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This open access book utilizes new data to thoroughly analyze the main factors currently shaping the African housing market. Some of these factors include the supply and demand for housing finance, land tenure security issues, construction cost conundrum, infrastructure provision, and low-cost housing alternatives. Through detailed analysis, the authors investigate the political economy surrounding the continent’s housing market and the constraints that behind-the-scenes policy makers need to address in their attempts to provide affordable housing for the majority in need. With Africa’s urban population growing rapidly, this study highlights how broad demographic shifts and rapid urbanization are placing enormous pressure on the limited infrastructure in many cities and stretching the economic and social fabric of municipalities to their breaking point. But beyond providing a snapshot of the present conditions of the African housing market, the book offers recommendations and actionable measures for policy makers and other stakeholders on how best to provide affordable housing and alleviate Africa’s housing deficit. This work will be of particular interest to practitioners, non-governmental organizations, private sector actors, students and researchers of economic policy, international development, and urban development.
Housing finance markets have been changing dramatically in both emerging and developed economies. On the one hand, housing finance markets are expanding and represent a powerful engine for economic growth in many emerging economies. However, the unfolding sub-prime mortgage crisis highlights the risks and potential turbulence that this sector can introduce into the financial system when expanding without proper infrastructure and regulation. As housing finance keeps growing in emerging economies to match a rising demand for housing, new risk management approaches, business models, funding tools, and policy instruments can help. Yet many questions remain about the right balance between innovation and regulation, the extent of risks to the financial system, the appropriate role of the state to promote affordable housing, and the effects of the sub-prime crisis. This book provides a guide for policymakers dealing with housing finance in emerging markets. It highlights the prerequisites for an effective housing finance system; it lays out several policy alternatives and models of housing finance; and it explores the role of governments in expanding access to housing finance for lower-income households. There is no "best" model set out in this book. The aim is to provide a developmental roadmap that can be tailored and sequenced to each country's situation and timing.
September 1995 Problems of developing specialized financial services for housing are acute in socialist economies in transition. Contractual savings for housing (CSH) are often advocated in Central and Eastern European countries as a primary solution. CSH systems were indeed used successfully in Europe for reconstruction after World War II. The issue today is what role CSH can play under very different financial conditions in latecomer countries that want to develop competitive and flexible financial systems capable of successfully integrating with the global financial markets. Problems of developing financial services for housing are acute in transitional socialist economies. Lea and Renaud examine contractual savings for housing (CSH), which are often advocated as a primary solution, especially in Central and Eastern European countries. A CSH instrument links a phase of contractual savings remunerated at below-market rate to the promise of a housing loan at a rate also fixed below market at the time the contract is signed. This contract can contain a variety of options. CSH were used very successfully in Europe after World War II. The issue today is not whether such specialized instruments can work. They clearly can under low inflation. The issue is whether CSH systems are advisable today in latecomer countries with vastly different financial technology and financial policy environments. Lea and Renaud focus on two influential CSH systems: the closed German Bauspar system and the open French épargne-logement. In a closed CSH system, access to a housing loan is based on queuing: a loan can be made only if funds are available in the specialist institution. In an open system, the saver can legally call his or her loan at contract maturity, regardless of the liquidity conditions in the CSH system. From the perspective of households, CSH contracts facilitate the accumulation of equity and offer the prospect of a low-interest loan. They promote savings discipline and provide a concrete goal that many households find important. But CSH instruments leave the objective of providing a primary loan unmet. In addition, even moderate inflation quickly leads to very low loan-to-value ratios for CSH loans and a large financing gap for housing purchases. From the perspective of financial institutions, CSH can help overcome the severe information asymmetries they face in transitional socialist economies, where there are no retail financial markets, no credit bureaus, and problematic income reporting. CSH are very effective in screening, monitoring, and establishing the reputation of steady savers as future borrowers, and they are good at lowering credit risks. With their saving periods of four to five years, CSH also help bridge the gap between long-term loans and short-term deposits. Finally, CSH can be an important commercial tool for developing cross-lending activities. But CSH can be risky. When the interest rate on outstanding contracts is low compared with current market rates, holders of mature contracts will want to call their loans. And new savers will be reluctant to sign on at very low contract rates. Eliminating this liquidity risk with a closed CSH system erodes the attractiveness of CSH. From the perspective of government, a CSH instrument can work in a noninflationary environment, yet a CSH system would have no justification in fully developed and competitive financial markets today. CSH instruments can play a useful but not a dominant role in housing finance. After stabilization, they can provide additionality, overcome information constraints on financial contracts, and contribute to higher financial savings rates. CSH instruments are best used to finance home improvements. They can also be used as part of a social policy to reach targeted social groups. This paper -- a product of the Financial Sector Development Department -- is part of a larger effort in the department to develop sustainable housing finance in transition economies.
Problems of developing sp ...
This report provides a comprehensive review of the challenges for low and moderate income housing. It focuses on the issues of affordability, accessibility and sustainability in resolving the housing problem. It looks at both formal and informal instruments and how experiences in developed countries and instruments in addressing middle income households can help inspire solutions for low and moderate income housing. The report examines a whole range of major instruments and experiences across the developing and developed worlds.
This book examines the options for, and obstacles to, successful financial sector tax reform, both in terms of theoretical and practical aspects. Issues discussed include: the design of optimal tax schemes, the role of imperfect information and the links between taxation and saving, inflation, the income tax treatment of intermediary loan-loss reserves, deposit insurance, VAT and financial transactions taxes; as well as current practice in the industrial world and case studies of distorted national systems. This is a co-publication of the World Bank and Oxford University Press.