaper cement; Two: Develop housing micro-finance, e.g.  through specialized assistance and institutions (NACHU, CLIFF); Three: Finance rental housing, e.g. through backyard rentals and financing rural-urban household linkages; Four: Target subsidies carefully, as in South Africa; Five: Build data and information platforms, so as to build affordable housing in the right place. Delivering housing is a complex process and solutions, including the institutions delivering them, must be sufficiently complex to match this. Included are cadastral registries, land conveyancing, integrated development finance, diversified (affordable) infrastructure services, large as well as small-scale construction industries, and targeted finance, e.g. for incremental housing development.    
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Dr. Zhao Changhui, EXIMBANK, Beijing - Chinese financing of African housing and urban development.

The Chinese experience of urbanization and economic development is itself recent and limited, based on the socialist market system. In Africa, without financing of the land component it is not sustainable. Preconditions for such a model are a conducive environment (without war and instability) and money. Possible solutions for African housing are having minimal housing on secure land. In the period 2030-2050 are brand-new cities feasible in Africa? The questions are capacity, management of infrastructure and maintenance. Eximbank is the biggest stakeholder in this for the 54 countries across Africa and it has a duty to perform. However, it had no mandate for housing, only dealing in export credits. But in the 1990s the situation was re-evaluated and housing was seen as a part of the infrastructure needed in Africa, with State Council approval. Projects were built in Namibia, Botswana, Mali and Sudan, but were these “low cost housing?”. Eximbank is a bank and it must have a return on its investment, even in housing, so the housing has to be economically viable. The goals are successful performance and risk mitigation. Eximbank needs a return on investment, collateral and a stable business environment.
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Transcription on Financing Urban Development speech


Discussant, Sam Sternin of Development Innovations Group.

Sam Sternin noted that the two presentations were complementary in that affordability of housing by the consumer is paramount. Kecia Rust’s presentation elucidated the affordability pyramid for urban housing and the roles of different actors in the value chain. Solutions evidently are needed that go for incremental housing versus a finished housing product and there is a possibility China can learn from Africa in this respect. At least, the Chinese private sector needs educating on African housing market conditions.

Discussion
Participants explored what is the role of the housing developer in the problem as configured, which is one of affordability. Possible routes for China to expand into the African low-income housing market are through: Provision of serviced land; Incremental development of houses through sale of materials or building components; Promotion of this type of housing delivery, or a mixed model of incremental, components and finished houses. Development projects often lead to evictions of low-income urban dwellers and it was asked if China adheres to international guidelines on displacement and evictions. It was agreed that a tool is needed for assessing the social impact of investments.

Kecia Rust responded and observed that, just as when the mortgage was invented, a new break-through tool is needed now for the delivery of housing for the urban poor in Africa. At issue is the institutional capacity of the housing provider.

Dr Zhao agreed that a type of developer is needed for the 21st Century and there must be knowledge development for this younger generation of developers that will work in Africa and understand the nature of its risks, working with local agents on the ground. Primarily it must be determined how the very poor can invest their meager resources in housing and what laws and policies can be developed to make this work. By all means guidelines are appropriate and China’s reputation will be established less from promotional activities but through performance.

The moderator concluded by commenting on the need for cross-border learning on these issues, as well as the need for people’s involvement in the housing process. Finally, he raised the issue of the urban landscapes and aesthetics that will be created in such cities. Trees and green spaces are a priority for a humane and sustainable city.


Rapporteur, Dr Diana Lee-Smith of Mazingira Institute

Diana Lee-Smith summarized the day’s proceedings and commented that there is an example of site-and-service housing from 30-35 years previously that can be viewed on the tour on 1 August. Funded by the World Bank and managed by the Nairobi City Council, it produced affordable housing through self-help investment by low income urban dwellers. However, the capacity was lost when the system was abandoned in 1983 for political reasons: there was corruption on the Kenyan side and World Bank policies changed towards private sector rather than public institutions engaging in low-income housing support institutions.