Why housing is key to Africa’s development

Housing policy is the single most important factor in Africa’s economic development. It needs to be elevated to the highest political level

Over the past half-century Africa has been the most rapidly urbanising region on the globe – but that urbanisation has been seriously dysfunctional. A good city provides people both with better employment opportunities and a better quality of life than in rural areas. African cities generally provide neither.

They are not locations for productive employment, because they lack the density of settlement and the supporting infrastructure that large firms need in order to produce at scale for global markets. They do not offer a better quality of life, because much housing is squalid and lacks basic public services, despite the fact that in principle they are far cheaper to provide for an urban population than for a dispersed rural one.

These deficiencies did not “just happen”; nor are they an inevitable consequence of low income. They are the consequence of errors in housing policy, or even a lack of formal policy in the first place. Fortunately, Africa is less than halfway through its urbanisation process, so there is still time.

So why does housing matter? First, the consequences for living standards are far-reaching: alongside the obvious, decent housing also improves health and enables children to do homework, freeing up women’s time to participate in the labour market. More subtly, a home and its surroundings affect identity and self-respect.

Secondly, the low-density settlement that characterizes African cities, combined with the poor infrastructure, inhibits the transition from “market cities” to “production cities”. Firms that rely on economies of scale and that market their output globally will not locate themselves in low-density cities, because of the attendant high costs: despite lower living standards, there is a wedge between the real income of workers and the cost of labour to the firm, due to the high costs of transport and inadequate infrastructure.

Thirdly, the role of housing in economic development is perhaps not sufficiently recognised: investment in housing is often regarded with disquiet due to its association with speculative property bubbles and financial instability. Yet in developed economies housing is by far the most important tangible asset, and in Africa it has the potential to make a substantial and prolonged contribution to labour demand.

Finally, urban housing has important political consequences. At one extreme, slums can become incubators for political instability. At the other, ownership of a home gives a household a stake in political life, and is likely to be stabilising. Currently, only three per cent of African households have a mortgage on a property.

Clearly, then, housing is critically important. And yet, for the necessary large-scale investment in it to happen through formal channels, it requires a series of supporting conditions. Construction costs must be low enough to be affordable, and legal title must be secure. Finance must be available and affordable both for small construction firms and for mortgages. Infrastructure must be planned and provided in advance of settlement, and residential services must follow construction.

Each of these points can be addressed by appropriate government policies, but addressing only one or two of them has little payoff if the others remain unresolved. They are the responsibility of distinct branches of government which do not naturally collaborate.

Unblocking these obstructions therefore requires coordination that can only come from the head of government: ministries of housing have neither the political weight nor the analytic capacity to play this role successfully. Yet in Africa, housing has never received such a high degree of political priority. This in turn is because the importance of housing in wellbeing and of housing investment in development has not been appreciated.

The message to Africa’s urban policymakers, then, is not the need for deregulation, but the need for policy coordination. They can only unleash the potential for urban housing by a coordinated push across a wide range of teams. But for any of this to take place, housing policy first needs to be elevated to the highest political level.

This article was published in the New Statesman’s City Metric blog.