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 ILMIs
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: ilmi@nust.na
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

TableofContents

1.IntroductionMacroeconomicContext 1
2.MacroeconomicBackground 2
3.CurrentHousingAndProvision 5

TheStructureOfHousingOwnership 5
HousingDeliveryModes 6
LandServicingAndAllocation 7
TheMHDPAndHousingSupply 7

4.HouseholdIncomeAnalysis 8
5.TheEconomicsOfHousingSupplyAndDemand 10

HousingDemand 10
HousingSupply 13

6.TheHousingFinanceMarket 15
7.ImplicationsAndConclusions 17
References 19



Acknowledgements

ThecurrentpaperderivesfromworkconductedinthecontextoftheRevisionoftheMassHousingDevelopment
Programme(MHDP)thattheMinistryofUrbanandRuralDevelopment(MURD)commissionedtotheIntegrated
Land Management Institute (ILMI) at the Namibia University of Science and Technology (NUST). The paper
containsonlypublicly-availableinformationandwaspreparedforpublicdisseminationofissuesrelatedtothe
workundertakenfortheMinistryinthecontextofthisproject.Moreinformationaboutthisprojectcanbefound
onhttp://newmasshousing.nust.na/

Abouttheauthor

DrChiripanhuraisaneconomistcurrentlybasedintheUK.HeholdsaPhDineconomicsfromtheUniversityof
Sheffield,UK.Hisworkfocusesonlabouranddevelopmenteconomics,employment-povertynexus,povertyand
social protection inAfrica,macroeconomicmodelling (CGEanalysis), andmicro-econometricsandmicro-data
analysis.Hehasbeensenior lecturerattheUniversityofNamibiaaswellastheNamibiaUniversityofScience
and Technology, an economist at the Office of National Statistics in the UK, lecturer at the Zimbabwe Open
University, and an economist for the Zimbabwe Congress of Trade Unions and the Labour Economic
Development Research Institute. He has published in several academic journals and presented at various
internationalconferencesinEurope,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 ILMIs 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.Introductionmacroeconomiccontext

Housing is an important socio-economic variable that is usually guaranteed in national
constitutions 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 be
safe, secure and affordable, and must provide freedom from forced eviction. This guarantees
securityfortheoccupants,bothinformalandininformalstructures.Theseprotectedrightsare
usuallyguaranteedbythegovernment,drawingfromnational(theconstitution)andinternational
conventionsandagreements(e.g.theAfricanCharter,theUniversalDeclarationofHumanRights,
the Convention against Discrimination and Racism, UN Committee on Economic, Social and
CulturalRightsetc.).

Theanalysisofthehousingsituationinacountrycanbedividedinto1)theanalysisofhousing
provision(i.e.thesupplyside),and2)accesstohousing(thedemandside).Thehouseprovision
process starts with land surveying and servicing, followed by the construction of the housing
units,andthentheoccupation/utilisation.Thesupplysideofhousingdependsontherulessetby
thelanduseandplanningsystem.Thedemandsideofhousingisgenerallycharacterisedbythe
commodificationofhousing,whichlimitstheaccessibilityandaffordabilityof(quality)housingby
poorersectionsofthecommunity.Affordabilityisdeterminedbyprice,andhouseholdfactorslike
income level, housing quality, tenants choice, and locality factors (e.g. the proximity and
availability of services, the quality of infrastructure, the aesthetic environmental effect, etc.).
Generallypoorpeoplefinditexpensivetobuyortorenthouses,resultinginthembeingrelegated
tothefringesofsociety,and,inurbanareas,toinformalsettlements.Thisresearchispremisedon
thisviewthatthemajorityof(urban)peopleinNamibia,areexcludedfromthehousingmarket
drivenbythemarketmechanism.Tofullyunderstandthegravityoftheproblem,itisnecessaryto
conductin-depthanalysesofthefunctioningofthemarketmechanisminthehousingmarket.The
proponentsofthemarketarguethattheallocationofhousingshouldindeedbelefttothemarket
because the market is efficient. However, the antagonists argue that markets sometimes fail
because,wherethereisimperfectcompetition,theyresultininequality(Stiglitz,1989).

TheapplicationofthemarketeconomicstotheNamibianhousingmarkethasresultedinaserious
housing crisis characterised by a shortage of housing units, especially in urban areas, and the
proliferationofinformalsettlements.Thelatteroftenlackbasicservicesandsanitationfacilities,
posing the danger of the outbreak of diseases. There are three basic problems to the housing
situation:first,manyhouseholdslackadequatefinancetobuyorrenthouses,inpartbecausethe
existing stockof housing is less thandemanded, andalsobecause it is too expensive formany
households;secondhousepricesaretoohigh,andthepriceshavebeenincreasingatafastrate
over the past few years; and thirdly, many Namibians are excluded from the housing finance
marketbecausetheyhavelowincomes,arepoor,ortheyareunemployed.Theseconditionshave
resultedinhigherdemandforcheaperhouses,andpropertydeveloperstendnottoconcentrate
theireffortsonthissectionofthemarketinpartbecauseitisexcludedfromthemortgagemarket.

Thepaperisstructuredasfollows:thenextsectionprovidesthemacroeconomicbackgroundof
thecountry,highlightingthevariablesthatimpactonthedemandandsupplyofhousing.Thisis
followedbyananalysisofthecurrenthousedeliverysystemintheeconomyinsection3.Section
4 analyses the classification of households by income level. It also assesses their potential to
participate in the housingmarket. Section 5 delves into the economics of housing supply and
demand,whilesection6examinesthehousingfinancemarketanditspotential.Lastly,section7
presentsthekeyimplicationsandconclusionsofthestudy.

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

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2.Macroeconomicbackground

Namibia ischaracterisedbyhighbut fallingoverall income inequality.Existingdatashowsthat
overall income inequalitydeclinedbetween1990and2010.Detailedanalysis of the changes in
income distribution show significant redistribution from the richest population to the poorer
population.Theproportionofincomegoingtotherichest20percentofthepopulationdeclined
from78.7per cent in1993/94 to57.3per cent in2009/10,while theproportion going to the
poorest20percentincreasedfrom1.4percentto5.5percentduringthesameperiod.Thattothe
second poorest20 per cent increased from 3 per cent to8.2per centduring the sameperiod.
However, inequalitybetweenquintileshasbeenincreasingsince1993,whichindicatesgrowing
inequality.The tablebelowshowsthepercentagedifferencebetweentheproportionof income
goingtothenext20percentofthepopulationandtheproportiongoingtothe20percentbelow
it.Thereisgrowinginequalitybetweenadjacentquintilegroups,andthismaygenerateagrowing
senseofinjustice.Thesituationisworsebetweenthebottomquintiles.Atthetopoftheincome
distribution,theinequalitybetweentherichestandsecondrichestquintileshasbeendecreasing
overtime.

Table1:Inter-quintilepercentageincomedifferences
1993/94 2003/04 2009/10
2ndPoorestlessPoor20percent 1.6 2.4 2.7
MiddleQuintileless2ndPoorest20percent 2.4 3.0 2.8
Secondrichest20percentlessMiddle20percent 6.1 7.0 7.1
RichestlessSecondrichest20percent 67.2 53.6 39.2
Source:CalculatedfromtheFourthNationalDevelopmentPlan(NDP4)(RepublicofNamibia,2012).

Themain challenge forNamibia is to findmechanisms to curb the between-quintile inequality
growth trend. In addition, the Gini Coefficient figures indicate that there is greater income
inequalityinurbanthaninruralareas.Thismaynotbesurprisinggiventherisingunemployment,
low average incomes, and high cost of accommodation within urban areas. Overall inequality
decreasedbetween2009and2016.Asof2016,theNamibiaStatisticalAgency(NSA)statedthat
income inequalityasmeasuredby theGiniCoefficienthaddeclined from0.597 in the2009/10
periodto0.572inthe2015/16period(NSA,2018).

Namibia also faces high butdeclining levels of poverty. The extent of severe poverty1 declined
from15.3%to11%between2009and2016,whilethegeneralheadcountpovertyleveldeclined
from28.7%to18%duringthesameperiod(RepublicofNamibia,2015).Infantmortality,aproxy
forthelevelofpoverty,declinedfrom50perthousandin2000to33perthousandin2016(World
Bank, 2018).This indicates that the investmentmade inprovidingprimaryhealthcare, potable
water and in controlling child killer diseases is bearing fruit. On this front, Namibia compares
favourablywithSouthAfrica thathadan infantmortalityrateof34per thousand in2016.The
countryhasalsomanagedtoreducemalariacasesfrom71perthousandpeoplein2007toonly
14perthousandin2016.BotswanaandSouthAfricahavelowermalariaincidencestatistics.

Regionalcountrieshadhigherinfantmortalityfigures:Mozambiquehad57perthousand,Angola
had 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. Namibias success in controlling
malaria comes from successful anti-malaria spraying campaigns, education programmes,
availabilityofhealthservices,andhousingthatexcludemosquitoes.Presumably,aruralhousing
programme that improves the housing in malaria-prone areas can help to further reduce the
number of cases. However, the challenge is that there is no rural housing policy in place. The
existingnationalhousingpolicyrefersandismoresuitabletoanurbanthanruralsetup.Table2

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

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

ILMI Working Paper No. 7 Page 3

summarisestheeconomicoutcomesofNamibiasdevelopmentprogrammes.Asstatedabove,the
tableshowsthatbothpovertyandinequalityhavebeendecliningovertime.

Thedevelopmentprogrammeshadotherdevelopmenttargets,forexample,socialtransformation
and skills development. The current development plan (NDP5) emphasises the need for skills
trainingand tackling youthunemployment.ThepastNDPsmissed their growth targets, inpart
becausethetargetswereratherambitious,andalsobecauseofexogenousshocksthataffectedthe
economy.

Despite the improving socio-economic statistics, one dimension remains stubbornly high:
unemploymentinthecountryremainshighandincreasing,measuredat28.1%in2014and34%
in2016.Unemploymentremainsveryhighamongtheyouthitaveraged38.7%overtheperiod
2011-2014,andover40%in2016.Theexistenceofhighunemploymentmeansalargeproportion
ofthepopulationlacksincomeandthereforetheabilitytopayforitshousingneeds.Womenare
over-represented among the unemployed (31.7% in 2014; and 38.3% in 2016). Overall
unemploymentisalsohigherinruralthaninurbanareas.Therehasbeenconsistentgrowthinthe
rateofurbanisation.Forinstance,while39%ofthepopulationlivedinurbanareasin2007,the
proportionhadincreasedto46.7%by2015(WorldBank,2018).Thisimpliesthatin2015,close
tohalfof thepopulation lived inruralareasandon farms.TheUnitedNationsDepartment for
Economic and Social Affairs 2014Revision ofWorld Urbanisation Prospects estimates that by
2020, the rural and urban populations will be 50% apiece (UN, 2015). Thereafter the urban
population will continue to increase while the rural population decreases such that by 2050,
about68%ofthepopulationwillbelivinginurbanareas.Thegrowingrateofurbanisationcalls
for concerted efforts towards the provision of services likewater, sanitation and housing. The
problem is muchmore serious for a country like Namibiawhere a growing proportion of the
populationlivesininformalsettlementsandhaslowaverageincomes.Thefollowingtableshows
the proportion of households with access to protected water and sanitation facilities in the
country.

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Table2:povertyandinequalitytargetsandoutcomes,1995-2016

Povertyreduction Reductionofinequality EconomicGrowth
Target Outcome Target Outcome Target Outcome

NDP1 Reducetheproportion
ofpoorhouseholdsfrom

47%to40%.

Progressreducedby
sloweconomicand
employmentgrowth.

Reducingincome
inequality(National
HumanDevelopment

Report(UNDP,1998)the
Ginicoefficientwas0.7

for1993/94)

Ginicoefficientof
0.701.

Targetedgrowth
average:5%

Actualaverage
growth:3.6%

NDP2 10%reductionofpoor
households;5%

reductionofseverely
poorhouseholds.

Poorhouseholds
declinedfrom38%
(1993/4)to28%

(2003/4);severelypoor
from9%to4%.

ReducetheGini
Coefficientfrom0.67to
0.6;increasefemale
representativesin

parliamentfrom19%to
35%.

GiniCoefficientof
0.604(2003/04);

female
representationin

parliamentwas28%
(2004)

Targetedgrowth
average:4.3%

Actualaverage
growth:4.7%

NDP3 Eliminatingsevere
poverty.

Severelypoor
householdsfellfrom
13.8%(2003)to10.3%
(2009);childpovertyfell
from43.5%to34.4%2.

AtargetedGini
Coefficientof0.58;

increaseincomeofthe
poorest25%by12%.

0.58(2009/10);
incomesofthe

poorest25%grewby
7.2%.

Targetedgrowth
average:5%

Actualaverage
growth:3.6%(cp.
6.1%inemerging
anddeveloping
countries).

NDP4 Reducingpovertyfrom
the2009/10level.

Extremepovertyfellto
5.8%from7.3%

(2009/10);General
povertyfellfrom28.7%
(2009/10)to18%

(2015/16).

Increaseincome
equality.

Ginifor20160.572 Targetedgrowth
average:6%

Actualaverage
growth:4.6%

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 to
propertoiletfacilities,especiallyinruralareas.Thataboutafifthoftheurbanpopulationdidnothave
accesstotoiletfacilitiesinurbanareasshowspooraccesstocriticalinfrastructure,andthisischronic
ininformalsettlements.Poorsanitationfacilitiestendtocorrelatewithpoorhousing.

Table3:Proportionofhouseholdsaccessingprotectedwaterandsanitationfacilities
2003/4 2009/10(NHIES) 2013(DHS)

Rural Urban Rural Urban Rural Urban
Protectedwatersource 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 South
Africa (64.8% as of 2015) and that of Botswana (57.4%). However, Namibias urbanisation rate
exceeds that of Swaziland(21.3%),Tanzania(31.6%)andZimbabwe (32.4%).Housing is topical in
Namibiabecauseof the fasturbanisationrate,drivenbyrural-urbanmigration fuelledbythedesire
forbetter services and jobs inurbanareas.Ahighurbanisation rateputspressureon services like
waterandsewerageprovision,roads,housing,educationandhealthservices.Forinstance,Windhoek
acts as a magnet attracting migrants from around the country. This puts a lot of pressure of the
existingservices,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 of
affordablehousing.Inconsequence,informalsettlementshavebeenestablishedaroundmajortowns,
andtheyhavebeengrowing.TheMassHousingDevelopmentProgrammeisanappealingandrational
projectaimedataddressingthehousingsituationinthecountry.Theprovisionofaffordablehousing
isadevelopmentalgoal in linewiththeprovisionsof internationalconventionstowhichNamibia is
signatory.TheMHDPfitsintothecurrentdevelopmentpolicyasoutlinedintheNDPsthatprioritise
povertyandinequalityreductionandaffordablehousing.Further,the2015HarambeeProsperityPlan
(HPP),arguefortheconstructionoftheall-inclusiveNamibianhouse(RepublicofNamibia,2016,pp.
12,41).However,thechallengeisinensuringthateveryonehasaplaceintheNamibianhousewhen
economic inequality and poverty are still high asmentioned above. To establish the structure and
capacityofNamibianhouseholdstoeffectivelyparticipateinnationaldevelopment,especiallyonthe
housingside,thenextsectionexamineshouseholdincomesandincomedistributioninthecountry.

3.Currenthousingandprovision

Thestructureofhousingownership
Asan entrypoint into analysinghosingprovision, this section startsbypresenting the structureof
housingownership,basedon the2011populationandhousingcensusdata.Table4showsthat the
majority of households owned their houses, with no outstanding debts. The majority of such
householdswere in rural areas and in informal settlements. Less than 15% of the households had
mortgage loans to finance their housing needs. The low number of mortgage holders points to
affordabilityproblems.The lownumber isalsopartlyexplainedby the low-incomecapacityofmost
householdsandthestrictcriteriaappliedbybanks.Asaresult,mortgagefinanceismainlyavailableto
high-incomegroups.InaninterviewconductedwithNHE(Chiripanhura&Jauch,2015),theinstitution
argued that even low-income households receiving housing subsidies were being accepted for
mortgage finance by banks. However, there is no information to corroborate this claim since the
respectivebankscannotprovidetherequiredinformation,andthe2011dataisratherold.

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Table4:TypesofhousingtenureinNamibia,2011
Tenure Namibia Urban Rural
Ownedwithnooutstandingdebts 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,parastatalsandprivatefirmsforaccommodationpurposes
aresubsidised.

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 special
groups receive subsidised rent.Keyproblems in theNamibianhousingmarketare that the existing
housingstockandrentalaccommodationaretooexpensiveforthemajorityofthepeople.Thishashad
theeffectofpushing low incomeearners intohighdensityareasand into informalsettlements.The
competitionforcheaperhousingisintense,causinglow-incomegroupstofacerelativelyhigherrents.
Thesituationismadeworsebythelackofservicedlandonwhichthesegroupscanbuildtheirown
houses. In the informalsettlements,there islimited tonoprovisionofelectricity,potablewaterand
sanitationfacilities.Lackofthesebasicservicesreducesthequalityoflifeoftheinhabitants.

Housingdeliverymodes
TheprovisionofhousinginNamibiaislargelylefttoindividuals,non-governmentalorganisationsand
theprivatesector.Forhistoricalreasons,thegovernmentdoesnotwanttodirectlyprovidehousesto
households.TheNationalHousingPolicyenvisagesanumberofpossiblemodesofhousingdeliveryin
the economy. It proposes the provision of credit-linked housing (houses for sale), rental
accommodation (including the rent-to-buy option), houses built by their owners, and subsidised
housing for low-incomehouseholds.Thepolicyalso includesarole for thegovernment throughthe
National Housing Enterprise (NHE) and councils to construct low-cost rent-to-buy housing for the
poor. In addition to the policy targeted beneficiaries, there are special groups that need direct
governmentattention toaddress theirhousingneeds.These includewarveterans, thedisabled, the
old-agedandothervulnerablepersons.

TheNHEbuildshousesforpeopleearningN$5,000toN$20,000permonth,oracombinedincomeof
up to N$30,000 (Remmert & Ndhlovu, 2018). However, under theMHDP, the NHEsmandate was
expanded to cover lower income households that used to be covered by the Build Together
Programme(BTP).TheBTPwasinitiatedin1992.Ittargetedlow-incomehouseholdswithamonthly
incomeoflessthanN$3,000.ThecoverageoverlapstheincomegrouptargetedbytheShackDwellers
FederationofNamibia(SDFN).TheSDFNwasformedin1998asahousingsavingsschemetoassist
the ultra-low-income households to save towards building their own houses. The SDFN gets
government subsidies and builds houses for the very low-income groups (with monthly incomes
belowN$2,000).

Oneaspectthatismissingfromthehousingpolicyisthepossiblerolethatcanbeplayedbyhousing
cooperatives.Thereismentionofcommunity-drivenhousingprocesses(RepublicofNamibia,2009,p.
14)butwithoutelaborationonthenatureandstructure.AlthoughtheSDFNisalreadydoingthis, it
wasnotmentionedasanexample.Thecommunity-drivenhousingprocessescouldbelinkedtowhat
the housing policy calls supporting people-housing processes. Individuals can form cooperatives,
contributemoney tobuy landand to constructhouses, andallocate thehouses to themembers. In
addition, employers can come up with housing schemes where both employers and employees
contributetoapotthatwillbeusedtobuylandand/orconstructhouses.

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Landservicingandallocation
Thegovernmentleavesituptolocalauthoritiestoserviceandallocatelandforhousing,andthrough
variousdevelopmentprogrammes,provides finance for theservicingof residentialplots.Some local
authoritiespartnerwith the private sector (i.e. public privatepartnerships (PPPs)) to service land.
Otherscontracttheprivatesectortoservicethelandinreturnforotherlandelsewhereaspayment.
These arrangements are regarded as costly anddriving up house prices. For instance, aprominent
caseisthelandinAcademia,Windhoek,thatwasservicedunderaPPParrangement.Theplotswere
sold throughan auction systemand they attractedveryhighbids3 thatmanyhouseholds couldnot
afford.

Local authoritiesdecide on the appropriatemechanism of allocating serviced plot, and this in turn
impacts on housing supply. The auction system came under the spotlight in Windhoek with the
criticism that it tended to favour established property developers and high-income people while
disadvantaging low-income groups. This resulted in the supply of new houses being dominated by
property developers who constructed houses affordable to middle and high-income groups. The
approachusedbytheCityofWindhoekperpetuatedinequality.It isnotsurprisingthattheCitywas
pressuredtoabandontheauctionsystem(TheNamibian,2014c).

TheMHDPandhousingsupply
TheMHDPisaN$45billionhousinginitiativethatwaslaunchedin2013tofosterlowcosthousingfor
lowincomehouseholdsthatfinditdifficulttoaccesshousingthroughthecompetitivehousingmarket.
TheBTPbecametemporarilyputonholdduringtheMHDP.ThecomponentsoftheMHDPwereland
servicing, the construction of credit-linked low-cost housing, upgrading of informal settlements,
improvementsinruralhousingandsanitation,andprovidingsocialhousing.Theresponsibleauthority
forthedeliveryofthehouseswastheNHE,whichinturncontractedprivatesectorcompaniestobuild
thehouses.Theprogrammefacedalotofchallengesrangingfromcostlyhousestopoorconstruction
ofthehouses,leadingtoitbeingsuspendedin2015.

There-launchedMHDPcontinuestodeliverhousesaroundthecountry,underthesupervisionofthe
NHE.Thehousesaresubsidisedbythegovernmenttomakethemaffordable.TheMHDPhasdifferent
types of houses targeted at low and middle-income groups, and the government is committed to
constructing about 5,000 new houses annually, in addition to serviced plots under the HPP. An
exampleoftheapplicationofthesubsidyisasfollows:someoneearningN$2,700permonthcanafford
atypeofhousevaluedatN$70,000,withamonthlyinstalmentofN$550(RepublicofNamibia,2018).
Thisentailsa65%subsidy(ofN$129,561)coveringthecostoftheland.
Toqualifyforthesubsidisedhouses,anumberofcriteriamustbemet,includingthatonemustbeon
theNHEwaitinglist,thatthebeneficiarymustbeafirst-timebuyer,thatshackswontbebuiltonthe
plot,andthatthehousesshouldnotchangeownershipforatleasttenyearsfromthedayofallocation,
afterwhichthegovernmentholdstherightoffirstoptiontobuyanysuchhouse.Itisanticipatedthata
revolvinghousingfundwillbecreated,withtheNHEplayingacentralroleinsettingupahousingloan
facility (New Era, 2018a). It cannot be established whether or not the NHE has the institutional
capacitytohandlethisrole.

In2014,over60%ofthepopulationearnedbelowN$2700(seeTable5).Assumingthatthecountrys
housingbacklogof110,000consistsofpersonsearningbelowN$2,700,ifallthesepeopleweretoget
thesubsidisedaccommodation,thetotalsubsidybillwillbeamaximumofN$297million.Thisisnot
animpossiblefigure,giventhatthetotalamountinitiallyenvisionedfortheMHDPwasN$45billion.
Effective implementation of the programme will increase the stock of houses, which should force
pricesdown.However,thereisneedconsiderhowthisimpactwillaffectthestabilityofthehousing
market 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)

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

ILMI Working Paper No. 7 Page 8

on the middle to upper sections of the housing market may face significant challenges servicing
mortgages,whichwillinturnaffectbanksandthefinancialsectorasawhole.

ThefearofahousingbubblecausedtheBankofNamibiatotakeaction.Inearly2017,itintroduceda
policythatmakesitincreasinglyexpensivetobuyasecond,thirdorfourthproperty.Thepolicystates
that,as fromthe22ndofMarch2017,Namibian first-timebuyerswillbegivenmortgage loanswith
zerodeposit (that is,100%mortgages).However,thepurchaseofasecondhouse issupposed tobe
backedbya20:80loantovaluehomeloan;athirdhouserequiresa30:70loantovaluehomeloan;
andsoonforadditionalhomeloans.Thecentralbankarguesthatthepolicygivesanadvantagetofirst
timebuyerstogetupthepropertyladder.However,acloseranalysisofhouseholdincomes(below)
showsthatitisunlikelythatmanypeoplewillhaveaccesstomortgagefinancetogetonthefirststep
onthepropertyladder.

Another concern is that theMHDPmay not benefit households that do not have a foothold in the
formallabourmarketbecausetheylackaconsistentflowofincometoservicethehousingloans.The
programmewouldneed toberefined toensure that itaccommodatesthepeculiaritiesofultra-low-
incomehouseholds.Thus, insteadof burdening suchhouseholdswithmonthly loanobligations, the
housing initiative must priorities allocating serviced plots to poor households so that they can,
throughanexpandedBTPprogrammeorincollaborationwiththeSDFN,buildtheirownhousesonan
incremental basiswith no bindingmortgage obligations. In addition, the condition that the houses
cannot be disposed of within a period of ten years may imply that the houses are not usable as
collateral,thusdenyinghouseholdsthebenefitofahouseasafinancialandeconomicasset.

4.Householdincomeanalysis

ThisresearchonmasshousingexaminesthehousingsituationinNamibiawiththeaimofimproving
the provision and accessibility of housing by low income households. The demand and supply of
housingdependonthemacroeconomicperformanceoftheeconomy.Householdsrelyontheirearned
income to pay for their housing needs. Existing data shows that the average household income in
Namibia in 2014 was N$6,626 per month (NSA, 2015). Table 5 shows that the majority of the
households earnmonthly incomes below this average. First, 55.1% of the households surveyed in
2014earnedlessthan$1,000permonth.Secondly,91.1%ofthehouseholdsearnedmonthlyincomes
thatfellbelowtheaverageincome.Thissituationhasnotchangedsignificantlysincethen,giventhat
house prices have been increasing, unemployment has been increasing, and thatwages have been
growingslowly.

There are a lot of householdsof different sizesand structure in the economy.Household sizes also
differbyregion.Table5showsthattheaveragehouseholdsizeconsistsoffivepersons,andthesize
has not changed significantly over the past six years. Ohangwena has the largest households, and
Erongohasthesmallest.Multiplyingthetotalnumberofhouseholdsbyaveragehouseholdsizegivesa
totalpopulationof2.45millionpeople.Ofthispopulation,2.23millionpeopleareinhouseholdsthat
hadaveragehouseholdincomesbelowN$6,000.Thisisworryingbecauseitindicatesthatthemajority
ofthepeopleinthecountryhavelowincomes,andtheirparticipationintheformalhousingmarketis
therefore limited.Asdiscussed later, the low incomespreclude themajorityof thepopulation from
accessingmortgagefinancefrombanks.

Columns 4 and 5 in Table 5 are obtained by applying the World Bank USD-denominated income
classification categories (World Bank, n.d.-a)4 to theNLFS 2014 income data. The conversion gives
comparable thresholds across countries. The upper limits of the NLFS 2014 income groups are
convertedtoUSDusingtheaverageexchangerateofthemonthofAugust2014(column4),expressed

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

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

ILMI Working Paper No. 7 Page 9

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

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 income
households.

The conversion and classification result in column 5. Converting the World Banks upper middle-
income limit toNamibianDollars gives aminimumhousehold income ofN$53,220.63 for thehigh-
incomegroup.

Table5:Numberofhouseholds,householdsizesandaveragemonthlyincomelevels,2014

Household
income(N$)

No.of
households

Proportion
oftotal

NLFSUpperLimitAverage
householdmonthlyincome

(USD)WBequiv.
WorldBankIncome

classification
Region Average

household
size

<1000 286853 0.551 19.94 Lowincome Zambezi 4.7
1000-2000 95756 0.184 39.88 Lowincome Erongo 3.5
2001-3000 39212 0.075 59.82 Lowincome Hardap 4.2
3001-4000 24358 0.047 79.76 Lowincome //Karas 3.7
4001-5000 16759 0.032 99.70 Lowermiddleincome Kavango 6.5
5001-6000 11744 0.023 119.64 Lowermiddleincome Khomas 4.1
6001-7000 7422 0.014 139.58 Lowermiddleincome Kunene 4.4
7001-8000 6195 0.012 159.52 Lowermiddleincome Ohangwena 6.1
8001-9000 4537 0.009 179.47 Lowermiddleincome Omaheke 4.1
9001-10000 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); Income
classificationcalculatedfromtheWorldBankIncomeClassification.Column4figuresarebasedonahouseholdsizeof4.7
personsandtheaverageAugust2014exchangerateofN$10.67perUSD.

ApplyingtheWorldBankincomeclassificationtoTable5showsthathouseholdsthatearnedN$4,000
per month and below can be classified as low income. These households constitute 85.7% of all
households.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 not
qualify foramortgage tobuyahouse;andonly8.9%ofNamibianhouseholdscouldafford togeta
mortgage in 2014. The majority of the households that could afford mortgage finance were
concentratedon the lowerlevelof thehousingmarketwhere transactionalactivitywashighestand
priceswerepushedupbecausedemandoutstripped supply.This is becauseofa limitednumberof
entrylevelproperties,whichforcedpricestoincreasesignificantly,resultinginover-valuation(IMF,
2016) and extra pressure on household finances. The situation has not changed significantly since
2014.Infact,therehasbeensignificantexpansionofinformalsettlementsinurbanareas,especiallyin
Windhoek, since that time. This is because of high rural-urbanmigrationwith restricted supply of
affordableurbanhousing.

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

ILMI Working Paper No. 7 Page 10

Applying the World Bank classification on the NLFS 2014 data indicates that less than 15% of
Namibian households can be classified as middle income, and about 4% can be classified as high
income.Splittingthemiddle-incomegroupintoloweranduppergroupsmaynotbefunctionallyuseful
in thecaseofNamibia.According toTable5, themajorityofNamibianhouseholds(85.7%)are low
incomeandcannotaccesstheformalhousingfinancemarket.Thesehouseholdsshouldbetheprimary
beneficiariesofagovernment-drivenmasshousingdevelopmentprogramme.Anotherclassificationof
NamibianhouseholdswasdonebytheNPC(RepublicofNamibia,2018)atthebeginningoftheNDP4.
Households were classified into three segments, namely ultra-low and low-income households
(alternativelycalledtheblue-collarclass), themiddle-incomehouseholds(alternatively identifiedas
thewhite-collarclass,whichconsistsoflow,middleanduppermiddle-incomeearners),andthehigh-
income households (or upper class) consisting of the rich and the super-rich. The low andmiddle-
incomegroupswerehardesthitbytheshortageofhousinginthecountryastheydidnotqualifyfor
mortgagefinance.

Another classificationofNamibianhouseholdsby income statuswasdoneby theMinisterofUrban
and Rural Development in a 2016 speech (Shaningwa, 2016). The minister identified the lowest
income sector ashavingmonthly incomes ranging fromzero toN$1,500(p.4). She also identified a
second incomegroupwith incomes falling in therangeN$1,501toN$4,600.TheMinister identified
thelowerandmiddle-incomecategoriesthatareintendedtobenefitfromthegovernmentsgrantsand
subsidies as falling within the income range N$1,501 to N$4,900 (p. 8). It is paradoxical that the
governmentgrantsandsubsidieswillbetargetedatthisgrouptotheexclusionofthelowestincome
group(0N$1,500monthlyincome).

The discussion above shows that there are a number ofways of classifying households by income
level. The different categorisationsdo not read to the same conclusions, andmay impact onpolicy
focus.TheMURDclassificationshowsthatthegovernmentwantstheMHDPtofocusonapproximately
34%ofthehouseholds,totheexclusionofthelowestincomecategorythatconstitutesaboutafifthof
allhouseholds.

5.Theeconomicsofhousingsupplyanddemand

According 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 an
increasing proportion of income to housing, which reduces the amount of income left for other
requirements. 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 fuel
charges) increasedbyanaverage3.4%between2010and2015.Thehighest increase inthecostof
housing was recorded in 2011 when rentals increased by 7.45%. Given that the cost of other
componentsoftheconsumerbasketalsoincreasedduringthisperiod, it isapparentthatonaverage
householdrealpurchasingpowerdeclinedasincomesgrewataslowerrate.Despitetheincreasein
thecostofliving,thedemandforhousinginthecountryremainedhigh.

Housingdemand
The demand for housing stems from the basic need for shelter. Households demand accessible,
sufficient/appropriateandaffordablehousing,andthisisnotavailableonthemarketinNamibia.In
addition,thegrowthofinformalsettlementswherethereisinadequatewaterandsanitationfacilities
is linked to the unaffordability of decent accommodation in urban areas. The Namibia Household
Income and Expenditure Survey of 2009/10 reported thatnearly a quarter of the population lacks
access to decent housing. The main challenge that households face is the lack of affordability of
existing houses. The Minister of Urban and Rural Development, Sophia Shaningwa (2016) defined
affordablehousingastheprovisionofhousingunitsthatarepricedinthatmannerthatwillallowthe

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

ILMI Working Paper No. 7 Page 11

targetbeneficiaries,thatisthelowerandmiddle-incomeearners,toalsobeabletoaffordotherbasic
living costs such as food, clothing, transport education andmedical care (p. 2). In the USA and in
Australia,affordability isdefinedasasituationwhenahouseholdcanpaynomore than30%of its
annual incomeonhousing,while theUKsNationalHousingFederationusesa cut-off point of 25%
(ColliersInternational,2014).The30%cutoffisconsistentwiththeweightingofhousingexpenditure
in the national consumer basket used by the Namibia Statistics Agency to calculate inflation. The
analysis of affordability canbedividedbetweenaffordability in the rentalsmarket,and in the sales
market.

There isnoconsistentsetofstatisticsshowingtheextentofthedemand forhousing in thecountry.
However,suchdemand isexhibitedby theproliferationof informalsettlementsaroundthecountry,
thelargenumbersofpeoplelivingininformalhousingandsettlements,sporadicdemonstrationsby
differentgroupsfightingforaccesstoland,andthehighdensityofoccupationperroomespeciallyin
towns,amongotherindicators.Althoughtheaveragehouseholdsizeisaboutfivepersons,thereare
some largehouseholds consistingof up to15persons (NSA,2012).Townsand local authoritiesdo
havesomedisjointedstatisticsofestimatedhousingbacklogs.For instance, in2008,Kalili,Andongo
andLarson(2008)estimatedabacklogof61,710units.In2011,theIPPRestimatedthatthebacklog
amountedto89,000units,thebulkofwhichwasatthebottomoftheincomedistribution.TheNHE
StrategicPlan(2017-2022)estimatedthebacklogtobeabout110,000units,growingatanannualrate
of3,700units.HousingFinanceAfrica(CAHF,2018)puttheNHEbacklogaloneashavingincreased
from76,800in2016to84,940bymid-2017.TheMinisterofUrbanandRuralDevelopment,in2016,
quotedanationalbacklogof100,000housingunits,withthelargestbacklogof45,000unitsbeingfor
thelowestincomegroupwithincomesrangingfromzerotoN$1,500(Shaningwa,2016).Theminister
alsomentionedthattheNationalHousingEnterprise(NHE)had,asatOctober2016,ahousingwaiting
list of over 80,000 applicants. City councils have their ownwaiting lists, and there is no system of
consolidating the backlog lists, and of eliminating double applications or listings. Despite the
inconsistent estimates, it is apparent that the demand for housing is high and that it outstrips the
supply, inpartbecauseof lackofaffordability. In2015, themedianhousepricewas$868,000(FNB
Namibia,2015).Thishasincreasedsincethen,andisnotaffordabletothemajorityofthepeople.

The growth in the backlog is a result of limited supply growth and higher demanddue to growing
numbersofhouseholds.Householdsizehasbeendecliningovertime(from5.7personsin1995to4.4
personsin2016),and,accordingtoKalili(2017),newhouseholdsincreasedfrom63,426in1994to
80,853in2016.Duringthesameperiod,thenumberofshackaccommodationincreasedbyaratioof
4:1relativetomodernhousing.Thesefigurespointtosignificantchallengesaffectingthesupplyside
ofhousingdelivery,ofwhichlanduseandvaluationareimportantfactors

Thedemandforhousingislinkedtothedemandforlandonwhichtobuildthehouses.Accesstoland
isvery important inbothruralandurbanareas. Inruralareaswhere landownership iscommunal,
individualscanbeallocatedlandonwhichtofarmandbuildahomesteadbythetraditionalauthorities
andthereisnoneedforservicingit(i.e.theprovisionofroads,waterandsewerlines).Newfamilies
canalsoconstructtheirhousesinornearthefamilycompound.Inurbanareaswherelandisascarce
commoditythedynamicsaredifferent.Itisthelocalauthoritythatisresponsibleforgivingaccessto
servicedland,andthisisdonethroughthemarketmechanism.Supportersofthemarketmechanism
arguethatitisefficientinallocatingresources,butthisisusuallyattheexpenseofequity.Themarket
tendstoberuthless,failingtotakecognisanceofsocialjusticeandpowerimbalanceissues.Itdoesnot
takeintoaccounttheinitialresourceallocation.Andthisisthemajorproblemwithhousinginurban
areaswherethereisagrowinghousinggapasdemandoutstripsthesupplyofhouses.

Thehousinggapdiffersacrossregionsandcities,andbyincomegroup.Itismoresevereintownsthan
inotherse.g.inWindhoek,WalvisBayandSwakopmund.Thereareanumberoffactorsthatdriveup
the demand for housing. First, the urbanisation rate has been increasing over the years, and the
growthintheurbanpopulationhasnotbeenmetwithsimilargrowthinhousingunits.Thegrowthof
the urban population is driven by migration from rural to urban areas, and by reproduction and
householdformationwithintheurbanareasthemselves.Ashouseholdsgrow,theirdemandformore

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

ILMI Working Paper No. 7 Page 12

living space also increases.With limited supply of housing units, the demand for housing ends up
outstrippingthesupply.Inaddition,theremaybeashortageofparticulartypesofhousingdemanded
by households. Themarket for low cost housinghas fewer units relative to the demand,while the
market forup-market andexpensivehouses tends tohave houses availableboth for rental and for
purchasing.Themajorityofthepopulationcannotaffordthelatter.Figure1showstheactivityratein
differentsegmentsofthemarket.

Figure1:Amarket-segmentedpercentagebreakdownofhousingtransactions

Source:FNBHousingIndex,December2016(FNBNamibia,2016).

Thefigureshowsthatthevolumeoftransactionsofsmallhouseshasbeenincreasingsince2009.The
smallhousessegmentof themarket is themostactiveandhasexperiencedsignificantpricegrowth
becauseofdemandexceedssupply.Therehasalsobeengrowingtransactionactivityofmedium-sized
housesovertime,anddecliningvolumeoftransactionsoflargehouses.Itislikelythatgrowinghouse
pricesshifteddemandtowardssmallerhouses,thusincreasingcompetitiononthelowerlevelofthe
housingmarket.Thus,althoughdemand forhousingexceeds thesupply,muchof thatdemand ison
smallandmedium-sizedhouses.Thisisthesectionofthemarketthatisdrivingupprices.
Thedemandforhousingisdeterminedbyhouseholdincomes.Ingeneral,migrantsfromruralareas
withlowornoskillstendtomoveintothehighdensityandinformalsettlementareasofcities.Given
the lowaverage incomes and income inequality in the economy, themajorityof thepopulationhas
restrictedchoiceofhousingandisconfinedtothehigh-densityareaswhichhavenotbeenexpanding
fastenoughtoaccommodate thegrowingpopulation.Low incomehouseholdscannotaccess landat
auction,and theyare technicallyeliminated fromthemortgagemarket.Given thehighpovertyrate
(see Table 2) in the economy, poor households are forced to trade-off between household
requirements, including housing. This results in the concentration of low income, poor households
livingininformalsettlements.

There is also a general shortage of housing suitable for households in the middle of the income
spectrum.Thesearehouseholdsthatcannotbeclassifiedaslowincomehencecannotaccesshousing
under programmes like the Mass Housing Development Programme, and they do not have high
enoughincomestoaffordmortgagefinance.Thisgrouphasbeengrowingwhilethesuitablehousing
stock has not, thus creating excess demand for housing. This shortage has been worsened by
speculativeactivitiesintherent-to-buysectionofthemarketwherehomeownerstendtochargehigh
rentals in order to service theirmortgages. The high rentals crowd out some households to lower
sectionsofthehousingmarket.Therisingdemandforhousingis,asmentionedearlier,drivenbyfast
growingurbanpopulation.Rural-urbanmigrationistakingplaceatafastrate,leavingtowncouncilsin
areactivemode.Shortageofaffordablehousing forcespeople intoinformalsettlements.Despite the
existenceofprogrammestoupgradeinformalsettlementstoprovidedecenthousing,theslowpaceof
implementation of the programmes, together with financial constraints, means the existence of
persistentexcessdemandforhousing.Therateofruralinfrastructuredevelopmentisalsoveryslow
andisthereforeunabletoreducerural-urbanmigration.Theslowpaceofhousesupplygrowthalso
causesexcessdemandforhosingtopersist.

Published by: FNB Namibia Address: @Parkside, 130 Independence Avenue, Windhoek
Author d 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 h wever, as 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 t the coas continued to enjoy robust pric
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%

D
ec

-0
9

M
ay

-1
0

O
ct

-1
0

M
ar

-1
1

Au
g-

11

Ja
n-

12

Ju
n-

12

N
ov

-1
2

Ap
r-1

3
Se

p-
13

Fe

b-
14

Ju

l-1
4

41
97

4
M

ay
-1

5
O

ct
-1

5
M

ar
-1

6
Au

g-
16

P rcentage breakdown of
housing transactions based on

arket seg entation

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
Ru u

Otavi
Tsumeb

Oshikuku
Ongwediva

Otjiwarongo
Grootfontein

Keetmanshoop
Ondangwa

Omaruru
Mariental

Arandis
Usakos

Oshikango
Henties Bay

Annual growth across main
towns

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

ILMI Working Paper No. 7 Page 13

Housingsupply
Thehousinggapcanbeexaminedfromasupplyside.Ingeneral,thesupplyofhousingunitshaslagged
behindthedemand,resultinginhigherhousingprices.Inaddition,thehousingsupplycurveisrather
unresponsive,meaningthereisalowresponseofthequantityofhousingsuppliedtoachangeinthe
price of housing. With growing demand for housing, the average house price increases very fast,
makinghousesunaffordabletolowincomehouseholds.

Thehousingbacklogisanindicationoftheshortageofhousingunits,itselfaresultoftheshortageof
servicedland.Althoughtherearemanycomplexfactorsaffectinghousingsupply,itissmartertofocus
onthesupplyofservicedland.Thelimitedsupplyofservicedlandimpliesthatittakesalongtimefor
land applicants to be allocated serviced land from local authorities (Immanuel, 2015). There are
accusationsthatsomedevelopershoard landinorder topushuphouseprices(Mwilima,Fillipus,&
Fleermuys, 2011), but there isnodata to verify the claim.Nonetheless,developersare fittingmany
smallhousingunitsontheavailableland.Thismaximizesthenumberofunitsforsalebutitreduces
thespaceavailabletohouseholds.

Thelanddeliverysystemislongandcumbersomebecauseitrequiresseveralapprovalprocessesby
thelocalauthoritiesandgovernment(Sweeney-Bindels,2011).Localauthoritiesarguethattheylack
the resources to expedite land servicing. For example, the Windhoek City Council argues that the
mountainous landscapearoundthe citymakes itmore expensive to service the land,and this feeds
intohigherhouseprices.Theyalsoarguethatlandaroundtownsandcitiesisprivatelandthatthey
havetobuyfromtheownersbeforedevelopingit,whichtakestime.

The slow supply of serviced land and its impact on house prices was also acknowledged in the
government. It has introduced a number of interventions aimed at alleviating the problem. For
instance,itofferedfundingforresidentiallandservicingtosomelocalauthoritiesundertheTargeted
Intervention Programme for Employment and Economic Growth (TIPEEG) programme. Under the
MHDP, the government committed to providing more serviced land around the country. The
programmeaimed todeliver185,000housingunitsby2030with anannual target of 10,300units.
However, in 2014, only 4,204 units were developed. The programme faced some challenges that
resultedinthegovernmentstoppingitin2015inordertoreformtheinstitutionalframeworkandto
renegotiatesomeofthecontractswhichwereviewedastoocostly.Nonetheless,newhousescontinue
tobedeliveredandallocatedaroundthecountry.

ThegovernmentfurthercommittedtosocialtransformationandprovisionofhousingintheHPP.The
HPP seeks todeliver 6,500 serviced residential plots and5,000 housing units per year.As of April
2016,therewere34,483urbanservicedplotsand100,447un-servicedones.Thedistributionofthe
plots varies across regions.There are twoseparate sets of statistics linked to theMHDPand to the
HPP.Thereisnoclarityfromthegovernmentwhetheronesetsubsumestheotherornot.

Despitethegovernmentsinterventions,propertydevelopersandindividualscomplainoffailingtoget
serviced land from local authorities,which results in reducedhousing construction.Restricted land
supply results in high land prices and consequently costly houses, which many Namibians cannot
affordtobuyorrent.

Thepriceoflandaccountsforasubstantialportionofthecostofanewhome.Theimpactoflandcost
on housing has been examined elsewhere, notably byMacFarlane (MacFarlane, 2017) for Scotland,
whoconcludedthattherisinghousepricesweremainlydrivenbyrisinglandprices.Otherstudiesthat
linklandpricestohousepricevolatilityincludeHannah,KimandMills(1993),Kok,Monkkonenand
Quigley (2014),Knoll, Schularick andSteger (Knoll, Schularick,& Steger, 2017)amongothers.Wen
and Goodman (Wen & Goodman, 2013) argued that there is significant reverse causality between
urbanlandpricehouseprices.ChiripanhuraandJauch(2015)statedthatonaverage,thecostofland
inNamibiaconstitutedupto40%ofthecostofanewhouse.Thisindicatesthatlandeconomicsisat
thecentreofthehousingsituationinthecountry.

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

ILMI Working Paper No. 7 Page 14

Aswith goods, there isnooneuniform landmarket: the landmarket varies across regions, inpart
becauseofdifferencesintopography,availabilityofservices(and/orcostofputtingupservices),and
neighbouring developments. Apart from the limited supply of serviced land,Windhoek, until a few
years ago, had the additional problem of allocating serviced land to the highest bidder. The
competitivesystemresultedinpoorandlow-incomepeoplebeingunabletoaffordland.Thepeople
that won the bids tended to construct high value properties whose prices and rentals were
unaffordabletothemajorityofthepopulation.

Generally,thereisnosingleconsistentsourceofdataonhousingcostsandsupply.Thisresearchputs
togetherdatafromdifferentsourcesinordertoenhancethepictureofthehousingsituation.Table6
belowshowstheaveragecostsofbuyingand/orrentinghousingunitsinNamibiantowns.

Table6:Averagecostofbuyingand/orrentinghousingunitsinNamibia

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

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

:outsidecitycentre N$6,273.49-N$17,000permonth
Buyinganapartmentincitycentre 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/m2
OtjomuiseNHEhouses:N$4,393/m2 (TheNamibian,2010)
NHEcorehouse(2009):N$5,900/m2 (Sweeney-Bindels,

2011)Conventionalhouse(2009):N$4,300/m2

Thetableshowstherangeofrentthatonecanpayforurbanaccommodation.Livinginthecitycentre
costsmore than living in the outskirts. The same applies to buying in the city centre compared to
buyingintheoutskirtsoftown.Outsidethecitycentre,differentresidentialareashavedifferentrental
andsellingpricesbecauseofneighbourhoodeffectsandincomeclass.Whatisstrikingisthedifference
incostpersquaremetreinbuildingahousebetweentheSDFN(whichbuildshousesforpeopleonthe
lowest income level) and construction companies/property developers (that build houses for the
middle tohigh incomegroups).Oneargument thathasbeenadvanced is thathouses are expensive
becauseofthehighcostofbuildingmaterials.ItisbafflingthattheSDFNandthepropertydevelopers
arebuying constructionmaterials from the same suppliers, yet theyhave such ahugedifference in
theirconstructioncostpersquaremetre.AsimilarquestionwasraisedbytheadvisertotheMinister
ofUrbanandRuralDevelopmentin2014,queryingwhytheNHEscostpersquaremetrewashigher
thanthatofaprivatedeveloperthatwasconstructingtheOmeyaEstateoutsideWindhoek(thatcaters
orhigh-incomehouseholds).These figures suggest there are some inefficiencieswithin thehousing
marketthatareforcingupprices.

The low supply of housing units around the country has contributed to rising prices. The most
authoritativesourceson the changes inhouseprices around the country is theFNBHousing Index.
The index shows the average house prices inmajor towns. On average, house prices increased by
11.4%between2010and2016.Duringthatperiod,disposableincomesgrewbyanaverage8%per
year(NamibiaEconomist,2016),whichshowsthatincomeslaggedbehindhouseprices.Thehighest
averagepriceincreaseoccurredinKatimaMulilo,Oshakati,RunduandWindhoek.Between2011and
2016, the housing volume increased by approximately 30.5% and the average price increased by
nearly90%.

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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 15.8
KatimaMulilo 286 275 326.35 430 528.75 543 997.08 26.0
Oshakati 486.3 475 416.00 420 964.1 686 826.8 17.9

Otjiwarongo 377.5 447 592.5 678 735.08 750 755 12.8
Rundu 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 12.1
WalvisBay 489.35 415 450 617.5 800 795.5 900 12.1
Windhoek 544 682.5 800 980 910 1150 1300 16.2
Namibia 450 480 609.75 640 700 800 850 11.4

Source:FNBHousingIndex,December2016(FNBNamibia,2016)

Giventhestructureofincomedistribution,manyhouseholdscannotaffordtobuytheexistingstockof
houses. The2017AfricaHousingFinanceyearbook reports the2017average cost of anewlybuild
houseinNamibiaasN$700,550(orUS$52,681),andthatonly19%ofurbanhouseholdscouldafford
thehouse, given the existingmortgage financing arrangement. LinkingTables4, 6 and7 illustrates
why many houses are unaffordable. Take the average house price in 2014 against the average
household income: given that access to mortgage finance is determined by earnings, the average
monthly income of N$6,626was inadequate to allow the average households to securemortgages.
Banksworkwiththeassumptionthattheindividualallocatesamaximumof30%ofmonthlyincome
tohousing/servicing the loan.Thispercentagedetermines the amount that thebankadvances as a
mortgage, which in turn determines the type of property an individual can afford.With our 2014
averagehouseholdincomeofN$6,626,anaveragehouseholdwouldhaveaffordedmonthlymortgage
paymentsofN$1,988permonth. Assuminga25-yearmortgage, theaveragehouseholdwouldhave
been granted a mortgage loan of approximately N$596,340 when the average house price was
N$700,000. The average householdwould have been able to purchase a house in KatimaMulilo or
Runduonly,butstillhadtocomeupwiththenecessarydepositandtransfercostsamount.According
to Table 5, over 90% of the householdswouldnot qualify for amortgage. It is not surprising that
Namibia is often ranked among the most expensive places in the world in terms of housing and
housing provision (The Namibian, 2014a). The discussion above shows that apart from the
constrained supply of houses, there is a serious problem of lack of affordability. Affordability is a
functionofthreefactors:income,priceandfinanceterms.

6.Thehousingfinancemarket

Theperformanceofthehousingmarketdependsontheperformanceofthehousingfinancemarket.In
Namibia,themainsourceofhousingfinanceinmortgagefinance.Sincetherearenobuildingsocieties,
it is commercial banks that offer mortgage loans. With existing data, it is not possible to extract
informationonthevalueofhousespurchasedonmortgage.Therearetenlicencedcommercialbanks
inNamibia,themajorityofwhichareforeign-owned.Theconcentrationoflendinginmortgagesisa
vulnerability threat to the banking sector that has forced the central bank to warn about rising
household debts. Because of the structure and conduct of the banks, their lending policies are
discriminatoryandtheymainlytargetformallyemployedpersons.Evenso,notallformallyemployed
peoplehaveaccesstomortgagefinance.

Accesstomortgagefinanceisrestrictedtopeoplethatcanmeetsetcriteriathatincludeaminimum
monthly income threshold. Individuals that offer acceptable collateral can accessmortgage finance,
providedtheycanprovethattheywillbeabletoservicetheloan.Theself-employedandthosewith
low incomes have limited access to formal housing finance because they often fail to meet the
stringentqualifyingconditions.Thekeyissuesthatdeterminetheaccesstoamortgageare:

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(i) aconsistentmonthlyincome(andbanksallocate30%ofnormalafter-taxincometomortgage

repayment);
(ii) agoodpersonalbalancesheetwithallmonthlyincomesandexpenses;and
(iii) goodcredithistory.Bankscheckthecredithistoryofloanapplicantsbycheckingwhetheror

nottheapplicantsareblacklistedbyTransUnion5.Banksalsocheckpotentialborrowersother
financialobligationsthatmayimpactonrepayments.

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 person
earningtheaverageincomecanaffordisscarceonthemarket,especiallyinWindhoek.Lackofaccess
of mortgages is partly to blame for the housing backlog in the country. The NHE stated that the
beneficiariesoftheMHDPareencouragedtosourcefinancefrombanks,butthebankshavegenerally
beenunwillingtodoso.Thegovernmenthasoftencomplainedthatbankswerenotplayingtheirpart
inaddressingthehousingchallengesthat thenations is facing.Thisresulted incabinetallowingthe
NHEtofinancethepurchaseofhousesconstructedundertheMHDP(NewEra,2018b).Asmentioned
above,itisnotpossibleatthisstagetoascertainwhethertheNHEhastheinstitutionalcapacitytodeal
with low incomemortgages. Inaddition, there is adanger that,where the state guarantees loans, a
moralhazardproblemariseswhereindividualsenterintofinancedealswhentheyarequiteawareof
their inability to pay back the loans. Instead, they cause the burden to fall into the guarantor. For
example,thereisriskassociatedwithaninstitutionliketheNHEofferingsubsidisedhouseswherethe
occupiersusebankfinancetopayofftheirportionofthecostofthehouse.Supposetheoccupierfails
tofulfilhis/herloanobligation,bankswillbemorethanwillingtorepossessthehouseandsell it in
order to recover their money. The banksmay or may not sell the house at market value. But the
problem that arises is that thiswill transfer the subsidy value from the poorer occupier to richer
buyersofhousesatauction,thusperpetuatinginequalityintheeconomy.Wherethehouseissoldat
marketvalue,thebankwillprofitfromthestatesubsidyinsteadofthelow-incomehousehold.

An additional problem affecting the housing market is possible lack of knowledge about the
functioningof themortgagemarket. IPPR(2011)argues thatthere isneed forpublicityby financial
institutionon the conditionsandavailability ofmortgages.Bankswouldalsoneed tobecomemore
creativeandtakeonmoreriskbydiversifyingtheclienteleoftheloanmarket.Sincealargeasection
of society cannot accessmortgage finance, then there is need for alternative forms of finance and
housingdelivery.

Analternativesourceofhousingfinanceispeoplesownsavings.Ittakesalifetimeforonepersonto
saveupenoughmoneytobuyahouse.However,poolingofresourcescanreducethetimetoacquiring
aproperty.Thiscanbeachieved throughhousingsavingsclubspooling theirresources tobuy land
and/or to build houses. Thriving savings clubs exist under the initiatives of the SDFN. The SDFN
reportsthatin2013ithadamembershipofover20,000householdsoperating605savingsschemes,
andbythattimehadsaved$13millionforhousingconstruction(SDFN,n.d.).Thefederationusesthe
generated resources tonegotiate andbuy landonwhich tobuildhouses for themembers. In cases
whereabasicstructureisputup,themembershavethechancetoincrementallyexpandthestructure
tosuittheirneeds.Becausetheydothiswiththeirownresources,theysaveonloaninterestpayment,
and they have the flexibility to build at their own pace. Further, the SDFN collaborated with local
authoritiesinimplementingtheBTP.

Anothergrowingsourceoffinanceforhousingismicrofinance.TheConsultativeGrouptoAssistthe
Poor6(CGAP,2004,p.1)definedhousingmicrofinanceasconsistingofloanstolow-incomepeoplefor
renovationorexpansionofanexistinghome,constructionofanewhome,landacquisition,andbasic
infrastructure(e.g.connectinguptocitysewagelines).Microfinancecanpotentiallyplayanimportant
roleinprovidingfinanceforhousing,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.

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than conventional banks, theymaybe the only accessible sourceof finance for financially excluded
individuals. The loans make it possible for financially excluded households to speed up the
constructionoftheirhouses,thusreducingcostsinthelongrun.Theloanstendtobeshort-term,and
thisaffectshowmuchhouseholdscanborrow.Insomecountries,somemicrofinanceinstitutionsoffer
morethanjustfinancialassistance,butincludeconstructionadvice,assistanceandsupervision.

Although there are microfinance institutions in Namibia, there is no record of any one of them
specialising in providing housing finance. Given the cost of housing in the country, the existing
institutions are unlikely to have adequate resources to advance as loans. Many of the existing
microfinance institutions operate pay-day loan schemes geared towards consumption. A variant of
housingmicrofinance iswhat iscalleda micro-mortgage.This ismore likeanormalmortgage,but
withashortduration(e.g.fivetotenyears).Theloanamountissmallenoughtobeaffordabletopoor
households.Itismainlyusedtobuyland,ortorenovateexistingstructures,orforimprovementslike
linkingup to the electricityor seweragenetwork. Thesemicro-mortgagesarealsomore expensive
thantraditionalfinance.

Lastly,pensionfundsareanotherpossiblesourceofhousingfinance.Pensionfundstendtohavehuge
financialresourceswhichcanpotentiallybeinvestedinhousingschemesfortheirmembers(morelike
housing associations in developed countries) or for rental. Pension funds can provide long time
financebeyondwhat traditional banks arewilling to. Longer term finance (e.g. 30-yearmortgages)
comeswith lowerrepaymentsforborrowerseventhoughtheypaymore in the long term.With the
lowincomesintheeconomy,thisisagoodalternative.Onechallengethatsuchschemesmayfaceisif
themembers lose their jobsand failtoservice their loans(if it isarent-to-buyarrangement). If the
fundownsthehousesandrentsthemout,thenthisproblemdisappears.Theroleofpensionfundsin
housing is determined by the regulatory frameworkwhichmay inhibit such investments. Since the
governmentalsousespensionfundsmoniestofinancerecurrentexpenditure,itmaynotbewillingto
allowthemtolocktheirfundsinrealestate.

7.Implicationsandconclusions

ThehousingsituationinNamibiaisamixtureofblessingandtragedy.Itisablessingtohouseowners
that are experiencing growing equity. It isalsoablessing to those in thebuy-to-letmarket thatare
experiencinghealthyreturns.However, it isalsoatragedytothemajorityofthepeoplewhocannot
accessdecenthousingbecause it istooexpensive for them.Themacroeconomicanalysishasshown
troublingstatisticsofhighinequalityandgrowingunemployment.

The classificationof householdsby income level has shown thatnearly90%of themearnnomore
thanN$2,700permonth.Thisisovertwoandhalftimeslessthantheaveragemonthlyincome.Ithas
beenarguedthatthelowincomemakesitimpossibleforthemajorityofhouseholdstoafforddecent
accommodation. It has been argued that the high cost of houses and the shortage of affordable
accommodation have forced households tomove down the housing structure. This has resulted in
higherdensityonthelowerlevelsofthehousingspectrum,whichhascontributedtotheproliferation
ofinformalsettlements.

AreviewoftheMHDPhasshownthatithasrecentlybeengivenanewleaseoflife.Morehousesare
beingconstructedundertheprogramme.Althoughtheallocationofthehousesissaidtobebasedon
theNHEhousinglist,thereappeartoexistsomeinefficienciesinthewaywaitinglistsaremaintained
in the economy. Local authorities have their own lists, while the NHE has its own. There is no
consolidatedwaiting list to eliminateduplicate allocationsand/or registrations, andeven to inform
futureplanning.Despitetheconditionalitiesthatcomewiththehouseallocation,therearesomeloose
endsthatarenotexplicitlyspeltout.Forexample,ifthemainbeneficiarydiesbeforethehouseisfully
paidfor,willitbeleftinthenameofthehouseholdorwillitberepossessedbythegovernment,given
thatthehousesmustnotchangeownershipwithinaperiodoftenyears?Theseissuesmaynothave
beenencounteredyet, and there isno source that explainshow theywill behandled.The effective

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ILMI Working Paper No. 7 Page 18

administrationof thesubsidisedhousingsystemrequires that therebeacomprehensiveandup-to-
date property register linked to the national registration system and allowing for data sharing
betweensocialwelfareministries.Thiscanhelptoaddresssomeproblemsthatarelikelytoaffectthe
MHDPlikespeculativeacquisitionsanddoubleallocations.

TheimplementationoftheMHDPgivesthegovernmenttheopportunitytoaddressotherproblemsin
theeconomy.Forexample,itcanlinktheconstructionofthehouseswithskillsdevelopment.TheHPP
and the fifth national development plan stress the need for technical skills training, and for the
provisionofattachmentstotrainees.Thetenderingprocesscanbemodifiedtoexplicitlyincorporate
skills training, especially for the youth. There is also potential to cultivate linkages between
manufacturing SMEs and construction companieswhere the former couldmanufacture and supply
construction materials like window and door frames for the latter, thus creating more jobs and a
sustainable local constructionmaterialsmanufacturing industry.This can enhancevalue chainsand
backwardandforwardlinkagesintheeconomy.TheemploymentcreationpossibilitiesoftheMHDP
areabsentfromcurrentdiscussionoftheprogramme,eventhoughtheMinistryofLabourconducted
researchexploringhowtheMHDPcouldbemadeemployment-intensive.

The National Housing Policy needs to consider the possibility of using alternative technologies in
constructinghouses.Thiscanhelpreduceconstructioncosts.Buildingstandardsmaythereforeneed
toberevisedtoallowforthis.Forexample,therearelowcosthousingprogrammesinothercountries
that use alternative construction materials. It is possible to adopt and adapt some of these
technologiesandproducethematerialslocally,whichguaranteessustainability.Itispossiblethatsuch
alternative technologiesmay reduce labourusage in the short term, thus reducing the employment
creationcapacity,buttheadvantageswillbelowerconstructioncosts,fasterhousecompletionrates,
anddecentaffordablehousing.Anotherexampleisthatalthoughlandcostscanbeashighas40%of
the total cost of a house, SDFN has developed a cost effective and participatorymethod to deliver
housing to people earning less than N$1,500 per month. The people in the local community are
engaged to build the houses, and this creates local jobs and boosts local incomes. Further, the
governmentmaynotneed toconstruct thesocialhousing itself,butratherallocateserviced landto
individuals tobuild their ownhouses.This approachallowshouseholds toparticipate effectively in
building their ownhouses.Those thatdesperatelyneedhelp canbeassisted individually througha
means-testedapproach.Thecurrentsystemisratherpoliticalandpopulistinnature,butithasserious
implicationsforgovernmentfinances,especiallygiventhecurrentdrivetoreducegovernmentdebt.

Lastly, the housing processes in the country need to consider the implications ofmass housing on
energy demand. Namibia is a net energy importer, and massive expansion of the housing stock
(especiallyinurbanareas)putpressureonthenationalgridasdemandforenergyincreases.Thenew
housesrequireenergy,andifthehousingandenergypoliciesarenotcommunicating,therewilllikely
beseriousenergyshortagesinthefuture.Thispotentialproblemcanbealleviatedifthenewhousing
initiatives consider the possibility of using energy-efficient constructionmethods and of renewable
energy sources. There is also need for consideration of other services that come with housing to
ensure that they are adequately provided and are affordable. Therefore, there is need for greater
collaborationandcoordinationbetweengovernmentministriestoensurethattheresultantsituation
inthecountryisonethatpromoteshigherlivingstandardsandqualityoflife.

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