Housing shortage needs a much better diagnosis

The National Social Security Fund’s help-to-buy scheme is being touted as an antidote to a dysfunctional housing market in Uganda.

Last Thursday, President Museveni launched the Fund’s Shs1.4 trillion housing project in Lubowa.

READ: How govt can address current housing shortage

The project’s 2,741 units are expected to go some distance in dealing with the property haves and have-nots in Uganda thanks in no small part to a rent-to-own model.

 In fact, the Fund envisages providing up to 50 percent of Ugandans living in urban areas with decent and affordable housing by 2050.

It is immediately clear that the Fund’s top managers have done their homework. For this, they should be commended. The rent-to-own model should come in handy for households with strained finances. Final prices for the cheapest properties set to be erected at the off-taker (Kyanja) and mixed use (Temangalo) projects are, however, still prohibitively high for a country whose GDP per capita is Shs3.3m.

What is also apparent is the fact that this is a classic example of a misdiagnosis. Conventional wisdom suggests that if the underlying problem in Uganda’s dysfunctional housing market is a dearth of homes, then one solution may be to build more. The problem, though, is that Uganda’s housing stock is being turned into an out-and-out asset class. This is all thanks to the financialisation of the country’s economy.

As a result, the knock-on effect of the Fund’s foray into the property market will be such that it will not only widen existing inequalities but create new ones. It is a public secret that property owners in Uganda—much like those elsewhere—are incentivised by soaring prices and a burning desire for more space. The revelation that the Fund’s properties (40 units) with an asking rate of Shs400m and above in Mbuya and Lubowa have already been sold out tells its own story.

If it needs to be spelt out, what this essentially means is that the Fund’s project—its well-intentioned goal notwithstanding—could end up widening the gap in status and resources between the have-properties and the have-nots. Since the former (have-properties) set out to buy as many properties as they can possibly do, building more homes could in fact end up being counterproductive.

We believe the Fund should instead pull in a direction that nudges prospective first-time buyers to get on to the first rung of the housing ladder. This breed of buyer should get priority in new housing developments. Making such buyers beneficiaries of some kind of affirmative action will shield them from continuing in a precipitous slide that has aggravated the quality of the existing housing stock in Uganda.

The Uganda National Housing Policy approved by Cabinet in 2016 spotlighted a housing deficit of 1.6 million housing units, with 210,000 of them needed in urban areas. The policy set several steep targets, including “increas[ing] the production of adequate housing for all income groups from 60,000 to 200,000 housing units per annum to meet the housing needs by 2022.”

Like its immediate predecessor, the National Shelter Strategy (NSS) of 1992, the policy has proved to be a paper tiger. This is why interventions such as the one of the Fund should be welcomed. We nevertheless believe a strong attempt has to be made to smooth out the rough edges (such as exploring public–private partnerships to bring down the final cost). Short of that, the Fund’s help-to-buy scheme will make things worse, not better.

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