Affordable housing is now one of the most frequently mentioned terms in the housing space than it were a few years ago.
In the context of housing, affordable housing is a term used to explain a house that is sold or rented at an amount that does not exceed one third of the buyer’s or tenant’s monthly income respectively.
This concept should not only be linked to the working class as these are the only ones seen to be having monthly incomes but also includes non-employed prospective home buyers or tenants. The only gauging criteria is whether one’s one third income be it from employment or any other activity suffices to settle the monthly housing expenses.
The bill should be related to either servicing the monthly mortgage installment or paying monthly rental dues. According to this definition, affordable housing does not apply to the lower income group only as it focuses on one’s ability to pay across the entire customers pyramid.
Even people with higher incomes need affordable houses that match their ability to pay. It follows that the affordable housing concept moves across all income levels and it can start say with a person who has an ability to pay 30,000/- per month as rent or repayment for a house loan to a person who can pay as higher as TZS 5,000,000 million per month as rent or mortgage installment to service the loan.
On the other hand, low cost housing is a different term although it is sometimes used interchangeably to mean affordable housing. In reality, low cost houses are normally meant for an even lower income group that may not be able to qualify for affordable homes and sometimes, low cost houses may be built to implement some government sponsored social housing programmes to cater for specific social unprivileged groups.
Such houses may be given for free or under subsidized prices targeting pre-targeted groups. In recent years, there has been a mixed perception by the general public on the affordability of houses sold by developers and more specifically questions have been raised on the relevance of labelling houses sold as affordable while the price tag of the same is beyond the reach of many.
In my view, this criticism is justified in the sense that there has been a mismatch in the assumptions used by developers in conceiving projects to the extent that most housing projects being developed missed to appreciate the reality and dynamism of the Tanzanians’ incomes.
Most houses are sometimes overdesigned a fact that results into higher building costs. On top of the higher building costs, is the myriad of other costs drivers such as inclusion of non-housing components such as the cost of infrastructure such as roads, electricity and water which ought not to have been included if developers had been availed with serviced land.
Houses supplied in the market need to be reasonably priced to align with the income levels of intended buyers. The challenge on developers lies on finding a balance between supplying a quality house and at the same time matching the income level of every prospective buyer be it one belonging from either a low income or higher income group.
Experience indicates that most house buyers are normally choosy and expect higher standard for a house that they are buying than houses which they construct for themselves on incremental basis.
The increasing use of the term affordable housing signals not only the increasing role of housing in economic development but also a trend where this generation is appreciating the role that developers can do address housing challenges.
Surely, as the country braces for moving to become a middle income economy come year 2025, there are basic traits of our society that we may need to elect and embrace such as promoting planned housing development.
But this cannot be achieved if developers do not rethink their strategy to housing by customizing their housing development to match the income level of prospective buyers. Experience shows that a bigger part of the underserved housing market lies at the bottom of the housing pyramid where people are only able to buy houses whose prices range from TZS 15 to 35 million.
To compound the problem, most home buyers are yet to appreciate the fact that one can climb through a housing ladder over years and can start with a modest small decent homes that matches her or his income level at a given moment.
Over years, one can always have options to either sell the existing home and buy another bigger one and hence moving to the next stage of the housing ladder. Interestingly, given the existing structure of the housing market, supplying houses at these prices to tap the lower income group is less profitable and sometimes not sustainable.
Luckily, the government is aware of this scenario and this is why there has been a call by the government for responsible agencies to ensure that land earmarked for housing development has the basic infrastructure needed for basic services such as water, electricity and roads.
If this new zeal is realised, a new housing dawn could be unfolding for Tanzania. Planned affordable housing development will have a far reaching positive impact to the national economy. As it is known, housing is an important stimulant to industries as it provides an important market for industrial goods such as the steel industry, paints, cement etc.
Affordable housing also enhances the competitiveness of industries as it supplies it with affordable accommodation that can attract and help to retain staff needed to work in industries.
Lack of affordable housing will negatively influence industries as they will have to pay more to accommodate staff and make products or services produced to be less competitive in the local and international market.
In conclusion, as the role of affordable housing in improving the quality of life and supporting the national economic development continues to be appreciated, it is important to maintain the already started zeal that emphasizes on planned development.
Prospective home buyers need to appreciate the fact that they can start modestly with houses that match their prevailing income and upgrade to larger houses as their income grows over the years.
Dr. Fred Msemwa is the CEO of Watumishi Housing Company REIT, responsible for management of collective investment schemes and provision of affordable homes in Tanzania.
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