Supply side solutions for housing affordability


ACCESS to affordable housing is so fundamental to the health and well-being of people across the world to the extent that it is one of UN Universal Declarations of Human Rights.

As the global demand surges, housing stocks have not been responding quickly enough, an issue that affects households in both developing and advanced economies across the globe.

In the context of the Tanzanian housing market, a relief on the trend of rental witnesses as well as the prices of houses has been witnessed. This has been caused by the general tightening of liquidity.

However, overall, looking at the past ten years, one would see that rental rates as well as house prices have been increasing over years relatively faster than income levels of the population.

This trend of rising housing costs has created a financial stress for urban residents not only in Tanzania but all around the world. The cost of housing and rent have increased at a far greater rate than income, particularly in big, desirable cities with significant job opportunities.

Government of most nations have not kept quiet to this unfavourable trend. Normally governments across the globe often tackle housing gaps by focusing on demand and financing.

These strategies often include providing housing subsidies, privileged financing or like the case of Tanzania in 1980s’ through various forms of rent control to protect low income households.

While these strategies attempt to provide temporally solutions to housing affordability, are costly and difficult to sustain and most importantly, do not address the core issue of an underlying housing shortfall.

The demand of housing like other goods and services is determined by the demand and supply forces. Correspondingly, to achieve greater housing affordability, a reasonable supply of houses is needed to push prices of houses down.

According to a recent report by the McKinsey Global Institute, global cities can increase housing supply by focusing on three key aspects namely; optimizing on the available land, removing cities and municipalities barriers and making the construction sector more productive.

Land is one of the major cost driver in housing development. Access to land as well as land prices form a major cost driver of houses prices. Projects that use land to its fullest potential have chances of cutting houses prices by up to 20 percent.

Comprehensive citywide mapping and undertaking land inventory exercise can reveal many opportunities. Actions that could be undertaken to enhance access and optimize on land-use include prioritising transit-orientated development where housing development match higher usage of public transport infrastructure.

In this case, congested cities need to focus on density around transit rather than encouraging a longer commute for citizens.

This may involve redevelopment of existing residential structures, slum clearance to redevelop underutilized land, permitting higher floor-space ratios, loosening height restrictions or allowing greater density in specific target zones.

In connection with the trans-oriented development, other actions to be taken should seek to get more out of underutilised sites by taking advantage of land currently under utilising their allowed density.

Underutilised sites can be identified as priority for redevelopment. Incentives such as expedited permitting, relief from parking requirements, or promoting investment in public parking can help attract developers.

One of the most frequently mentioned challenges that developers cite to be retarding housing development is lack of coordination of government agencies that otherwise should have been working together to facilitate housing delivery.

As it is known, the delivery of housing strategies involves financing, urban planning, infrastructure development, land-use regulations, building codes, delivery, contracting approaches and many more.

Different participants in the process rarely collaborate creating frictions instead of focusing on the goal of creating more affordable housing fast. Practical experience shows that where agencies have formed working teams to jointly address sector challenges including facilitating developers, commendable successes have been registered.

Such joint teams are aimed to turning high-level housing strategies into detailed initiatives, implementation plans, and key performance indicators, also addressing any misperceptions and arriving at joint solutions.

These teams can ensure plans are integrated across each member’s role and timelines for when each stage is delivered. Overall, the productivity in the construction sector is cited to be low all around the world.

Over the past two decades labour productivity growth averaged one per cent a year in contrast with manufacturing growth at 3.6 per cent and the total world economy at 2.8 per cent.

Low levels of productivity can partially be blamed on both internal factors such as deficiencies within developers as well as external factors such as building codes, permitting processes and cyclical fluctuations in public and private demand.

At the industry level construction is highly fragmented and inexperienced owners and buyers find it hard to navigate a dense marketplace.

This is happening while developers also suffer from internal deficiencies ranging from inadequate design processes, poor project management, lack of investment in technology, limited investment in research and development and inadequate training on the workforce. Recent initiatives to reduce the housing affordability gap has mainly been focusing on enhancing the ability of prospective home buyers to afford to buy.

Efforts to enhance the supply of houses in the market have not been done to the same magnitude leaving developers to struggle to deliver homes at the desired speed and quality to match the ever increasing demand.

While developers have got to address internal challenges which derail their speed, cities, municipals and other stakeholders have got an important role to play by optimizing the utilization of the available land such as transit oriented development and removing cities and municipalities barriers that retard efforts to supply homes at the desired speed.

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