Housing
Urbanisation and informality in Africa's housing markets
Stiffled housing market leads to growth of slums in Africa
Authors:
K. Boudreaux; Institute of Economic Affairs; Free Market Foundation of Southern Africa; Mercatus Center
Publisher:
Mercatus Center, George Mason University, 2008
As Africa’s slums expand, international organisations, NGOs, and governments themselves call for strong public-sector action to deal with the problems in these settlements and to limit their expansion. This paper suggests that government intervention in African housing markets may have contributed significantly to the growth of informal settlements.
The author says a maze of regulations and administrative barriers has imposed high transaction costs on formal-sector housing entrepreneurs. By raising the costs of providing low-income housing, African governments bear much responsibility for driving formal-sector entrepreneurs out of the housing market and for driving their citizens into slums.
Faced with high transaction costs, housing entrepreneurs also respond by providing housing informally. Given the complexities and costs of building formal-sector housing, the author says, it should come as no surprise that much of the continent’s housing stock is now provided informally, either by the poor building and gradually improving a home on their own, or by informal developers working outside the scope of a government’s approval process.
The result is ever-expanding informal settlements. These settlements, a spontaneously evolved response to the problems of government intervention in housing markets, are difficult and often dangerous places to live.
The author, however, notes that more governments now recognise that the best strategy for improving slums is through upgrading projects that provide slum dwellers with improved tenure security and better infrastructure. However, tenure security alone will not solve the housing problems of the poor. The author suggests that African governments should:
- reduce the regulatory and administrative burdens that formal-sector developers face. continue to control inflation
- improve the institutional environment so that the poor can access housing micro-finance and other financial tools
- allow local entrepreneurs to do more to provide much-needed services in informal settlements
