A cross-sectoral approach is key for affordable housing in Ghana

1. Why is a cross-sectoral approach important for the implementation of affordable housing solutions? 

Affordable housing, especially in West Africa, cannot be achieved by one stakeholder group alone like for example, by the construction companies only. All different stakeholders need to be involved: material suppliers, architects, the financial sector, but also the private sector, the government side and different associations. If one of these stakeholders is not involved in the supply of affordable housing, the affordability will be gone. Giving one example: if you do not involve the government, there will be no proper registration of land titles.

2. What are the biggest barriers on company-level to engage in cross-sectoral partnerships?

The biggest challenge for all stakeholders is to trust each other. In the end, everything, starting from the ownership of the land via providing loans to building a house, is based on trust: The ownership of land needs to be certified and guaranteed by the government that nobody else will come and claim the land. Then, if a loan has been approved, it is important that the financial institutions allocate the money in time. The same goes for material suppliers that need to deliver the right quantity of material on site in good quality and so on. Actually, the whole value chain providing affordable housing is based on trust between all different stakeholders including the final owner of the house.

Another challenge for affordable housing is to reduce costs. The highest income of our target group is a maximum of 9 USD per day, which amounts to 270 USD per month. Meanwhile, the banking system in West Africa, especially in Ghana, has interest rates for housing loans of approximately 12.5 % for around 15 years. If you have 90 USD a month available and interest rates of 12.5% and a running time of the loan of 15 years, you are only able to receive a loan between 6.000 - 6.500 USD. With this amount, it is very difficult to deliver any housing product at all. Therefore, each stakeholder asks: “How is it possible to reduce costs in order to provide affordable housing?” Firstly, academia started to address this issue by working on new, less costly materials as well as by finding methods to reuse traditional, less costly materials that are locally available and that for reasons of efficiency could be pre-fabricated in a different way.  

3. Are there already solutions in place that reduce risks in the value chain? 

Actually, yes. There is, for example, the affordable housing model PROBAT, developed by LafargeHolcim in Ivory Coast. With this model, all stakeholders come together and commit themselves to work together, signed by MoUs and contracts. The project was presented during the last IB Sector Dialogue in Ghana by LafargeHolcim Ivory Coast and will start towards the end of this year. Everybody is looking at this project with the hope, as this is currently one of the few affordable housing solutions that have great potential to work in the long run.

4. What other cross-sectoral approaches and solutions are in place in West Africa?

There are some activities from local governments in Ghana to integrate regulations into the housing sector regarding energy and sanitation solutions. On the one hand, the demand for energy increases and the government has to find solutions to cover it. Therefore, they think about making it a requirement for real estate and construction companies to include renewable energy solutions in newly constructed buildings.

On the other hand, the governments are very concerned regarding the pollution of the environment through liquid waste. The common solution that is in place are septic tanks, which have to be emptied occasionally. Still, there is no end disposal and hardly a sewage system, which leads to the untreated waste being dumped somewhere in the environment. The private Biogas Association of Ghana is working on an alternative solution to the septic tanks. They have developed and designed an anaerobic wastewater treatment system, which enables purification of the wastewater. The system is available, but it is still expensive compared to the costs of the septic tanks. Therefore, the Biogas Association of Ghana and a plastic tank producer in Ghana are working on a solution to reduce costs by substituting some of the material with pre-fabricated plastic parts.

5. What are your conclusions regarding affordable housing in West Africa?

Affordable housing cannot only be done by the private sector alone as the main challenges in the region are related to the financing systems for the population with lower incomes as well as the regulation of the ownership of land, which needs to be addressed by the government. They have to enforce a system, in which all landowners need to register their land in order to avoid having two, three or even more people claiming ownership of a certain piece of land. A solution for the financing system might be to endow affordable housing for the end user, e.g. by giving special conditions to private borrowers.  

This blog is a part of the August 2017 series on Affordable Housing in partnership with Business Call to Action.

Read the full series for more innovative inclusive business models, lessons learnt by practitioners, and the unique challenges of understanding and measuring impact in the housing sector.

More than 70 people attended the IB Sector Dialogue on affordable housing in May 2017…

… among them CEOs of construction companies, architects and representatives of finance institutions or of business associations.

The “PROBAT” model by LafargeHolcim Cote d’Ivoire is linking low income households, housing financing, material and construction companies.