Decent housing remains a far dream for low earners


The promise:
In October 2010, as the country prepared for the 2011 general elections, the ruling National Resistance Movement (NRM) party issued a manifesto in which it reiterated its commitment to ensuring that Ugandans living in the rural areas access decent accommodation.

The party released an 11-point plan through which this would be achieved. The promise to partner with commercial banks to enable people in the rural areas access low-cost housing mortgages to enable them erect decent houses was one of them.

“Low-cost housing mortgages in the countryside will be provided in partnership with banks,” the manifesto reads in part.
The manifesto points out that this particular package had been mooted with a view of mostly catering for teachers and medical workers, but hastened to add that a few other categories of public servants and youth with regular incomes would also be factored in.
“Consideration will be extended to cover youth and farmers who have regular income from either their salaries or the sale of their agricultural produce.
Payment of the mortgage should be within the income reach of the rural population,” the document said.

The promise was made shortly after the Uganda National Bureau of Statistics (UBOS) had just released findings of the Uganda National Household Survey (UNHS) 2010, which indicated that 73 per cent of the households in the country have no cement floors, 38 per cent did not have iron roof tops and 43 per cent of the households’ houses did not have walls made of brick.

The promise also coincided with the release of findings of a housing value chain that was carried out by Ayani Inclusive Financial Sector Consultants with the aim of assisting financing institutions working in the housing sector to increase their ability to provide affordable products which would enable low income earners in Uganda access mortgages to put up low cost houses.

The study, which was carried out with funding from Habitat for Humanity International, targeted people with earnings of below $10 per day or a monthly income of less than Shs750,000.

The findings of the study, which was conducted in 2010, revealed that Uganda had a housing backlog of about 1.6 million units. The urban areas were at the time said to have a deficit of 211,000 units, while the rural area had a deficit of 1.4 million units.

The huge deficit in the rural areas and attendant indecent accommodation was associated with, among other things, the numerous difficulties that low-income earners and public servants experience in accessing mortgage financing.
Given a population growth rate of 3.5 per cent per year, the projection was that the population would have hit the 45 million mark by 2020, which portended an increase in the housing deficit unless some drastic action was to be taken in the quickest time possible.

The Uganda National Household Survey 2016/2017 shows that there has been an improvement in the state of housing across the country over the last eight years. The survey shows that the number of households with iron sheet tops stands at 75 per cent, up from about 62 per cent in 2010.

The number of households that have brick walls increased to 67 per cent, up from 57 in 2010 and the number of households with cement floors increased to 37.4 per cent up from about 27 per cent in 2010, but these improvements would have perhaps been by bigger percentages if government had fulfilled its promise to provide the country with cheap mortgage financing.

The government’s failure to live up to its promise has also meant that shortfalls in the country’s housing needs have persisted despite the best attempts by both the National Housing Company and the few property development companies in town.
As of July last year, local housing experts were putting the deficit at two million units, adding that it would soon spiral out of control given that it was growing at a rate of 350,000 units per annum.

It is partly due to the failure of interventions such as what had been promised that mortgage financing has remained on a very low despite the fact that government has been talking of impressive economic, Gross Domestic Product (GDP) and Gross National Product (GNP) figures over the last decades.

The Centre for Affordable Housing Finance in Africa (CAHF) has, as of January 2017, put the number of mortgages across the country at a paltry 6,000, with the highest standing at $30,000 (approximately Shs110 million).
The numbers were partly blamed on the stiff rules set by the financers.

A borrower was, for example, said to be required to bring a down payment of 30 per cent and pay 22 per cent interest, figures which put mortgage financing out of the reach for most low and middle income earners, thus making the improvement of their housing and living conditions a pipe dream.

However, most worrying is the fact that the prohibitive conditions and stiff interest rates are not confined to personal mortgage financing plans. They stretch to construction finance for large housing estates. Private developers are compelled to borrow from financial institutions at very high interest rates. The sum total of this sad state of affairs is that the country is not making the kind of strides that it would have required to move out of the housing deficit maze in which it is lost.

The state of affairs is partially responsible for the prohibitive rent that is being demanded by most landlords in all the major urban centres. This means the cost of doing business remains high. That is another minus for the economy.

The State Minister for Housing, Dr Chris Baryomunsi, told Daily Monitor in a telephone interview yesterday that government is in negotiations with the World Bank to lend it money to provide cheap mortgages to boost the housing sector.
“Negotiations with the World Bank are in very advanced stages. Feasibility studies were conducted and we hope the process will have been ended by the end of this year. We shall then decide which banks to partner with in order to provide the cheap mortgages,” he said.

The minister was quick to point out that government is intent on seeing the negotiations end on a good note because it is aware that the biggest challenge facing the housing sector is around the area of finance. Banks, he said, levy interest on building loans at commercial rates, which makes it difficult for people to borrow and build. The situation, he said, has stifled growth of the sector.

Government needs to take quick and decisive action to address the housing deficit, which is spiraling out of control.
While the recent injection of capital into the Housing Finance Bank was a great move for which government is lauded, there is need for such cash injections to be followed up with policy actions that will put mortgage financing from this semi-public institution within the reach of the low and middle income earners.

While we do not wholly agree with the concept of price controls in a free market economy, there is need for the country to examine its priorities and predicaments and put in place policies and mechanisms that will help it extricate itself from the peculiar situations in which it finds itself.

Uganda instituted affirmative action for the girl children and affirmative action for women on the political scene. The time might be right for it to once again launch an affirmative action plan to help us tackle the housing deficit. That calls for lowering the interest rates on mortgages and review or wave some of the stiff demands made of those interested in taking up mortgages.

Government should at the same time address the issue of capitalising Housing Finance Corporation and put into action an incentives regime that will see private sector actors who venture into the housing sector get tax discounts and rebates as and when they put forward well mapped out and planned housing estates for low income earners.

A developer who recommits the profits gained off the initial investment in a housing project should be considered for even bigger incentives, including tax waivers on stuff like imported building materials and fittings.

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