High Costs Push Dream of Low-Cost Housing Beyond Reach
Food is a basic need. The others are shelter and clothing.
That is why when a family moves from one house to a better residence or location, it considers this an achievement.
And that is why the slum upgrading projects in towns and cities in the developing world get attention of decision-makers, development partners, and philanthropists.
When families leave humble structures made of rusty iron sheets, polythene bags, and cartons to stone houses like has happened in Nairobi’s Mathare and Kibera slums, adults can’t hide their joy laughing into the wide lenses of news cameras.
A month ago, when 200 families from Mathare slums left their shacks and moved into new spacious tiled-roof three bedroom houses in Isinya, their joy was palpable.
But, so far, the dream of better housing, through the low-cost schemes, remains distant for millions of families because of slow processes involving private developers, humanitarian organisations and churches.
While the target market is ready and big — with at least two million Kenyans said to be living in squalid conditions in Nairobi’s slums and other major towns — the quest to provide low-cost housing continues to falter under the heavy weight of a host of challenges as the government seems not to get it right on incentives.
Government projects to house the houses decently has moved in tandem with controversy while private developers have eyes on the more lucrative middle and high-end markets, where there is a ready market.
In these areas, infrastructure — estimated to take at least 25 per cent of the construction cost — is better compared to the low income areas where roads, water, and electricity are scarce, frustrating efforts to invest in such areas.
“The high cost of land, which has acquired a speculative angle due to the rush to accumulate makes the construction of affordable housing for the lower end of the pyramid more difficult,” says Moses Wekesa, the director of Property Supply at Housing Finance, the leading mortgage provider in the local market.
“Previous efforts to provide low-cost housing was possible as the government donated the land for the construction of such housing schemes,” says Mr Wekesa.
The government backed Nyayo Highrise Estate which was meant to house some Kibera residents came a cropper when the middle-class ran ahead of the slum-dwellers.
A similar outcome faced the upgrade of Mathare 4A where the ownership wrangles pitting the Catholic Archdiocese of Nairobi and the residents over payment of rent, claiming the houses were built on their land and were entitled to free housing.
For private developers, the trouble is bigger.
Real estate experts reckon reforms in the housing industry to allow for clustering housing schemes based on people’s income, work location and availability of infrastructure could boost the quest for low-cost housing.
However, a multi-million shilling housing project expected to house 2,000 families by Jamii Bora, a microfinance institution in Isinya, Kajiado, looks set to navigate the tricky terrain.
Developers of the scheme say they have managed to lower the cost of construction while at the same time leveraging on savings to allow beneficiaries to claim ownership of the houses.
“The provision of low-cost housing is possible through access to social capital which does not attract the same return requirement as commercial capital,” says Frank Ireri, the managing director of Housing Finance.
The Jamii Bora plan is one of those that have tapped social capital touted as critical to the success of housing the masses.
Under Jamii, members save and borrow using colleagues as guarantors, thus removing the requirement of collateral, which remains a major barrier to accessing commercial mortgage.
In addition, the housing scheme has lowered the overall cost of construction through on-site production of building materials and the use of sweat capital — the actual involvement of the beneficiaries in the construction work.
The housing project covering 300 acres of land has been structured into eight phases; it targets 2000 housing units.
Limited access
“The houses we are building are meant to provide permanent and affordable housing to our members, improving their overall well-being and providing a decent life,” said Ingrid Munro, the founder and chief executive officer of Jamii Bora.
This is different from with government slum upgrading projects such as the Kibera Slum Upgrading Project (KENSUP), which was jointly undertaken with the UN Habitat.
The Kibera residents pay special rent for the houses with electricity, water and sewerage systems, markedly different from the one-room slum shacks.
Just like the previous Nyayo Highrise scheme which did not benefit the intended group, the KENSUP project is seen taking a similar direction bringing to question how effective such schemes are in the long run.
The ability to manage a balance between ensuring ownership in the long run and affordability remain elusive.
The Jamii Bora scheme allows members to access mortgage facility of Sh300,000 for a three-bedroom house and Sh495,000 for four bedrooms.
In the market, such units go for between Sh4 million and Sh10 million.
Jamii members apply for mortgage and are allocated a house, whose repayment runs for between five and 20 years.
The lack of a saving culture has also immensely contributed to limited access to housing.
Says Mr Ireri: “We have a poor culture of savings and hence even upgrading our informal systems is bound to face the reality of the beneficiaries being required to repay their mortgage but probably not willing to make the sacrifice.”, said Mr. Ireri.
Given the high cost of construction the need to use appropriate technology has been fronted as one that is expected to lower the overall cost.
“We need to change the country building regulation codes to allow the use of locally available materials such as prefabricated walling materials, stabilising blocks to reduce the cost of development”, said Reginald Okumu of Ark Consultants.
The Jamii Bora housing scheme has managed to confront the ogre of cost by engaging in on site production of the building materials such as blocks and tiles.
These have enabled the scheme to cut down on the cost of purchase of these building materials and also the associated overheads such as transport.
Other players have adopted different approaches to the provision of affordable houses.
A case in point is Habitat for Humanity Kenya (HFHK) which is providing financial resources to low income earners to construct their own homes.
“We are providing construction funds to people who plan to put up houses in three phases to ensure repayment is made to initial instalment before availing more funds,” said Simon Nyabwengi, the national director of Habitat for Humanity.
According to Mr Nyabwengi, the phased fund provision ensures members are prompt in repayments hence reducing the possibilities of default.
“The new programme of advancing the loans in tranches will ensure we process more applications while at the same time realise quick repayment as borrowers will be motivated to repay in order to access the subsequent tranche to complete their construction”.
Habitat for Humanity targets people whose monthly income is less than Sh25,000 making the majority of the beneficiaries to be the low income earners.
At an estimated cost of Sh160, 000 Habitat for Humanity has managed to lower the otherwise high cost of construction by emphasizing the use of locally available materials such as bricks. In addition, prospective home owners are required to provide labour hence reducing the associated cost of construction.
Such innovative schemes are expected to address the acute shortage of affordable housing chipping off the eye sore of informal settlement.
“There is no one solution appropriate enough to tackle the informal settlement but a concerted effort by various players will address the problem”, said Mr. Wekesa of Housing Finance.
Author: Johnstone Ole Turana
Source: Business Daily (http://www.businessdailyafrica.com/High%20costs%20push%20dream%20of%20low-cost%20housing%20beyond%20reach%20/-/539546/875538/-/corathz/-/index.html)
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