ASSESSMENT OF HOUSING FINANCE CAPACITY AND NEEDS OF HOUSEHOLDS IN INFORMAL SETTLEMENTS

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ASSESSMENT OF HOUSING FINANCE CAPACITY AND NEEDS
OF HOUSEHOLDS IN INFORMAL SETTLEMENTS

• SOCIO-ECONOMIC STUDIES IN
• MWANANYAMALA KISIWANI, BUGURUNI MNYAMANI, AND
  MAKANGARAWE INFORMAL SETTLEMENTS IN
• DAR ES SALAAM, TANZANIA
• PRESENTATION TO AUHF-AGM SEPTEMBER 21, 2007
• TUMSIFU JONAS NNKYA
• ARDHI UNIVERSITY, DAR ES SALAAM

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TANZANIA

• Total population 35 million people
• About 30 live in urban places where the average
  annual growth rate is 4.5
• 30 of the urban population live in Dar es Salaam
  City
• All the land in Tanzania is state owned
• Formal access to urban land is thus through
  granted right of occupancy for 33 or 99 years
  government lease

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INFORMAL SETTLEMENTS IN DAR ES SALAAM CITY

• Habitat for 70-80 of the 3.5 million city
  residents (different social and economic status)
• Recognized and earmarked for infrastructure
  upgrading since 1972
• Permanent incrementally built houses as a result
  of secure land tenure
• Modest infrastructure upgrading through
  individual initiatives, sometimes in
  collaboration with local authorities
• Property registration and issuance of residential
  license (2004) infrastructure upgrading and
  regularization to follow

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COVERAGE OF INFORMAL SETTLEMENTSIN DAR ES SALAAM
CITY
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A TYPICAL INFORMAL SETTLEMENT SHOWING FORMALIZED
PROPERTY BOUNDARIES
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A TYPICAL MULTI-FAMILY (6 ROOMS) SWAHILI HOUSE
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ONE FAMILY HOUSE
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INTRODUCTION

• Results from a housing survey of 3 informal
  settlements
• Data on the household capacity and demand for
  housing finance
• Purpose to inform the development of appropriate
  housing finance products, a project by African
  Union for Housing Finance AUHF with funding by
  Cities Alliance
• Selection of settlements
• There are differences which influence the demand
  and capacity for housing finance Proximity to
  employment and income opportunities Economic
  vibrancy Tenure status of the residents Level
  of investments in housing and hence quality

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INTRODUCTION (cont.)

• MWANANYAMALA KISIWANI a fair mixture of
  different house types, habitat for all tenure
  groups, substantial economic activities
• BUGURUNI MNYAMANI a higher economic vibrancy,
  proximity to CBD and other employment centres
• MAKANGARAWE urban fringe settlement
• Sample size 380 households
• 8 enumerators trained, tested questionnaire
• Selection of houses from each housing cluster
  facilitated by up to date maps and property
  registers
• Interviewed all households in the selected houses

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FINDINGS HOUSEHOLDS DEMONSTRATED CAPACITY TO
FINANCE HOUSING

• Land for housing was bought 97 of all house
  owners bought land for building
• Houses were permanent 85 of all the houses were
  built of sand-cement blocks, 90 of them with
  sand-cement floor and 97 roofed with CI sheets
• Houses had basic facilities a private or shared
  cooking space, toilet, bathroom, electricity and
  connection to clean water (14), from vendors or
  neighbours(68), wells (12)
• Household savings was the main source of finance
  87 of all the houses were financed by savings
• Savings financed also available infrastructure

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HOUSEHOLDS HAD CAPACITY TO FINANCE HOUSING (cont)

• 6. Informal and formal employment activities were
  the sources of income for 65 and 35 of
  households respectively regardless of tenure
  status
• 7. Average declared household income was Tshs.
  132,175 while expenditure was Tsh. 198,907
• 8. The feeling of security was the corner stone
  of the demonstrated capacity to finance housing
• 9. This was most likely the outcome of the
  Government policy in support of informal
  settlements over the last 35 years
• 10. There was a huge unexploited potential for
  housing finance upgrading

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Table 1 HOUSEHOLD SAVINGS AS THE MAIN SOURCE OF
HOUSING FINANCE
Source Mwana-nyamala Buguruni Makanga-rawe Average
Savings and selling of assets 87 84 90 87
Friends and relatives 1 5 0 2
Loan from employer 3 0 5 2.6
Loan from SACCOS 3 0 5 2.6
Others 6 11 0 5.6
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Table 2 HOUSEHOLD MONTHLY INCOME BY TENURE
STATUS(Tsh. 1,250 was equivalent to US 1 at
the time of survey)
Renter House-hold Owner House-hold Overall
Settle-ment Mean (Tsh) (thousands) Median (Tsh) (thousands) Mean (Tsh) (thousands) Median (Tsh) (thousands) Mean (Tsh) (thousands) Median (Tsh) (thousands)
Mwana-nyamala 118.3 90.0 154.7 120.0 129.7 100.0
Buguruni 121.7 90.0 151.1 120.0 129.0 97.5
Makangarawe 122.1 87.5 197..2 96.0 142.6 90.0
Overall 119.8 90.0 162.1 110.0 132.2 100.0
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Table 3 COMBINED EXPENDITURE FIGURES WERE MUCH
HIGHER THAN INCOME, SUGGESTING UNDECLARED INCOME
Buguruni (Tsh.) Makanga-rawe (Tsh.) Mwana- nyamala (Tsh.) Average of all (Tsh.)
Average income 129,039 142,591 129,692 132,175
Average expenditure 302,782 208,137 160,999 198,907
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FINDINGS (cont.)

• 11. To supplement income, particularly for
  housing finance households borrowed money from
  friends, relatives and to some extent employers.
• 12. Borrowing from formal financial institutions,
  banks particularly was insignificant. However, if
  loans were to be available, 46 of willing
  borrowers would borrow up to Tsh. 5 mill 24
  Tsh. 5-10 mill and the rest up to Tsh. 25 mill.
• 13. Households saved (about 70), primarily for
  emergency purposes (41). Others include to build
  a house including buying land (17) to establish
  income source (15), school fees (7) and others
  (18)
• 14 Saving in form of building materials did not
  count as part of household savings, yet it was a
  common practice among the house builders to
  accumulate building materials.

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Table 4 SIZE OF A LOAN HOUSEHOLDS WISHED TO
BORROW
Amount (Tsh.) BUGURUNI MAKANGA-RAWE MWANA-NYAMALA AVERAGE OF ALL
Up to 1,0000 2.6 2.6 5.3 2.3
gt1,000,000 -10,000,000 28.9 48.1 46.6 43.5
gt5,000,000-10,000,000 27.6 29.9 21.5 24.4
gt10,000,000 20,000,000 22.4 13.0 15.9 16.6
gt20,000,000 18.4 3.9 9.1 10.2
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Table 5 CAPACITY FOR UPFRONT PAYMENT
Amount (Tsh.) BUGURUNI MAKANGA-RAWE MWANA-NYAMALA AVERAGE OF ALL
10,000 -50,000 31.4 44.2 29.0 32.7
gt50,000 -100,000 14.4 13.0 21.2 18.1
gt100,000 -200,000 19.7 13.0 16.3 16.4
gt200,000 500,000 13.2 10.4 15.9 11.9
gt500,000 1,000,000 10.4 9.1 8.7 9.2
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Table 6 AMOUNT THAT HOUSHOLDS WERE ABLE AND
WILLING TO PAY MONTHLY TO SERVICE A HOUSING LOAN
Monthly repayment (Tsh) Buguruni Makanga-rawe Mwananya-mala Average of all
Up to 15,000 30.1 42.9 22.4 28.0
gt15,000 to 50,000 52.6 42.9 56.8 53.3
gt50,000 to 100,000 7.9 7.8 13.6 11.5
Above 100,000 5.2 3.9 3.0 3.7
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CONCLUSION

• The relatively good quality of houses and
  infrastructure in the informal settlements
  demonstrates a capacity to finance housing and
  feeling of security to invest in housing.
• The demonstrated capacity to finance housing
  constitute a building block for an innovative,
  affordable and sustainable housing finance
  system.
• Thus, there is a need to recognize, organize and
  build on this capacity as a way of addressing the
  thorny issue of housing finance for the majority
  of Tanzanians.
• However, appropriate housing finance upgrading
  strategy and action plan need to recognize the
  peculiar characteristics of the housing markets
  the incremental and subsistence nature of
  housing delivery the informal sources of
  employment and income dynamic affordability and
  willingness to borrow and repay and savings in
  form of building materials.

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AUTHORS BIO DATA

• Tumsifu Jonas Nnkya (PhD), a Tanzania citizen
  educated as town planner, has 27 years of
  experience as a trainer, researcher and
  consultant in urban development planning, urban
  design and housing.
• He has published papers, books and contributed
  to several UN-Habitat publications as a member of
  the UN-Habitat Advisory Board on Human
  Settlements Research Network (HS-Net). His
  forthcoming planning practice research based
  publications include Collaborative Turn in
  Planning Practice, and Why Planning Does Not Work
  in Tanzania.
• As a consultant and advisor, Dr. Nnkya has
  worked for the Government, International
  Development Agencies, Embassies and participated
  in several national and global meetings. He is a
  member of several local and international
  professional associations and policy making
  bodies.