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The Housing Crisis and how to solve It

Published 10 months ago -


A model housing unit being built by National Housing & Construction Company. However, the units are not that affordable. One unit costs up to $75000

In 1964, Parliament passed an Act establishing the National Housing Corporation. This was later repealed by the 1974 Decree to form National Housing and Construction Corporation. In July 2002, it changed to National Housing and Construction Company (NHCC) as a Public Limited Liability Company owned by both the State and Private.

Between 1964-1970, 2,384 housing units were constructed in different parts of the country together with office blocks, schools and hospitals by the corporation. Though the Housing Policy of 2016 does not recognize this. On average, 397 units were constructed annually in a period of 6 years. Earlier on, between 1953-1955, workers’ houses were constructed in Naguru, Nakawa and Ntinda under the African Urban Housing project.

In 1970s and 1980s, due to the economic and political instabilities, less or none was achieved in the housing sector. Under the Movement Government, the first step taken was to adopt the National Shelter Strategy of 1992 whose main goal was for Government to support individual households, the private sector, NGOs and Community Based Organisations to provide decent and affordable housing.

This meant government was divesting itself from directly providing housing. Consequently, in 2002, after the passing of the Public Enterprise Reform and Divestiture law, NHCC was privatised.  49% shares were sold to LAICO, a Libyan Government Company and Government of Uganda remained with 51% shares. However, its rate of production has been low, let alone the affordability of its products by the population.

Inadequacy of Housing Units

Since 1986 to date, 464 housing units have been constructed. Still going by the average, 15 units have been constructed annually in 30 years of the National Resistance Movement by the State Company.

There are 7.3m households in the country living in 6.2m housing units with an average household size of 4.7persons. The estimated annual need for new housing is 200,000 units. Of these 135,000 and 65,000 units are in rural and urban areas respectively.

The National Housing and Population census indicates that 47% of the population resides in dwellings with one sleeping room while 29% stay in dwellings with two sleeping rooms. The national Housing Policy of 2016 estimates a deficit of 140,00 units nationally. This is on addition to the backlog of 1.6m housing units carried forward.

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Affordability

Currently, the housing development is mainly done by the private sector, with Real Estate Development estimated annual growth of 5.8%.  These products are not only too expensive to the poor but even the Country’s middle class.

According to the Federation of Uganda Employers, an average Ugandan worker earns UGX 500,000 monthly. With no assumption of any demand, this average employee will need 17 years to clear UGX 100m mortgage for a two-bedroomed unit to be constructed by NHCC in Bukerere, Wakiso District

The Uganda National Household Survey 2012/13 estimates that the average month per capita expenditure, which is the measure of standards of living is UGX 163,000 in Kampala. This is enough evidence to show that most of Kampala’s population cannot afford any of NHCC’s three-bedroom units in Naalya and Namungoona that costs UGX  315m and 290m respectively.

Financing of the Housing sector.

The State, itself has in some way hurt the performance of its own company. On 5th of August 2016, Daily Monitor News Paper published a story quoting the Company’s Executive Director, Parity Twinomujuni saying that for the last 15 years, State House has defaulted them of their rent which amounts to UGX 20bn. The other defaulters are; Ministry of Defence and Uganda Land Commission, whose costs are yet to be computed

While launching the construction of the NHCC’s condominiums in Kira Municipality, Mr Patrick Ocailap, the Deputy Secretary to the Treasury said that Government which is the major shareholder in NHCC, is seeking for more shareholders to attract more money.

The project will cost UGX 19bn, NHCC will provide UGX 9.5bn while Tropical bank will lend the company the balance to be paid in 5years at 20% interest. When completed, a four-bedroomed unit will cost UGX 480m while a three-bedroomed unit will go for UGX 430m.

The high interest rate on housing loans is one of the reasons for the high cost of housing in the country. In this FY2016/17, government had proposed to increase UGX 1,000 tax on the already expensive cement, only to be rejected by Parliament on account of promoting the construction sector.

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Comparison with other countries.

According to the Centre for Affordable Housing Finance in Africa; HOUSING FINANCE IN AFRICA, A Review of Some of Africa’s Housing Finance Markets 2015, Uganda is not in a unique position from some of its counterparts in terms of deficit in housing. For example, in Rwanda, the price of housing is on a high end coupled with the housing shortage. Houses on the market cost Rwf700 million (about US$1 million) while the lowest decent ones’ cost Rwf25 million. Kigali alone needs over 1 000 units per year.

However, the country is adopting a number of mechanisms to address this. The Kigali city has adopted a low cost model house worth US$10 000 where some building materials, especially bricks are made on site. In 2014, the Development bank of Rwanda invested over RWF5 billion in mortgage financing for affordable housing.

Tanzania is faced with a 3 million shortfall on addition to 200,000-unit demand annually. However, in 2011, National Housing Corporation increased its budget from US$23 million to US$230 million to raise its output. The housing cost is cheaper compared to Uganda. For instance, in Mwongozo Housing Estate, a two bedroomed house costs US$20 992.

Way forward.

Uganda being a State Party to the International Covenant on Social, Economic and Cultural Rights which recognizes the right to decent housing as an important right in the life of an individual, the country ought to adopt legislative and budgetary measures to address the housing crisis.

To begin with, government should capitalize the Housing Finance Bank to provide low interest and long-term loans to individual households and real estate developers. In addition to reducing taxes on construction materials and regulation of the rental prices of the private sector houses.

Lastly, various Government ministries and Agencies payment of their arrears they owe to NHCC and its recapitalizing is long overdue. This will enable the entity to gain capacity to take on construction of huge housing projects. Still the State should consider rebuilding the capacity of its company to venture into construction of schools, hospitals, roads, office blocks like it used to do in 1960s, instead of awarding these contracts to private companies most of which are foreign.

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