Govt should offer property developers incentives to build low-income houses

Wednesday May 29 2019

house

Government needs to invest in affordable housing subsidies or ease of zoning requirements to cater for current and future housing needs of low income residents. PHOTO | CYRIL NDENGEYA 

RWANDA TODAY
By RWANDA TODAY
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A team of experts tasked with designing the new Kigali City masterplan, which will guide growth up to 2050 has recommended that the government should offer subsides or incentives to facilitate access to affordable housing for the City’s local income earners.

This is partly because incomes around Kigali remain significantly low yet the cost of living remains relatively high.

In recent weeks, most city dwellers are grappling with drastic increases in their water bills. Indeed, available data shows that more than 59 per cent of Kigali city dwellers earned less than Rwf100,000 a month, and could not afford to spend more than Rwf40,000 a month on rent or buying a house on average.

Therefore it is not surprising that while home ownership is a dream for many ordinary Rwandans, an increasing proportion of low-income earners are in rental stress.

And now research by experts shows that the government has to do more to ensure a lot more housing is built particularly in Kigali to cater for low-income earners who are more than 50 per cent of the city’s population.

The housing affordability crisis has made life particularly hard for low-income earners. There is a powerful case for extra public support for the most vulnerable Rwandans. The government should prioritise investing in social housing, and target the most vulnerable Rwandans living in the city. To enable more affordable homes to be built, the government should consider providing incentives to property developers who continue to focus on high-end accommodation, which remains lucrative.

The fact is the current housing shortage around Kigali City is unlikely to be filled by the conventional housing providers.

This is because private business models dictate that they pay attention to their profit margins more than anything else. Partly because of the current limited access to long-term capital at affordable interest rates on the local market.

 

But perhaps more importantly, to get affordable housing, we will need different business models in the market to add to what developers can offer.

We need to see more diverse housing providers enter the market with different business models developers taking all the land risk for a homes for sale product.

The government needs to consider partnering with developers and incentivising housing projects on public land for affordable housing for vulnerable Rwandans.

Building affordable homes requires land, which is in short supply and extremely expensive. If land is acquired at the highest price, the reality is we will never achieve affordable houses for vulnerable Rwandans.

If the government is really committed to solving the affordable housing crisis, then it must be willing to provide incentives that make economic sense for its partners in the private sector and must be guided by people’s needs. That means it must directly invest to enable affordable housing to be available for those on low incomes.

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