Affordable housing refers to housing that is within the financial reach of the general population.

Private developers aim to maximise profit and may only incur losses for a good cause like providing affordable housing. This is because while labour is cheap, the cost of building materials is high. It makes it even simple residential properties out of reach for most people, making it difficult for property developers to offer affordable housing profitably. Milton Friedman puts it succinctly - “the business of business is business.”

The private sector plays a significant role in meeting the country’s housing needs. However, the success of affordable housing initiatives in Ghana depends on various factors such as project structuring, construction cost management, policy flexibility, transaction costs, land availability, interest rates, and foreign exchange. By combining government support, private sector investment, innovative finance methods, and improved revenue strategies, developers can finance projects effectively and contribute to sustainable economic growth.

This article explores project structuring for affordable housing in Ghana, focusing on proven global concepts that developers can use to deliver affordable housing. Building on  Deloitte’s previous article “Analysing Affordable Housing In Ghana”.

Affordable Housing Around the World

Globally, housing is one of the greatest social infrastructure, commanding billions in financial commitments both from private and public sectors. Governments have sought to close housing deficits through the development of quality, yet affordable housing for the masses. With the spike in construction costs following periods of rapid inflation, policy makers continue to explore the most efficient strategies for delivering on housing needs. 

Over the last two decades, countries like South Korea (21 million housing units), Canada (16 million housing units), and Brazil developed over 40 million housing units by adopting unconventional development concepts whereas Ghana in contrast has developed approximately 2.5 million housing units.

What if by benchmarking such successful housing models from around the world and in other African countries, Ghana can draw inspiration to improve its own housing landscape? This would attract more private capital into the space and marry the opportunities created by urban population growth to the reality of affordability.

India

India in 2015, launched the Pradhan Mantri AWAS Yojana (PMAY) to provide a pucca house to all eligible beneficiaries of urban India by 2022. The minimum size of the house was 25 sq. m. (raised from 20 sq. m) with a hygienic cooking space. Central and state governments shared the cost of unit assistance in this scheme in the ratio 60:40 in plain areas and 90:10 for north-eastern and the Himalayan states.

There are four verticals under PMAY scheme namely In-Situ Slum Redevelopment (ISSR), Affordable Housing in Partnership (AHP), Credit Linked Subsidy Scheme (CLSS) and Beneficiary Linked Construction (BLC). More than 10 million houses have been sanctioned, 7.5 million houses have been grounded and 4.3 million houses completed across the nation. More than 24 billion USD sanctioned for the successful implementation of this scheme, with the total investment amounting close to 100 billion USD. Uttar Pradesh followed by Madhya Pradesh and Andhra Pradesh have been the best performing states for implementation of PMAY scheme.

South Korea

South Korea has made significant strides in providing affordable housing for its population through various government-led initiatives and policies. It has a robust public rental housing program aimed at providing affordable housing options for various low-income group households.

The government builds and manages public rental housing complexes, offering subsidized rents to eligible households. These units are typically allocated based on income level and household size, with priority given to vulnerable populations such as low-income families, elderly individuals, and people with disabilities. South Korea also promotes “Mixed Income Housing Developments” that integrate affordable housing units with market-rate housing. These developments aim to create inclusive and socially diverse communities while providing affordable housing options for low and middle-income households. Government incentives such as tax breaks and land subsidies, are often provided to encourage private developers to include affordable housing units in their projects.

Canada

Canada offers cooperative housing models that empower residents to collectively own and manage their housing complexes. These models not only provide affordable housing but also foster a sense of community and ownership among residents. In cooperative housing, residents are members of a housing cooperative, which owns the entire housing complex.

Members typically purchase shares in the cooperative, entitling them to occupy a specific unit within the complex. Unlike renting, where tenants have limited control over their housing situation, cooperative members have a say in the management and maintenance of their housing complex. By empowering residents to take an active role in the ownership and management of their housing, cooperative housing contributes to a more inclusive and sustainable housing landscape in Canada.

Brazil

The Brazilian government launched a programme called the Minha Casa, Minha Vida (MCMV) Program that provides housing for families through financing, grants, and tax incentives. Households with income above grade 3 on the salary scale a month are self-responsible for enrolling into the program that they qualify for. The maximum gross income of the households who can participate in the program is BRL 4.900 per month.

The family selection process is made by the governmental bank Caixa Econômica Federal directly controlled by the Ministry of Finance. The program offers different tiers of housing, catering to varying income levels, and prioritizes vulnerable populations such as the homeless, single mothers and rural households. Since the launch of this program there has been a successful delivery of millions of units across the country, significantly reducing the housing deficit and improving living conditions for millions of Brazilians.

Rwanda

The Rawandan government launched an Integrated Development Program called the IDP Model Village that was designed to promote proper human settlement in rural areas. In 2016, the government extended this mandate, announcing that all thirty districts nationwide should also accommodate an urban community model village.

As of 2021, settlements (both rural and urban) have been constructed in all 30 of Rwanda’s Districts. The successful delivery of more than 28,000 units in 222 settlements over a 10-year period is the result of an efficient and closely monitored supply chain involving agencies and actors at all levels of government, from planning, design through construction.

Senegal

The Senegalese government launched an initiative called the Cité Baraka that provides housing for to 210 families (1600) residents living in Baraka, located in the capital of Dakar, drawing on land values to support housing construction costs.

The project officially started in March 2018 with the construction of the first six buildings, and involved a training programme for 215 craftsmen, semi-skilled workers, and service providers of Baraka to enhance their capacities in strategic management and marketing. Main components of the initiative include 15000m2 of land transferred to SOREBA (non-profit project company), 2/3 of land for redevelopment for previous dwellers (1,600 people, 210 housing units in 11 mid-rise buildings) and 1/3 land for 200 market units.

 What Has Ghana Done in The Past?

Ghana has previously sought to provide affordable housing through various government-led initiatives and partnerships with private developers.  Some of these include:

·         Establishing a National Housing Policy in 2015 to guide the development of affordable housing and address housing challenges across the country.

·         Developing Public Housing Projects such as the 2012 Saglemi Project which typically involve the construction of housing units by government agencies or in collaboration with private developers, with a focus on ensuring affordability and accessibility for target populations.

·         Mortgage Financing Schemes which involve partnerships between government institutions, financial institutions.

·         Liaising with development agencies that provide mortgage loans at affordable interest rates and favorable terms, and Private Sector Partnerships.

However, while Ghana has made efforts to address affordable housing challenges in the past, significant gaps remain. Taking some key lessons from failed initiatives such as the STX and Saglemi housing projects, as well as benchmarks from other economies, the country should be set on the right course to deliver well-structured and workable solutions in the coming years.

How Can Ghana Learn from Other Nations

The country could explore similar cooperative housing initiatives to Canada, where residents share ownership and responsibility for the maintenance and management of their housing units. By promoting cooperative housing schemes, the country can create sustainable and affordable housing solutions tailored to the needs of its communities.

Furthermore, Ghana could promote community housing initiatives, such as cooperatives and non-profit housing organizations, to develop and manage affordable housing projects. Kenya deploys a similar initiative where savings & credit cooperatives work with Housing Construction Cooperatives. Simple shell and core developments which make use of vast available lands in peri-urban areas will fit the budget of such housing schemes. Success of this however, will ride on the availability and investment in transport and other social infrastructure to encourage settlement in these budding locations.

Considering strategies from other countries referred to previously in this article, the government of Ghana can provide targeted support for vulnerable populations, including rental assistance, home ownership support, and housing subsidies, to ensure access to affordable housing options for all citizens leveraging access to social-impact focused funds, cheap concessionary facilities, housing specific taxes to develop housing and related infrastructure.

Developers can explore innovative construction technologies, materials, and building techniques to reduce construction costs and improve housing affordability without compromising quality and safety standards. They can also Incorporate mixed-income housing models, community amenities, and social infrastructure to create inclusive and vibrant communities that cater to diverse housing needs and preferences.

Investors can consider investing in affordable housing projects that align with social impact goals and contribute to sustainable development objectives, such as improving housing affordability, reducing homelessness, and promoting economic empowerment. Investors can also diversify investment portfolios to include a mix of affordable housing assets, including rental properties, social housing projects, and affordable home ownership opportunities.

Home seekers can seek financial counseling and assistance to understand the costs and benefits of home ownership, including mortgage financing, down payment assistance, and on-going maintenance expenses.

Ghana can also look to Rwanda’s IDP model village programme which has been tremendously successful in structuring an efficient and effective supply chain in support of maximizing affordability and facilitating socio economic transformation of rural and peri-urban areas.

Ghana can learn from global housing models to create safe and affordable housing. By studying examples from India, Canada, South Korea, Senegal and Brazil, Ghana can develop effective strategies. Government subsidies, social housing programs, cooperative models, and innovative solutions can help provide affordable housing for all. Given the challenges, the question arises: “Can Ghana discover innovative approaches to offer affordable housing?”

While commercial institutions in Ghana may not find investing in long-term projects appealing, the government could explore the option of mortgage into perpetuity. This approach would enable extended repayment periods, potentially reducing the financial strain on homebuyers through favourable interest rates. Another option could be to promote affordable renting, providing stability in rental prices for both private and public investors indefinitely.