The term “affordable” is so ambiguously used in housing by Ghanaian politicians such that nobody really knows what they mean. Whether the housing scheme involves a 3 or 4 bedroom Bungalow or high-rise apartments they still call it affordable housing.
What is Affordable Housing?
The term Affordable Housing refers to residential properties offered for sale or rent below their market value. Such housing initiatives are mainly designed for certain groups of people whose income are below the national average wage. In principle, affordable housing schemes are residential properties made cheaper (i.e. not cheap properties) for people who cannot afford to buy or rent at market rates.
With this definition in mind, we can safely say what Ghanaian politicians refer to as affordable housing like the Saglemi Housing scheme, is NOT really affordable housing. Similarly, housing development by State Housing Corporation, SSNIT Housing Scheme and the Tema Development residential properties are also NOT affordable housing.
This means the only housing model that will qualify as Affordable Housing in Ghana would be the one designed, built and sold or rented at below market rates for the people we normally call ‘Kayayei’. So far neither the Central Government nor property developers in Ghana have conceived and delivered any housing scheme for Kayayei. This is long overdue and therefore we call upon our political leaders to rethink the housing delivery approaches followed in the country over the years. Affordability should be defined by numbers.
Studies have shown, and Banks usually use, a certain percentage of a borrower’s gross monthly income to qualify them for housing. Usually, this is set from 26% to 38% if the buyer invests from 5% to 20% of their own money. Assuming the average cost of constructing is $20,000 or GHS 100,000 for a small 2-3 bedroom house, at Ghana’s interest rate of around 20%, given even 30year payment term, the monthly fully amortized Principal and Interest payment on a 95% loan comes to GHS 1,588. How then does a typical family qualify? At the 38% Debt to Income ratio, that implies an income of GHS 4,178 per month. Supposing the Government subsidized by providing an interest rate of 5%, the payment on that same loan then becomes GHS 510. The family income required at the 38% ratio, then becomes GHS 1,342.
Housing for Kayayei - how possible? Well, it said where there is a will, there is a way. The whole notion of housing development and delivery in Ghana lack the input of housing professionals to make it worthwhile. Housing is not about erecting structures. Housing is about creating both sustainable livelihood and sustainable communities. As stated in the Sustainable Development Goals, - Housing development should be about making cities and human settlements inclusive, safe, resilient and sustainable. We cannot just appoint people from a political wish list and expect things to happen! No!
More often than not housing initiatives developed by the State has targeted the educated elite, middle- and high-income earners, political class, civil servants and public officials. When will we develop housing for Kayayei, Trotro drivers, Hairdressers, Tailors and our economically vibrant Market Women? We have learnt from Rural banking, Savings & Loans and Microfinance schemes that these groups of people are creditworthy, resilient and can maintain a monthly mortgage. They can be trusted sometimes better than the elite.
How then do we develop housing schemes for Kayayei?
- First, Central Government and Parliament should do what they do best, pass the necessary legislation and establish the national institutional bodies (such as Housing Regulator, Housing Fund, Rent Control Authority etc) to provide regulatory oversight to regulate and enforce the laws.
- The Government should also work with banks, the stock exchange and pension funds to create the financial products to provide short-term capital to developers and long-term mortgage funds to the specified groups.
- Through their respective professional bodies, we should ask the Architects, Engineers, Planners, Surveyors and other built environment professionals to produce prototype designs (i.e. basic structures) for different regions in the country.
- Government and National House of Chiefs should identify and designate land for the schemes.
- Encourage and assist Trade Associations of Kayayei, drivers and market women to setup professionally constituted independent housing companies (IHC) who will be responsible for procuring, delivering and managing the housing schemes.
For example, the Government can decide to guarantee special below-market interest rate loans to these low-income earners. As shown in the above example for the same loan amount, there is a more than 300% (GHS1,588 compared to GHS510 per month) difference in payment based on interest rates alone. This is done in even the Western nations such as the USA.
Housing development for Kayayei can be secured through a package deal. This will involve in kind, land donations held in a land trust, sponsorship from commercial entities, government budget allocation into housing fund, creation of Affordable repayment schemes (i.e. 25 – 30yrs mortgages) and refinancing system to allow mortgage payment to be reinvested in future housing developments.
Developing housing for Kayayei is not an option but a national obligation. It is an agenda we must fulfil to improve the livelihood of our low-income earners. Ghana as a nation subsidies education and we subsidise health care. If the Architects, Engineer, Planners, Surveyors and Built Environment professionals from Kwame Nkrumah University of Science and Technology who benefited from these subsidies cannot or are unwilling to deliver a housing scheme for KAYAYEI, then they should be made to refund all the subsidies they received.
Profile: Kwadwo Owusu-Darko is an architect and specialises in Housing. He has over 20yrs experience in real estate development, regeneration and housing management in the UK. He is the Co-Founder & Executive Director of Centre for Real Estate & Social Housing, a research and advocacy think tank.
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