Friday, July 03, 2015

Building Homes or Selling Property?

Known as Vision City and financed by the Rwanda Social Security Board, or RSSB, the country’s pension body, the project will begin with an initial phase of 504 units, due to be completed next year. It will eventually scale up to 4,500 homes. In line with Kigali’s ambitious master plan, which seeks to transform the city of 1.3 million into a “center of urban excellence,” the site’s developers promise a community “tempered with a tinge of elegance and subtle nobility” that will be a “reference point for contemporary Rwandan living.” In addition to the houses, there will be restaurants, hotels, offices, schools, a sports complex and a Wi-Fi-connected town center. It’s all part of a citywide mixed-use strategy meant to decentralize key business and recreational activities and minimize road congestion.

There’s just one nagging detail. According to RSSB, the most affordable Phase 1 Vision City units, two-bedroom apartments, will cost 124 million Rwandan francs ($172,000), more than 100 times the city’s median annual household income. The most expensive — five-bedroom luxury villas with exteriors of marble and granite — will run close to 320 million francs.

Vision City is only one of several forthcoming Kigali housing developments, some of which, officials say, will deliver more affordable units. But the project is emblematic of a conundrum facing cities across sub-Saharan Africa, the world’s most rapidly urbanizing region. Buoyed by a decade-and-a-half of robust economic growth, Africa’s cities are home today to unprecedented concentrations of wealth. They’re also seeing endless streams of impoverished rural migrants, typically young people in search of jobs who see no viable future in the small-scale farming of their parents’ generation. These dual phenomena have led to striking degrees of inequality. According to the United Nations Human Settlements Program, U.N. Habitat, Africa’s urban areas are now collectively the most unequal in the world, having surpassed the cities of Latin America sometime in the century’s first decade.

Nowhere is this widening gap more visible than in Africa’s radically divergent standards of housing. While upscale developments, which are more attractive to investors, have sprouted on all corners of the continent, governments across the region have largely failed to spur development of modern formal housing that’s accessible to ordinary urban residents. Today, according to U.N. figures, 62 percent of Africa’s urban population lives in slums. These are typically tightly packed, haphazardly planned settlements that do not adhere to basic building standards nor allow for proper sanitation. Cities with a high prevalence of informal, single-story houses generally face extensive public-health challenges and lack the population density needed to become cost-effective hubs of manufacturing, therefore hindering job creation.

Kigali, which only became Rwanda’s capital during the country’s 1962 independence, is at an earlier stage of development than many African cities. It’s also largely free of the extreme degrees of squalor present in many of the continent’s urban areas. An estimated 80 percent of Kigali’s population lives in informal settlements, most of which were erected as the city swelled in size in the years following the 1994 genocide. But Kigali’s slums tend to be far less densely populated, and better equipped with amenities, than those of Nairobi, Kenya; Kampala, Uganda; or other major cities in the region. Kigali’s formal built environment has also blossomed. Today, modern office buildings sprout from the hilltop city center, highlighted by the 20-story blue-glass-paneled Kigali City Tower. In quiet suburbs, connected to town by roads so impeccably manicured they feel sterile, local elites and expatriates dine on Neapolitan-style pizza, sushi or steak au poivre and conduct business over cappuccinos at one of some two dozen upmarket coffee shops. Save the occasional waft of unpleasant odors — a reminder that Kigali still lacks a central sewage system — much of city would be barely recognizable to someone who left in the midst of the 1994 carnage.

Kigali’s rapid development, however, has also ushered in a host of challenges. Chief among them is the shortage of adequate housing. With a population of just over 200,000 in 1990, the city has grown sixfold in the 25 years since. That rate is expected to slow only slightly in the coming years. Kigali’s master plan, prepared in 2013 by the Singapore-based firm Surbana, projects the city will be home to 4 million people by 2040, at which point Kigali’s planners intend it to be transformed into a regional hub of finance, education, logistics and other value-added services. The housing scale-up required to support this growth is difficult to overstate. According to a 2012 City of Kigali study, the projected population increase and inadequacy of much of the city’s current housing stock mean Kigali will require 344,000 new housing units by 2022. That’s an enormous number given that the supply of new houses in the formal market has historically been fewer than 1,000 units per year. Moreover, the majority of these new houses, like those soon to be on sale at Vision City, have catered to the city’s elites. Yet as outlined in the city’s study, two-thirds of all new housing demand will come from families earning less than 200,000 francs per month.

As in many African cities, Kigali land prices are highly inflated, the result of speculation by elites who lack the range of vehicles for investment that savers have in more advanced economies. An underdeveloped financial sector also means that mortgage rates are high, typically 17 or 18 percent, putting home ownership out of reach for many otherwise well-off families. Rwanda’s limited industrial capacity and location 1,000 miles from the coast also make the cost of construction, despite an abundance of low-wage labor, abnormally high. According to Wang, the Vision City site manager, his company is forced to import 70 percent of the materials used in the project’s construction. That includes cement sourced from Uganda and Tanzania and finishing products from Turkey, Dubai and China. “If we buy materials from China, the transport to Kigali from the port will be twice the cost of transport in the sea,” he says. “Materials are the No. 1 expense.”

Kigali officials say the city’s first affordable formal housing units are currently in the pipeline. According to Fidele Ndayisaba, Kigali’s mayor, construction on several new mass housing developments is due to begin in the next few years. Unlike high-end projects such as Vision City, which typically generate adequate returns without the need for state support, these developments will benefit from government subsidies for roads, water, electricity, sanitation and other basic infrastructure. The idea, Ndayisaba explained, is that this will attract reluctant investors. The first of these projects, a 600-unit “low-cost” development known as Batsinda Estate, to be financed by RSSB and built by the military-affiliated contractor Horizon, will soon be under construction on Kigali’s northern outskirts. According to Daniel Ufitikirezi, the pension body’s director general, Batsinda will be an “experimental project” meant to prove the viability of the concept and help lure private-sector interest in similar state-supported projects in the future. Units, most of them three-bedroom apartments, will cost approximately 20 million to 25 million francs. RSSB, Ufitikirezi said, will help connect buyers to sources of finance, which, in theory, will offer more-favorable lending terms than are currently available on the market. “We wanted something that would be affordable to the majority of our own employees,” he said.

Even if Batsinda proves to be a viable model, however, such prices are still far beyond the means of most Kigali residents. Despite economic growth that’s averaged 8 percent per year over the last decade, only a minority of Rwandans have income beyond what’s required for day-to-day survival. Today, in many informal settlements, rental units are available for as little as 15,000 francs per month — a segment of the market that is only expected to grow with continued migration from the countryside. One explicit goal of the master plan, however, is to move toward a slum-free city, eradicating these settlements over time though a mix of demolition, upgrading and the unfurling of the planned mass-housing strategy. To many critics, including Tomà Berlanda, director of the School of Architecture, Planning and Geomatics at the University of Cape Town and co-founder of the Kigali-based studio Active Social Architecture, these realities simply do not match up. Although slum life may be far from ideal, he argues, authorities’ insistence on a top-down push toward formal housing risks causing unnecessary hardship for the city’s-lower income residents while increasingly excluding them from much of the urban fabric. “My sense is that there is a kind of naïve optimism that what is affordable is actually way too expensive for the average population,” Berlanda said. “Kigali is still richer than other parts of the country, but by and large it’s poor. And that message is difficult to discuss with government, because it’s not something that Rwanda wants to portray.”

Past slum eradication efforts, including the razing of hundreds of homes near the city center to make room for yet-unrealized commercial development, have only made life more difficult for the majority of affected residents. According to a 2014 study by Vincent Manirakiza, a Rwandan researcher at Belgium’s Catholic University of Louvain, families removed from the city’s informal settlements have typically had “little chance to reclaim their former standards of living.” That’s mainly because compensation, which is guaranteed under Rwandan law, is “often too low, not fairly calculated, and only paid after lengthy delays,” he writes in the study. Manirakiza’s research, based on interviews with members of 360 Kigali households, found that only 20 percent of relocated families had managed to build “improved homesteads.” Sixty-five percent, meanwhile, had purchased houses in other informal settlements. Others were pushed to peripheral areas, in many cases far from employment opportunities. Residents seeking to construct new informal houses, his paper notes, also face daunting bureaucratic challenges due to strict regulations intended to limit informal development. Often, residents are compelled to undertake “illicit” building strategies. These include the construction of small rooms at night or during the weekend, when inspectors are absent, or the building of new homes based on permits for renovations. Such structures are often discovered — and demolished. “So many houses built like this are destroyed,” Manirakiza said. “It’s very risky.”

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