The Hous­ing Cri­sis and how to solve It

By: MUSA MU­GOYA

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.

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.

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.