Public-Private Partnership can be solution to housing

If Kigali’s housing problem sounds daunting, well, that’s because it actually is a solution to providing affordable housing to city dwellers continues to shirk policymakers. The issue was among those that took centre stage during the recently concluded leaders’ retreat as officials took audit of stalled projects, including one that proposed an affordable housing scheme. Kigali city’s population is growing fast but response to housing need is tepid; from 1,059,000 population in 2011, it will hit almost two million by 2022 and over three million by 2030. Meanwhile as of 2011, the city had 223,000 dwelling units, but according to a state of housing report launched in October 2012, only about half of them were habitable while 71,487 need urgent up-grading. Yet until a solution is found, Kigali can’t afford to flatten the 108, 903 condemned units because these are not only home to thousands of low earners, but also a source of income to property owners who can’t afford the cost of modern redevelopment. The need for affordable housing is a challenge to every city in the world, but this cannot be an excuse for not finding a solution to Kigali’s situation. Experts say that the city needs at least 344,068 new units between now and 2022. While the demand is high, supply is however terribly low and misguided. It is low because while between 800-1,000 units come into the market every year, the city actually needs 25,000 units annually. And it is misguided because formal supply concentrates high end client earning above Rwf2.5 million per month — that constitutes about 0.4 per cent of city dwellers. The biggest concern is therefore to find 186,163 units for the majority — 54.11 per cent who earn Rwf 35,500-200,000 per month. The other major category that needs attention is the 32.8 per cent who earn 200, 000-2.5 million and need 112,867 units. There is another category — of those who earn less than Rwf 25,500 per month. They constitute 12.6 per cent of Kigali’s population and need at least 43,436. It’s these daunting figures that must have informed a government resolution almost a year and a half ago to invest in a 1,200 low-cost housing project to ease the deficit. Yet it emerged during the leader’s retreat that the scheme is yet to materialise. “We don’t seem to have developed proper policies and strategies to address the problem. The institution handling the problem seems to be weak on many fronts,” Infrastructure Minister Prof. Silas Lwakabamba was quoted as saying. So where is the solution? Industry players have faulted the high cost of land, credit and construction materials as the main factors standing in the way of affordable housing schemes. That means the solution is in cheaper credit as well as tax holidays for investors in low cost units. The fact that government is concerned about the situation means public-private partnerships are possible. Public private approach eases land acquisition while the private sector raises money for development. According to the Kigali Conceptual Master plan, the city has only 35,590 hectares of land for potential growth, of those, Gasabo district has 25,122; Kicukiro 7,379 and Nyarugenge 3,089. Kigali’s land resource is mainly constrained by natural factors which reduce the actual available land for development. Gasabo for instance has a total of 43,002 hectares available but 36.09% of it is constrained by natural factors leaving only 25,122 hectares available. The same factor could indeed explain Nyarugenge’s expensive land rates because; of the district’s available 13,423 hectares, 64.9% of it is almost out of reach due to natural constraints leaving just 3089 hectares for development. Moreover, these available spaces include both residential land and other uses. This would then suggest that developers and policymakers need to solve the land economics problem before they can hunt for funds. Rwanda’s land reforms undertaken between 2005 and 2012 made it possible for Rwandans to actually register and own land privately; this development presents one major opportunity, involving landowners as partners in low housing schemes. For instance, if the owners of the 108, 903 dwelling units around Kigali actually own the land privately, it’s quite possible to work out a hybrid approach that would see a partnership of land owners-government and private developers. Say twenty city plot owners agreed to offer their plots to become partners in the development of an affordable modern urban housing project with say 100 apartment units; under the arrangement, the twenty plot owners would get a unit each in the completed project while the government and the developers retain 80 units to recoup their investment. This approach would possibly clear most of the city’s slum suburbs as land owners in those places are made partners in several government-public affordable housing schemes around the city. Future funding of such special Kigali affordable housing schemes shouldn’t be hard especially with the involvement of government as a guaranteeing partner; first banks would find it easier to provide financing in projects where the government is a major shareholder. Secondly, the success of recent central government bonds can be extended to mobilizing funding for future affordable housing schemes in Kigali or around the country at possibly, local government level. This works if local governments look at providing affordable housing as a potential business in which they can invest; Kicukiro district could for instance issue a local housing bond, raise money and put up several low cost units that would repay the bond given the almost assured demand for housing. The current bank interests on housing finance are high because the industry is still narrow and has few actors but the involvement of government and more private players would change this and gradually normalize the market prices.