Housing Finance in Africa: Building the Investment Argument

This article is drawn from our 10th anniversary Yearbook on Housing Finance in Africa, launched at the AUHF Conference in Cape Town, South Africa, on 6 November 2019.

Investor interest in affordable housing has grown considerably in the past ten years.  A rapidly urbanizing, young and growing middle class, has suggested an important investment opportunity at the same time as opportunities in other sectors have declined.  While conventional investors began to explore residential property in general, investors looking for impact opportunities have taken this further towards affordable housing, supported by development finance institutions wishing to leverage their interest.  More recently, conventional investors are also looking down market into what they call the ‘affordable space’.  Their interest has become particularly evident in the past five or so years, as the myriad of property conferences increasingly include or explicitly focus on affordable housing.

The argument for affordable housing has long been a social one, highlighting the massive need, and framed in the context of key global agreements such as the Sustainable Development Goals (SDGs).  More recently, it is also becoming an economic one.  The public sector is recognizing the link between housing and growth, and that not only can good housing contribute to the twin goals of economic growth and poverty alleviation, but that the opposite is also true: poor housing can undermine economic growth and exacerbate poverty.[1] Increasingly, therefore, the public sector housing conversation is happening within central banks and finance ministries, as well as within the housing, planning and land ministries.

Meanwhile, housing backlogs persist and cities are struggling under the pressure of informal, household-level, privately-financed efforts to meet housing needs.  While we track investment activity, we can see that only a fraction goes into residential real estate.[2]  Investors still favour the seemingly bottomless consumer-focused sectors (including food and beverages, healthcare and pharmaceuticals, and retail), agriculture and agribusiness, manufacturing and industries, financial services, and green energy / clean technology.  In East, West and Southern Africa, real estate and construction features far lower down on the priority list for the private equity sector – rising, but still very low down.[3]

The next frontier for the growth of affordable housing in Africa, therefore, is to build the investment argument – because this argument will ultimately shape the potential for affordable housing at the scale required.  Over the past ten years, we’ve seen an improvement in many of the metrics framing national and local housing sectors: in many jurisdictions, cement prices have come down, administrative processes have become more efficient, land is being titled and tenure regularized, efforts have been made to address liquidity in mortgage markets, and policy has aligned itself in favour of affordable housing. Most importantly, perhaps, is the careful but progressive effort by the private sector – individual companies and households themselves – to identify niche market opportunities along the value chain, in some cases despite the lack of an overall enabling environment.

This effort must be closely monitored and shared, because the investment argument is found here.   With information, each successful investment begets further investment, crowding in market players seeking new opportunities.  Without information, each failed investment builds a stereotype that militates against further investment, and shifts investors’ sights elsewhere.  In 2019, investors are desperate for information about the affordable housing market, its opportunities and its risks. Very many have bought into the impact investment argument for housing – even while seeking competitive financial returns – and increasingly they note their contribution towards the SDG’s, while they report their progress against ESG (environmental, social, and corporate governance) targets.   This enthusiasm, ripe for the picking, will dissipate if specific opportunities cannot be identified and quantified in sufficiently reliable ways.  We can see that current investment in affordable housing in Africa, while growing, is still grossly insufficient.   Taking it to the next level will require a concerted effort to demonstrate what is possible to the investors who have real capital to place.  The next ten years must be focused on this goal.

A ten-year review

CAHF began its review of African housing finance markets ten years ago, in 2010, when we published the first ever Yearbook on housing finance in Africa, “a review of some of Africa’s housing finance markets”. In that first edition we profiled fifteen countries, curating existing data from primarily secondary sources to highlight market potential.  In the years since then, the Yearbook has grown, to 28 country profiles in 2011, 35 the following year, 48 in 2015, 54 in 2017 and now 55 countries and territories, and 5 regions in 2019, our 10thanniversary edition.  This is the third year that we’re also publishing the Yearbook in French.  What started out as a 78-page book in 2010 is now almost 300 pages in 2019.

Over these ten years, the Yearbook has come to be known as the primary source of information on housing in Africa.  While we are delighted with the recognition, we also note that this is a sorry accolade: that a publication with only four pages per country is the primary source of information is a poor indictment on the state of information in the sector.  It is something that CAHF continues to struggle with, as we seek to encourage investors to enter very difficult market environments.

Tracking cement prices

In 2010 we did our first-ever survey of cement prices, asking colleagues across the continent for the retail price of a 50kg bag of cement in US$.  In that year, cement was most expensive in Malawi (US$18), and cheapest in Mauritius (US$6).  In 2016, the price of a bag in South Sudan was US$50 – explaining why so few houses are built with cement in that country.  In 2019, the very cheapest price for a bag of cement comes from Egypt, where 50kg is sold for about US$4, likely supported by subsidy.  While prices have fluctuated widely, in 2019 they seem to be collecting under US$9 per bag.  Cement prices in US$ are also an indicator for the broader question of macroeconomic (and political) stability.  Huge variations in price have been seen in Eritrea, Sudan, South Sudan, and the DRC.  Cement prices also provide commentary about the wider infrastructure: poor road networks in Malawi and Sudan lead to high costs; and declining cement costs in Rwanda and Nigeria are likely due to investment in domestic cement manufacturing plants.

Monitoring government attention

As affordable housing has become a more critically considered sector, we’ve seen a shift in government attention to the things that should make their housing markets grow.  The World Bank’s Doing Business Indicators provide a useful proxy for the ease of property development.  Their main indicators, the number of days and cost of registering a commercial property, quantify the relative ease or difficulty with which property registration might also occur in the residential market.

In some countries, there has been considerable change in the efficiencies associated with property registration.  Between 2010 and 2019, Togo, Sierra Leone, Guinea-Bissau, Malawi, Lesotho, Senegal, Burundi, Cabo Verde, Morocco and Rwanda have all reduced the number of days it takes to register property.  In Angola, Benin, Nigeria, Togo, Central African Republic, Guinea-Bissau, Guinea, Chad, Senegal, the DRC, Côte d’Ivoire, Comoros, Mali, Djibouti, Cabo Verde, Mauritius and Niger, the cost as a percentage of property value has also come down by at least 5 percent.  In Senegal, the cost of registering property as a percentage of the property value came down by about 12 percent.  Some markets became less efficient, however: in Gabon, the number of days to register property more than doubled between 2010 and 2019, to about 100 days.  In Zambia, Namibia, the Congo Republic, and Morocco, registering property got more expensive.

Quantifying affordability

CAHF’s flagship indicator has been the cost of the cheapest, newly built house, built by a private sector developer.  This year, at US$8 040, the cheapest newly built house is in Nigeria, built by the Millard Fuller Foundation (see box).  The most expensive house, at US$90 000, is found in South Sudan.  These are indicative statistics: we ask in-country authors to tell us what is the cheapest house that is available on market.  It is not the cheapest house that canbe built, but rather the cheapest house that is beingbuilt by private sector developers.

Over the years, the costs have varied considerably. The most expensive houses ever built were priced at US$200 000, in Angola (2015 and 2016) and Guinea-Bissau (2018).  In 2017, Madagascar was the most expensive with a house at about US$145 000.

In 2019, only 13 countries have houses priced at below US$20 000; and 14 countries have houses prices between US$20 000 – $30 000.  Half of all countries, however have their cheapest newly built house priced above US$30 000.  This is clearly not affordable.  To investigate the relationship of size to cost, we measure house size at the same time. While a very many are smaller than 50m2, the entry-level homes in a significant number of countries are larger, between 50m2– 100m2.

Unpacking housing construction costs

The size of a house does impact on the cost, but only so much.  In 2015 we sought to quantify the cost of constructing a basic 55m2house in a development of 20 units, in 30 cities across 15 countries.[4]This work has been updated and in this past year, we considered a range of different house types, specifically in Kenya, Nigeria, Rwanda, South Africa, Tanzania and Uganda.  The difference in price between 55m2, 45m2and 35m2houses is obvious and expected – though it is worth noting that the cost difference between the 35m2and 45m2houses is greater than the difference between the 45m2and 55m2houses, as the level of finish also changes.  This is something that developers should consider further as they explore options for better targeting their housing production.

Of the cities surveyed, Nairobi was the most expensive in which to build the 55m2house in 2018[5], followed by Dar es Salaam, and Kampala[6].  The 55m2house was least expensive in South Africa.[7]  Key differences relate to the price of land (double in Kenya compared with South Africa), and developer mark up (also double) – which may be an indication of development efficiencies and developers hedging their margin against the risk of construction.

The construction cost (red bar) for a 55m2house also varies from a low of US$16 635 in South Africa to a high of US$28 085 in Kenya.  Considering the composition of the construction cost, the proportional contribution of labour costs to the total housing cost varies from a low of 10 percent in Rwanda to a high of 22 percent in Nigeria.  Manufactured inputs vary from 32 percent in Nigeria to 38 percent of total cost in Rwanda.  Another significant cost differential is the tax paid. Whereas Nigeria and South Africa have the lowest tax rates, Kenya, Tanzania and Uganda all have significantly higher tax burdens on housing cost.[8]

Profiling access to affordable finance

A critical piece of the puzzle is access to affordable housing finance.  Mortgage rates above 15 percent and offered at tenors below ten years are unhelpful and do little to enhance affordability.  Beyond the factors that liquidity facilities address, macroeconomic factors such as the pricing of Treasury Bill rates, inflation, the availability of long term capital, the strength of capital markets and so on, are behind a lender’s ability to make the mortgage work.[9]  In 2019, the prevailing mortgage rate for Ghana, Guinea, Zambia, Mozambique, Nigeria, and South Sudan – above 25 percent – means that mortgage finance is not assisting with affordability and is unlikely to be a significant feature in the economy.  This is reflected in the mortgage to GDP rates in those countries (all below one percent).

Some mortgage markets are beginning to work, however.   In South Africa, mortgage lenders are beginning to recognise the opportunity of an entry-level market that leverages off the resale potential of government-subsidised housing stock.  In South Africa, while the mortgage market itself has been strong, it has focused on the high end of the market.  More recent activity is beginning to extend down market and lenders are beginning to compete for the business of first-time homebuyers.[10]Morocco’s mortgage market is the second largest, with US$22 billion outstanding.  Comprising 170 425 outstanding mortgages, this suggests the market targets middle and upper middle income earners.   In Kenya, the establishment of the KMRC in early 2019 promises to support that mortgage market, with a particular focus (it has been said) on the role of SACCOs in supplying housing financing.  Although likely subsidised, eighteen countries report mortgage rates at 10 percent and below.  Another 21 have mortgage rates between 10-20 percent.  Most countries report tenors of 15 years or longer.

Understanding the impact of housing on the economy

All of this activity – new housing construction and its letting over time, enabled by finance – has a profound impact on the economy. This is something we’re coming to understand better as we calculate the Housing Economic Value Chain in greater detail.[11]  In a report published this year, it was found that residential construction activity in South Africa, by both formal and informal contractors, produced housing valued at US$5.3 billion in 2017.[12]In Kenya, the value of housing construction in 2016 was US$2.7 billion[13]; and in Rwanda, about US$763 million worth of housing construction was undertaken in 2017.[14]  This activity contributed 2 percent to the South African GDP in 2017, 6.3 percent to the Kenyan GDP in 2016, and 11.5 percent to the Rwandan GDP in 2017.

Housing also creates jobs. In Kenya, we estimate that total employment in residential construction in 2016 was more than 575 000 full time jobs (noting that over 90 percent of this was informal).[15]  In Rwanda, the estimated employment of 157 000 jobs in the housing sector is expected to be an undercount, not reflecting the informally employed.  And in South Africa, it is estimated that 732 000 persons are employed in the housing sector.

An investigation into the impact that housing construction and rental has on the economy is a worthwhile exercise, both to understand the particular country concerned, as well as to create a basis for benchmarking and thereby better understanding the structure of country housing economies.  Reflecting on the performance of the rental market in Kenya, Gardner et al note:

When compared with housing rental markets in some other countries (most notably South Africa and Nigeria), the rental market in Kenya is substantially smaller in scale and has more limited linkages to other sectors of the economy. Whereas housing rental activity in South Africa is roughly equivalent in value to housing construction (with 37 percent of households renting in 2011), in Kenya it appears to be only 30 percent of the size of construction value, with 36 percent of Kenyans renting their properties. This suggests that the rents paid in Kenya are generally substantially lower than in South Africa (due in part to much lower levels of urbanisation), and/or that the actual value of rental income is higher than reflected in available data from official sources.

 More significantly, the contribution of intermediate inputs to total output is only 12 percent in Kenya, compared with 48 percent in South Africa 2016 and 35 percent in Nigeria.  This suggests that housing rental products in Kenya are less sophisticated and that housing rental currently has a much smaller direct impact multiplier than similar activities in countries such as Nigeria and South Africa. Viewed positively, this could be interpreted as providing substantial potential for future growth and development – particularly within the context of rapid urbanisation and rising urban incomes.[16]

The data and the analysis highlight the structural factors that support or constrain specific segments of a housing sector and influence its targeting and performance. Over time, as policy makers become more familiar with the approach, they can use the analysis to find the specific niche or niches where an intervention might have best effect.

The analysis also highlights potential.  Kenya’s Housing Economic Value Chain has been considered in light of that country’s Affordable Housing Programme, which promises to build 500 000 affordable houses over the next five years.  The analysis suggests that if the ‘Big Four’ agenda achieves this target, this could increase the contribution of housing construction to GDP to more than 14 percent, and is likely to generate an additional 176 819 jobs, bringing total employment in housing construction in Kenya to more than 750 000.[17]  Kenya’s plan to deliver housing is clearly also a significant strategy to deliver jobs and economic growth.  This is an important message for governments across the continent.

Linking housing into the SDGs

Interestingly, while governments are beginning to consider housing in economic terms, investors are looking back at the social argument, and many are beginning to highlight the impact of their investments on the SDGs.[18]  The SDGs comprise 17 goals and 169 targets agreed by the signatories of the 2030 Agenda on Sustainable Development.  Goal 11 focuses explicitly on sustainable cities and communities, and target 11.1.1 measures the percent of the urban population living in slums, informal settlements or inadequate housing.[19]

For target 11.1.1, the six years between 2010 and 2016 has shown some progress in a number of countries: Cameroon, Senegal, Ghana, Tanzania, Rwanda, Mali, Uganda, Angola, Benin, Niger, Ethiopia, and Madagascar all saw the proportion of their urban populations living in slums drop by more than ten percent between 2010 and 2016.  In others, such as the DRC, Zambia, Sierra Leone, South Africa, Nigeria[20]and Guinea, the percentage of households living in slums appears to have increased, in some cases considerably.  Still, in 2016 (the most recent year for which data is available), just over half of all countries in Africa had more than half of their urban populations living in slums.  Efforts to support affordable housing are likely to have a significant, positive impact.  This attracts investors seeking to demonstrate their ESG (environmental, social, and corporate governance) credentials.

Understanding investor intentions

And yet, housing still makes up a very small slice of the investment pie.  In a review of the landscape of housing investment across Africa, we’ve identified that across the breadth of investments that are made into various African sectors, housing is a minority sector, often quantified under ‘other’. Of what does go into affordable housing, the bulk is still coming from the DFI sector, or from investors somehow linked to government.  Even private equity investors operating in Africa source much of their funding from the DFI sector and from governments.  Purely commercial investors seeking real returns are in the minority.

Measured by capital deployed over the last ten years, the largest investors in Southern Africa have been DFIs (AfDB, EIB, OPIC, IFC, World Bank), government agencies, some pension funds and banks and Chinese companies.  The AfDB has invested the most (US$1.2 billion), mostly through debt instruments. Rabobank was the largest private sector investor, when it bought a 45.59 percent stake in Zambia National Commercial Bank with a US$632 million investment.  Three Chinese companies (CITIC, Henan Guoju and Sinomach) provided both equity and debt to a value of US$1.5 billion, investing in housing delivery and its financing, much of this in Angola.[21]  In West Africa, the most significant investment in the past ten years was a US$130 million investment by the World Bank into the creation of the West African mortgage liquidity facility, the Caisse Régionale de Refinancement du Crédit Hypothécaire de l’UEMOA (CRRH-UEMOA).  The CRRH has attracted significant DFI capital, also through the West African Development Bank, BOAD.  The French Development Agency, AfD, has provided funding to ARIZ, which guarantees loans to MSMEs and MFIs, although it is not clear if this was used in support of housing microfinance.[22]

There is also interesting activity in new investment spaces. Real Estate Investment Trusts (REITs), often the domain of commercial property investors, are very slowly starting to develop residential portfolios, and some of these are focusing explicitly on the affordable market.  The most activity can be found in South Africa, where Indluplace’s portfolio of 9 933 units and Transcend Property’s portfolio of 4 767 units both focus on affordable rental accommodation.[23] In other countries, take-up has been less enthusiastic.  In Kenya, Stanlib Fahari is the only listed REIT (with a focus on commercial property), although regulations were in place in 2013. Rwanda has an established REITs framework but still has no listed REITs.  Rwanda’s National Pension Fund (RSSB) has been contemplating the establishment of a REIT, but is yet to list a vehicle. The lack of appetite for REITs in Rwanda might be due to the lack of tax exemptions – this is something to explore.   In Zambia, REIZ is the only listed REIT, which is invested in both commercial and residential properties.[24]  Nevertheless, a key barrier in all contexts is the absence of clear real estate track records – not because real estate investments are new, but because their performance has not been systematically tracked.

While the quantum of investment needs to be increased, there is a very real opportunity to take current investor experience and document it with detail and rigour, in support of the investment argument that the affordable housing sector so badly needs.  This is especially so in the blended finance space, where the standard investment approach needs to shift from the norms applied to infrastructure funding where there is an existing understanding of which market risk capital will cover.   In the particular context of social infrastructure investments that include housing, investors are actively looking for tools and frameworks that establish how to blend the mix of capital.  This would help create speed in the delivery of housing transactions and free up more opportunities for consideration.  In the scramble to do the deals and implement the funded interventions, however, the need for careful documentation, data collection and analysis, and indeed, tool development, is overlooked.  This is a real problem: if investors cannot accurately, quickly and consistently quantify their risk, they will continue to rely upon DFI and government supports to make their investments.  This may not be sustainable: the need is so great, and across so many sectors, it is entirely possible that attention on affordable housing may again shift away to another sector.  Just when we’re beginning to feel a groundswell of interest in this under-developed sector, we must think about securing market efficiencies in order to sustain this focused attention.

Assessing the Information Infrastructure

The lack of regular and reliable data on key indicators that would frame our understanding of the housing sector and its potential in particular local contexts continues to be a serious constraint to investment. Where NGOs and DFIs may be happy to go on trust – trust that the enormity of the housing challenge means that anything they do is worthwhile – this is not a sufficient driver for conventional investors that have shareholders to report to and quarterly financials to publish.

In 2007, when initial proposals for CAHF were contemplated, a literature review was commissioned by the FinMark Trust on housing finance development in Sub-Saharan Africa.  The report explicitly noted limited availability of data and research, and that “the most rigorous analysis of various countries housing sectors’ come from donor agents that use off-shore consultants to assess the local situation.” The paper goes on to argue that “the most recent and thorough country assessments reside with the governments and the development agents that fund them and are generally not in the public domain.”[25]

In the thirteen years since then, much has changed. As CAHF has grown, so has the library of research and data on housing finance, much of which is shared through our website.  At the same time, domestic data sources have become much more diverse, and accessible, with governments publishing data through their national statistical offices, in their Central Bank annual reports, and in the reports of other departments at national and sometimes also local level.  Most countries also have national statistical services that undertake regular household surveys, many of which are relevant to housing.  In some cases, agencies have adopted explicit data collection objectives. The Nigeria Mortgage Refinance Company, for example, has established a Housing Market Information Portal where it promises to provide data on the Nigerian housing market.[26]  Private data sources are also becoming more available: online property websites provide a useful indication of market dynamics, much like the Sunday section of local newspapers did in the past.  Residential property analysts are also making their work available online. Lightstone in South Africa and Cytonn Real Estate in Kenya are just two examples.  DFIs and development organisations such as the African Development Bank, the World Bank, IFC, UN Habitat, UNICEF, Habitat for Humanity International and others also collect and publish data, much of which can be aligned with housing investors’ information needs.

Still, there are huge gaps.  This year’s effort to produce the 2019 Yearbook gave special attention to data collection.  Before appointing our country authors, we did background research on the data publicly available in each country and provided each country author with a list of references. We also collected basic secondary data – macroeconomic statistics, some industry data – from international sources such as the World Bank, UNHabitat, and others.  This effort notwithstanding, we have emerged from the exercise with many countries where “n/a” has been placed in the data field.  We have countries for which we have been able to establish the total size of the book of outstanding mortgages (provided by the Central Bank), but not the total number of mortgages outstanding.  Given this, it is probably not surprising that we struggled to find the number of mortgages classified as non-performing.  Very few countries collect data on the other forms of housing lending – construction loans, microfinance loans.  While the World Bank’s Doing Business Indicators can tell us about the status of the deeds registry in the country, we could find the total number of title deeds for only 25 countries.[27]Because of this, we also couldn’t collect data on property market performance: the number of new residential transactions, the number of resale transactions, and the number of transactions financed with a mortgage bond.

For some countries, we struggled to access basic policy information, such as the minimum size of a residential plot in square meters. In others, we struggled to get administrative data that provides an indication of market efficiencies, such as the number of approved building permit applications, or the number of properties that are rated in the main city.  Industry data, such as the number of formal estate agents, or private developers, was also hard to get, highlighting that in many countries the housing sector is not well organized.  A surprising number of countries do not appear to track housing completions, and do not have a data point that clarifies how many houses there are in the country – this is also true for a segment of the South African market, where the total number of subsidised houses built by the government since 1994 cannot be determined with certainty.[28]

Some countries have better data than others.  In a few countries, the Central Bank publishes real estate and lending data. In Kenya, mortgage data is published annually. In Morocco, Tunisia and South Africa, data is published monthly and quarterly.  The Tanzania Mortgage Refinance Company publishes a quarterly review of mortgage data in that country.  Very many governments publish no housing-specific data, however.  It is surprising that there is also very little private sector data.  Many of our country authors expressed frustration with the unwillingness of companies to share their data, citing competitive reasons. Where industry bodies do exist – the Kenya Property Developers Association, for example, or the Banking Association of South Africa, or the Ghana Real Estate Developers Association – it is surprising that they too provide very little or no data.

This Yearbook is testament to the fact that the more we know, the more we understand how little we really know.  One challenge is that the data that we are able to collect is invariably aggregated to the national level.  Very little data is available at the city, neighbourhood or even project level.  This means that we lose the ability to understand local nuance – nuance that may make or break a development.  Data is also often provided as an aggregated average across the market, rather than by market segment.  In highly unequal societies this is a particular challenge – the potential opportunity in the affordable market segment gets lost in the averages skewed by high income housing sector activity.  And then there is the question of data reliability and consistency, in terms of the definitions applied, the method and frequency of collection, and the ability to compare across jurisdictions – all important factors if we are to promote increased investment in this sector.

A Data Agenda for Africa

CAHF believes that market intelligence and good, reliable, consistent data is fundamental market infrastructure for the housing finance sector. In providing market intelligence that makes the case for investment in underserved markets, we can support a better policy environment and increased private sector activity in affordable housing markets.  In this way, we catalyse scale interventions.  This is an effort that must apply across the continent, and be on the minds of all stakeholders.

Working with partners and colleagues across the continent, CAHF’s Data Agenda for Africa therefore seeks to meet five objectives:

  1. Collect, assess and curate available data (public, private and deal-specific) relevant to increased investment in affordable housing across Africa.
  2. Identify data gaps that inhibit market activity and close key data gaps by:
    • Encouraging data owners to make existing data available or improve quality /coverage of data they collect
    • Commissioning partners to gather additional data (primary data)
  3. Integrate, optimise and expand our set of knowledge products & data tools to produce a set of key data outputs that are widely used.
  4. Build the capacity of partner institutions to analyse data and engage with data-driven outputs .
  5. Promote the importance of accessible, credible data as a catalyst in the affordable housing market.

Our ability to pursue these objectives is significantly enhanced in the current context where technological advances, from blockchain to marketplace applications to drone photography, are creating new data sources never before imagined.  As deeds registries become digital, this too will create new data with which to understand property markets.  And then, there is the regular effort of all stakeholders, which offer an array of administrative data worthy of our attention.  Our ability to maximise these opportunities, however, will depend on the overall framework we design and the standards we uphold, as well as the active participation of the parties. This is our Data Agenda for Africa.

Looking forward

The development of sustainable and vibrant financial frameworks for housing, which explicitly address the contexts of local markets and the households who live in them, is about both the technical specifications of the approach, and the process that is followed to build market confidence and encourage the participation of the parties, in both the public and the private sectors.  Looking forward, Africa’s affordable housing sector needs attention in four broad areas:

  1. The development of mechanisms to enable patient, blended capital. Housing is a long term, complex effort which requires capital that is patient in terms of time, the target and objective.  Investors, whether public, private, DFI, or households themselves, have different return expectations and risk appetites.  Their investments may be equity, debt, or grant.  Blended finance is the effort of combining the most productive arrangement of capital from the various sources, in a way that delivers the funding needed to undertake the initiative.  While blended finance has been tested in other sectors, it hasn’t yet developed a track record in housing, with only a few deals offering promise.  There is an opportunity to create a framework for thinking about blending finance with subsidies and other supports to achieve acceptable returns, and setting a precedent for future investors by testing this in a few sites.
  2. The development of mechanisms to enable the investment of local capital.Given the particularly volatile nature of developing economies, affordable housing finance can really only be achieved if capital is local, drawn from local capital markets, and in local currency.  This will require the development of local capital markets, and attention to policy and legislative barriers to local investment in housing.  Local pension funds should be obvious investors, but the concept of affordable housing is a stretch for their investment committees. There is a need for pilot initiatives to test the participation of local capital in particular housing contexts.
  3. The concurrent application of different financial mechanisms along the housing value chain.It is insufficient to apply capital to only one link in the housing delivery value chain – this approach puts the investment at risk of failure when other broken links undermine delivery.Investors require a bird’s eye view of the entire housing ecosystem and a way to require or apply interventions along the value chain.  Support for sector development will be an important component– for example, if a microlender makes a housing microloan available, can they be certain that there is a builder with the technical capacity to build quality accommodation? This is an area in which Habitat for Humanity, iBUILD Global and Reall have been involved.  Integrating a value chain approach with a consideration of where capital is best applied, is an important area of focus.
  4. The presentation of data, market analytics, thought leadership and market trackingnecessary to bring the parties along. As investors consider their options, they rely on market data that is both timely and trustworthy, speaks directly to their concerns and interests, and highlights where further opportunities might lie.  A large part of the effort to establish sustainable and inclusive financial frameworks is demonstrating that these frameworks can offer competitive returns.  This will require the development of market development-focused key performance indicators, and then an insistence on transparency in performance and impact analyses.  An investment into information infrastructure that is explicitly targeted at this market niche will go a long way to mainstreaming affordable housing as an investment target.

These four factors are not necessarily new or unique: they are the basic building blocks of any sector.  What is unique is their application to the question of affordable housing in Africa, where so long this market segment has been seen to be the domain of the state.  As we move into the next decade of market tracking through the Housing Finance in Africa Yearbook, our focus must be on the depth and rigour necessary to support good investment decisions in affordable housing.  Building the “information infrastructure” will enable the evidence-based development of products, services, policies and regulations, which can support financially sustainable interventions in affordable housing, and ultimately, more effective housing markets that meet the diverse needs of all residents.


[1]Lall, Somik Vinay, J. Vernon Henderson, and Anthony J. Venebles (2017). “Africa’s Cities: Opening Doors to the World.” World Bank, Washington, DC. License: Creative Commons Attribution CC BY 3.0.

[2]See CAHF’s Housing Investment Landscape series of reports: https://housingfinanceafrica.org/projects/landscapes-housing-investment-africa/(Accessed 20 October 2019).

[3]Deloitte (2019) 2018 Deloitte Africa Private Equity Confidence Survey.  https://www2.deloitte.com/content/dam/Deloitte/za/Documents/finance/za_Deloitte-Africa-Private-Equity-Confidence-Survey-2018.pdf(Accessed 20 October 2019).

[4]For a detailed overview of the study methodology see https://housingfinanceafrica.org/documents/using-cahfs-housing-cost-benchmarking-methodology-to-analyse-housing-costs-in-fifteen-african-countries/.  Also see the dashboards with data from all 15 countries: https://housingfinanceafrica.org/dashboards/benchmarking-housing-construction-costs-africa/and https://housingfinanceafrica.org/dashboards/brick-level-benchmarking-housing-construction-costs-africa/(All websites accessed 17 October 2019).

[5]Gardner, D., Pienaar, P., Lockwood, K. and Maina, M. (2019). Assessing Kenya’s Affordable Housing Market. https://housingfinanceafrica.org/documents/assessing-kenyas-affordable-housing-market/(Accessed 17 October 2019).

[6]Gardner, D., Pienaar, P., and Lockwood, K. (2019). Assessing Rwanda’s Affordable Housing Sector.  https://housingfinanceafrica.org/documents/assessing-rwandas-affordable-housing-sector/(Accessed 17 October 2019).

[7]Lockwood, K. (2019). Estimated Contribution of Housing Construction and Residential Rental Activities to the South African Economy in 2017. https://housingfinanceafrica.org/documents/estimated-contribution-of-housing-construction-and-residential-rental-activities-to-the-south-african-economy-in-2017/(Accessed 17 October 2019).

[8]Email correspondence with David Gardner, 17 October 2019.

[9]For a useful analysis of this, see Fuchs, M (2018). Working Paper 1: Lowering the high interest rate cost of housing finance in Africa.  https://housingfinanceafrica.org/documents/working-paper-lowering-the-high-interest-rate-cost-of-housing-finance-in-africa/(Accessed 17 October 2019).

[10]For a discussion on South Africa’s mortgage market see Melzer, I. (2018). Bringing mortgage markets to life in South Africa. https://housingfinanceafrica.org/documents/bringing-life-to-mortgage-markets-in-south-africa/(Accessed 19 October 2019).  Also see CAHF’s dashboard on mortgage lending in South Africa, which segments loan origination in the neighbourhoods of South Africa’s eight major metros: https://housingfinanceafrica.org/documents/mortgage-lending-in-south-africa/(Accessed 21 October 2019).

[11]For all of CAHF’s work in this area, visit https://housingfinanceafrica.org/projects/housing-and-the-economy/

[12]Gardner, D. and Lockwood, K. (2019). Quantifying South Africa’s housing economic value chain in 2017 https://housingfinanceafrica.org/documents/quantifying-south-africas-housing-economic-value-chain-in-2017/(Accessed 19 October 2019).

[13]Gardner, D, Lockwood, K., Pienaar, J., and Maina, M. (2019). Assessing Kenya’s Affordable Housing Market. April 2019. https://housingfinanceafrica.org/documents/assessing-kenyas-affordable-housing-market/(Accessed 19 October 2019).

[14]Gardner, D., Lockwood, K., and Pienaar, J.(2019). Assessing Rwanda’s Affordable Housing Sector. March 2019. https://housingfinanceafrica.org/documents/assessing-rwandas-affordable-housing-sector/(Accessed 19 October 2019).

[15]Gardner, D, Lockwood, K., Pienaar, J., and Maina, M. (2019). Assessing Kenya’s Affordable Housing Market.  April 2019.  https://housingfinanceafrica.org/documents/assessing-kenyas-affordable-housing-market/(Accessed 19 October 2019). Pg. 12.

[16]Gardner, D, Lockwood, K., Pienaar, J., and Maina, M. (2019). Assessing Kenya’s Affordable Housing Market. April 2019. https://housingfinanceafrica.org/documents/assessing-kenyas-affordable-housing-market/(Accessed 19 October 2019). Pg. 13.

[17] Ibid. Pg. 15.

[18]See, for example, Old Mutual’s 2019 report on responsible investing: http://ww2.oldmutual.co.za/docs/default-source/omig-insights/2019-responsible-investment-reportl.pdf?sfvrsn=4(Accessed 20 October 2019).

[19]UNHabitat (2016) defines a slum household as one that “lacks one or more of the following: durable housing, sufficient living space, easy access tosafe water, access to adequate sanitation and security of tenure.” (Security of tenure is not yet included in the measurement, however, due to insufficient comparable data.) Inadequate housing is measured using affordability, where a household is “considered as having inadequate housing if the net monthly expenditure on housing costs exceeds 30 percent of the total monthly income of the household”.  See: UN Habitat (2016). SDG Goal 11 Monitoring Framework: A Guide to Assist National and Local Governments to Monitor and Report on SDG Goal 11 Indicators. https://unhabitat.org/wp-content/uploads/2016/02/SDG-Goal%2011%20Monitoring%20Framework%2025-02-16.pdf(Accessed 19 October 2019). Pgs. 14-15.

[20]This is a point that the UN Special Rapporteur on Adequate Housing made recently in her assessment of Nigeria’s housing sector, where she noted a housing sector in crisis, with development efforts focusing on housing for the wealthy squeezing the poor into more vulnerable housing situations.  See: The Office of the High Commissioner for Human Rights (2019). Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, and on the right to non-discrimination in this context. 23 September 2019. https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=25033&LangID=E/(Accessed 20 Oct 2019).

[21]Wood, D. (2019). Housing Investment Landscapes: Southern Africa Development Community. https://housingfinanceafrica.org/documents/housing-investment-landscapes-southern-african-development-community-sadc/(Accessed 20 October 2019).

[22]Grelet, L. (2019). Housing Investment Landscapes: West African Economic and Monetary Union (WAEMU) Regional Report. https://housingfinanceafrica.org/app/uploads/West-Africa-Report_HIL_FinalReport_May2019_1.pdf(Accessed 20 October 2019).

[23]Indluplace (2019). Specialist Management to Drive Indluplace Performance: Focus remains on diversified residential portfolio strategy. http://www.indluplace.co.za/downloads/2019/press/Indluplace_Interim_Results_%20Press%20Release.pdfand Transcend Residential Property Fund (2019) Unaudited Condensed Interim Financial Statements for the Six Months ended 30 June 2019. https://transcendproperty.co.za/wp-content/uploads/2019/08/Transcend-2019-Interim-results.pdf(Both accessed 21 October 2019).

[24]Altair. (forthcoming) Exploring the potential for the development of a residential REITs market in Africa, with a focus on Morocco, Ghana, Nigeria, Kenya, Rwanda, Tanzania, Uganda and Zambia.  Research commissioned by CAHF.

[25]Tomlinson, M (2007) A Literature Review on Housing Finance Development in Sub-Saharan Africa. https://housingfinanceafrica.org/documents/a-literature-review-of-housing-finance-development-in-sub-saharan-africa/Page 35. (Accessed on 20 October 2019).

[26]See https://hmip.nmrc.com.ng/nmrc/(Accessed on 20 October 2019).

[27]Perhaps this is explained by the state of the deeds registries: while all countries have some sort of deeds registry, only four are fully digital, a further fifteen are computerized, and the remaining (35) exist on paper.

[28]For a discussion on this with relation to South Africa, see Melzer, I. (2019). From Counting Houses to Making Houses Count: Publicly Available Administrative Data on Subsidised Housing. https://housingfinanceafrica.org/documents/from-counting-houses-to-making-houses-count-publicaly-available-administrative-data-on-subsidised-housing/(Accessed 21 October 2019).

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