Policies and Barriers in the Provision of Affordable Housing in Ghana
Introduction
Housing is a fundamental driver of economic growth and a key indicator of national development. In Ghana, as in many developing nations, the challenge of providing affordable housing has become a major economic, political, and social issue. The research paper titled “Policies and Barriers in the Provision of Affordable Housing in Ghana” by Adjei, K. O., Fobiri, G., and Owideu, G. K. (2015) investigates the critical factors influencing the supply of housing that low- and middle-income households can afford.
The study focuses on identifying and evaluating existing housing policies and the barriers that both current and potential real estate developers face in the country. Understanding these elements is essential for policymakers, construction industry players, and financial institutions aiming to reduce the widening housing deficit in Ghana.
The concept of affordable housing is defined in the paper as housing that costs no more than 30 percent of the occupant household’s income, a standard widely accepted in housing economics. However, affordability also encompasses the ability of households to consume other basic necessities such as food, clothing, healthcare, and education after paying for shelter. In Ghana, despite numerous government interventions over the decades ranging from the establishment of the State Housing Corporation (SHC) to the National Housing Corporation (NHC) the provision of decent, low-cost housing remains critically insufficient.
The study highlights that private sector developers, who possess the necessary capacity and skills, have shown minimal interest in building for low-income groups due to various systemic obstacles. Therefore, this paper aims to shed light on the key policies in affordable housing and the most pressing barriers that hinder progress.
Research Methodology
To achieve its objectives, the study adopted a quantitative survey approach. The research targeted key players in Ghana’s construction and housing industry within the Ashanti Region. These included building contractors, real estate developers, consultants, and clients. Stratified random sampling was used to select contractors and real estate developers, while purposive sampling was applied for consultants and clients.
The final sample size consisted of 38 building contractors, 28 real estate developers, 21 consultants, and 15 clients, totaling 102 questionnaires administered. Out of these, 84 were successfully retrieved and analyzed, representing a strong 82% response rate. Data analysis employed simple statistical tools such as mean scores and standard deviations, with the help of SPSS. The use of a Likert-type scale (1 to 5) allowed respondents to express their level of agreement or disagreement regarding various policies and barriers. The high response rate and the significant work experience of respondents 32% had between 11 and 15 years in the industry, lend credibility to the findings.
Key Findings on Housing Policies in Ghana
One of the primary objectives of the study was to identify which housing policies are most significant for enabling the provision of affordable housing. Based on mean scores and ranking, the research identified five critical policies:
Tax Policy – Ranked highest, this policy emphasizes that tax exemptions or reductions on imported construction machinery, equipment, and building materials could significantly lower overall construction costs. The study agrees with UN Habitat’s position that when developers are exempt from customs duties, they have stronger incentives to invest in affordable housing projects.
Housing Finance / Mortgage Policy – Also ranked first jointly with tax policy. The research notes that financial institutions in Ghana have historically attached little importance to mortgages as a form of investment. A robust housing finance policy is needed to create sustainable mortgage markets, making it easier for low- and middle-income families to access credit for homeownership.
Construction Policy – This policy encourages the use of local building materials such as landcrete blocks, compressed earth bricks, pozzolana cement, bamboo, and secondary timber species. By reducing dependency on expensive imported materials, construction costs can be lowered, directly improving housing affordability.
Promotion of Real Estate Development Policy – This policy focuses on creating an enabling environment for private developers through land assembly, infrastructure provision, and streamlined approval processes. The study found this policy highly significant for encouraging more private sector participation.
Land Policy and Rent Policy – While slightly lower in ranking, these policies remain important. Land ownership in Ghana is largely controlled by traditional leaders (chiefs), and government acquisition for development can be complex. Rent policy also plays a role in controlling costs for tenants.
The study concludes that the most effective approach to affordable housing provision involves a combination of tax incentives, construction innovations, and accessible housing finance.
Major Barriers in the Provision of Affordable Housing
While policies provide a framework, the study identifies several practical barriers in affordable housing that developers face daily. These barriers were ranked by mean scores, with the most critical being:
1. Material Cost and Availability (Ranked 1st)
The cost and availability of building materials emerged as the single most significant barrier. Ghana relies heavily on imported materials such as cement, steel, and roofing sheets, which are subject to global price fluctuations and high import duties. Even when local alternatives exist, their adoption is limited due to perceptions of lower quality or lack of technical know-how.
2. Construction Cost (Ranked 2nd)
Closely related to material costs, overall construction costs remain prohibitively high. The paper notes that there is often a gap between the sale price of a house and the actual cost of building it. Factors such as labor, transportation, and energy costs further inflate construction expenses, making it difficult for developers to offer homes at prices affordable to average Ghanaians.
3. Developmental Regulations (Ranked 2nd jointly)
Land use controls and building regulations can inadvertently raise housing costs. The study cites that in some communities, regulations have increased new development and construction costs by as much as 35%. Impact fees, inclusionary zoning, and minimum lot size requirements often force developers to build larger, more expensive homes rather than smaller, low-cost units. In heavily regulated localities, rents can be 17% higher, and home prices 51% higher compared to less regulated areas.
4. Political Interference (Ranked 4th)
Government involvement in housing provision has been inconsistent, depending largely on the political ideology of the ruling administration. While political will is necessary for funding and policy implementation, frequent changes in housing programs, corruption, and bureaucratic delays create uncertainty for developers. The paper argues that political interference can disrupt long-term housing projects and discourage private investment.
5. Land Cost and Availability
Land is a key factor of production, but access to low-cost land is extremely difficult in urban areas. Traditional land ownership systems, speculation, and the rising cost of serviced plots mean that land alone can consume a large portion of a housing project’s budget. The study notes that in the past, land for low-income housing was allocated easily, but that is no longer the case.
6. Labor Cost and Availability, Time Factors, Water Cost, and Financing
Other notable barriers include the cost and availability of skilled labor, project delays (time factors), high water connection costs, and lack of access to affordable financing. Financial institutions remain reluctant to offer long-term mortgages or construction loans for low-income housing projects, further constraining supply.
Negative Impacts of These Barriers
The cumulative effect of these barriers leads to several negative outcomes, which the study also quantified:
Low patronage of affordable housing (Ranked 1st): Paradoxically, even when affordable housing is built, low patronage occurs because the units are still too expensive for the target population, or because of poor location and lack of amenities.
High cost in construction materials (Ranked 2nd): This directly increases the final selling price of homes.
Lack of housing units in Ghana (Ranked 3rd): The housing deficit continues to grow as supply fails to keep pace with urbanization and population growth.
Lack of government support and low financial support from private institutions further exacerbate the problem.
Poor housing facilities and high overall housing costs were also identified as negative consequences.
Benefits of Affordable Housing
The paper emphasizes that the benefits of quality affordable housing are immense. It impacts economic productivity, socio-cultural stability, and political well-being. Affordable housing provides shelter, protects against weather and hazards, and influences the efficiency of financial markets. For a developing country like Ghana, ensuring that housing is affordable is not merely a social good but an economic necessity. When families spend more than 30% of their income on housing, they are forced to cut back on food, healthcare, and education, perpetuating cycles of poverty.
Recommendations
Based on the findings, the authors offer several actionable recommendations to improve the provision of affordable housing in Ghana:
Tax Reforms on Building Materials and Equipment: The government should develop policies that reduce or eliminate taxes on imported construction tools, machinery, and building materials. Lowering these costs would directly reduce construction costs and encourage more developers to enter the affordable housing market.
Education and Capacity Building: The Ghana Real Estate Developers Association (GREDA) should organize regular seminars and workshops to educate members on existing housing policies, financing options, and innovative construction techniques that lower costs.
Land Allocation for Affordable Housing: Traditional leaders and customary landowners should be encouraged to allocate a percentage of their land specifically for affordable housing projects rather than solely for profit-making ventures. This could be done through public-private partnerships and government incentives.
Reduce Developmental Regulations: Policymakers should review land use controls, zoning laws, and impact fees that unnecessarily inflate housing costs. Streamlining approval processes and allowing higher-density, smaller-unit developments could make housing more accessible.
Strengthen Housing Finance Systems: The government and central bank should work with financial institutions to create mortgage products tailored to low- and middle-income earners, including micro-mortgages and community-based cooperative financing models.
Conclusion
In conclusion, the provision of affordable housing in Ghana is constrained by a combination of weak policy implementation and formidable barriers. The study successfully identifies that tax policy, housing finance policy, and construction policy are the most significant policies that can drive change. However, without addressing critical barriers such as material costs, construction costs, developmental regulations, and political interference, progress will remain slow.
The negative impacts of low patronage, high material costs, and a persistent lack of housing units demonstrate the urgency of action. The paper calls for a collaborative approach involving government, traditional leaders, financial institutions, and private developers. By reducing taxes, promoting local materials, reforming land use regulations, and ensuring political stability in housing programs, Ghana can move closer to solving its affordable housing crisis. The study serves as a valuable resource for policymakers, developers, and researchers seeking to understand and overcome the challenges in this vital sector.
Also Read: 2022-2027 Berlin Affordable Housing Plan