Mortgage? What's that? Urban Africans dream of owning homes, but these remain out of reach for most

In Addis Ababa, Ibadan, Kampala, Lagos and Luanda, more than 40% of the urban population lives in overcrowded houses - Mo Ibrahim Foundation.

THE State of African Cities is a biennial report by UN-Habitat, that gives in-depth information the major issues that shape African urban life – housing, transport, water and sanitation, electricity, health and education.

But sometimes you can get insights from what is missing in a report, not only from what is mentioned.

The word “mortgage” does not appear even once in all 278 pages of the 2014 report, the most recent edition in the series.

It’s not a wonder, as at least half of African urban dwellers – or 200 million people – live in slums and informal settlements. 61% of urban employment opportunities in Africa are informal, which often means vulnerable and low-paying work, putting simple banking services out of reach, let alone a mortgage.

And even for those who have stable employment, high borrowing costs and lack of lending policies strongly limit accessibility to formal housing.

It means that the vast majority of Africa’s urban population - 85% according to data from the Mo Ibrahim Foundation – is not eligible or able to secure formal housing loans, so mortgage debt is very small relative to GDP in most African countries.

North and southern Africa lead in mortgage-to-GDP ratio on the continent – South is first at 22%. Namibia is second at 18.2%, and Morocco third, at 13.9%.

But if we exclude North Africa, the outstanding mortages to GDP is 1% in sub-Saharan Africa, underscoring the fact that urban Africans lack financial tools to access property. In Europe and the USA, this ratio is 50% and 70% of GDP respectively.

By contrast, a mortgage loan is often the major liability of households in developed countries, with the house being the corresponding asset, making up a critical part of household wealth.

It’s often a marker of having firmly arrived in the “middle class”, and a critical aspect of financial sector maturity, and formalisation of a country’s economy. When Mail & Guardian Africa analysed Africa’s middle class by assets, we found that they may only number 18 million, and not the 300 million that has often been touted.

In most developing countries, financial systems are dominated by short-term financial contracts, as both lenders and borrowers are wary of each other.

Still, housing finance has been at the centre of multiple banking crises, most recently in the US where the housing market collapse in 2007-8 triggered a global financial crisis. Recent research has shown that banking crises linked to housing boom and bust cycles are typically deeper than other crises.

Enormous strain
But housing remains a deep challenge for African urban administrations. Sustained and rapid urban growth on the African continent is placing enormous strain on the provision and affordability of urban land and housing.

Between 2001 and 2011 over 60 million new dwellings were required to accommodate the rapidly growing number of new urban households in Africa. Kenya’s housing shortage is estimated at 2 million units, while Nigeria needs? 17 million units.

In Addis Ababa, Ibadan, Kampala, Lagos and Luanda, more than 40% of the urban population lives in overcrowded houses, data from the Mo Ibrahim Foundation indicates. High costs mean that in most African cities middle-priced housing is still out of reach of middle- income levels.

The Arab Spring has been extensively theorised, but it is generally less well known that the anger of North African youth had a basis in urban housing shortages, the UN-Habitat report states.

Most governments in the region follow a statist model of economic development, which suppresses the emergence of a dynamic private sector. It’s no different in the housing market, where the majority of housing is built and leased by government.

But a shortage of affordable urban rental units prevented many youngsters from marrying and starting a family of their own, simply because they did not have access to affordable housing.

Rather, young people typically have had to continue living with their parents until comparatively advanced ages, into their 30s and beyond.

Given the fact that culturally, premarital relationships are taboo in several African societies, especially in north Africa, interactions with the opposite sex restricted, and a young man could not get married without securing a house, the Arab Spring resulted not only from lack of political participation, but was also embedded in sheer social frustration.

Ghost cities
But building houses is not enough. Houses need to be located in properly serviced and easily reachable areas. In many cities, an acute shortage of well-located, serviced land for housing has caused prices to rise sharply.

In Luanda, a $3.5 billion housing project was built by Chinese contractors, designed to alleviate the grinding housing shortage in a city that has been ranked among the most expensive several years in a row.

Located 30km outside Luanda, Nova Cidade de Kilamba is a mixed residential development of 750 eight-storey apartment buildings designed to house 500,000 people, plus a dozen schools and more than 100 retail units.

But most of them are empty – the occupancy rate of the “ghost town” is just 10%, due to the high cost of the apartments and the distance from the capital city and urban amenities.

Building regulations must also be followed, or there will be deadly consequences. Between July 2012 and ?June 2013, 392 residential buildings collapsed in Egypt, 52% of them due to a outright lack of government regulation, according to investigations.


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