Supply, Demand Mismatch in Housing Requires Fresh Thinking

Twelve years since the Addis Abeba Administration introduced the low-cost housing programme to address the chronic housing problem in the capital, it appears that demand continues to outpace supply. There are currently close to a million house-seekers registered under the various housing schemes.

Since its inception in 2005, the city’s housing programme has overseen the construction and transfer of around 175,000 low-cost condominiums to its residents through eleven rounds. On average, the capacity of the various actors involved in the construction and transfer of the condos is approximately 14,500 homes a year, aggregated over the last twelve years. The pace with which these relatively affordable housing units are constructed is as slow as molasses compared with how fast the city’s population is expanding. It is predicted that Addis Abeba’s population is expected to grow by as much as half its current size over the next ten years.

At the current rate of construction and transfer of homes, the Revolutionary Democrats will be able to provide housing for the just shy of a million citizens currently registered in roughly 68 years. Though the city’s capacity to deliver this essential component of basic human rights to its residents has seen successive improvements over the years, it is obvious that the Administration is completely overwhelmed by the ever-increasing volume of home-seekers. The EPRDFites are grappling with the widening gap between supply and demand.

The multi-faceted objectives set to be achieved by the housing programme seem to have put less emphasis on enhancing construction pace and improving on schedule delivery. The government, aside from providing shelter to its citizens, envisions creating hundreds of thousands of jobs through these projects. In fact, the programme has created more than half a million jobs in over a decade and had the capacity to absorb more than 65,000 jobs last year alone.

The government commissions several actors in the construction of its housing projects, ranging from first grade contractors for its 40/60 scheme and large public buildings to lower grade contractors and micro and small enterprises in the 20/80 and 10/90 programmes. To date, more than 13,000 micro and small enterprises have taken part in different capacities and aspects of the project. Last year, the housing programme employed 4,311 such enterprises, highlighting the economic significance of the programme in terms of job creation.

From the supply of building materials to the actual construction of the houses, the programme envisions capacity building for local contractors, consultants, sub-contractors and suppliers; on top of availing employment opportunities. Enhancing the society’s saving culture is also an aspiration the programme lists as its mission. These objectives, although noble and sensible, seem to have overshadowed what should be the primary aim of the programme – providing affordable housing to residents. The government’s approach thus far – through the Ministry of Urban Development and Housing and Addis Abeba’s Construction and Housing Development Bureau, which comprises several agencies and authorities (highlighting the bureaucratic, procedural and administrative construct that needs to be navigated) – lacks an out of the box solution to the problem.

Despite providing housing for tens of thousands of people, the affordable housing programme is engrossed within a variety of problems. Though citizens are required to save a monthly sum of money corresponding to the scale set for the specific housing scheme in order to be eligible for a raffle, and a huge amount of money has been allocated by the government for this purpose, administrative issues pertaining to a delay in the payment procedure is repeatedly raised as a major problem by contractors, sub-contractors and the thousands of micro and small enterprises involved in the projects.

There are also claims of corruption witnessed at different stages of the construction process. This concern is particularly amplified with the quality control mechanism, where substandard materials have been used. Skills deficit with some of the workforce is also hindering the speedy implementation of the programme.

Additionally, the supply of building materials is as inefficient as any government bureaucracy laden approach. Last year, the government only supplied 86pc of cement, 69pc of agro-stone partition boards and 44pc of gravel required by the housing project.

More importantly, though, the housing programme is failing to build houses in a speedy manner compared with the rising population of the city. This is because of a lack of capacity of most of the contractors, consultants and subcontractors. The lack of adequate machinery and experience in managing construction projects also appear to be common shortcomings of most of the local contractors.

In view of this shortcoming, the government announced last year that it would seek the services of international contractors, mainly from China and Turkey, to get involved in the low-cost housing programme in a bid to address the gap between supply and demand. It even said that 14 companies have made it through to the final stages of an international bid floated by the government. Financial capability, technology and speed with which a company can finalise a project were taken as criteria in the selection process.

However, despite making the right call in trying to get international contractors involved in the low-cost housing programmes taking place in the city, no such company is yet to take part in the project. The government, unfortunately, is only giving lip service to the initiative and needs to provide the proper legal framework and incentives for such companies, as the profit may not be attractive.

Addis Abeba’s aim to build 350,000 homes during the second growth plan should take into consideration the amount of capital, experience and work ethic international contractors can bring to the table.

Published on Aug 16,2016 [ Vol 17 ,No 850]



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