Promoting Affordable Housing in African Cities:

The need for housing across Africa is immediately visible. In virtually every city across the continent, evidence of informal and inadequate housing conditions can be found in the proliferation of informal settlements, slum areas, and overcrowding. African cities have among the highest urbanization, population, and household growth rates globally – in some cities as high as 6 percent per annum. Without the supply of adequate, affordable housing at scale, housing backlogs continue to grow almost to the point of absurdity:

Nigeria claims a backlog of 17 million units; in Kenya, the housing backlog is estimated at about two million units, growing to over 200,000 units per annum as the formal supply sector fails to meet new family formations. Angola’s backlog is also estimated at just under 2 million units and growing at 100,000 units per annum; Cameroon and Côte d’Ivoire both claim backlogs of over 700 000 units; and in South Africa, notwithstanding its ambitious subsidized housing program, the backlog persists at an estimated two million units.

Annual delivery rates of formal, developer-driven housing, don’t even begin to match growth, much less chip away at the backlog. As a result, most households build and finance their housing independently – and often poorly. Governments are at a loss of how to address the challenge and the private sector looks away, towards other opportunities.

And yet, the market opportunity, if the housing ecosystem were to function effectively, is tremendous. We know that the production and consumption of housing stimulate economic growth and job creation and that growing property markets support enhanced financial intermediation contributing to the efficient development of national economies. We know that good housing can have a profound effect on household living conditions, addressing very many of the Sustainable Development Goals by providing access to basic services, contributing towards inclusive growth, and supporting the development of a sustainable future.

Housing assets, whether geared toward finance or not, can act as a financial springboard to micro and medium enterprise and human capital development. For the African Development Bank, housing sits squarely within the Bank’s highs 5’s. Explicitly addressing an improved quality of life for the people of Africa, a productive affordable housing sector would also contribute towards industrializing Africa (with domestic housing supply chains contributing substantially to economic growth), while drawing substantially on the outputs of the AfDBs objectives to light up and power Africa, and to integrate Africa. The AfDB has an

In the context of low growth figures in countries across the continent, investment in housing creates an important and strategic opportunity to change the narrative and drive growth domestically, from within.

Housing finance – investment capital, construction capital, end-user finance, and all the facilitative interventions (guarantees, insurance, subsidies, etc.) that happen in between – is a critical ingredient to addressing the housing challenge in Africa. Across the continent, this section of the financial sector is underdeveloped for two reasons. First, financial sector development initiatives focus largely on other sectors: insurance, agriculture, small business development, and mobile money.

The notion of a housing sector in the African context is still very new and the financial sector is unfamiliar with its dynamics. This is possible because of the second reason: that housing finance is dependent on a much wider array of activities and sectors that together comprise the housing value chain – activities that are beyond the financial sector’s reach. So, whether in the public or the private sector, among government officials or investors, housing has commonly been considered without its financial imperative – that it must be paid for. In this, a key opportunity for improving the efficiency and effectiveness of the sector to meet the growing and pressing needs of urban Africans and contribute critically towards economic growth has been lost.