Land, livelihoods and housing Programme...

Faculty of Natural Resources and Spatial Sciences Integrated Land Management Institute (ILMI)

Land, livelihoods and housing Programme 2015-18 Working Paper The Integrated Land Management Institute (ILMI) is a centre of the Faculty of Natural Resources and Spatial Sciences (FNRSS) at the Namibia University of Science and Technology (NUST), committed to developing reputable and multidisciplinary research and public outreach activities in the fields of land administration, property, architecture, and spatial planning. The Land, Livelihoods and Housing Programme aims at deepening and expanding the focus on these three key issues in Namibia. This thematic approach seeks to reflect the wide-ranging skills exiting at the FNRSS, and was developed to guide ILMI’s activities during the 2014-18 period. The programme is organised in four aspects: institutional, environmental, fiscal and spatial processes.

May 2018 Integrated Land Management Institute (ILMI) 13 Storch Street Private Bag 13388 Windhoek Namibia T: +264 61 207 2483 F: +264 61 207 9483 E: [email protected] W: ilmi.nust.na

Working Paper No. 7 Housing in Namibia:

The challenges and prospects for adequate future provision

Dr Blessing M. Chiripanhura

Senior Lecturer, Faculty of Economics and Management Sciences, University of Namibia

TableofContents1.Introduction–MacroeconomicContext 12.MacroeconomicBackground 23.CurrentHousingAndProvision 5

TheStructureOfHousingOwnership 5HousingDeliveryModes 6LandServicingAndAllocation 7TheMHDPAndHousingSupply 7

4.HouseholdIncomeAnalysis 85.TheEconomicsOfHousingSupplyAndDemand 10

HousingDemand 10HousingSupply 13

6.TheHousingFinanceMarket 157.ImplicationsAndConclusions 17References 19 AcknowledgementsThecurrentpaperderivesfromworkconductedinthecontextoftheRevisionoftheMassHousingDevelopmentProgramme(MHDP)thattheMinistryofUrbanandRuralDevelopment(MURD)commissionedtotheIntegratedLand Management Institute (ILMI) at the Namibia University of Science and Technology (NUST). The papercontainsonlypublicly-availableinformationandwaspreparedforpublicdisseminationofissuesrelatedtotheworkundertakenfortheMinistryinthecontextofthisproject.Moreinformationaboutthisprojectcanbefoundonhttp://newmasshousing.nust.na/AbouttheauthorDrChiripanhuraisaneconomistcurrentlybasedintheUK.HeholdsaPhDineconomicsfromtheUniversityofSheffield,UK.Hisworkfocusesonlabouranddevelopmenteconomics,employment-povertynexus,povertyandsocial protection inAfrica,macroeconomicmodelling (CGEanalysis), andmicro-econometricsandmicro-dataanalysis.Hehasbeensenior lecturerattheUniversityofNamibiaaswellastheNamibiaUniversityofScienceand Technology, an economist at the Office of National Statistics in the UK, lecturer at the Zimbabwe OpenUniversity, and an economist for the Zimbabwe Congress of Trade Unions and the Labour EconomicDevelopment Research Institute. He has published in several academic journals and presented at variousinternationalconferencesinEurope,LatinAmericaandAfrica.DrChiripanhuracanbereachedatchiripanhura@yahoo.co.uk

© 2018 ILMI – Integrated Land Management Institute ISBN 978-99916-55-67-3 ILMI is a research centre at the Faculty of Natural Resources and Spatial Sciences (FNRSS) at the Namibia University of Science and Technology (NUST). Downloads from the web are intended for public use and may not be sold in any form. Views expressed by the authors are not to be attributed to any of these institutions. Please visit our website for details on ILMI’s publications policy: http://ilmi.nust.na

CHIRIPANHURA Housing in Namibia: The challenges and prospects for adequate future provision

ILMI Working Paper No. 7 Page 1

1.Introduction–macroeconomiccontextHousing is an important socio-economic variable that is usually guaranteed in nationalconstitutions as a basic right. Access to housing should not be determined by gender, race,religion, political affiliation and/or wealth status. Fundamentally, adequate housing should besafe, secure and affordable, and must provide freedom from forced eviction. This guaranteessecurityfortheoccupants,bothinformalandininformalstructures.Theseprotectedrightsareusuallyguaranteedbythegovernment,drawingfromnational(theconstitution)andinternationalconventionsandagreements(e.g.theAfricanCharter,theUniversalDeclarationofHumanRights,the Convention against Discrimination and Racism, UN Committee on Economic, Social andCulturalRightsetc.).Theanalysisofthehousingsituationinacountrycanbedividedinto1)theanalysisofhousingprovision(i.e.thesupplyside),and2)accesstohousing(thedemandside).Thehouseprovisionprocess starts with land surveying and servicing, followed by the construction of the housingunits,andthentheoccupation/utilisation.Thesupplysideofhousingdependsontherulessetbythelanduseandplanningsystem.Thedemandsideofhousingisgenerallycharacterisedbythecommodificationofhousing,whichlimitstheaccessibilityandaffordabilityof(quality)housingbypoorersectionsofthecommunity.Affordabilityisdeterminedbyprice,andhouseholdfactorslikeincome level, housing quality, tenants’ choice, and locality factors (e.g. the proximity andavailability of services, the quality of infrastructure, the aesthetic environmental effect, etc.).Generallypoorpeoplefinditexpensivetobuyortorenthouses,resultinginthembeingrelegatedtothefringesofsociety,and,inurbanareas,toinformalsettlements.Thisresearchispremisedonthisviewthatthemajorityof(urban)peopleinNamibia,areexcludedfromthehousingmarketdrivenbythemarketmechanism.Tofullyunderstandthegravityoftheproblem,itisnecessarytoconductin-depthanalysesofthefunctioningofthemarketmechanisminthehousingmarket.Theproponentsofthemarketarguethattheallocationofhousingshouldindeedbelefttothemarketbecause the market is efficient. However, the antagonists argue that markets sometimes failbecause,wherethereisimperfectcompetition,theyresultininequality(Stiglitz,1989).TheapplicationofthemarketeconomicstotheNamibianhousingmarkethasresultedinaserioushousing crisis characterised by a shortage of housing units, especially in urban areas, and theproliferationofinformalsettlements.Thelatteroftenlackbasicservicesandsanitationfacilities,posing the danger of the outbreak of diseases. There are three basic problems to the housingsituation:first,manyhouseholdslackadequatefinancetobuyorrenthouses,inpartbecausetheexisting stockof housing is less thandemanded, andalsobecause it is too expensive formanyhouseholds;secondhousepricesaretoohigh,andthepriceshavebeenincreasingatafastrateover the past few years; and thirdly, many Namibians are excluded from the housing financemarketbecausetheyhavelowincomes,arepoor,ortheyareunemployed.Theseconditionshaveresultedinhigherdemandforcheaperhouses,andpropertydeveloperstendnottoconcentratetheireffortsonthissectionofthemarketinpartbecauseitisexcludedfromthemortgagemarket.Thepaperisstructuredasfollows:thenextsectionprovidesthemacroeconomicbackgroundofthecountry,highlightingthevariablesthatimpactonthedemandandsupplyofhousing.Thisisfollowedbyananalysisofthecurrenthousedeliverysystemintheeconomyinsection3.Section4 analyses the classification of households by income level. It also assesses their potential toparticipate in the housingmarket. Section 5 delves into the economics of housing supply anddemand,whilesection6examinesthehousingfinancemarketanditspotential.Lastly,section7presentsthekeyimplicationsandconclusionsofthestudy.



2.MacroeconomicbackgroundNamibia ischaracterisedbyhighbut fallingoverall income inequality.Existingdatashowsthatoverall income inequalitydeclinedbetween1990and2010.Detailedanalysis of the changes inincome distribution show significant redistribution from the richest population to the poorerpopulation.Theproportionofincomegoingtotherichest20percentofthepopulationdeclinedfrom78.7per cent in1993/94 to57.3per cent in2009/10,while theproportion going to thepoorest20percentincreasedfrom1.4percentto5.5percentduringthesameperiod.Thattothesecond poorest20 per cent increased from 3 per cent to8.2per centduring the sameperiod.However, inequalitybetweenquintileshasbeenincreasingsince1993,whichindicatesgrowinginequality.The tablebelowshowsthepercentagedifferencebetweentheproportionof incomegoingtothenext20percentofthepopulationandtheproportiongoingtothe20percentbelowit.Thereisgrowinginequalitybetweenadjacentquintilegroups,andthismaygenerateagrowingsenseofinjustice.Thesituationisworsebetweenthebottomquintiles.Atthetopoftheincomedistribution,theinequalitybetweentherichestandsecondrichestquintileshasbeendecreasingovertime.Table1:Inter-quintilepercentageincomedifferences 1993/94 2003/04 2009/102ndPoorestlessPoor20percent 1.6 2.4 2.7MiddleQuintileless2ndPoorest20percent 2.4 3.0 2.8Secondrichest20percentlessMiddle20percent 6.1 7.0 7.1RichestlessSecondrichest20percent 67.2 53.6 39.2Source:CalculatedfromtheFourthNationalDevelopmentPlan(NDP4)(RepublicofNamibia,2012).Themain challenge forNamibia is to findmechanisms to curb the between-quintile inequalitygrowth trend. In addition, the Gini Coefficient figures indicate that there is greater incomeinequalityinurbanthaninruralareas.Thismaynotbesurprisinggiventherisingunemployment,low average incomes, and high cost of accommodation within urban areas. Overall inequalitydecreasedbetween2009and2016.Asof2016,theNamibiaStatisticalAgency(NSA)statedthatincome inequalityasmeasuredby theGiniCoefficienthaddeclined from0.597 in the2009/10periodto0.572inthe2015/16period(NSA,2018).Namibia also faces high butdeclining levels of poverty. The extent of severe poverty1 declinedfrom15.3%to11%between2009and2016,whilethegeneralheadcountpovertyleveldeclinedfrom28.7%to18%duringthesameperiod(RepublicofNamibia,2015).Infantmortality,aproxyforthelevelofpoverty,declinedfrom50perthousandin2000to33perthousandin2016(WorldBank, 2018).This indicates that the investmentmade inprovidingprimaryhealthcare, potablewater and in controlling child killer diseases is bearing fruit. On this front, Namibia comparesfavourablywithSouthAfrica thathadan infantmortalityrateof34per thousand in2016.Thecountryhasalsomanagedtoreducemalariacasesfrom71perthousandpeoplein2007toonly14perthousandin2016.BotswanaandSouthAfricahavelowermalariaincidencestatistics.Regionalcountrieshadhigherinfantmortalityfigures:Mozambiquehad57perthousand,Angolahad the highest figure of 96 per thousand, and Zambia and Zimbabwe had figures in the 40s.Malaria cases are higher in Angola, Zambia and Zimbabwe. Namibia’s success in controllingmalaria comes from successful anti-malaria spraying campaigns, education programmes,availabilityofhealthservices,andhousingthatexcludemosquitoes.Presumably,aruralhousingprogramme that improves the housing in malaria-prone areas can help to further reduce thenumber of cases. However, the challenge is that there is no rural housing policy in place. Theexistingnationalhousingpolicyrefersandismoresuitabletoanurbanthanruralsetup.Table2

1 The severe poverty line is based on the cost of meeting basic requirements for life.



summarisestheeconomicoutcomesofNamibia’sdevelopmentprogrammes.Asstatedabove,thetableshowsthatbothpovertyandinequalityhavebeendecliningovertime.Thedevelopmentprogrammeshadotherdevelopmenttargets,forexample,socialtransformationand skills development. The current development plan (NDP5) emphasises the need for skillstrainingand tackling youthunemployment.ThepastNDPsmissed their growth targets, inpartbecausethetargetswereratherambitious,andalsobecauseofexogenousshocksthataffectedtheeconomy.Despite the improving socio-economic statistics, one dimension remains stubbornly high:unemploymentinthecountryremainshighandincreasing,measuredat28.1%in2014and34%in2016.Unemploymentremainsveryhighamongtheyouth–itaveraged38.7%overtheperiod2011-2014,andover40%in2016.Theexistenceofhighunemploymentmeansalargeproportionofthepopulationlacksincomeandthereforetheabilitytopayforitshousingneeds.Womenareover-represented among the unemployed (31.7% in 2014; and 38.3% in 2016). Overallunemploymentisalsohigherinruralthaninurbanareas.Therehasbeenconsistentgrowthintherateofurbanisation.Forinstance,while39%ofthepopulationlivedinurbanareasin2007,theproportionhadincreasedto46.7%by2015(WorldBank,2018).Thisimpliesthatin2015,closetohalfof thepopulation lived inruralareasandon farms.TheUnitedNation’sDepartment forEconomic and Social Affairs’ 2014Revision ofWorld Urbanisation Prospects estimates that by2020, the rural and urban populations will be 50% apiece (UN, 2015). Thereafter the urbanpopulation will continue to increase while the rural population decreases such that by 2050,about68%ofthepopulationwillbelivinginurbanareas.Thegrowingrateofurbanisationcallsfor concerted efforts towards the provision of services likewater, sanitation and housing. Theproblem is muchmore serious for a country like Namibiawhere a growing proportion of thepopulationlivesininformalsettlementsandhaslowaverageincomes.Thefollowingtableshowsthe proportion of households with access to protected water and sanitation facilities in thecountry.



Table2:povertyandinequalitytargetsandoutcomes,1995-2016

Povertyreduction Reductionofinequality EconomicGrowth Target Outcome Target Outcome Target Outcome

NDP1 Reducetheproportionofpoorhouseholdsfrom

47%to40%.

Progressreducedbysloweconomicandemploymentgrowth.

Reducingincomeinequality(NationalHumanDevelopment

Report(UNDP,1998)theGinicoefficientwas0.7

for1993/94)

Ginicoefficientof0.701.

Targetedgrowthaverage:5%

Actualaveragegrowth:3.6%

NDP2 10%reductionofpoorhouseholds;5%

reductionofseverelypoorhouseholds.

Poorhouseholdsdeclinedfrom38%(1993/4)to28%

(2003/4);severelypoorfrom9%to4%.

ReducetheGiniCoefficientfrom0.67to0.6;increasefemalerepresentativesin

parliamentfrom19%to35%.

GiniCoefficientof0.604(2003/04);

femalerepresentationin

parliamentwas28%(2004)

Targetedgrowthaverage:4.3%


NDP3 Eliminatingseverepoverty.

Severelypoorhouseholdsfellfrom13.8%(2003)to10.3%(2009);childpovertyfellfrom43.5%to34.4%2.

AtargetedGiniCoefficientof0.58;

increaseincomeofthepoorest25%by12%.

0.58(2009/10);incomesofthe

poorest25%grewby7.2%.

Targetedgrowthaverage:5%

Actualaveragegrowth:3.6%(cp.6.1%inemerginganddevelopingcountries).

NDP4 Reducingpovertyfromthe2009/10level.

Extremepovertyfellto5.8%from7.3%

(2009/10);Generalpovertyfellfrom28.7%(2009/10)to18%

(2015/16).

Increaseincomeequality.

Ginifor2016–0.572 Targetedgrowthaverage:6%


CompiledfromtheNDP2(RepublicofNamibia,1999),NDP3(RepublicofNamibia,2007)andNDP4(RepublicofNamibia,2012),andtheNHIES2015/16(NSA,2018).

2 The poverty statistics are based on national poverty lines.

Table3 showsthat there still existsa largesegmentof thepopulation thatdoesnothave access topropertoiletfacilities,especiallyinruralareas.Thataboutafifthoftheurbanpopulationdidnothaveaccesstotoiletfacilitiesinurbanareasshowspooraccesstocriticalinfrastructure,andthisischronicininformalsettlements.Poorsanitationfacilitiestendtocorrelatewithpoorhousing.Table3:Proportionofhouseholdsaccessingprotectedwaterandsanitationfacilities 2003/4 2009/10(NHIES) 2013(DHS)

Rural Urban Rural Urban Rural UrbanProtectedwatersource 79.4 99.4 74.6 98.9 71.9% 97.8%Toilets 25 77 25.6 80.4 20% 73.2%Bushsystemornotoilet 73 21.5 72.1 17.5 76.4% 20%Bucketsystem 1.87 1.34 0.97 0.9 0.4% 0.6%Source:UNICEFNamibia(UNICEF,n.d.)andDHSProgramme(RepublicofNamibia,2014).Compared to countries in the region, the rate of urbanisation inNamibia is less than that of SouthAfrica (64.8% as of 2015) and that of Botswana (57.4%). However, Namibia’s urbanisation rateexceeds that of Swaziland(21.3%),Tanzania(31.6%)andZimbabwe (32.4%).Housing is topical inNamibiabecauseof the fasturbanisationrate,drivenbyrural-urbanmigration fuelledbythedesireforbetter services and jobs inurbanareas.Ahighurbanisation rateputspressureon services likewaterandsewerageprovision,roads,housing,educationandhealthservices.Forinstance,Windhoekacts as a magnet attracting migrants from around the country. This puts a lot of pressure of theexistingservices,andthesituationismadeworsebythescarcityofwaterinareasaroundthecapital.This calls for long termplans tomanagemigration and theprovisionof services in the capital city.Growing demand for housing with constrained housing supply have resulted in a shortage ofaffordablehousing.Inconsequence,informalsettlementshavebeenestablishedaroundmajortowns,andtheyhavebeengrowing.TheMassHousingDevelopmentProgrammeisanappealingandrationalprojectaimedataddressingthehousingsituationinthecountry.Theprovisionofaffordablehousingisadevelopmentalgoal in linewiththeprovisionsof internationalconventionstowhichNamibia issignatory.TheMHDPfitsintothecurrentdevelopmentpolicyasoutlinedintheNDPsthatprioritisepovertyandinequalityreductionandaffordablehousing.Further,the2015HarambeeProsperityPlan(HPP),arguefortheconstructionoftheall-inclusive‘Namibianhouse’(RepublicofNamibia,2016,pp.12,41).However,thechallengeisinensuringthateveryonehasaplaceintheNamibianhousewheneconomic inequality and poverty are still high asmentioned above. To establish the structure andcapacityofNamibianhouseholdstoeffectivelyparticipateinnationaldevelopment,especiallyonthehousingside,thenextsectionexamineshouseholdincomesandincomedistributioninthecountry.

3.Currenthousingandprovision

ThestructureofhousingownershipAsan entrypoint into analysinghosingprovision, this section startsbypresenting the structureofhousingownership,basedon the2011populationandhousingcensusdata.Table4showsthat themajority of households owned their houses, with no outstanding debts. The majority of suchhouseholdswere in rural areas and in informal settlements. Less than 15% of the households hadmortgage loans to finance their housing needs. The low number of mortgage holders points toaffordabilityproblems.The lownumber isalsopartlyexplainedby the low-incomecapacityofmosthouseholdsandthestrictcriteriaappliedbybanks.Asaresult,mortgagefinanceismainlyavailabletohigh-incomegroups.InaninterviewconductedwithNHE(Chiripanhura&Jauch,2015),theinstitutionargued that even low-income households receiving housing subsidies were being accepted formortgage finance by banks. However, there is no information to corroborate this claim since therespectivebankscannotprovidetherequiredinformation,andthe2011dataisratherold.



Table4:TypesofhousingtenureinNamibia,2011Tenure Namibia Urban RuralOwnedwithnooutstandingdebts 56.1% 23% 5.7%ownedbutnotyetfullypaidoff(e.g.withmortgage) 14.2% 37.4% 74.3%Occupiedfree 12.6% 10% 15.1%Rentedwithoutsubsidy 9.1% 17.3% 1.1%Rentedwithsubsidy1 7.1% 11.9% 2.4%Other,specify 0.9% 0.4% 1.3%Source:TheNamibia2011PopulationandHousingCensusMainReport,Table7.2(NSA,2011).1Assumesthatdwellingrentedbygovernment,localauthorities,parastatalsandprivatefirmsforaccommodationpurposesaresubsidised.The table also shows that16.2% of the householdswere in rented accommodation, ofwhich 7.1%received housing subsidies. The bulk of rented accommodation is in urban areas, and only specialgroups receive subsidised rent.Keyproblems in theNamibianhousingmarketare that the existinghousingstockandrentalaccommodationaretooexpensiveforthemajorityofthepeople.Thishashadtheeffectofpushing low incomeearners intohighdensityareasand into informalsettlements.Thecompetitionforcheaperhousingisintense,causinglow-incomegroupstofacerelativelyhigherrents.Thesituationismadeworsebythelackofservicedlandonwhichthesegroupscanbuildtheirownhouses. In the informalsettlements,there islimited tonoprovisionofelectricity,potablewaterandsanitationfacilities.Lackofthesebasicservicesreducesthequalityoflifeoftheinhabitants.

HousingdeliverymodesTheprovisionofhousinginNamibiaislargelylefttoindividuals,non-governmentalorganisationsandtheprivatesector.Forhistoricalreasons,thegovernmentdoesnotwanttodirectlyprovidehousestohouseholds.TheNationalHousingPolicyenvisagesanumberofpossiblemodesofhousingdeliveryinthe economy. It proposes the provision of credit-linked housing (houses for sale), rentalaccommodation (including the rent-to-buy option), houses built by their owners, and subsidisedhousing for low-incomehouseholds.Thepolicyalso includesarole for thegovernment throughtheNational Housing Enterprise (NHE) and councils to construct low-cost rent-to-buy housing for thepoor. In addition to the policy targeted beneficiaries, there are special groups that need directgovernmentattention toaddress theirhousingneeds.These includewarveterans, thedisabled, theold-agedandothervulnerablepersons.TheNHEbuildshousesforpeopleearningN$5,000toN$20,000permonth,oracombinedincomeofup to N$30,000 (Remmert & Ndhlovu, 2018). However, under theMHDP, the NHE’smandate wasexpanded to cover lower income households that used to be covered by the Build TogetherProgramme(BTP).TheBTPwasinitiatedin1992.Ittargetedlow-incomehouseholdswithamonthlyincomeoflessthanN$3,000.ThecoverageoverlapstheincomegrouptargetedbytheShackDwellers’FederationofNamibia(SDFN).TheSDFNwasformedin1998asahousingsavingsschemetoassistthe ultra-low-income households to save towards building their own houses. The SDFN getsgovernment subsidies and builds houses for the very low-income groups (with monthly incomesbelowN$2,000).Oneaspectthatismissingfromthehousingpolicyisthepossiblerolethatcanbeplayedbyhousingcooperatives.Thereismentionofcommunity-drivenhousingprocesses(RepublicofNamibia,2009,p.14)butwithoutelaborationonthenatureandstructure.AlthoughtheSDFNisalreadydoingthis, itwasnotmentionedasanexample.Thecommunity-drivenhousingprocessescouldbelinkedtowhatthe housing policy calls ‘supporting people-housing processes’. Individuals can form cooperatives,contributemoney tobuy landand to constructhouses, andallocate thehouses to themembers. Inaddition, employers can come up with housing schemes where both employers and employeescontributetoapotthatwillbeusedtobuylandand/orconstructhouses.



LandservicingandallocationThegovernmentleavesituptolocalauthoritiestoserviceandallocatelandforhousing,andthroughvariousdevelopmentprogrammes,provides finance for theservicingof residentialplots.Some localauthoritiespartnerwith the private sector (i.e. public privatepartnerships (PPPs)) to service land.Otherscontracttheprivatesectortoservicethelandinreturnforotherlandelsewhereaspayment.These arrangements are regarded as costly anddriving up house prices. For instance, aprominentcaseisthelandinAcademia,Windhoek,thatwasservicedunderaPPParrangement.Theplotsweresold throughan auction systemand they attractedveryhighbids3 thatmanyhouseholds couldnotafford.Local authoritiesdecide on the appropriatemechanism of allocating serviced plot, and this in turnimpacts on housing supply. The auction system came under the spotlight in Windhoek with thecriticism that it tended to favour established property developers and high-income people whiledisadvantaging low-income groups. This resulted in the supply of new houses being dominated byproperty developers who constructed houses affordable to middle and high-income groups. TheapproachusedbytheCityofWindhoekperpetuatedinequality.It isnotsurprisingthattheCitywaspressuredtoabandontheauctionsystem(TheNamibian,2014c).

TheMHDPandhousingsupplyTheMHDPisaN$45billionhousinginitiativethatwaslaunchedin2013tofosterlowcosthousingforlowincomehouseholdsthatfinditdifficulttoaccesshousingthroughthecompetitivehousingmarket.TheBTPbecametemporarilyputonholdduringtheMHDP.ThecomponentsoftheMHDPwerelandservicing, the construction of credit-linked low-cost housing, upgrading of informal settlements,improvementsinruralhousingandsanitation,andprovidingsocialhousing.TheresponsibleauthorityforthedeliveryofthehouseswastheNHE,whichinturncontractedprivatesectorcompaniestobuildthehouses.Theprogrammefacedalotofchallengesrangingfromcostlyhousestopoorconstructionofthehouses,leadingtoitbeingsuspendedin2015.There-launchedMHDPcontinuestodeliverhousesaroundthecountry,underthesupervisionoftheNHE.Thehousesaresubsidisedbythegovernmenttomakethemaffordable.TheMHDPhasdifferenttypes of houses targeted at low and middle-income groups, and the government is committed toconstructing about 5,000 new houses annually, in addition to serviced plots under the HPP. Anexampleoftheapplicationofthesubsidyisasfollows:someoneearningN$2,700permonthcanaffordatypeofhousevaluedatN$70,000,withamonthlyinstalmentofN$550(RepublicofNamibia,2018).Thisentailsa65%subsidy(ofN$129,561)coveringthecostoftheland.Toqualifyforthesubsidisedhouses,anumberofcriteriamustbemet,includingthatonemustbeontheNHEwaitinglist,thatthebeneficiarymustbeafirst-timebuyer,thatshackswon’tbebuiltontheplot,andthatthehousesshouldnotchangeownershipforatleasttenyearsfromthedayofallocation,afterwhichthegovernmentholdstherightoffirstoptiontobuyanysuchhouse.Itisanticipatedthatarevolvinghousingfundwillbecreated,withtheNHEplayingacentralroleinsettingupahousingloanfacility (New Era, 2018a). It cannot be established whether or not the NHE has the institutionalcapacitytohandlethisrole.In2014,over60%ofthepopulationearnedbelowN$2700(seeTable5).Assumingthatthecountry’shousingbacklogof110,000consistsofpersonsearningbelowN$2,700,ifallthesepeopleweretogetthesubsidisedaccommodation,thetotalsubsidybillwillbeamaximumofN$297million.Thisisnotanimpossiblefigure,giventhatthetotalamountinitiallyenvisionedfortheMHDPwasN$45billion.Effective implementation of the programme will increase the stock of houses, which should forcepricesdown.However,thereisneedconsiderhowthisimpactwillaffectthestabilityofthehousingmarket in general, given the dominance of mortgage loans on banks’ asset books. The IMF (2016)warnedofahousingbubblebuildingintheeconomy.Thebuy-to-letmarketthathasbeenquiteactive

3 The lowest priced plots of land were sold for was N$850,000 (The Namibian, 2014b)



on the middle to upper sections of the housing market may face significant challenges servicingmortgages,whichwillinturnaffectbanksandthefinancialsectorasawhole.ThefearofahousingbubblecausedtheBankofNamibiatotakeaction.Inearly2017,itintroducedapolicythatmakesitincreasinglyexpensivetobuyasecond,thirdorfourthproperty.Thepolicystatesthat,as fromthe22ndofMarch2017,Namibian first-timebuyerswillbegivenmortgage loanswithzerodeposit (that is,100%mortgages).However,thepurchaseofasecondhouse issupposed tobebackedbya20:80loantovaluehomeloan;athirdhouserequiresa30:70loantovaluehomeloan;andsoonforadditionalhomeloans.Thecentralbankarguesthatthepolicygivesanadvantagetofirsttimebuyerstogetupthepropertyladder.However,acloseranalysisofhouseholdincomes(below)showsthatitisunlikelythatmanypeoplewillhaveaccesstomortgagefinancetogetonthefirststeponthepropertyladder.Another concern is that theMHDPmay not benefit households that do not have a foothold in theformallabourmarketbecausetheylackaconsistentflowofincometoservicethehousingloans.Theprogrammewouldneed toberefined toensure that itaccommodatesthepeculiaritiesofultra-low-incomehouseholds.Thus, insteadof burdening suchhouseholdswithmonthly loanobligations, thehousing initiative must priorities allocating serviced plots to poor households so that they can,throughanexpandedBTPprogrammeorincollaborationwiththeSDFN,buildtheirownhousesonanincremental basiswith no bindingmortgage obligations. In addition, the condition that the housescannot be disposed of within a period of ten years may imply that the houses are not usable ascollateral,thusdenyinghouseholdsthebenefitofahouseasafinancialandeconomicasset.

4.HouseholdincomeanalysisThisresearchonmasshousingexaminesthehousingsituationinNamibiawiththeaimofimprovingthe provision and accessibility of housing by low income households. The demand and supply ofhousingdependonthemacroeconomicperformanceoftheeconomy.Householdsrelyontheirearnedincome to pay for their housing needs. Existing data shows that the average household income inNamibia in 2014 was N$6,626 per month (NSA, 2015). Table 5 shows that the majority of thehouseholds earnmonthly incomes below this average. First, 55.1% of the households surveyed in2014earnedlessthan$1,000permonth.Secondly,91.1%ofthehouseholdsearnedmonthlyincomesthatfellbelowtheaverageincome.Thissituationhasnotchangedsignificantlysincethen,giventhathouse prices have been increasing, unemployment has been increasing, and thatwages have beengrowingslowly.There are a lot of householdsof different sizesand structure in the economy.Household sizes alsodifferbyregion.Table5showsthattheaveragehouseholdsizeconsistsoffivepersons,andthesizehas not changed significantly over the past six years. Ohangwena has the largest households, andErongohasthesmallest.Multiplyingthetotalnumberofhouseholdsbyaveragehouseholdsizegivesatotalpopulationof2.45millionpeople.Ofthispopulation,2.23millionpeopleareinhouseholdsthathadaveragehouseholdincomesbelowN$6,000.Thisisworryingbecauseitindicatesthatthemajorityofthepeopleinthecountryhavelowincomes,andtheirparticipationintheformalhousingmarketistherefore limited.Asdiscussed later, the low incomespreclude themajorityof thepopulation fromaccessingmortgagefinancefrombanks.Columns 4 and 5 in Table 5 are obtained by applying the World Bank USD-denominated incomeclassification categories (World Bank, n.d.-a)4 to theNLFS 2014 income data. The conversion givescomparable thresholds across countries. The upper limits of the NLFS 2014 income groups areconvertedtoUSDusingtheaverageexchangerateofthemonthofAugust2014(column4),expressed

4 Themselves based on the Atlas method (World Bank, n.d.-b)



in per capita terms, and compared to the World Bank (monthly) per capita income classificationgroups:

i) households with monthly per capita income that was less than or equal to USD87.08(N$4,367.48)fellinthelow-incomeclass;

ii) thosewithmonthlypercapita incomesranging fromUSD87.09toUSD343.75(N$17,238.72)werelowermiddle-incomehouseholds;

iii) thosewithmonthlypercapitaincomesrangingfromUSD343.76toUSD1061.25(N$53,220.63)wereuppermiddle-incomehouseholds;and

iv) those with average monthly per capita income above USD1061.25 were high incomehouseholds.

The conversion and classification result in column 5. Converting the World Bank’s upper middle-income limit toNamibianDollars gives aminimumhousehold income ofN$53,220.63 for thehigh-incomegroup.Table5:Numberofhouseholds,householdsizesandaveragemonthlyincomelevels,2014Householdincome(N$)

No.ofhouseholds

Proportionoftotal

NLFSUpperLimitAveragehouseholdmonthlyincome

(USD)–WBequiv.WorldBankIncome

classificationRegion Average

householdsize

<1000 286853 0.551 19.94 Lowincome Zambezi 4.71000-2000 95756 0.184 39.88 Lowincome Erongo 3.52001-3000 39212 0.075 59.82 Lowincome Hardap 4.23001-4000 24358 0.047 79.76 Lowincome //Karas 3.74001-5000 16759 0.032 99.70 Lowermiddleincome Kavango 6.55001-6000 11744 0.023 119.64 Lowermiddleincome Khomas 4.16001-7000 7422 0.014 139.58 Lowermiddleincome Kunene 4.47001-8000 6195 0.012 159.52 Lowermiddleincome Ohangwena 6.18001-9000 4537 0.009 179.47 Lowermiddleincome Omaheke 4.19001-10000 7219 0.014 199.41 Lowermiddleincome Omusati 5.2>10000 20862 0.040 >199.41 Lowermiddleincome Oshana 4.9

>1061.25 Highincome Oshikoto 5

Otjozondjupa 4.1

Total 520917 Namibia 4.7

Adapted from the NLFS 2014 (NSA, 2015); Household sizes from the NHIES Report, 2009/10 (NSA, 2012); IncomeclassificationcalculatedfromtheWorldBankIncomeClassification.Column4figuresarebasedonahouseholdsizeof4.7personsandtheaverageAugust2014exchangerateofN$10.67perUSD.ApplyingtheWorldBankincomeclassificationtoTable5showsthathouseholdsthatearnedN$4,000per month and below can be classified as low income. These households constitute 85.7% of allhouseholds.Households thatearnedN$4,000andN$10,000were the(lower)middle-incomegroup,and they constituted 10.4% of all households. As stressed later, the low-income group could notqualify foramortgage tobuyahouse;andonly8.9%ofNamibianhouseholdscouldafford togetamortgage in 2014. The majority of the households that could afford mortgage finance wereconcentratedon the lowerlevelof thehousingmarketwhere transactionalactivitywashighestandpriceswerepushedupbecausedemandoutstripped supply.This is becauseofa limitednumberofentrylevelproperties,whichforcedpricestoincreasesignificantly,resultinginover-valuation(IMF,2016) and extra pressure on household finances. The situation has not changed significantly since2014.Infact,therehasbeensignificantexpansionofinformalsettlementsinurbanareas,especiallyinWindhoek, since that time. This is because of high rural-urbanmigrationwith restricted supply ofaffordableurbanhousing.



Applying the World Bank classification on the NLFS 2014 data indicates that less than 15% ofNamibian households can be classified as middle income, and about 4% can be classified as highincome.Splittingthemiddle-incomegroupintoloweranduppergroupsmaynotbefunctionallyusefulin thecaseofNamibia.According toTable5, themajorityofNamibianhouseholds(85.7%)are lowincomeandcannotaccesstheformalhousingfinancemarket.Thesehouseholdsshouldbetheprimarybeneficiariesofagovernment-drivenmasshousingdevelopmentprogramme.AnotherclassificationofNamibianhouseholdswasdonebytheNPC(RepublicofNamibia,2018)atthebeginningoftheNDP4.Households were classified into three segments, namely ultra-low and low-income households(alternativelycalledtheblue-collarclass), themiddle-incomehouseholds(alternatively identifiedasthewhite-collarclass,whichconsistsoflow,middleanduppermiddle-incomeearners),andthehigh-income households (or upper class) consisting of the rich and the super-rich. The low andmiddle-incomegroupswerehardesthitbytheshortageofhousinginthecountryastheydidnotqualifyformortgagefinance.Another classificationofNamibianhouseholdsby income statuswasdoneby theMinisterofUrbanand Rural Development in a 2016 speech (Shaningwa, 2016). The minister identified the lowestincome sector ashavingmonthly incomes ranging fromzero toN$1,500(p.4). She also identified asecond incomegroupwith incomes falling in therangeN$1,501toN$4,600.TheMinister identifiedthelowerandmiddle-incomecategoriesthatareintendedtobenefitfromthegovernment’sgrantsandsubsidies as falling within the income range N$1,501 to N$4,900 (p. 8). It is paradoxical that thegovernmentgrantsandsubsidieswillbetargetedatthisgrouptotheexclusionofthelowestincomegroup(0–N$1,500monthlyincome).The discussion above shows that there are a number ofways of classifying households by incomelevel. The different categorisationsdo not read to the same conclusions, andmay impact onpolicyfocus.TheMURDclassificationshowsthatthegovernmentwantstheMHDPtofocusonapproximately34%ofthehouseholds,totheexclusionofthelowestincomecategorythatconstitutesaboutafifthofallhouseholds.

5.TheeconomicsofhousingsupplyanddemandAccording to the national consumer basket, households allocate28.4% of their incomes to housing(NSA, 2017). Increases in rents that exceed increases in incomes cause households to allocate anincreasing proportion of income to housing, which reduces the amount of income left for otherrequirements. An analysis of the rental cost of accommodation, including imputed rent for owner-occupied houses, shows that housing costs (that is rentals, water, electricity, gas and other fuelcharges) increasedbyanaverage3.4%between2010and2015.Thehighest increase inthecostofhousing was recorded in 2011 when rentals increased by 7.45%. Given that the cost of othercomponentsoftheconsumerbasketalsoincreasedduringthisperiod, it isapparentthatonaveragehouseholdrealpurchasingpowerdeclinedasincomesgrewataslowerrate.Despitetheincreaseinthecostofliving,thedemandforhousinginthecountryremainedhigh.

HousingdemandThe demand for housing stems from the basic need for shelter. Households demand accessible,sufficient/appropriateandaffordablehousing,andthisisnotavailableonthemarketinNamibia.Inaddition,thegrowthofinformalsettlementswherethereisinadequatewaterandsanitationfacilitiesis linked to the unaffordability of decent accommodation in urban areas. The Namibia HouseholdIncome and Expenditure Survey of 2009/10 reported thatnearly a quarter of the population lacksaccess to decent housing. The main challenge that households face is the lack of affordability ofexisting houses. The Minister of Urban and Rural Development, Sophia Shaningwa (2016) definedaffordablehousingas‘theprovisionofhousingunitsthatarepricedinthatmannerthatwillallowthe



targetbeneficiaries,thatisthelowerandmiddle-incomeearners,toalsobeabletoaffordotherbasicliving costs such as food, clothing, transport education andmedical care” (p. 2). In the USA and inAustralia,affordability isdefinedasasituationwhenahouseholdcanpaynomore than30%of itsannual incomeonhousing,while theUK’sNationalHousingFederationusesa cut-off point of 25%(ColliersInternational,2014).The30%cutoffisconsistentwiththeweightingofhousingexpenditurein the national consumer basket used by the Namibia Statistics Agency to calculate inflation. Theanalysis of affordability canbedividedbetweenaffordability in the rentalsmarket,and in the salesmarket.There isnoconsistentsetofstatisticsshowingtheextentofthedemand forhousing in thecountry.However,suchdemand isexhibitedby theproliferationof informalsettlementsaroundthecountry,thelargenumbersofpeoplelivingininformalhousingandsettlements,sporadicdemonstrationsbydifferentgroupsfightingforaccesstoland,andthehighdensityofoccupationperroomespeciallyintowns,amongotherindicators.Althoughtheaveragehouseholdsizeisaboutfivepersons,therearesome largehouseholds consistingof up to15persons (NSA,2012).Townsand local authoritiesdohavesomedisjointedstatisticsofestimatedhousingbacklogs.For instance, in2008,Kalili,AndongoandLarson(2008)estimatedabacklogof61,710units.In2011,theIPPRestimatedthatthebacklogamountedto89,000units,thebulkofwhichwasatthebottomoftheincomedistribution.TheNHEStrategicPlan(2017-2022)estimatedthebacklogtobeabout110,000units,growingatanannualrateof3,700units.HousingFinanceAfrica(CAHF,2018)puttheNHEbacklogaloneashavingincreasedfrom76,800in2016to84,940bymid-2017.TheMinisterofUrbanandRuralDevelopment,in2016,quotedanationalbacklogof100,000housingunits,withthelargestbacklogof45,000unitsbeingforthelowestincomegroupwithincomesrangingfromzerotoN$1,500(Shaningwa,2016).TheministeralsomentionedthattheNationalHousingEnterprise(NHE)had,asatOctober2016,ahousingwaitinglist of over 80,000 applicants. City councils have their ownwaiting lists, and there is no system ofconsolidating the backlog lists, and of eliminating double applications or listings. Despite theinconsistent estimates, it is apparent that the demand for housing is high and that it outstrips thesupply, inpartbecauseof lackofaffordability. In2015, themedianhousepricewas$868,000(FNBNamibia,2015).Thishasincreasedsincethen,andisnotaffordabletothemajorityofthepeople.The growth in the backlog is a result of limited supply growth and higher demanddue to growingnumbersofhouseholds.Householdsizehasbeendecliningovertime(from5.7personsin1995to4.4personsin2016),and,accordingtoKalili(2017),newhouseholdsincreasedfrom63,426in1994to80,853in2016.Duringthesameperiod,thenumberofshackaccommodationincreasedbyaratioof4:1relativetomodernhousing.Thesefigurespointtosignificantchallengesaffectingthesupplysideofhousingdelivery,ofwhichlanduseandvaluationareimportantfactorsThedemandforhousingislinkedtothedemandforlandonwhichtobuildthehouses.Accesstolandisvery important inbothruralandurbanareas. Inruralareaswhere landownership iscommunal,individualscanbeallocatedlandonwhichtofarmandbuildahomesteadbythetraditionalauthoritiesandthereisnoneedforservicingit(i.e.theprovisionofroads,waterandsewerlines).Newfamiliescanalsoconstructtheirhousesinornearthefamilycompound.Inurbanareaswherelandisascarcecommoditythedynamicsaredifferent.Itisthelocalauthoritythatisresponsibleforgivingaccesstoservicedland,andthisisdonethroughthemarketmechanism.Supportersofthemarketmechanismarguethatitisefficientinallocatingresources,butthisisusuallyattheexpenseofequity.Themarkettendstoberuthless,failingtotakecognisanceofsocialjusticeandpowerimbalanceissues.Itdoesnottakeintoaccounttheinitialresourceallocation.Andthisisthemajorproblemwithhousinginurbanareaswherethereisagrowinghousinggapasdemandoutstripsthesupplyofhouses.Thehousinggapdiffersacrossregionsandcities,andbyincomegroup.Itismoresevereintownsthaninotherse.g.inWindhoek,WalvisBayandSwakopmund.Thereareanumberoffactorsthatdriveupthe demand for housing. First, the urbanisation rate has been increasing over the years, and thegrowthintheurbanpopulationhasnotbeenmetwithsimilargrowthinhousingunits.Thegrowthofthe urban population is driven by migration from rural to urban areas, and by reproduction andhouseholdformationwithintheurbanareasthemselves.Ashouseholdsgrow,theirdemandformore



living space also increases.With limited supply of housing units, the demand for housing ends upoutstrippingthesupply.Inaddition,theremaybeashortageofparticulartypesofhousingdemandedby households. Themarket for low cost housinghas fewer units relative to the demand,while themarket forup-market andexpensivehouses tends tohave houses availableboth for rental and forpurchasing.Themajorityofthepopulationcannotaffordthelatter.Figure1showstheactivityrateindifferentsegmentsofthemarket.Figure1:Amarket-segmentedpercentagebreakdownofhousingtransactions

Source:FNBHousingIndex,December2016(FNBNamibia,2016).Thefigureshowsthatthevolumeoftransactionsofsmallhouseshasbeenincreasingsince2009.Thesmallhousessegmentof themarket is themostactiveandhasexperiencedsignificantpricegrowthbecauseofdemandexceedssupply.Therehasalsobeengrowingtransactionactivityofmedium-sizedhousesovertime,anddecliningvolumeoftransactionsoflargehouses.Itislikelythatgrowinghousepricesshifteddemandtowardssmallerhouses,thusincreasingcompetitiononthelowerlevelofthehousingmarket.Thus,althoughdemand forhousingexceeds thesupply,muchof thatdemand isonsmallandmedium-sizedhouses.Thisisthesectionofthemarketthatisdrivingupprices.Thedemandforhousingisdeterminedbyhouseholdincomes.Ingeneral,migrantsfromruralareaswithlowornoskillstendtomoveintothehighdensityandinformalsettlementareasofcities.Giventhe lowaverage incomes and income inequality in the economy, themajorityof thepopulationhasrestrictedchoiceofhousingandisconfinedtothehigh-densityareaswhichhavenotbeenexpandingfastenoughtoaccommodate thegrowingpopulation.Low incomehouseholdscannotaccess landatauction,and theyare technicallyeliminated fromthemortgagemarket.Given thehighpovertyrate(see Table 2) in the economy, poor households are forced to trade-off between householdrequirements, including housing. This results in the concentration of low income, poor householdslivingininformalsettlements.There is also a general shortage of housing suitable for households in the middle of the incomespectrum.Thesearehouseholdsthatcannotbeclassifiedaslowincomehencecannotaccesshousingunder programmes like the Mass Housing Development Programme, and they do not have highenoughincomestoaffordmortgagefinance.Thisgrouphasbeengrowingwhilethesuitablehousingstock has not, thus creating excess demand for housing. This shortage has been worsened byspeculativeactivitiesintherent-to-buysectionofthemarketwherehomeownerstendtochargehighrentals in order to service theirmortgages. The high rentals crowd out some households to lowersectionsofthehousingmarket.Therisingdemandforhousingis,asmentionedearlier,drivenbyfastgrowingurbanpopulation.Rural-urbanmigrationistakingplaceatafastrate,leavingtowncouncilsinareactivemode.Shortageofaffordablehousing forcespeople intoinformalsettlements.Despite theexistenceofprogrammestoupgradeinformalsettlementstoprovidedecenthousing,theslowpaceofimplementation of the programmes, together with financial constraints, means the existence ofpersistentexcessdemandforhousing.Therateofruralinfrastructuredevelopmentisalsoveryslowandisthereforeunabletoreducerural-urbanmigration.Theslowpaceofhousesupplygrowthalsocausesexcessdemandforhosingtopersist.

Published by: FNB Namibia Address: @Parkside, 130 Independence Avenue, Windhoek Authored by: Daniel Kavishe Tel: +264 61 2992725 Fax: +264 61 225994 Methodology: The FNB House Price Index is based on the median house price from Deeds Office data. Disclaimer: The information in this publication is derived from sources which are regarded as accurate and reliable, is of general nature only, does not constitute advice and may not be applicable to all circumstances.

Market segments Overall, the market seems concentrated in the small to medium segment where property is valued between N$400K to approximately N$2.6mn. These two segments constituted 70% of the total volumes across the country as seen in the adjacent graph. Volume trends upwards (16%q-o-q) in these segments as the prices remain within the affordability band of most. Within the luxury segment (property deals over N$6.5mn), Isolated transactions took place at the coastal town and in central Namibia which pushed the median price in the segment to N$16mn. Growth in this segment tends to be volatile as it is dependent on movements of a few expensive transactions and therefore may not be indicative of overall market strength or weakness. Within, the large segment (property deals between N$2.7mn and N$6.5mn) price growth tapered to 14%q-o-q during the fourth quarter with prices leveling at N$3.4mn. The appetite for large houses continues to decline with volumes down to -47% during 4Q2016. Central property In the central part of the country, the median prices in the large segment recorded N$3.5mn. In the medium segment, house price printed at N$1.65mn, 6% higher than the same period last year. The small segment saw prices adjusting by 25% to N$845k further proof that market activity is concentrated in this segment. The central house price index however, has already dipped into negative territory (-3%) for the quarter suggesting that relative to the prior year growth, prices have started to weaken. Across the major municipalities, Windhoek, Okahandja and Gobabis, registered significantly lower price growth than the five-year average after prices averaged N$900k in Gobabis, N$1,300k in Windhoek and N$874k in Okahandja. Coastal towns Property prices at the coast continued to enjoy robust price growth after prices soared 19.16% quarter on quarter. However, volumes remained weak contracting by 36% in the final quarter. Price growth has been substantially poor in areas such as Henties Bay; however, this has been overshadowed by higher prices in Swakopmund and at Walvis Bay. Median price, as at December 2016, was N$1mn in Swakopmund and N$790k in Henties Bay and Walvis Bay.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug-

11

Jan-

12

Jun-

12

Nov

-12

Apr-1

3 Se

p-13

Fe

b-14

Ju

l-14

4197

4 M

ay-1

5 O

ct-1

5 M

ar-1

6 Au

g-16

Percentage breakdown of housing transactions based on

market segmentation

Small Medium Large Luxury

84% 77%

45% 33%

22% 21% 18% 17% 16% 15% 13% 13% 11% 10% 9% 8% 7%

3% 1%

0% -8% -8%

-17% -19%

-24% -32% -35%

-59%

Katima Mulilo Okahao

Omuthiya Swakopmund

Luderitz Oshakati Eenhana

Outapi Outjo

Gobabis Walvis Bay Windhoek

Okahandja Rundu

Otavi Tsumeb

Oshikuku Ongwediva

Otjiwarongo Grootfontein

Keetmanshoop Ondangwa

Omaruru Mariental

Arandis Usakos

Oshikango Henties Bay

Annual growth across main towns



HousingsupplyThehousinggapcanbeexaminedfromasupplyside.Ingeneral,thesupplyofhousingunitshaslaggedbehindthedemand,resultinginhigherhousingprices.Inaddition,thehousingsupplycurveisratherunresponsive,meaningthereisalowresponseofthequantityofhousingsuppliedtoachangeintheprice of housing. With growing demand for housing, the average house price increases very fast,makinghousesunaffordabletolowincomehouseholds.Thehousingbacklogisanindicationoftheshortageofhousingunits,itselfaresultoftheshortageofservicedland.Althoughtherearemanycomplexfactorsaffectinghousingsupply,itissmartertofocusonthesupplyofservicedland.Thelimitedsupplyofservicedlandimpliesthatittakesalongtimeforland applicants to be allocated serviced land from local authorities (Immanuel, 2015). There areaccusationsthatsomedevelopershoard landinorder topushuphouseprices(Mwilima,Fillipus,&Fleermuys, 2011), but there isnodata to verify the claim.Nonetheless,developersare fittingmanysmallhousingunitsontheavailableland.Thismaximizesthenumberofunitsforsalebutitreducesthespaceavailabletohouseholds.Thelanddeliverysystemislongandcumbersomebecauseitrequiresseveralapprovalprocessesbythelocalauthoritiesandgovernment(Sweeney-Bindels,2011).Localauthoritiesarguethattheylackthe resources to expedite land servicing. For example, the Windhoek City Council argues that themountainous landscapearoundthe citymakes itmore expensive to service the land,and this feedsintohigherhouseprices.Theyalsoarguethatlandaroundtownsandcitiesisprivatelandthattheyhavetobuyfromtheownersbeforedevelopingit,whichtakestime.The slow supply of serviced land and its impact on house prices was also acknowledged in thegovernment. It has introduced a number of interventions aimed at alleviating the problem. Forinstance,itofferedfundingforresidentiallandservicingtosomelocalauthoritiesundertheTargetedIntervention Programme for Employment and Economic Growth (TIPEEG) programme. Under theMHDP, the government committed to providing more serviced land around the country. Theprogrammeaimed todeliver185,000housingunitsby2030with anannual target of 10,300units.However, in 2014, only 4,204 units were developed. The programme faced some challenges thatresultedinthegovernmentstoppingitin2015inordertoreformtheinstitutionalframeworkandtorenegotiatesomeofthecontractswhichwereviewedastoocostly.Nonetheless,newhousescontinuetobedeliveredandallocatedaroundthecountry.ThegovernmentfurthercommittedtosocialtransformationandprovisionofhousingintheHPP.TheHPP seeks todeliver 6,500 serviced residential plots and5,000 housing units per year.As of April2016,therewere34,483urbanservicedplotsand100,447un-servicedones.Thedistributionoftheplots varies across regions.There are twoseparate sets of statistics linked to theMHDPand to theHPP.Thereisnoclarityfromthegovernmentwhetheronesetsubsumestheotherornot.Despitethegovernment’sinterventions,propertydevelopersandindividualscomplainoffailingtogetserviced land from local authorities,which results in reducedhousing construction.Restricted landsupply results in high land prices and consequently costly houses, which many Namibians cannotaffordtobuyorrent.Thepriceoflandaccountsforasubstantialportionofthecostofanewhome.Theimpactoflandcoston housing has been examined elsewhere, notably byMacFarlane (MacFarlane, 2017) for Scotland,whoconcludedthattherisinghousepricesweremainlydrivenbyrisinglandprices.OtherstudiesthatlinklandpricestohousepricevolatilityincludeHannah,KimandMills(1993),Kok,MonkkonenandQuigley (2014),Knoll, Schularick andSteger (Knoll, Schularick,& Steger, 2017)amongothers.Wenand Goodman (Wen & Goodman, 2013) argued that there is significant reverse causality betweenurbanlandpricehouseprices.ChiripanhuraandJauch(2015)statedthatonaverage,thecostoflandinNamibiaconstitutedupto40%ofthecostofanewhouse.Thisindicatesthatlandeconomicsisatthecentreofthehousingsituationinthecountry.



Aswith goods, there isnooneuniform landmarket: the landmarket varies across regions, inpartbecauseofdifferencesintopography,availabilityofservices(and/orcostofputtingupservices),andneighbouring developments. Apart from the limited supply of serviced land,Windhoek, until a fewyears ago, had the additional problem of allocating serviced land to the highest bidder. Thecompetitivesystemresultedinpoorandlow-incomepeoplebeingunabletoaffordland.Thepeoplethat won the bids tended to construct high value properties whose prices and rentals wereunaffordabletothemajorityofthepopulation.Generally,thereisnosingleconsistentsourceofdataonhousingcostsandsupply.Thisresearchputstogetherdatafromdifferentsourcesinordertoenhancethepictureofthehousingsituation.Table6belowshowstheaveragecostsofbuyingand/orrentinghousingunitsinNamibiantowns.Table6:Averagecostofbuyingand/orrentinghousingunitsinNamibia

Cost Source1-bedroomapartmentrental:incitycentre N$4,500-N$8,962.13permonth (Numbeo,2018)

:outsidecitycentre N$3,500-N$7,500permonth3-bedroomapartmentrental:incitycentre N$8,000-N$18,000permonth

:outsidecitycentre N$6,273.49-N$17,000permonthBuyinganapartmentincitycentre N$8,333-N$20,000/m2 (Numbeo,2018)

:outsidecitycentre N$4,500-N$17,000/m2

Constructioncosts

SDFN:N$900/m2; (Chiripanhura &Jauch,2015)Construction company average: over

N$6,000/m2OtjomuiseNHEhouses:N$4,393/m2 (TheNamibian,2010)NHEcorehouse(2009):N$5,900/m2 (Sweeney-Bindels,

2011)Conventionalhouse(2009):N$4,300/m2Thetableshowstherangeofrentthatonecanpayforurbanaccommodation.Livinginthecitycentrecostsmore than living in the outskirts. The same applies to buying in the city centre compared tobuyingintheoutskirtsoftown.Outsidethecitycentre,differentresidentialareashavedifferentrentalandsellingpricesbecauseofneighbourhoodeffectsandincomeclass.WhatisstrikingisthedifferenceincostpersquaremetreinbuildingahousebetweentheSDFN(whichbuildshousesforpeopleonthelowest income level) and construction companies/property developers (that build houses for themiddle tohigh incomegroups).Oneargument thathasbeenadvanced is thathouses are expensivebecauseofthehighcostofbuildingmaterials.ItisbafflingthattheSDFNandthepropertydevelopersarebuying constructionmaterials from the same suppliers, yet theyhave such ahugedifference intheirconstructioncostpersquaremetre.AsimilarquestionwasraisedbytheadvisertotheMinisterofUrbanandRuralDevelopmentin2014,queryingwhytheNHE’scostpersquaremetrewashigherthanthatofaprivatedeveloperthatwasconstructingtheOmeyaEstateoutsideWindhoek(thatcatersorhigh-incomehouseholds).These figures suggest there are some inefficiencieswithin thehousingmarketthatareforcingupprices.The low supply of housing units around the country has contributed to rising prices. The mostauthoritativesourceson the changes inhouseprices around the country is theFNBHousing Index.The index shows the average house prices inmajor towns. On average, house prices increased by11.4%between2010and2016.Duringthatperiod,disposableincomesgrewbyanaverage8%peryear(NamibiaEconomist,2016),whichshowsthatincomeslaggedbehindhouseprices.ThehighestaveragepriceincreaseoccurredinKatimaMulilo,Oshakati,RunduandWindhoek.Between2011and2016, the housing volume increased by approximately 30.5% and the average price increased bynearly90%.



Table7:Housepricesinselectedtowns,2010-2016(N$’000)

2010 2011 2012 2013 2014 2015 2016

Averagepriceincrease(%),2010-2016

Gobabis 383 481.50 608.5 620 630.2 783.5 900 15.8KatimaMulilo 286 275 326.35 430 528.75 543 997.08 26.0Oshakati 486.3 475 416.00 420 964.1 686 826.8 17.9

Otjiwarongo 377.5 447 592.5 678 735.08 750 755 12.8Rundu 280 320.7 331 401 553.23 614.8 676.29 16.3

Swakopmund 612 580.5 700 787.5 750 875.8 1164.17 12.1WalvisBay 489.35 415 450 617.5 800 795.5 900 12.1Windhoek 544 682.5 800 980 910 1150 1300 16.2Namibia 450 480 609.75 640 700 800 850 11.4

Source:FNBHousingIndex,December2016(FNBNamibia,2016)Giventhestructureofincomedistribution,manyhouseholdscannotaffordtobuytheexistingstockofhouses. The2017AfricaHousingFinanceyearbook reports the2017average cost of anewlybuildhouseinNamibiaasN$700,550(orUS$52,681),andthatonly19%ofurbanhouseholdscouldaffordthehouse, given the existingmortgage financing arrangement. LinkingTables4, 6 and7 illustrateswhy many houses are unaffordable. Take the average house price in 2014 against the averagehousehold income: given that access to mortgage finance is determined by earnings, the averagemonthly income of N$6,626was inadequate to allow the average households to securemortgages.Banksworkwiththeassumptionthattheindividualallocatesamaximumof30%ofmonthlyincometohousing/servicing the loan.Thispercentagedetermines the amount that thebankadvances as amortgage, which in turn determines the type of property an individual can afford.With our 2014averagehouseholdincomeofN$6,626,anaveragehouseholdwouldhaveaffordedmonthlymortgagepaymentsofN$1,988permonth. Assuminga25-yearmortgage, theaveragehouseholdwouldhavebeen granted a mortgage loan of approximately N$596,340 when the average house price wasN$700,000. The average householdwould have been able to purchase a house in KatimaMulilo orRunduonly,butstillhadtocomeupwiththenecessarydepositandtransfercostsamount.Accordingto Table 5, over 90% of the householdswouldnot qualify for amortgage. It is not surprising thatNamibia is often ranked among the most expensive places in the world in terms of housing andhousing provision (The Namibian, 2014a). The discussion above shows that apart from theconstrained supply of houses, there is a serious problem of lack of affordability. Affordability is afunctionofthreefactors:income,priceandfinanceterms.

6.ThehousingfinancemarketTheperformanceofthehousingmarketdependsontheperformanceofthehousingfinancemarket.InNamibia,themainsourceofhousingfinanceinmortgagefinance.Sincetherearenobuildingsocieties,it is commercial banks that offer mortgage loans. With existing data, it is not possible to extractinformationonthevalueofhousespurchasedonmortgage.TherearetenlicencedcommercialbanksinNamibia,themajorityofwhichareforeign-owned.Theconcentrationoflendinginmortgagesisavulnerability threat to the banking sector that has forced the central bank to warn about risinghousehold debts. Because of the structure and conduct of the banks, their lending policies arediscriminatoryandtheymainlytargetformallyemployedpersons.Evenso,notallformallyemployedpeoplehaveaccesstomortgagefinance.Accesstomortgagefinanceisrestrictedtopeoplethatcanmeetsetcriteriathatincludeaminimummonthly income threshold. Individuals that offer acceptable collateral can accessmortgage finance,providedtheycanprovethattheywillbeabletoservicetheloan.Theself-employedandthosewithlow incomes have limited access to formal housing finance because they often fail to meet thestringentqualifyingconditions.Thekeyissuesthatdeterminetheaccesstoamortgageare:



(i) aconsistentmonthlyincome(andbanksallocate30%ofnormalafter-taxincometomortgage

repayment);(ii) a‘good’personalbalancesheetwithallmonthlyincomesandexpenses;and(iii) goodcredithistory.Bankscheckthecredithistoryofloanapplicantsbycheckingwhetheror

nottheapplicantsareblacklistedbyTransUnion5.Banksalsocheckpotentialborrowers’otherfinancialobligationsthatmayimpactonrepayments.

Many low-income individuals fail to qualify formortgages because they cannotmeet requirements,evenwith the zero deposit as instructed by the Bank of Namibia. The type of house that a personearningtheaverageincomecanaffordisscarceonthemarket,especiallyinWindhoek.Lackofaccessof mortgages is partly to blame for the housing backlog in the country. The NHE stated that thebeneficiariesoftheMHDPareencouragedtosourcefinancefrombanks,butthebankshavegenerallybeenunwillingtodoso.Thegovernmenthasoftencomplainedthatbankswerenotplayingtheirpartinaddressingthehousingchallengesthat thenations is facing.Thisresulted incabinetallowingtheNHEtofinancethepurchaseofhousesconstructedundertheMHDP(NewEra,2018b).Asmentionedabove,itisnotpossibleatthisstagetoascertainwhethertheNHEhastheinstitutionalcapacitytodealwith low incomemortgages. Inaddition, there is adanger that,where the state guarantees loans, amoralhazardproblemariseswhereindividualsenterintofinancedealswhentheyarequiteawareoftheir inability to pay back the loans. Instead, they cause the burden to fall into the guarantor. Forexample,thereisriskassociatedwithaninstitutionliketheNHEofferingsubsidisedhouseswheretheoccupiersusebankfinancetopayofftheirportionofthecostofthehouse.Supposetheoccupierfailstofulfilhis/herloanobligation,bankswillbemorethanwillingtorepossessthehouseandsell it inorder to recover their money. The banksmay or may not sell the house at market value. But theproblem that arises is that thiswill transfer the subsidy value from the poorer occupier to richerbuyersofhousesatauction,thusperpetuatinginequalityintheeconomy.Wherethehouseissoldatmarketvalue,thebankwillprofitfromthestatesubsidyinsteadofthelow-incomehousehold.An additional problem affecting the housing market is possible lack of knowledge about thefunctioningof themortgagemarket. IPPR(2011)argues thatthere isneed forpublicityby financialinstitutionon the conditionsandavailability ofmortgages.Bankswouldalsoneed tobecomemorecreativeandtakeonmoreriskbydiversifyingtheclienteleoftheloanmarket.Sincealargeasectionof society cannot accessmortgage finance, then there is need for alternative forms of finance andhousingdelivery.Analternativesourceofhousingfinanceispeople’sownsavings.Ittakesalifetimeforonepersontosaveupenoughmoneytobuyahouse.However,poolingofresourcescanreducethetimetoacquiringaproperty.Thiscanbeachieved throughhousingsavingsclubspooling theirresources tobuy landand/or to build houses. Thriving savings clubs exist under the initiatives of the SDFN. The SDFNreportsthatin2013ithadamembershipofover20,000householdsoperating605savingsschemes,andbythattimehadsaved$13millionforhousingconstruction(SDFN,n.d.).Thefederationusesthegenerated resources tonegotiate andbuy landonwhich tobuildhouses for themembers. In caseswhereabasicstructureisputup,themembershavethechancetoincrementallyexpandthestructuretosuittheirneeds.Becausetheydothiswiththeirownresources,theysaveonloaninterestpayment,and they have the flexibility to build at their own pace. Further, the SDFN collaborated with localauthoritiesinimplementingtheBTP.Anothergrowingsourceoffinanceforhousingismicrofinance.TheConsultativeGrouptoAssistthePoor6(CGAP,2004,p.1)definedhousingmicrofinanceasconsistingofloanstolow-incomepeopleforrenovationorexpansionofanexistinghome,constructionofanewhome,landacquisition,andbasicinfrastructure(e.g.connectinguptocitysewagelines).Microfinancecanpotentiallyplayanimportantroleinprovidingfinanceforhousing,especiallywhencombinedwiththeincrementalhousingprocess(HabitatforHumanity,2015).Althoughmicrofinanceinstitutionstendtochargehigherinterestrates

5 TransUnion is an independent commercial credit bureau (Informante, 2013). 6 A global partnership of more than 30 leading organizations that seek to advance financial inclusion housed at the World Bank.



than conventional banks, theymaybe the only accessible sourceof finance for financially excludedindividuals. The loans make it possible for financially excluded households to speed up theconstructionoftheirhouses,thusreducingcostsinthelongrun.Theloanstendtobeshort-term,andthisaffectshowmuchhouseholdscanborrow.Insomecountries,somemicrofinanceinstitutionsoffermorethanjustfinancialassistance,butincludeconstructionadvice,assistanceandsupervision.Although there are microfinance institutions in Namibia, there is no record of any one of themspecialising in providing housing finance. Given the cost of housing in the country, the existinginstitutions are unlikely to have adequate resources to advance as loans. Many of the existingmicrofinance institutions operate pay-day loan schemes geared towards consumption. A variant ofhousingmicrofinance iswhat iscalleda ‘micro-mortgage’.This ismore likeanormalmortgage,butwithashortduration(e.g.fivetotenyears).Theloanamountissmallenoughtobeaffordabletopoorhouseholds.Itismainlyusedtobuyland,ortorenovateexistingstructures,orforimprovementslikelinkingup to the electricityor seweragenetwork. Thesemicro-mortgagesarealsomore expensivethantraditionalfinance.Lastly,pensionfundsareanotherpossiblesourceofhousingfinance.Pensionfundstendtohavehugefinancialresourceswhichcanpotentiallybeinvestedinhousingschemesfortheirmembers(morelikehousing associations in developed countries) or for rental. Pension funds can provide long timefinancebeyondwhat traditional banks arewilling to. Longer term finance (e.g. 30-yearmortgages)comeswith lowerrepaymentsforborrowerseventhoughtheypaymore in the long term.With thelowincomesintheeconomy,thisisagoodalternative.Onechallengethatsuchschemesmayfaceisifthemembers lose their jobsand failtoservice their loans(if it isarent-to-buyarrangement). If thefundownsthehousesandrentsthemout,thenthisproblemdisappears.Theroleofpensionfundsinhousing is determined by the regulatory frameworkwhichmay inhibit such investments. Since thegovernmentalsousespensionfundsmoniestofinancerecurrentexpenditure,itmaynotbewillingtoallowthemtolocktheirfundsinrealestate.

7.ImplicationsandconclusionsThehousingsituationinNamibiaisamixtureofblessingandtragedy.Itisablessingtohouseownersthat are experiencing growing equity. It isalsoablessing to those in thebuy-to-letmarket thatareexperiencinghealthyreturns.However, it isalsoatragedytothemajorityofthepeoplewhocannotaccessdecenthousingbecause it istooexpensive for them.Themacroeconomicanalysishasshowntroublingstatisticsofhighinequalityandgrowingunemployment.The classificationof householdsby income level has shown thatnearly90%of themearnnomorethanN$2,700permonth.Thisisovertwoandhalftimeslessthantheaveragemonthlyincome.Ithasbeenarguedthatthelowincomemakesitimpossibleforthemajorityofhouseholdstoafforddecentaccommodation. It has been argued that the high cost of houses and the shortage of affordableaccommodation have forced households tomove down the housing structure. This has resulted inhigherdensityonthelowerlevelsofthehousingspectrum,whichhascontributedtotheproliferationofinformalsettlements.AreviewoftheMHDPhasshownthatithasrecentlybeengivenanewleaseoflife.Morehousesarebeingconstructedundertheprogramme.AlthoughtheallocationofthehousesissaidtobebasedontheNHEhousinglist,thereappeartoexistsomeinefficienciesinthewaywaitinglistsaremaintainedin the economy. Local authorities have their own lists, while the NHE has its own. There is noconsolidatedwaiting list to eliminateduplicate allocationsand/or registrations, andeven to informfutureplanning.Despitetheconditionalitiesthatcomewiththehouseallocation,therearesomelooseendsthatarenotexplicitlyspeltout.Forexample,ifthemainbeneficiarydiesbeforethehouseisfullypaidfor,willitbeleftinthenameofthehouseholdorwillitberepossessedbythegovernment,giventhatthehousesmustnotchangeownershipwithinaperiodoftenyears?Theseissuesmaynothavebeenencounteredyet, and there isno source that explainshow theywill behandled.The effective



administrationof thesubsidisedhousingsystemrequires that therebeacomprehensiveandup-to-date property register linked to the national registration system and allowing for data sharingbetweensocialwelfareministries.ThiscanhelptoaddresssomeproblemsthatarelikelytoaffecttheMHDPlikespeculativeacquisitionsanddoubleallocations.TheimplementationoftheMHDPgivesthegovernmenttheopportunitytoaddressotherproblemsintheeconomy.Forexample,itcanlinktheconstructionofthehouseswithskillsdevelopment.TheHPPand the fifth national development plan stress the need for technical skills training, and for theprovisionofattachmentstotrainees.Thetenderingprocesscanbemodifiedtoexplicitlyincorporateskills training, especially for the youth. There is also potential to cultivate linkages betweenmanufacturing SMEs and construction companieswhere the former couldmanufacture and supplyconstruction materials like window and door frames for the latter, thus creating more jobs and asustainable local constructionmaterialsmanufacturing industry.This can enhancevalue chainsandbackwardandforwardlinkagesintheeconomy.TheemploymentcreationpossibilitiesoftheMHDPareabsentfromcurrentdiscussionoftheprogramme,eventhoughtheMinistryofLabourconductedresearchexploringhowtheMHDPcouldbemadeemployment-intensive.The National Housing Policy needs to consider the possibility of using alternative technologies inconstructinghouses.Thiscanhelpreduceconstructioncosts.Buildingstandardsmaythereforeneedtoberevisedtoallowforthis.Forexample,therearelowcosthousingprogrammesinothercountriesthat use alternative construction materials. It is possible to adopt and adapt some of thesetechnologiesandproducethematerialslocally,whichguaranteessustainability.Itispossiblethatsuchalternative technologiesmay reduce labourusage in the short term, thus reducing the employmentcreationcapacity,buttheadvantageswillbelowerconstructioncosts,fasterhousecompletionrates,anddecentaffordablehousing.Anotherexampleisthatalthoughlandcostscanbeashighas40%ofthe total cost of a house, SDFN has developed a cost effective and participatorymethod to deliverhousing to people earning less than N$1,500 per month. The people in the local community areengaged to build the houses, and this creates local jobs and boosts local incomes. Further, thegovernmentmaynotneed toconstruct thesocialhousing itself,butratherallocateserviced landtoindividuals tobuild their ownhouses.This approachallowshouseholds toparticipate effectively inbuilding their ownhouses.Those thatdesperatelyneedhelp canbeassisted individually throughameans-testedapproach.Thecurrentsystemisratherpoliticalandpopulistinnature,butithasseriousimplicationsforgovernmentfinances,especiallygiventhecurrentdrivetoreducegovernmentdebt.Lastly, the housing processes in the country need to consider the implications ofmass housing onenergy demand. Namibia is a net energy importer, and massive expansion of the housing stock(especiallyinurbanareas)putpressureonthenationalgridasdemandforenergyincreases.Thenewhousesrequireenergy,andifthehousingandenergypoliciesarenotcommunicating,therewilllikelybeseriousenergyshortagesinthefuture.Thispotentialproblemcanbealleviatedifthenewhousinginitiatives consider the possibility of using energy-efficient constructionmethods and of renewableenergy sources. There is also need for consideration of other services that come with housing toensure that they are adequately provided and are affordable. Therefore, there is need for greatercollaborationandcoordinationbetweengovernmentministriestoensurethattheresultantsituationinthecountryisonethatpromoteshigherlivingstandardsandqualityoflife.



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