Ghana takes steps to tackle housing shortage

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The 1.7m-unit housing deficit in Ghana is again in the spotlight, with a national housing policy released earlier this year and moves on the part of the private sector to address pent-up demand.

Like many emerging markets with steady population growth and an increasing rate of urbanisation, Ghana’s housing shortage has been exacerbated by limited public resources and hitherto limited private sector involvement in affordable housing development.

More momentum needed

Based on current trends, Ghana’s housing deficit is expected to reach 2m units by 2018, according to local media reports, though estimates often exclude those currently living with relatives who wish to move into their own homes.

President John Dramani Mahama, speaking to local press in June, said he expects an average of 150,000 units per year will be needed for the next 20 years.

To help address the growing deficit, the government published a National Housing Policy in March to govern state and non-state actors in the housing sector, underscoring Ghana’s commitment to providing affordable housing by improving access to land and encouraging the use of local building materials.

The 39-page policy aims to accelerate efforts to address the affordable housing shortage by identifying bottlenecks that have hampered progress in the past and creating an enabling environment for private sector leadership in housing delivery.

However, public and private efforts to meet growing demand for affordable housing have historically fallen short. Government projects have been unable to supply a sufficient number of units, and while the private sector has the necessary expertise and economies of scale, current pricing and slim margins make projects less attractive, particularly in light of the high capital costs.

Development costs are driven up by the import of building materials, which are sometimes subject to duties and have become more expensive in the wake of the cedi’s depreciation, down by nearly 30% year to date against the US dollar in September. Moreover, lower-income homebuyers have less access to finance, which makes it more difficult for developers to recoup costs.

The solution will likely require greater public-private cooperation. According to consultancy PwC, the drive to meet demand for low-cost housing across the continent will probably be through “direct or indirect investment spearheaded by the public sector”, the firm wrote in a March 2015 report. This could involve state financial support for private projects to bolster profitability – a form of public-private partnership (PPP) the government is also keen to advance in other areas of the construction sector.

Construction push

One such state-backed funding structure could be in the works shortly. In June Rashid Pelpuo, minister of PPPs, said a $1.5bn guarantee could be offered to Ghanaian companies or consortia willing to build 200,000 affordable units. In addition to addressing the housing shortage, Pelpuo said this would promote the growth of local construction companies, though some question whether local players have the scale or expertise to execute a project of this magnitude, even as part of a consortium.

The guarantee is similar to an affordable housing project announced in 2009, when South Korean conglomerate STX Corporation said it would form a joint venture with the Ghanaian government to build 200,000 affordable homes by 2015. The project, worth an estimated $10bn, would have potentially benefited from a $1.5bn sovereign guarantee, but funding was suspended in early 2012 after negotiations failed, according to local media reports.

Going forward, more creative state backing may be needed to encourage private development, particularly as many Ghanaians are still unable to afford current mortgage terms.

To address private sector concerns, some government agencies have pledged to house employees to ensure uptake of completed units. Mark Nii Akwei Ankrah, former managing director of the State Housing Corporation, told local media in August the Ghana Revenue Authority and the Ghana Cocoa Board had already asked for 7000 and 2000 units, respectively.

Speaking to local press in January, Frank Aboagye Danyasah, CEO of Danywise Estate and Construction, called for the creation of a real estate development fund to engage local developers and make homeownership more affordable. A fund of this nature was also suggested in the National Housing Policy released in March, to be used for affordable mortgages, construction finance and support for small-scale local building materials companies.

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