Ministry announces more plans to solve Egypt’s urban housing crises

Egyptian Housing Minister Mostafa Madbuly announced on Sunday that the government will invest LE10 billion to “develop 248 slum areas across Egypt by 2018.”

Priority will be given to “first- and second-degree hazardous” structures that threaten the safety of the 150,000 families living in these areas, according to an announcement via state-owned news agency MENA. However, the announcement did not offer details on how the areas will be developed.

The news comes three weeks after Madbuly told reporters that Egypt will build one million homes for low-income Egyptians over the next five years at a cost of US$20 billion – the latest in a series of million-housing-unit plans.

The housing minister told Reuters news agency that Egypt needs to build more than half a million homes per year to meet overall demand, 70 percent of which should be affordable to Egypt’s poor. According to the plan, the government will build 200,000 inexpensive homes per year, meeting about half of the demand – allowing private developers to build the rest. Madbuly said funds for this project would be raised by selling state-owned land to high-end developers.

In this week’s announcement, Madbuly added that his ministry is working closely with Minister of International Cooperation Sahar Nasr, who has, as of late, been the face of international aid coming into Egypt. The ministers hope to secure $1 billion in international grants and loans over the next three years.

Egypt’s housing issues are numerous and well known – as are the recent efforts to relieve some of the problems. Egypt’s population has more than tripled since 1960 and rapid urbanization has stressed the housing capacities of major cities, particularly Cairo.

Meanwhile, a deregulated housing market has pushed prices far out of reach of low-income Egyptians. The resulting unplanned housing settlements have become home to 1 million Cairenes and make up 37.5 percent of Egyptian cities, according to the UNDP. These settlements provide inadequate public services and are often dangerous. By some estimates, between 800,000 and 1.6m people live in condemned buildings, which kill hundreds each year.

The government took a mostly laissez-faire approach to urban development for much of the 20th century, looking the other way as urban housing failed to catch up to demand and adopting neo-liberal policies that allowed a few well-connected individuals to make millions in upper-class real-estate development, while lower-class housing was largely ignored, leading to high prices, shortages and slums.

Over the past decade, greater attention has been paid to housing shortages and informal communities, resulting in a number of initiatives to address the issue – with limited success. Among the main problems have been a lack of public construction in appropriate locations that is truly available to low-income Egyptians, and a lack of support for private construction of affordable housing in planned locations, which has led to the current system of informal housing in unplanned areas. Government funding for low-income housing has been very limited – taking a backseat to other projects.

In 2005, President Hosni Mubarak announced plans to build half a million affordable homes in six years. The effort was poorly planned and executed – completing only half of the targeted units, 50,000 of which officials admitted were not connected to utilities and infrastructure.

In 2011, the Supreme Council of the Armed Forces announced a similar plan: to build 1 million affordable homes in 5 years.

“Why was it a million? Because Mubarak’s last housing program was 500,000. So we gotta do better,” said Cairo urban planning expert David Sims in an interview last year. While figures on the 2011 plan are scarce, there is little indication the plan is achieving its targets. As of last year, none of the homes built were occupied.

Another million housing unit project was launched in 2014, a joint venture with UAE-based construction firm Arabtec that was supposed to build a million affordable units by 2020. That project has also floundered.

Funding for low-income housing

In addition to land sales and seeking funding from abroad, the government has announced its intention to support low-income housing via the implementation of a tax on real estate.

Originally proposed in 2008, the tax was finally passed in 2013, and requires certain landholders to pay around 10 percent of the total value of their land and buildings per year to the government. An amendment passed in 2014 allocated 50 percent of real-estate tax revenues towards slum and marginalized-area development, in an effort to use rapid high-income development to support low-income housing.

However, the results of the tax have so far been unimpressive. Residences worth less than LE2 million are exempt, leading the finance minister to estimate that 75 to 80 percent of Egypt’s housing units will not be taxed. Industrial and commercial units worth less than LE100,000 are also tax-exempt, as are hotels, clubs and other entities affiliated with the armed forces.

Determining the value of property has been difficult because of Egypt’s informal, undocumented economy and lack of a central database for property registration. As a result, in the 2014/2015 fiscal year – which included eight months in which the tax should have been implemented – recurring taxes on land and buildings amounted to only LE647 million, according to preliminary figures from the Ministry of Finance.

The government has also faced problems with actually delivering homes to the announced beneficiaries. In previous attempts to provide cheap public housing, prices of the homes built rose beyond the reach of the poor – a problem in the entire Egyptian housing market where deregulated housing prices have far outstripped incomes. Further, the bureaucratic requirements of these schemes, such as proving income statements, have made the housing more available to the middle class than the poor, who often operate in the informal economy.

In addition, projects built in city outskirts are impractical for the livelihoods of Egypt’s poor, as transportation into town is limited.

“One of the reasons why practically nobody lives in any of the units built in the first place, in 2005 and 2011, is the land they could find is so far out on the edges of these new towns. There’s no infrastructure, there’s no water, there’s no electricity, there’s no roads, there’s no nothing,” Sims said last year.

In all, projects such as these have rarely had a major effect on Egypt’s poor, who often wouldn’t want to live in these out-of-town settlements if they could.

The specific plans remain unclear for how the Housing Ministry will address informal areas and build new affordable housing. The announcements made seem to focus on construction of new homes and addressing unsafe structures in some way.

Madbuly’s announcement that Egypt would build one million new low-income homes by 2021 came at the “Egypt Mega Projects Conference” held in early December – a fitting name for the announcements that were made. Among the other notable new government ventures were major expansions of the metro system and plans for the new administrative capital.

Sims calls Egypt’s past attempts at providing low-income housing a “high-modernist approach” – grandiose plans to solve complex problems. However, this approach has historically been limited in its success, requiring funding, planning and politics that Egypt just doesn’t have. Many of the projects being rolled out of late seem to follow this line of thinking.

Proponents of new approaches advise the need for a more limited and interagency approach – addressing the deficiencies in slum areas, including economic, infrastructure, utilities, education, health and other important services, rather than concocting grand schemes for giant construction projects. This is the approach much of the development community is now taking towards housing development. However, the political tide seems to call for a large, flashy and quick solution – despite having been down this road before.

Robert Barron 

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