It is possible to provide housing units under Sh1 million ($9,000) even without government subsidies, a new study by a continental think tank on affordable housing shows.
Centre for Affordable Housing in Africa (CAHF) says with the right innovation and resources, private developers can still make a profit from this venture. This information was being shared alongside the publication of the cheapest houses put up by private developers in the continent.
The cheapest house put up in the market in 2022 by the private sector was Sh1.6 million ($12,726) according to the data shared.
The data also shows the cheapest house by the private sector was in Nigeria, whose selling price stood at Sh1.1 million ($9,391).
The cheapest house in Kenya was a 30 square metres apartment which is part of the Park Road development sold through the State's Boma Yangu platform located in Ngara, Nairobi.
The cheapest house in Nigeria is 42 square metres. Data on the cheapest house built by a private developer in the continent is published every year by the CAHF. CAHF notes that although government subsidies and State interventions play a critical role in the delivery of new housing in most African countries, the private sector remains the main deliverer of units in the continent.
"This data provides an indication of how far down-market formal private developers can reach to provide affordable housing thus, the data does not include developments where the government has provided land and any financial assistance," says CAHF.
CAHF notes that given that purchasing a new house is unaffordable to most households, step-by-step self-build and informal construction have proven to be vital components of delivering units to the market.
These methods cost lower than the figures shared for the cheapest houses in the continent, says CAHF. "However, this method is often messy, slow, does not meet green certification standards and many times it does not even meet the standard building codes," notes CAHF in the February 13, 2023 publication.
The centre adds that these shortcomings emphasise the importance of the role played by formal developers producing affordable housing, who can build to meet these standards and even tap into green finance that could make the stock they produce even more sustainable and more affordable in the long run.
CAHF states that apart from the social argument which is the basis for affordable housing, this narrative can also be supported via an investment narrative, at least from the data CAHF has collected. "The evidence shows that even without government assistance, it is possible to deliver stock at prices under Sh2.5 million ($20,000) and as we have seen in Nigeria, Mozambique and Angola, even under Sh1.3 million ($10,000)," says CAHF.
"With the right mix of tools, resources, innovation, and financing, private developers are able to profitably deliver decent housing units at affordable prices."
The think tank adds that the challenge facing the sector is to more effectively support and create an enabling environment for these developments so that they may be produced on a larger scale. CAHF say that as the data on the cheapest newly built house in Africa is being studied, it is important to consider affordability and housing prices.
This, the think tank notes, is usually based on the household's income, the price of the house that is available for sale, and the terms of the housing loan - whether in the case of a mortgage or an unsecured housing loan for which the individual qualified.
Guinea Bissau
CAHF says the indicator is to determine how far down the market private developers are able to go in the absence of government support.
The indicator shows also the disparity among African countries on what cost the private sector can avail houses in the market. For example, while Nigeria is recorded to have the cheapest housing unit at Sh1.1 million, a house in Guinea Bissau costs Sh8.02 million ($63,720).
"This major difference in price underlines a large variation in this indicator across the continent. In most African countries, the cheapest newly built house by a private developer is not affordable to the majority of the population," says CAHF.
The think-tank notes that for Sh8.02 million ($63 720) and at 40 square metres in size, the cheapest house in Guinea Bissau is unaffordable. "In 2021, only 5.77 per cent of the country's population would have been able to purchase this house with a bond at the prevailing mortgage terms," says CAHF.
The indicator shows Chad, Algeria, Equatorial Guinea, Sao Tome and Principe, Tanzania, Gabon, South Africa, Eswatini, Tunisia, Seychelles and Comoros have their cheapest houses priced over Sh5.04 million ($40 000) - beyond the reach of most households.