THE CHALLENGE OF HOUSING THE UGANDA MASSES

Last week the Vision Group hosted its first Homes & Construction Expo.

The event that was carried out mostly virtually, explored the process of getting a home from buying the land to financing the build to construction and eventual  finishing.

The event a spinoff of the Saturday Vision's section of the same name, addresses a key aspect of our economy.

Interestingly, during the same week parliament was considering the landlord and tenancy bill, which among other things aims to curb the power of the landlord over the tenants on his property. The initial bill seeks to restrict  how much the landlord can demand as advance payment, prevent them from charging in hard currency and  arbitrarily evicting their tenants among other things.

The situation of housing remains inadequate, according to official figures there is a deficit of more than two million quality houses in the country.

This is a mind boggling number when you consider that,

the stock of housing has grown exponentially over the last 30 years to extend Kamapala beyond Ntinda, Wandegeya, Lubaga, Najjanakumbi, Muyenga and Nakawa...

One of the biggest drivers of the economy during the period has been the construction  boom. Construction currently accounts for 12 percent of GDP and the sector a doubling in size every decade.

This has not happened by mistake. In the early days of the NRM the argument was made to impose rent controls, as the few landlords were charging exorbitantly for even the most basic of hovels.

The government resisted these calls and for good reason.

By letting landlords charge what they wish it made the sector attractive for investment, first of all by the tenants who were suffering under the weight of the high rents and secondly by the real estate investors  who came in to the market to fill the gap.

As a result housing supply has risen to meet demand or at least tried. This too has resulted in greater choice with housing, for every economic segment now catered for.

Were government to have capitulated to the populists then the situation would have been so much worse.

"The populists have reared their heads again to try and restrain the landlords, in the process jeopardizing the viability of the sector and guaranteeing that bridging the housing deficit will be so much harder...

But why don’t we have huge housing developments like neighbours Kenya, who have doe a better job of keeping up with the rapid urbanisation?

It starts from our tenure system, which is convoluted at best and confused at worst. It raises the prices of the few pieces of land whose status is verifiable. No one is going to commit billions of shillings needed to develop the housing estates when they are not sure whether they own the land or not. Or if putting the necessary land together will throw the cost of land out of reason.

Secondly, we don’t have locally the large pools of long term capital required to finance these estates.

Lately, National Social Security Fund(NSSF) have embarked upon the development of their land in Lubowa and Temangalo, which will bring more than 5000 housing units to the market within the next ten years. The nearly sh15trillion fund has the long term money to do that, beyond them there is nobody.

In addition to the lack of long term money the cost of money is too prohibitive. Mortgage rates in the double digits do not have potential home owners running to the bank.

Many of our developers take out dollar loans, where they can enjoy sub 10 percent interest rates but then pass on the exchange risk to the potential buyers or tenants.

And finally government gives little to no incentive to developers meeting a key need. In the past developers have suggested that government underwrite the cost of infrastructure, a major cost, as a way to lower housing prices. Nothing has happened.

In other countries which recognise the importance of housing, governments has provided highly confessional funding for large scale developers. In some countries if you are a developer and the government provides financing and you fail to pay, as long as you have provided the housing as intended they can write off the money. Interestingly serious players rarely if ever take this exit route because it would jeopardize their access to the same facility in future.

"The government did a good thing to let market forces help it bridge the housing deficit, it’s own efforts through the troubled national housing corporation have not caused a dent in the situation.

That being said they time was yesterday when they should have jumped in determinedly to  facilitate the sector better...

 

pbusharizi@newvision.co.ug

Twitter @pbusharizi