[Senate Hearing 109-946]
[From the U.S. Government Publishing Office]
S. Hrg. 109-946
HOUSING AND URBANIZATION ISSUES IN AFRICA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICAN AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MAY 4, 2006
__________
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
NORM COLEMAN, Minnesota JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire BILL NELSON, Florida
LISA MURKOWSKI, Alaska BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
Kenneth A. Myers, Jr., Staff Director
Antony J. Blinken, Democratic Staff Director
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SUBCOMMITTEE ON AFRICAN AFFAIRS
MEL MARTINEZ, Florida, Chairman
LAMAR ALEXANDER, Tennessee RUSSELL D. FEINGOLD, Wisconsin
NORM COLEMAN, Minnesota PAUL S. SARBANES, Maryland
JOHN E. SUNUNU, New Hampshire CHRISTOPHER J. DODD, Connecticut
LISA MURKOWSKI, Alaska BARACK OBAMA, Illinois
(ii)
C O N T E N T S
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Page
Feingold, Hon. Russell D., U.S. Senator from Wisconsin........... 10
Martinez, Hon. Mel, U.S. Senator from Florida, opening statement. 1
Obama, Hon. Barack, U.S. Senator from Illinois................... 4
Reckford, Mr. Jonathan, chief executive officer, Habitat for
Humanity International, Americus, GA........................... 38
Prepared statement........................................... 41
Smith, James T.M., Senior Deputy Assistant Administrator, Bureau
of Economic Growth, Agriculture, and Trade, U.S. Agency for
International Development, Washington, DC...................... 11
Prepared statement........................................... 13
Tibaijuka, Dr. Anna Kajumulo, Under Secretary-General and
Executive Director, UN-HABITAT, Nairobi, Kenya................. 25
Prepared statement........................................... 32
Williams, Hon. Darlene F., Assistant Secretary for Policy
Development and Research, Department of Housing and Urban
Development, Washington, DC.................................... 5
Prepared statement........................................... 7
Additional Material Submitted for the Record
Responses of Jonathan Reckford and Darlene Williams to questions
submitted by Senator Obama..................................... 48
Letter from the International Housing Coalition.................. 55
(iii)
HOUSING AND URBANIZATION ISSUES IN AFRICA
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THURSDAY, MAY 4, 2006
U.S. Senate,
Subcommittee on African Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Mel Martinez
(chairman of the subcommittee) presiding.
Present: Senators Martinez, Obama, and Feingold.
OPENING STATEMENT OF HON. MEL MARTINEZ,
U.S. SENATOR FROM FLORIDA
Senator Martinez [presiding]. Good afternoon to everyone.
Welcome to the Foreign Relations Subcommittee on African
Affairs and I appreciate your appearance and call the meeting
to order.
In today's hearing, we're going to discuss an issue of
critical importance in developing countries, particularly in
Africa, which is housing and organization. Before I do that, I
wanted to take a moment to speak about something of great
importance in the African continent, that I've been wanting to
stress my concern about, and that is the terrible situation in
Darfur. These disastrous situations are ones that transcend
national wars, religious convictions, and political identity.
This really hits very close to home for many Americans
including many communities in Florida. Over the last 2 years,
the African Union Mission in Darfur has taken significant steps
to bring stability and security to the region, despite having
more than 7,000 personnel in a region roughly the size of
France.
I commend the African Union and it's leaders for all that
they have accomplished, thus far. However, personnel shortages
and inadequate logistical support limit the African Union's
capabilities in Darfur. It is no secret that the situation on
the ground is deteriorating. The incidents of violence are
growing, adding to the millions who have already been displaced
from their homes and the hundreds of thousands who have died.
Humanitarian organizations who are trying to alleviate the
suffering in Darfur, have been the target of repeated attacks,
greatly hindering their ability to distribute aid. To make
matters worse, chaos and instability have spilled across the
boarder into Chad, where many of the refugees from Darfur have
fled.
A few weeks ago, rebel forces attempted to overthrow the
Government of Chad. This instability only paints a darker
picture for the livelihoods of the innocent civilians in Darfur
and inside the border of Chad.
Over the past weekend, thousands of people descended on
Washington, DC, to rally the United States Government and the
international community to act. I want those people to know
that their voices are being heard. The administration, under
the leadership of President Bush, Secretary Rice, Deputy
Secretary Zoellick, and Ambassador Bolton and this Congress,
have worked diligently on a number of fronts to alleviate this
crisis.
First, Ambassador Bolton has pressed tirelessly for the
U.N. Security Council to authorize a U.N. peacekeeping force in
Darfur. Unfortunately, at this point, the efforts to move
forward with this new force have stalled. I urge Ambassador
Bolton to continue fighting for a U.N. peacekeeping mission
which is absolutely critical to stabilize the region, to
protect innocent lives, and distribute humanitarian assistance
to those in need.
The administration is also devoted to the peace talks in
Abuja, which United States officials are playing an important
role in assisting the African Union and pressing all parties to
reach a peace accord. Deputy Secretary Zoellick is in Abuja
today, helping to broker an agreement.
Finally, we must to continue to provide financial aid to
promote security and ease the suffering of the people of
Darfur. Since 2003, the United States has given close to $2
billion in assistance for Sudan. Additionally, over the last
year, we have contributed over $150 million for peacekeeping
operations in Darfur. The United States Senate is currently
debating--we just passed this morning in fact, the Emergency
Supplemental which includes an additional $624 million in
emergency funding for Sudan.
We need to work together in a bipartisan fashion to
expedite this important legislation as it moves through to the
next House of Congress and on for the President's signature.
While these are all significant steps, the United States and
the international community must do more to bring about a
resolution to this tragic situation.
Over the weekend, the Sudanese Government and the rebel
groups failed to reach a compromise peace agreement by the date
set by the African Union and the United Nations. This deadline
has been extended. I urge all those involved in the peace talks
to negotiate in good faith and work toward a settlement, so
that real steps can be taken to end this catastrophe.
At the same time, we must keep the pressure on the
Government of Sudan to end support for the Janjawid and other
rebel groups. In addition to supporting the ongoing
negotiations in Abuja, we need to significantly increase the
international presence in Darfur as President Bush has
advocated.
In March, the Senate passed a resolution, Senate Resolution
383, which I cosponsored, calling on the United Nations
Security Council to approve as soon as possible a peacekeeping
force for Darfur and urging the President to take immediate
steps to help improve the security situation.
As the U.N. prepares for this mission, we must work with
our international partners in NATO to provide immediate support
to the African Union mission. We must also continue to pressure
Russia and China to play a constructive and responsible role in
pushing Sudan to accept a U.N. mission.
Furthermore, I call on the President to appoint a
Presidential envoy for Sudan to coordinate our efforts. In
closing, I just want to thank those that have been so closely
involved, and committed to this important issue, Chairman
Lugar, Senator Biden, Senator Brownback, and others for their
commitment to this important issue. Bringing about a peaceful
resolution is not going to be easy. But it's time for the
international community to step to the plate with a strong
unified voice. Immediate action is needed to stop the violence
and bring about a lasting peaceful settlement. Human life is
too precious to bide our time any longer.
Now turning our attention to the more hopeful subject of
housing. Let me start by thanking our four distinguished guests
who have joined us today and honor us with their presence. I
greatly appreciate their participation and look forward to
engaging in a discussion on this significant and growing
problem. I'm also grateful to the Overseas Private Investment
Corporation and the International Housing Coalition for
submitting statements for the record.
[Editor's note.--The statements noted will appear in the
Additional Material Submitted for the Record section at the end
of this hearing.]
Sub-Saharan Africa is the fastest urbanizing region in the
world. In 1994, the urban population in Africa was
approximately 172 million. By 2004, it had grown to close to
264 million. A rapid rate of organization has serious social,
economic, social, and health implications. Urban poor living in
densely populated slums and informal settlements constitute a
significant portion of this population.
In these areas, social disorders simmer because of
overcrowding and economic despair--like a sewage facility in
contaminated water create an environment in which disease is
rampant. Furthermore, with limited property rights and without
access to capital it's virtually impossible for the urban poor
to create sustainable housing on their own.
The solutions to this predicament are complicated and
require long-term planning. African Governments are working
with international institutions, NGO's, and foreign governments
like the United States to address their numerous challenges
this situation creates.
A lot of our time here is spent debating strategies to
promote democracy, stability, economic development, and good
governance. Africa's urban housing problems are a fundamental
piece to this puzzle. While it can serve as a source of
instability and an impediment to economic progress, it can also
be utilized as an opportunity to incur sound government policy
and as an engine for economic growth.
So at this time, I would like to take a moment to introduce
our guests. We have two excellent panels before us and on the
first we'll hear from two administration officials, Mr. James
Smith, Senior Deputy Assistant Administrator for the Bureau of
Economic Growth, Agriculture and Trade at the U.S. Agency for
International Development. We welcome you, Mr. Smith.
And then Dr. Darlene Williams, Assistant Secretary for
Policy, Development, and Research at the U.S. Department of
Housing and Urban Development. An old friend, that I am just
pleased as can be to welcome. And I also want to extend a
welcome to all of my friends from HUD that are here today. My
fellow coworkers from a time past, who did so much with such
dedication to improve housing not only in the United States,
but in many places around the world.
And then on our second panel, we are pleased to have Ms.
Anna Tibaijuka, who I also knew from my days at HUD, and a
person that I hold in very high regard and consider her work to
be extremely important to what is happening in the world. I'm
so pleased that we could do this hearing today, to highlight
these issues that I know you are so passionate about. And she's
the executive director of UN-HABITAT.
And I also want to welcome Jonathan Reckford, chief
executive officer of Habitat for Humanity International. And
also of course, Tom Jones who is such a long-time friend and
whom I worked so closely with at Habitat for Humanity, during
my time at HUD.
So, I look forward to hearing your evaluations of Urban
Housing in Africa and in the programs currently underway.
Please be candid in assessing what is working, what is not, and
why not. And I also encourage our panelists to recommend what
more can be done and how we can help.
So, with that sir, welcome.
Senator Obama. He was feeling lonely, and so----
Senator Martinez. I appreciate your being here and I was
awfully lonely. I want to just welcome Senator Obama, who is I
know very passionate about his concern for not only Africa, but
also for housing issues. So, I'm delighted you're here.
STATEMENT OF HON. BARACK OBAMA,
U.S. SENATOR FROM ILLINOIS
Senator Obama. Mr. Chairman, I'm only going to be here for
a brief moment, unfortunately. Because after the votes, I have
to fly back to Chicago. I wanted to come, first of all, to
commend you for holding this hearing on this important issue. I
wanted to thank the panel for being here. I am going to read
your written testimony on the plane. So, I will be looking very
carefully at some of the recommendations you may have. And I
just want to voice my appreciation for your work.
I do have some questions, Mr. Chairman. And what I'd like
to do is submit those for the record and my staff will be here
taking extensive notes.
Senator Martinez. They'll be accepted to the record and
made as part of the hearing, and your questions will be
incorporated as part of the record.
[Editor's note. The previously referred to information will
appear in the Additional Material Submitted for the Record
section at the end of this hearing.]
Senator Obama. Thank you. And just one last thing, Mr.
Chairman. The staff person who is here, Ms. Liz Drew, this is
her last committee hearing, because she is going to be going to
the London School of Economics and do all kinds of wonderful
stuff. And I want to place in the record, what wonderful work
she has done.
Senator Martinez. Terrific. We are going to miss you. We
wish you well. Don't eat too many fish and chips.
Senator Obama. Thank you, Mr. Chairman.
Senator Martinez. Yeah. Thank you very much and folks,
there are votes going on and what I'm going to try to do is
hopefully, see if we can hit them before I get close to having
the first vote, so I can vote late and early, and come back. So
in about 5 minutes, we'll probably take a recess for about 15
minutes and then come back.
So Ms. Williams, we welcome you and you can open with your
remarks.
STATEMENT OF HON. DARLENE F. WILLIAMS, ASSISTANT SECRETARY FOR
POLICY DEVELOPMENT AND RESEARCH,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,
WASHINGTON, DC
Ms. Williams. Thank you, sir. Chairman Martinez, Ranking
Member Feingold, and now in his absence, Senator Obama, and
other distinguished members of the subcommittee, I am Darlene
Williams, Assistant Secretary for Policy Development and
Research at the U.S. Department of Housing and Urban
Development. Thank you for the opportunity to speak to you on
HUD's activities regarding the implications of urbanization in
Africa.
Mr. Chairman, back in June 2001, a Bush administration
cabinet secretary addressed the U.N. General Assembly, and
here's what he said: Within the next three decades, more than
60 percent of the world's citizens will live in urban settings,
most of them in developing countries ill-equipped to handle the
housing needs of so many people. We have decades of experience
in creating solutions. Not Federal Government solutions, but
solutions developed in partnership with local authorities,
private enterprise, and community organizations. We are eager
to share what we have learned and we continue to reach beyond
our borders to form strong partnerships with our global
neighbors.
You were that HUD Secretary, Mr. Chairman. The
international initiative that you started is an enduring part
of your legacy at the Department. Thank you, sir.
Senator Martinez. Thank you, very much.
Ms. Williams. I am pleased to participate in these hearings
with our partners, the Agency for International Development,
UN-HABITAT, and Habitat for Humanity International.
HUD worked closely with Dr. Anna Tibaijuka, Executive
Director of UN-HABITAT, on a wide range of global housing
issues. HUD partners, including those at these hearings, help
us address diverse aspects of housing and community development
issues here in the United States and in many countries around
the world.
Expanding and deepening America's ties with the Nations of
Africa are among the administration's highest priorities.
President Bush has directed his cabinet secretaries to engage
with their African counterparts. In that spirit of cooperation,
Secretary Jackson will travel to South Africa this month. He
will follow up on HUD's Cities in Change conference in South
Africa. He will also meet with government and business leaders,
who are meeting this week at the Housing Finance conference in
South Africa, sponsored by OPIC. Secretary Jackson will also
support the Millennium Challenge Corporations's Program in
Madagascar.
[Editor's note.--Information supplied by Ms. Williams after
this hearing stated that Secretary Jackson's trip was
postponed.]
The Department assists the U.N. by encouraging conditions
for attaining the Millennium Development Goals and by improving
relations with African countries. HUD meets with foreign
officials in related housing and development fields. We
exchange housing data with other nations and participate in
international conferences.
Our enabling legislation, under the Housing Act of 1957,
does not authorize foreign assistance, but within these
parameters, HUD carries out an active international agenda.
Sir, in May of 2004, I was honored to join a delegation to
South Africa and Botswana made up of principals from the
Department of Treasury and Ginnie Mae with USAID support.
Because we know that housing is an economic engine, we shared
information on secondary mortgage markets, we discussed the
challenges of establishing a comprehensive national housing
policy, and explained the Federal Government's financial role
in fostering affordable housing and home ownership, adding to
their knowledge of British and Swedish financial models.
I had the opportunity to meet with key government and
business officials including the South African Department of
Housing, the Micro Finance Regulatory Council, the Banking
Council Housing Committee, the National Housing Finance
Corporation, and TEBA Bank Home Loans.
We discussed their difficulty in encouraging traditional
banks to provide mortgages for low-income groups that make up
most of the population. We explained how we set minority
housing targets for our government-sponsored enterprises which
they found most useful for the targets they are trying to set
in the government written financial sector charter.
In Botswana, we held discussions with the Ministry of
Finance, the Botswana Building Society, the Central Bank, the
Insurance Fund Management, and Motswedi Securities, as well as
the Botswana Stock Exchange Stakeholders. One of the highlights
of my trip was explaining the Home Mortgage Disclosure Act, or
HMDA Data that PD&R utilizes. These nations lack accurate data
on the characteristics of their housing. I held up this
publication on American Housing Survey Data Chart and the
response was amazing. They realized they must institutionalize
a similar survey.
Sir, would you appreciate having a copy of this? We have
several here for everybody.
In August 2004, as part of South Africa's 10 Years of
Freedom Celebration, HUD cosponsored a Cities In Change
Conference in Johannesburg and Cape Town with the International
Downtown Association on rejuvenating downtown areas. The
conference focused on urban development and decay over the past
decade and looked forward to the next 10 years.
In November of 2005, HUD sponsored a high-level East Africa
Peer Exchange Conference in Kampala, Uganda. Government and
financial institutions from Kenya, Tanzania, and Uganda
attended. The program resulted in solid accomplishments. All
three nations are implementing action plans prepared at the
Peer Exchange including setting up large-scale housing
development enterprises, establishing rules for asset-backed
securitization, developing long-term credit facilities to
assist mortgage lending to private banks, and creating
institutions that will finance affordable housing.
In fact, Ghana's President and Secretary Jackson have
agreed to a similar peer exchange for West African countries in
November of 2006. These outcomes show the value of HUD's
partnership with other countries to help promote universal
housing goals.
A critical element in making progress on the Millennium
Development Goal of improving the lives of slum dwellers in
Africa and around the world, is the collection and analysis of
reliable international housing data, as I mentioned before. I
am proud that the office of PD&R, Policy Development and
Research was invited to share our expertise with the
Statistical Research Office of UN-HABITAT.
HUD also works with UN-HABITAT in international meetings
such as the World Urban Forum which attract some 8,000
participants interested in housing and urban issues. Each year,
government officials from Africa and around the world, come to
HUD for briefings on a wide variety of HUD policies and
programs. The core message we share with them is this: Protect
private property rights; enforce contracts under impartial
judges; keep taxes low and equitable; reduce regulatory
barriers to enterprise and housing; prohibit discrimination in
housing; and support popular participation in governance. With
these vital principles in place, the private sector of any
nation can thrive and produce desperately needed affordable
housing.
The application of these essential principles will take
much dialog and hard work. Sir, Mr. Senator, as I have shown,
HUD continues to build on and expand the international
commitments that we have been allowed to. I would be happy to
respond to any questions you may have.
[The prepared statement of Ms. Williams follows:]
Prepared Statement of Hon. Darlene F. Williams, Assistant Secretary for
Policy Development and Research, Department of Housing and Urban
Development, Washington, DC
Chairman Martinez, ranking member Feingold, and distinguished
members of the subcommittee. I am Darlene Williams, Assistant Secretary
for Policy Development and Research at the U.S. Department of Housing
and Urban Development.
I want to thank you for the opportunity to speak to you this
afternoon on HUD's activities regarding the implications of
urbanization in Africa. Mr. Chairman, I know you have a long-standing
interest in ways HUD can provide help to developing countries around
the globe. Thank you sincerely for the opportunity to focus on these
concerns.
I am also pleased to participate in this hearing with the U.S.
Agency for International Development (USAID) and UN-HABITAT. HUD worked
closely with Mrs. Anna Tibaijuka, Executive Director of UN-HABITAT on a
wide range of global housing issues. We recognize Mrs. Tibaijuka's
great work as the Secretary General's Special Envoy on Human
Settlements in Zimbabwe. Mrs. Tibaijuka reported on the tragic
wholesale destruction of urban slums in that nation which displaced
700,000 people and affected millions more. Habitat for Humanity
International, represented by Mr. Jonathan T.M. Reckford, is a faith-
based organization doing incredible work providing housing for needy
people around the world and proving that faith is a powerful source of
compassion. HUD partners, like Habitat for Humanity, help us address
diverse aspects of housing and community development issues here in the
United States and in many countries around the world.
Expanding and deepening America's ties with the nations of Africa
are among President Bush's highest priorities. This administration has
demonstrated the greatest level of personal engagement with Africa in
our history and has provided the greatest levels of assistance ever. To
show his commitment, the President has directed his cabinet secretaries
to engage with their African counterparts. In that spirit of
cooperation, Secretary Jackson will travel to South Africa and
Madagascar at the end of May. He will follow up on HUD's ``Cities and
Change'' conference in South Africa and will also discuss the upcoming
housing finance conference sponsored by OPIC in South Africa by meeting
with government and business leaders to discuss these issues. He will
also support the Millennium Challenge Corporation's program in
Madagascar.
The Department of Housing and Urban Development has an important
role to play in encouraging conditions for attaining the Millennium
Development Goals and in improving relations with African countries.
Our enabling legislation under the Housing Act of 1957 does not
authorize foreign assistance, but it does encourage HUD to meet with
foreign officials in related housing and development fields, exchange
housing data with other nations, and participate in international
conferences. Within these parameters, HUD carries out an active
international agenda, and we engage in cooperative international
exchanges that inform other governments about America's experience and
knowledge in housing markets, how HUD works with the private sector in
urban regions, and the nature and value of HUD programs.
In that spirit, in May of 2004, I was part of a delegation to South
Africa and Botswana to share information on the nation's secondary
mortgage market and discussed the challenges of establishing a
comprehensive national housing policy, and explained the Federal
Government's role in the financial framework to foster affordable
housing and homeownership.
Today you will hear from USAID and UN-HABITAT on the critical need
for housing in Africa. The eight Millennium Development Goals (MDGs)
all have major implications for urban areas.
Housing is a basic necessity for a stable and decent society. When
a family has a home that they feel proud of, they thrive through
education, health, and wealth-creation. A safe and decent home is
important in improving the health of families and communities. Children
from healthy families and communities can grow in knowledge and access
better educational opportunities. And a family with improved job
prospects and a home of their own has a valuable means for wealth-
creation. Although HUD's mandate is limited to providing activities
involving information exchange, by sharing what we have learned, we can
participate in UN-HABITAT's mission to ``improve the state of human
settlements worldwide.'' People everywhere share the same hope, the
same dream of having a home they call their own because people
everywhere know that owning your own home is central to having a stake
in the community's destiny. HUD works with its partners at the table to
share the knowledge and experience acquired to make that hope a reality
everywhere.
Let me tell you in detail about one example: the High-Level East
Africa Peer Exchange program held in Kampala, Uganda. In November of
2005, HUD partnered with UN-HABITAT to explore how government can
foster private sector lending that will encourage affordable housing.
Because of growing interest in sub-Saharan Africa for innovative
approaches to financing affordable housing, HUD and UN-HABITAT shared
lessons learned about public sector support for private sector
financing. We identified countries in the East Africa region as the
first pilot locations for the peer exchange. Many of them share a
common history. Some already have relatively mature domestic capital
markets and fully liberalized domestic financial services sectors.
Others are models for strong economic growth, decentralization, and
local self-governance.
Moreover, in recent years, commercial banks in East Africa have
entered into retail mortgage lending, responding to lower interest
rates and greater competition in a newly liberalized financial service
sector. Community organizations, cooperatives, and microfinancial
institutions are emerging here as credible financial intermediaries
often lending where banks cannot.
Government and financial institutions from Kenya, Tanzania, and
Uganda attended the peer exchange. For a country that wishes to
encourage affordable housing, the great gap between the enormous demand
for housing and the limited supply of housing units can be closed only
with substantial involvement by private lending institutions.
Conditions for private lending are improving, but the reforms and
regulations for private lending markets are not yet in place.
In many East African nations, the banking sector is nascent but
vibrant, dynamic, and innovative. Countries such as Kenya have strong
financial intermediaries that provide a bridge between banks and the
previously unbankable--a key to financing affordable housing. Tanzania
is establishing regulatory conditions that are enabling communities and
markets that will increase private lending activity.
I am happy to report that the East Africa Peer Exchange Program has
resulted in solid accomplishments. All three nations are implementing
action plans prepared at the Peer Exchange.
Kenya is establishing a special purpose development company
for large-scale housing development in slum areas of Nairobi as
it prepares for a high-level investment conference this month.
The government is also presenting Parliament with a framework
for asset-backed securitization, and a housing bill that will
accelerate private lending for affordable housing.
Tanzania is developing a long-term credit facility for
mortgage lending to private banks, with preferential
consideration to those that partner with financial
intermediaries. The country is also promoting a commercially
operated national housing finance institution as part of its
second generation financial sector reforms.
Uganda is preparing a national framework for promoting
housing finance.
These outcomes demonstrate the value of HUD's partnerships with
other countries to help promote universal housing goals. They suggest
that professionals can gain valuable and useful information by
interacting with their counterparts from neighboring countries.
Identifying how different countries treat commonly shared problems and
the constraints each faces in government and the private sector reflect
how much imaginative thinking can occur if countries work together.
Beyond that, President Kufour of Ghana met with Secretary Jackson last
year and agreed to a similar peer exchange for West African countries
in November 2006, to be hosted by Ghana, with the partnership of HUD,
UN-HABITAT, and with USAID experts.
In August 2004, as part of South Africa's 10 years of freedom
celebrations, HUD cosponsored a ``Cities in Change'' conference in
Johannesburg and Cape Town, with the International Downtown
Association, on rebuilding and rejuvenating depressed downtown areas.
That conference focused on urban development needs and looked forward
to the next 10 years. Experts from the United States, the United
Kingdom, and South Africa discussed issues such as cities globally and
locally; economic problems; private-sector interventions; and,
residential, community, and social concerns.
HUD, together with the State Department and USAID, will cosponsor a
seminar in Amman, Jordan, for mayors, city managers, and infrastructure
engineers in North African and Middle Eastern countries on how
Geographic Information Systems (GIS) can be an important planning tool
for sustainable city and housing development. GIS combines data and
maps to provide a rich source of information that can spatially show
trends, problems, and opportunities, allowing local governments to plan
development and more effectively provide city services. The
participants will have the opportunity through this workshop to assess
their cities' needs and build strategies to meet their goals. We
believe that this technology, if successfully applied, can demonstrate
how geospatial technology can enhance local democracy and effective
city governance.
A critical element in making progress on the MDG of ``improving the
lives of slum dwellers'' in Africa and around the world is the
collection and analysis of international housing data. I am proud that
the Office of Policy Development and Research (PD&R) was invited to
share our expertise with the Statistical Research Office of UN-HABITAT
on the methodology of obtaining reliable housing data from around the
world. HUD is the U.S. representative on the Steering Committee of UN-
HABITAT's Global Partnership for Monitoring the Millennium Development
Goal. PD&R has extensive experience in collecting and analyzing urban
and housing data, and our experience in conducting the American Housing
Survey provides wide-ranging expertise for this mandate.
HUD works with UN-HABITAT in international meetings such as the
World Urban Forums, which attract approximately 8,000 participants
interested in housing and urban issues.
In cooperation with USAID, we are sponsoring and participating in
at least 15 networking events on such topics as property rights, use of
GIS, housing finance, and donor coordination. In this effort, we are
working with the International Housing Coalition, which includes
Habitat for Humanity International and the National Association of
Realtors (NAR).
Each year, government officials from Africa and other regions of
the world come to HUD for briefings on a wide variety of HUD policies
and programs. There is great international interest in American
experience and research on housing finance and urban investment. Many
of these officials represent programs sponsored by the State Department
and USAID. Currently we are working with Mexico to modernize building
codes and have worked with Spain to help develop their public-private
partnerships. Similar activities could be applied to an African
context.
The nations of Africa can benefit from learning about the housing
sector in the United States, where almost 69 percent of Americans own
their own home. Candidly, this is a remarkable record. And there is no
reason why it cannot be matched or exceeded in Africa or elsewhere,
provided they hear the core message we want to share. Economic growth
and prosperity, affordable and decent housing, and community
development do not spring up from institutional structures but from the
principles that give them life. When private property rights are
protected, when contracts are enforceable by impartial judges, when
taxes are kept low and applied fairly and equally, when regulatory
barriers to enterprise and housing are lowered, and when people
participate in governance, then the vital principles are in place for
the private sector to thrive and produce the affordable housing so
desperately needed in so many countries. The application of these
essential principles takes much dialog and hard work.
Opportunity and prosperity are the birthright of all human beings.
On July 13, 2004, as President Bush signed the African Growth and
Opportunity Act, he said: ``No region has more to gain from free
markets than Africa.''
I would be happy to respond to any questions you may have.
STATEMENT OF HON. RUSSELL D. FEINGOLD,
U.S. SENATOR FROM WISCONSIN
Senator Feingold [presiding]. Thank you, Assistant
Secretary Williams. And Mr. Smith, my welcome to you, as well.
I apologize, as I assume the Chairman did, for the back and
forth while we have these two votes. So, I will preside until
he comes back. And then when he comes back, I'll have to go
vote again. But I hope you know, this doesn't, in any way,
indicate a lack of strong interest in the subject. And I will
come back to try to ask some questions of this panel, as well
as the other panel.
Thank you again, for taking the time to travel here to
provide us insight into the housing crisis in Africa. I extend
my thanks to Chairman Martinez for arranging this hearing and I
look forward to an in-depth discussion of this important, but
often overlooked issue.
I think we can all agree today, addressing this problem and
creating solutions to the housing difficulties of the urban
poor in Africa must occur as a part of a larger effort to bring
economic stability to the continent. This is a problem that
will take a long-term commitment with a multifaceted approach.
As I'm sure you agree, we need to address the overall
causes of population migration to urban centers. That means
taking on inadequate economic policies that lead to populations
trading their hopelessly inadequate rural living situations,
for what they perceive to be is an opportunity to take one step
closer to economic security. Urbanization will continue as long
as cities are seen to provide the greatest opportunities for a
personal economic growth.
We must recognize however, that economic policies are not
moving quickly enough to address the urban population explosion
and that migration of the African poor to urban centers is a
very immediate problem. This migration, without adequate
infrastructural planning has contributed to the creation
sometimes of massive slums. It's not enough for cities to
prevent new slums--they now have to address existing slums that
are becoming increasingly permanent.
Finally, the people themselves do not have incentives
sometimes, to organize or commit to greater infrastructure
reforms if they are not assured basic property or tenure rights
in order to gain home ownership opportunities. Communities will
not participate in activities they do not perceive to benefit
them. Any policy decisions made, if they are to be truly
comprehensive and long-lasting, must address the plight of
those who choose urban squalor over their rural homes in
pursuit of a better life.
I particularly look forward to your suggestions on how the
United States Government can improve its assistance in Africa
to deal with this issue. I also hope that you will provide
greater insight into how the heads of state, city planners, and
the local populations have succeeded in addressing housing
problems and how you have assisted them along the way.
So again, I thank you for taking the time to brief our
subcommittee and I'm enjoying your testimony today. With that,
I'll turn to Mr. Smith.
STATEMENT OF JAMES T.M. SMITH, SENIOR DEPUTY ASSISTANT
ADMINISTRATOR, BUREAU OF ECONOMIC GROWTH, AGRICULTURE, AND
TRADE, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, WASHINGTON,
DC
Mr. Smith. Thank you very much, Senator Feingold. I'd like
my written testimony to be entered into the record and I'll
make a brief statement, thank you.
Thank you, Mr. Chairman and members of the subcommittee,
for the opportunity to appear before you today, to discuss
housing and urbanization in Africa. The United States Agency
for International Development recognizes the complexity and
importance of these economic drivers to the overall development
of countries in sub-Saharan Africa.
I'd like to take a little time to elaborate on the
implications of current urban growth trends in Africa and how
these affect our development objectives of promoting democracy
and economic growth. I would also like to highlight USAID's
role in promoting these objectives through credit programs,
capacity building support, and other technical assistance
programs.
Africa has the highest rate of urban growth in the world at
5 percent per annum. By the year 2025, half of the continent's
population will be living in urban areas and if current trends
persist, the majority of Africa's poor will be living in
cities, primarily in slums. Tremendous demand already exists
for adequate and affordable shelter, upgrading of squatter
settlements, and access to finance. The demands and pressures
on Africa's cities will only increase over time.
The primary challenges facing African cities and towns are
local and national policies that serve to limit private
investment, job creation, services, citizen participation, and
cities' ability to generate sufficient revenue or borrowing
from private capital markets. For cities and towns to achieve
their potential as places where jobs are generated and as
engines of both rural and urban growth, national and local
governments need to reform policies and increase municipal
capacity so that they can better attract and manage trade and
investment.
Urbanization is not the only major trend changing the face
of Africa. The spread of democracy and decentralization have
dramatically changed the way that governments interact with
citizens in numerous countries in the region. If city and town
governments can improve the delivery of key services such as
education, community healthcare, and potable water, the
tangible benefits that result can demonstrate the value of
democratic governance. Because at the end of the day, what
matters most to citizens is that their quality of life
improves.
In Africa, this means not only providing basic
infrastructure and social services, but also creating the right
environment for the
development of housing. USAID is a leader in providing
capacity-building support to city and town governments to plan,
manage, finance, and deliver urban services. For example, their
resource cities partnership between Johannesburg, South Africa
and the city of Houston, Texas brought practitioners together
to learn about United States approaches to solving urban
problems and to think about how they might be adapted to the
South African context. The partnership was instrumental in
strengthening Johannesburg's capacity to access financing
directly in the international capital markets.
In post-conflict countries such as Angola, USAID is working
with the national government and other donors to improve city
management, promote good governance practices, and increase
investment in local infrastructure. To reach their potential as
drivers of overall economic growth, it is essential that
Africa's cities have access to finance, attract investment, and
pursue job creation strategies to provide opportunities to
their residents.
Housing is a particularly important term in this equation,
as a strong housing sector fuels economic growth and
contributes directly to job creation through construction and
related consumer goods. Housing is also important when it can
serve as collateral to start or expand small businesses.
While the housing market conditions in the United States
and Africa are vastly different, the basic principles from the
United States model can and are being successfully applied to
the African context. A functional, commercially oriented
housing market requires access to long-term finance, rational
land tenure laws, as you stated Senator, impartial and
effective mediation instruments, liquidity, and adequate
housing stock.
Looking first at the issue of titling land and property,
USAID has extensive experience ranging from our support to the
Institute for Liberty and Democracy and promoting legal and
institutional reforms related to property, to efforts underway
in Zambia currently, to work with the ministry of lands to
enable a more transparent and efficient system of property
titling and registration.
This targeted technical assistance in Zambia is part of a
larger initiative in conjunction with the Overseas Private
Investment Corporation aimed at developing a viable sustainable
mortgage market in Zambia.
We hope this will become a model for low- to middle-income
housing development in sub-Saharan Africa in countries where
there is potential for mortgage market development.
The work in Zambia takes the type of comprehensive approach
to the housing sector which is characteristic of USAID's
extensive experience going back more than 40 years. Today,
USAID makes use of the development credit authority to mobilize
private local capital financing. To date, USAID has mobilized
$48.5 million for housing purchase, construction, and upgrades
as well as for related infrastructure services.
To increase private sector participation in the region,
USAID has submitted a budget request for fiscal year 2007 to
provide dedicated funds for the Africa housing and
infrastructure facilities. USAID's potential role in this
sector is not limited to our credit guarantee tool, rather the
agency utilizes a range of tools including the Global
Development Alliance, GDA, to tap into the vast and valuable
resources of the private sector, which are necessary to meet
the substantial demand for infrastructure and housing
investment. By partnering with organizations that are not our
traditional partners, USAID is able to bring the private-sector
perspective into our development assistance.
If we reflect back for a moment on the trends in Africa, we
will see that, increasingly, the housing problem is one of
people living in inadequate conditions in urban slums. There is
no simple solution. It requires strengthening the formal
sector, as well as creating specific strategies to improve the
lives of slum dwellers.
USAID, along with UN-HABITAT, and 12 other donors, sponsors
the Cities Alliance--City's Without Slums Strategy, which has
led to greater investment in urban infrastructure, housing, and
slum upgrading. Other solutions include housing microfinance
which can be a viable option for financing home improvements
and upgrading the existing housing in informal settlements.
USAID and its partner, ShoreBank International, are already
demonstrating the value of this tool in South Africa.
In Ambassador Tobias' recent testimony to the House
Appropriations Committee, he outlined a new approach to improve
the effectiveness of the U.S. Government's overall foreign
assistance. USAID will contribute to the overall objectives to
achieve peace and security; improve governance and democratic
participation; promote investments in people; and engender
economic growth. Addressing the challenges of urbanization and
housing in sub-Saharan Africa will support these key
objectives.
I hope the many example supplied in my written testimony
amply illustrate USAID's support to housing in urban issues in
sub-Saharan Africa. USAID will continue to be a key player in
the urban and housing development agenda through the use of
strategic and focused technical assistance, the application of
the credit guarantee tool, to leverage resources from the
private sector, and global development alliances to partner
with the private sector.
Thank you very much, Mr. Chairman. I would be happy to
answer any questions from the committee.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of James T.M. Smith, Senior Deputy Assistant
Administrator, Bureau of Economic Growth, Agriculture, and Trade, U.S.
Agency for International Development, Washington, DC
Thank you, Mr. Chairman and members of the subcommittee, for the
opportunity to appear before you today to discuss housing and
urbanization in Africa. The United States Agency for International
Development (USAID) recognizes the complexity and importance of these
economic drivers to the overall development of the countries in sub-
Saharan Africa. I would like to take a little time to elaborate on the
implications of current urban growth trends in Africa and how these
affect our development objectives of promoting democracy and economic
growth in the region. I would also like to highlight USAID's role in
promoting these objectives through credit programs, capacity-building
support, and other technical assistance programs. Reflecting on
Administrator Tobias' commitment to focus the U.S. Government's foreign
assistance and make it more strategic, I will close with a brief
discussion of future priorities.
introduction
Africa has the highest rate of urban growth in the world at 5
percent per annum. By the year 2025, more than half of the continent's
population will be living in urban areas and if current trends persist,
the majority of Africa's poor will be living in cities, primarily in
slums. The World Bank estimates that 300 million urban Africans who
have left rural areas in search of jobs and a better life for their
children will be living without access to water and sanitation if the
situation does not change. Tremendous demand already exists for
adequate and affordable shelter, upgrading of squatter settlements, and
access to finance; at this time it is estimated that 30 million
families lack adequate housing. The demands and pressures on Africa's
cities, however, will only increase with time.
The primary challenges facing African cities and towns are local
and national policies that serve to limit private investment, job
creation, service provision, citizen participation, and cities' ability
to generate sufficient revenue or borrow from private capital markets.
For cities and towns to achieve their potential as generators of jobs
and engines of both rural and urban growth, national and local
governments need to reform policies and increase municipal capacity so
that they can better attract and manage trade and investment.
What are the implications of rapid urban growth in Africa? This
demographic shift heralds a profound change for Africans as well as
their development partners. The region, assisted by donors, must
prepare for the demographic changes that are already becoming apparent.
High urban growth rates can be linked to political instability,
particularly where accompanied by low or negative GDP per capita
growth. This is particularly true in countries with youth bulges, where
youth make up more than 35 percent of the adult population of a
country.
Youth, aged 15 to 24 years, constitute about 20 percent of the
total population, and young people under 25 years make up about 70
percent of the population in most African countries. Increasingly, they
comprise the majority of urban populations as well. Youth are
potentially Africa's greatest natural resource.
Despite the challenges, the opportunities to achieve sustainable
development are very real. If managed well, cities can be engines of
growth and can create a better quality of life through access to higher
paying jobs, better health care, and quality education. Evidence shows
that Africa's economic growth in recent decades has primarily been
urban-centered.
It is important to build on the positive aspects of urban growth as
it is the inexorable future for Africa. Africa's urban growth rates
cannot be explained solely by rural migration, and strengthening the
agricultural sector, or making life in rural areas more attractive will
not stem the growth of urban centers. Rather, policies and programs
need to be aimed at supporting the development of secondary cities and
market towns and at improving services to the informal sector so that
the potential of Africa's cities can be realized.
decentralization, urban governance, and city management
Urbanization is not the only major trend changing the face of
Africa; decentralization has also been sweeping across the region,
dramatically changing the way that governments interact with citizens.
For myriad reasons, many African countries have decentralized
significant functions to local governments. In some cases, these
decentralization efforts have gone beyond simply devolving
administration or management of service delivery to include instituting
democratic processes by establishing elected mayoral and/or municipal
council positions.
Decentralization creates both challenges and opportunities. The
challenges include the reality that many local governments have limited
financial and human resources and inadequate governance capacity.
Decentralization in most countries remains limited to the
``deconcentration'' of national authority and services to the local
level, without the devolution of revenue-generating and decision making
authority necessary for true decentralization. Still, the opportunities
to clean up government, improve services, or establish democratic
principles, in practice, can be significant. Decentralization brings
government closer to the people, who can relate local politics and
issues to their daily lives. If city and town governments can improve
the delivery of key services (e.g., education, community health care,
potable water), the tangible benefits that result can demonstrate the
value of decentralized democratic governance. In Africa, this means not
only the provision of basic infrastructure and
social services but also housing.
What conditions are necessary to create more transparent,
accountable, responsive, and effective local governments? USAID works
on both the supply of and demand for good governance: creating the
legal and regulatory framework, strengthening civil society and
increasing opportunities for participation in the governance process,
and improving the capacity of local governments to manage, finance, and
deliver services. At the end of the day, what matters most is that city
and town governments can deliver services to their residents and that
citizens have recourse through democratic means should governments be
unwilling or unable to deliver those services.
At the national level, the legal and regulatory framework needs to
support sound fiscal and administrative functions at the local level.
It is the responsibility of the national government to set the
parameters. Deciding what level of government is most appropriate for
carrying out public functions is a political determination that each
country must make for itself. Numerous countries on the path to
decentralization have pushed service delivery down to the lowest levels
of government. As public sector resources are insufficient to meet all
infrastructure investment needs, it is also critical that the legal and
regulatory framework supports market-oriented municipal finance.
City and town governments need the capacity to take on new
responsibilities and authorities. Sustainable development requires that
local institutions function well and are capable of making wise
decisions in allocating limited public resources, which in turn
requires the development of systems, processes, and human resources to
plan, budget, manage, and deliver services. A good measure of progress
is the creditworthiness of a city government. Achieving
creditworthiness can be a challenge for many local governments but must
be the target if local governments want to access private capital
markets. Creditworthiness is not enough though. As far as citizens are
concerned, they expect to receive urban services, which require city
and town governments to have the right technical and managerial skills
to deliver those services.
Achieving creditworthiness and improving city management and
service delivery is a long process, but USAID has a proven track record
in helping cities progress. USAID is a leader in providing capacity-
building support to city and town governments to plan, manage, finance,
and deliver urban services in a more transparent, participatory, and
accountable way. Some examples include the following:
USAID's global CityLinks program supports peer-to-peer
learning and technical exchange partnerships between developing
country cities and U.S. cities and county governments.
Implemented by the International City/County Management
Association, the program aims to build the capacity of local
governments to manage and plan effectively, promote local
economic development, and deliver water and other key public
services. Recent partnerships in Africa include Bamako, Mali,
which successfully introduced new solid waste management
practices as well as an educational awareness campaign for
school children. The USAID Mission in Ethiopia is initiating
two new partnerships to help cities promote economic
development to create jobs.
CityLinks builds upon the successes of a previous program, Resource
Cities, which had a proven track record of introducing U.S. city
management practices to developing country counterparts. One such
success was the partnership between Johannesburg, South Africa, and the
City of Houston, Texas. By bringing practitioners together and helping
translate United States approaches to solving urban problems to the
South African context, the partnership was instrumental in launching a
municipality that today is able to access financing directly in the
international capital markets.
USAID continues to strengthen the capacity of decentralized
public financial management in Ethiopia. The program builds the
capacity of local governments in the areas of accounting,
financial management, and financial control systems in order to
enhance their ability to provide services, improve
infrastructure, and promote economic growth.
In Mali, USAID is strengthening local governments by
facilitating collaboration and partnership in targeted
municipalities, establishing sound financial management
systems, and encouraging women's participation in political
life.
In several post-conflict countries, USAID is investing in urban
services and governance to promote a culture of democratic
participation, provide a democracy dividend, and improve health,
education, and economic growth outcomes. For example:
The Municipal Development Program (MDP) in Angola will
support a larger multi-donor effort to assist the Government of
Angola in achieving decentralized planning and budgeting at the
local government level with broad community-determined needs.
The MDP is a product of Global Development Alliance
partnerships with the Chevron Corporation and Lazare Kaplan
International. MDP combines technical assistance at the
national level on policy issues and at the local level to
improve the capacity of municipal governments with a Municipal
Development Fund (MDF) for financing local infrastructure.
USAID will implement a new local government capacity-
building program in five secondary cities in Mozambique through
the Municipal Government Increasingly Democratic (MGID)
program. This technical assistance and training program aims to
improve the democratic governance process with interventions
to: (1) Implement local-level citizen participation mechanisms;
(2) develop municipal planning and management capacity; (3)
strengthen municipal revenue generation and service delivery;
(4) establish local-level anticorruption mechanisms; and (5)
disseminate best practices through existing networks.
Other USAID programs mitigate potential conflicts by implementing
innovative approaches to dealing with the specific problems of Africa's
youth:
USAID, in partnership with the International Youth
Foundation, Nokia, and the Lions Clubs International
Foundation, launched the ``Alliance for African Youth
Employability'' in 2004. The Alliance promotes employability
and employment for more than 35,000 disadvantaged young people
aged 14 to 29 living in rapidly urbanizing areas of South
Africa, Malawi, Mozambique, and Rwanda.
In the area of conflict mitigation in Uganda, USAID provided
formerly abducted children with shelter, access to clean water,
and vocational training to facilitate reintegration with their
communities. The program helped vulnerable groups such as
people living with HIV/AIDS and thousands of children who flee
to urban night shelters.
economic growth and poverty reduction
Dysfunctional urban areas deter economic growth, whereas well-
managed cities stimulate regional economic development. African cities
have the potential to generate jobs, increase economic growth, and
boost rural productivity, thus playing a vital role in poverty
reduction and rural development. To reach their potential as drivers of
overall economic growth, Africa's cities must have access to finance,
investment, and job creation strategies to provide opportunities to
their residents. This, in turn, will benefit peri-urban and rural areas
by providing expanded markets, farm inputs, and off-farm employment.
Housing is a particularly important term in this equation. It is
well understood that a vibrant housing market is a critical component
of developed country economies, as is the case with the housing market
here in the United States. A strong housing sector fuels economic
growth and contributes directly to job creation through construction
and increased demand for related consumer goods. Housing is also
important in serving as collateral to start or expand small businesses.
In the absence of a mortgage market, housing stock is essentially
``dead capital.'' The formal housing and real estate sector also has
the potential to create substantial revenues for local governments to
be used for investments in improved infrastructure services. South
Africa is an excellent example, as 86 percent of local government
revenues come from housing property taxes and related fees.
While the conditions in the United States and Africa are vastly
different, the basic principles from the United States model can and
are being successfully applied to the African context. A functional,
commercially oriented housing market requires access to long-term
finance, rational land tenure laws, impartial and effective mediation
instruments (through the police, alternative dispute resolution
centers, and courts), liquidity, and adequate housing stock. While it
is difficult to ensure that all of these factors are in place, it is
not impossible.
Strengthening the legal and regulatory framework needs to be
addressed in order to encourage greater private sector investment in
the housing market. Lenders need to operate in a secure environment in
which contracts can be enforced, and foreclosure is both timely and
cost-effective. Potential borrowers and homeowners need to have access
to finance and need secure land tenure and, ultimately, legal title.
land tenure and titling
Land titling is a critical issue that deserves special attention,
particularly in relation to the housing needs of the urban poor, who
often live in informal settlements without any security. Access to land
and legal security of tenure are strategic prerequisites for the
provision of adequate shelter for all and for the development of
sustainable human settlements. Helping to establish secure land tenure
is also one way to break the vicious circle of poverty. With legal
title and tenure, potential borrowers can apply for traditional
mortgage loans. Households are also more likely to invest in
maintenance or home improvements if their assets are secure.
USAID has extensive experience working on these issues with a broad
range of alternative solutions.
Hernando de Soto, director of the Institute for Liberty and
Democracy (ILD), argues that transparent and equitable property
markets are the keystone of vibrant market economies, strong
democracies, and healthy environments. Through a long and
productive relationship with the ILD, USAID is promoting legal
and institutional reforms related to property. ILD's efforts in
Peru enabled 6.3 million poor households to receive legal title
to their properties, leading to an increase in real estate
assets of more than $2 billion; 380,000 enterprises operating
legally; 550,000 new jobs; and additional tax revenues of over
$300 million per year. Tanzania and Ethiopia are prepared to
initiate research on the extent of informal property in their
respective countries as a first step. A new agreement with ILD
will help USAID respond to these and other sub-Saharan African
countries that are struggling to overcome the problems
associated with large informal housing markets.
In support of the United States-Africa Mortgage Market
Initiative, USAID is providing technical assistance to the
Ministry of Lands in Zambia as part of a larger initiative
aimed at developing the mortgage market for low- to medium-
income households. USAID assistance will include the necessary
hardware and software required to ensure safe and timely
electronic transfer between the private developer's sales
office and the Ministry of Lands. This will facilitate
transparent issuance of land title certificates for the 5,000
houses to be built on the Lilayi estate in Lusaka, Zambia.
USAID is working in partnership with Overseas Private
Investment Corporation (OPIC) as part of an effort to kick-
start a viable, sustainable mortgage market in Zambia and to
develop a model for low- to middle-income housing development
in sub-Saharan Africa.
role of private sector in housing
In many respects, the time may be ripe to capitalize on the demand
and need for housing. Countries like South Africa, Uganda, Ghana, and
to a lesser extent Kenya, Zambia, and other emerging economies like
Mozambique have developing financial markets. In some countries,
pension funds, provident funds, and insurance companies are
corporatized or privatized and are looking for alternate, long-term
investments. Infrastructure investments are increasingly attractive, as
is the emerging housing finance market.
USAID's experience in the housing sector is extensive, going back
more than 40 years. From 1961 to 2002, USAID issued close to 200
guarantees in 39 countries around the world through its $2.8 billion
Housing Guarantee program. Today, USAID continues to focus on housing
finance through its Development Credit Authority. USAID has mobilized
$48.5 million in local capital financing for housing purchase,
construction, and upgrades, as well as for related infrastructure
services. USAID's worldwide experience ranges from helping to deepen
mortgage lending at the middle- and low-income segments by mobilizing
capital to establishing financing mechanisms for slum dwellers. A few
examples can illustrate how USAID has employed partial credit
guarantees to mobilize local capital in Africa:
To increase access to housing and environmentally sound
urban services for historically disadvantaged groups in South
Africa, USAID provided a Development Credit Authority guarantee
for ABSA Bank to reduce the perceived risk of lending to
municipal governments. Under the $25 million guarantee, the
Greater Johannesburg Municipal Council (GJMC) prepared a
project delivery plan that established project selection
criteria for water and electricity services, roads, storm water
and waste management, housing and urban redevelopment, and
health clinics, rather than selecting individual investments.
USAID's technical support and partial guarantee helped the city
improve its credit rating and access long-term private
financing for municipal infrastructure. By further developing
and demonstrating adequate planning and budgeting to the local
commercial banks, as well as establishing a history of
repayment, GJMC strengthened its access to private financing
for future projects.
Also in South Africa, USAID provided a 5-year, rand-
denominated, portable guaranty to help finance a subsidiary of
the Infrastructure Finance Corporation (INCA). The purpose of
the $20 million guaranty was to partially cover Investec Bank
in purchasing existing municipal debt from local governments
experiencing repayment problems. Investec then repackaged the
debt, reselling it to investors in the capital market.
In Nigeria, USAID worked with the Federal Mortgage Bank to
produce draft legislation that improves the enabling
environment for the Nigerian mortgage market. Discussions are
now underway to establish the Mortgage Finance Program to
support the purchase of homes by low- and middle-income
households in four regions: Abuja, Lagos, Port Harcourt, and
Kano. The program will complement the efforts of the Nigerian
Government and others to address the significant housing
deficit. Provision of strategic lending into housing and
supporting industries will help foster ancillary skills in
construction, create employment, and reduce poverty. This
guarantee will provide confidence to financial institutions to
invest and support sectors that have been neglected in the past
but are now beginning to show signs of opportunity. USAID/
Nigeria proposes a guarantee period of 10-12 years to enable
low- and middle-income Nigerians to invest in the ownership of
their own primary residences, to facilitate the development of
the mortgage sector in Nigeria. The guarantee will enable banks
to fully address the most pressing financing needs for housing
and also build their internal capacity to continue to play an
active role in supporting the target group continuously and in
a sustainable manner.
The United States-Africa Mortgage Market Initiative was mobilized
following President Bush's speech in Abuja, Nigeria, in 2002,
encouraging a targeted reengagement in the housing finance sector to
foster real asset growth and wealth among poor people. USAID has joined
forces with OPIC and the local private financial sector to enhance, via
the housing sector, the positive political and economic signs currently
emerging in Zambia and other countries in the region.
USAID and OPIC are working with the private sector in Zambia
to expand investment in local businesses and infrastructure by
increasing the availability of financial instruments for the
productive sector and improving transparency and integrity in
the public sector to address corruption and improve governance.
USAID has proposed using the Development Credit Authority
facility to partially guarantee construction loans issued by
Stanbic Bank Zambia Limited for low- to middle-income housing
in Lusaka. The Lilayi Housing and Community Economic
Development Project (Lilayi Project) will provide home
mortgages, land tenure, and municipal services that are not
presently available to this segment of the population. OPIC
will facilitate mortgage financing for 5,000 households to be
built on the privately owned estate in Lusaka. In addition to
the credit guaranty, USAID will provide technical assistance to
the Ministry of Lands to pave the way toward a more effective
and efficient transfer and registration of land titles to
homebuyers.
USAID's potential role in this sector is not limited to its credit
guarantee tool. Rather, the Agency utilizes a range of tools, including
the Global Development Alliance, to tap into the vast and valuable
resources of the private sector. By partnering with organizations that
are not our traditional partners, USAID is able to bring the private
sector perspective into our development assistance. This is essential
in order to begin harnessing the private sector financing necessary to
meet the substantial demand for infrastructure and housing investment.
Building on the success of a Global Development Alliance
with Evenson Dodge International in Mexico, USAID entered into
a strategic partnership to provide technical assistance to
South African municipal, subnational, and national governments.
The goal is to help improve the ability of South African local
governments to finance municipal infrastructure by accessing
domestic capital markets through the issuance of municipal
bonds. In December 2005, Evenson Dodge assisted the City of
Tshwane (formerly Pretoria, the capital of South Africa) in
issuing the local currency equivalent of a $100 million Request
for Proposals for long-term funding. This funding will be used
to refinance other debt under more favorable conditions,
thereby making more resources available for infrastructure
improvements. Six proposals were received in February of this
year and are under consideration by the city. Evenson Dodge
also anticipates assisting the City of Tshwane with a $380
million refinancing in 2007 and a $500 million refinancing for
Durban in 2008.
USAID awarded a cooperative agreement to the International
Housing Coalition to promote a private sector approach for
provision of housing and housing finance to the poor in
developing countries. Habitat for Humanity International, the
National Association of Realtors, and the Canadian Real Estate
Association are the key members of the coalition. The coalition
aims to mobilize needed resources for housing in support of the
goal ``Housing for All.'' USAID Missions can tap into the
coalition's network to carry out research, provide policy
advice, and carry out targeted technical assistance related to
housing sector issues. One of their first activities is to
promote the housing agenda at the third annual World Urban
Forum to be held in Vancouver, June 17-23, 2006. Through its
many partners, International Housing Coalition is sponsoring
research and networking events aimed at elevating the
discussion on housing.
Last, in support of the United States-Africa Mortgage Market
Initiative, USAID continues to play a role in providing targeted
technical assistance. While the initiative is only modestly funded, it
is a strategic intervention by USAID and its partners to carry out a
series of assessments on mortgage market development in key countries
(Ghana, Uganda, Zambia, Tanzania, South Africa, and in conjunction with
OPIC, Kenya) to develop baseline data on the state of play on a
country-by-country basis.
informal sector and slums
Achieving the Millennium Development Goal of improving the lives of
at least 100 million slum dwellers will be a major challenge. There is
no simple solution to the problem of slums, the problem must be
addressed both directly and indirectly. USAID's support to the formal
sector is relevant as the development and expansion of formal housing
systems has implications for broader economic goals and is a necessary
prerequisite for sustainable financing and provision of housing to the
informal and/or low-income sector. Given that the majority of the poor
live and will continue to live in informal settlements and increasingly
in urban slums, strategies also need to be designed and implemented
that address their specific needs through slum upgrading.
USAID, along with UN-HABITAT and 12 other donors, sponsors
the Cities Alliance cities without slums strategy. USAID has
provided $1.5 million for core funding to the Cities Alliance
Trust Fund as well as $2 million for the establishment of a
Community Water and Sanitation Facility. The Cities Alliance
supports and works with the Union of Cities and Local
Governments to help city governments improve services and
strengthen local economic development for the betterment of
their citizens, particularly the urban poor. Cities Alliance
aims to improve security of tenure for slum dwellers; upgrade
slums and improve housing; expand citywide infrastructure and
services; create jobs; provide alternatives to slum formation;
and carry City Development Strategies. Grants awarded by the
Cities Alliance since its inception in 1999 have been linked to
$6 billion in investments worldwide.
Within the Cities Alliance framework, USAID, along with Norway and
Sweden, helped to kick-start the ``Cities Without Slums Facility for
Africa'' with seed money in 2002. The Africa Facility is supporting
city development strategies and poverty reduction activities in
Ethiopia, South Africa, Ghana, Nigeria, and Swaziland. Plans are
underway in numerous other African countries including activities to
``scale up'' pilot activities through the development of innovative
financing options.
USAID's Urban Programs Team provides technical support to USAID
Missions and host country counterparts through a contract with an 8(a)
firm in preparing applications to the Cities Alliance.
As the majority of poor households live in informal settlements
that they have constructed themselves, traditional housing finance
often does not address their real needs. Recent experience in the
microfinance sector has demonstrated that housing microfinance has the
potential to provide affordable, reliable, and appropriate financing to
support the shelter needs of the poor through home improvement loans.
Whether housing microfinance is offered as a stand-alone service or is
linked to other microenterprise services or savings schemes, housing
microfinance can be financially viable and does have a positive impact
on low- and middle-income households. Due to the nature of microfinance
(usually shorter term, small loans) institutions are primarily offering
products that can be used for home improvements and upgrading of
existing housing which matches the needs of the informal sector.
While this is a very new area for USAID, the potential is already
evident, particularly in a number of fragile states with nascent
capital markets. Through complementary technical assistance and the
strategic use of the credit guarantee tool, USAID is already
demonstrating that microfinance for housing could be the wave of the
future.
USAID, through its partner Shorebank International, is
providing technical assistance to microfinance institutions and
private sector banks in South Africa in order to increase
housing opportunities for low-income families. Shorebank is
assisting microfinance institutions to develop the processes
and procedures necessary to demonstrate to commercial banks
that they can properly service and collect housing finance
loans to low-income households. If the microfinance
institutions succeed with this demonstration, they will seek
additional financing from traditional banks to expand the new
housing finance services.
Shorebank is providing complementary support to the commercial
banks to educate them on the positive business case for expanding their
product lines to include low-income borrowers. Shorebank is providing
technical assistance on how to properly assess the risk for this
segment of the housing market and is highlighting the role that both
banks and microfinance institutions can play in servicing those loans.
The support that Shorebank has provided in South Africa to a
commercial bank, ABSA, and two microfinance institutions, Kuyasa and
SOHCO, has led directly to the issuance of a $900,000 loan from ABSA to
Kuyasa to expand their housing microfinance operations. To provide
further comfort and encouragement to ABSA to take on the risk of this
new scheme, USAID will provide a 50 percent credit guaranty through the
Development Credit Authority. No such incentive, however, was needed
for ABSA to take a $10,000,000 equity/long-term debt position in SOHCO
for expansion purposes. ABSA was sufficiently impressed by SOHCO's
current operations that the technical assistance from Shorebank was
enough to help bring this deal to fruition.
the future
I hope these many examples amply illustrate USAID's long and rich
history of work on housing and urban issues in sub-Saharan Africa.
Drawing from the experience of the United States and other developed
countries, it is clear that the housing sector is vital to the
development and urbanization agenda. Housing provides the single most
important multiplier effect to economies and can be the highest source
of revenues to local governments through the form of property taxes and
related fees. Housing is also a viable mechanism by which to deliver
water, sanitation, and electricity and other urban services to
households and provides sustainable, tangible evidence of U.S. foreign
assistance.
To promote housing and urban development in Africa, USAID will use
strategic and focused technical assistance interventions, application
of the credit guarantee tool to leverage resources from the private
sector, Global Development Alliances to partner with the private
sector, and collaboration with other U.S. Government agencies.
In recognition of Africa's demographic realities, USAID has
made urbanization a cross-cutting theme in its new Strategic
Framework for Africa, which guides the strategies for USAID's
sub-Saharan Africa missions. The Africa Bureau is working
closely with other USAID Bureaus and Offices and potential
private sector partners to address the urban and youth
challenges facing the continent.
Through its existing and planned mission programs in Africa,
USAID will continue to provide technical assistance and
capacity-building to city and town governments to improve
service delivery and move toward the development of sustainable
human settlements.
USAID is proposing to launch the Africa Housing and
Infrastructure Facility in 2007. USAID has requested dedicated
funds to cover the budget cost of providing partial credit
enhancement in support of private sector financing for housing
and related infrastructure in Africa. The proposed facility
will increase USAID's capacity to deliver on the President's
goals in a cost-effective manner that is fully supportive of
and focused on mobilizing private sector resources for
infrastructure development in Africa.
The Microenterprise Development Team is conducting a study
of microfinance for housing to provide a short and accessible
study that recounts the current achievements in the housing
sector, lessons learned, constraints and limits, and most
importantly, how housing microfinance can enhance and support
USAID activities. In addition, this study will assess how to
bring together urban development strategies, slum upgrading
models, and assistance to microlenders. This study will help
serve as a roadmap for future potential activities in this
emerging microfinance market.
USAID will continue to explore Global Development Alliances,
such as a proposal currently under discussion from Habitat for
Humanity International's Africa division which represents a
shift in the organization's traditional shelter approaches.
USAID will continue to collaborate with other U.S.
Government agencies such as OPIC and the Departments of
Treasury and Housing and Urban Development. It is hoped that
the Zambia pilot effort and the assessment studies on mortgage
markets in select African countries will pave the way for
expanded support to the housing sector as an entree to
sustainable development.
USAID plans to enhance its partnership with Cities Alliance
to promote innovative solutions for the millions of slum
dwellers in Africa and elsewhere if funds are available to
carry out our commitment.
USAID is exploring the potential of a direct partnership
with the Union of Cities and Local Governments (UCLG) a
powerful umbrella organization combining the World Federation
of United Cities, the International Union of Local Authorities
and Metropolis into one international body. Its membership
includes cities and national associations. The organization
strengthens the role of local governments in tackling urban
problems and addressing housing problems in the developing
world.
In support of the Water for the Poor Act, USAID will promote
the approach of ``making cities work for the poor'' by working
with municipal governments and the private sector to tap into
capital market financing for infrastructure investments.
Potential partners include the UCLG which presented the ``Local
Government Declaration on Water'' at the recent World Water
Forum in Mexico.
In Ambassador Tobias' recent testimony to the House Appropriations
Committee, he outlined a new approach to improve the effectiveness of
the U.S. Government's overall foreign assistance. USAID will contribute
to the overall objectives to achieve peace and security; improve
governance and democratic participation; promote investments in people;
and engender economic growth. Addressing the challenges of urbanization
and housing in sub-Saharan Africa will support these key objectives.
Senator Martinez [presiding]. Thank you both very much. And
please know that your full remarks will be read by both of us,
and I know Senator Obama as well, even though we're in this
shuttle between votes. Please know that that will be the case.
Senator, did you have an opportunity to give your opening
remarks?
Senator Feingold. Yes, sir.
Senator Martinez. Okay. I wanted to just touch on an issue
that I think is so important, which is the opportunity for
financing which is tied to the opportunity to have title--in
titling. And I don't know which one of you all, maybe Mr.
Smith, but if not, Dr. Williams. But one of you, if you would
please, address the issue of titling as it relates to the issue
of obtaining the potential for financing and how that all is
developing, or how we could assist it in any way that could
more enhance the opportunity for folks to have an opportunity
to finance a home.
Mr. Smith. Thank you, Mr. Chairman. I'm sure we'd both want
to say something about it, is that correct? My observation
would be that we've worked, as I said in my oral testimony,
we've worked for a long time with the Institute for Liberty and
Democracy, because quite a few years ago, Hernando DeSoto
pointed out to all of us, that lots of--there are lots of
informal titles which aren't very secure and which discourage
investment in housing.
Senator Martinez. Uh-huh.
Mr. Smith. I mentioned the Zambia Project and in that case,
we're working directly with the Ministry of Lands to improve
the titling process, so that the people who enter into a
mortgage agreement to buy that housing on term have secured
title, which isn't--we've had to help the Zambians modify their
titling procedure. I think if we do things like that, we can
help counties develop titling processes that'll actually work
and provide secure title that could eventually be then
collateral for bank lending and so forth.
It's not a simple process. And Hernando's experience is
that many ministers around the developing world find out when
they are confronted with the type of titles that they have,
that they are actually informal titles, and they're not
registered property, and not recognized in their own courts.
And they are quite surprised to find that they've all been
working on a very informal system.
So, it's a major problem. And I think technical assistance
is the way to solve it. Just presenting African Governments
with systems that can be made to work and then getting them to
introduce the policy reforms that are necessary in the
systematic changes. It will be a very long-term process, I
believe.
Senator Martinez. My guess is it is a true concern all over
the third world, really--or whatever, the developing world in
terms of Latin America and other parts of the Middle East. And
I know that Mr. DeSoto's writings have really sparked my
curiosity about how we could get this done, because it would be
a huge breakthrough I think, to open opportunities. Because
there's a lot of trapped capital that isn't manifested in the
economy.
Ms. Williams, anything you care to add?
Ms. Williams. Yes, sir. I would just like to add--and this
really does come from my experiences, that firsthand
opportunity that I had in May of 2004 in visiting South Africa
and meeting with many of the officials and the business
community there. I had mentioned in my oral testimony, that I
did have the opportunity to meet with the South African
Department of Housing, the Microfinance Regulatory Council, and
the TEBA Home Loan Bank Group in South Africa. And then in
Botswana, I met with their charter bank. And one of their
concerns was the fact that they don't have an institutionalized
title situation. And so, that is very problematic.
I had also mentioned that we do have an opportunity now,
through discussions and through presenting our own U.S. model
on how we are doing things, to share with them at least another
option. They have a British experience that they had shared
they were looking at, as well as a Swedish model. And I'm not
really that involved at that level, but I believe we could also
provide you with additional information, if you'll allow us to
present a written response.
Senator Martinez. You know, I think that would be very
welcome and I think that will be a great thing if you could do
that. I think that would be terrific.
Ms. Williams. Thank you.
Senator Martinez. I appreciate that. Also, Ms. Williams, if
you could tell me a little more about the meetings for a West
African countries plan for November 2006 in Ghana. What is the
focus of the meetings, and what countries and institutions will
be involved? I would appreciate knowing about that.
Ms. Williams. Yes, sir. The West Africa Peer Exchange
Program will probably be very similar to the one that we hosted
in East Africa. In that, we focused on elements of policy
reform and market innovation. In that first initiative we had
countries from--or representatives from government and
financial institutions and we focused on housing finance.
President Kufour of Ghana had met with Secretary Jackson in
Washington in October of 2005 and a similar peer exchange
program for West African countries was discussed. Ghana has
expressed strong interest in hosting the West Africa Peer
Exchange and it will be held in a similar format with three to
four selected countries. HUD will continue to work in support
of UN-HABITAT and USAID.
Senator Martinez. Very good, thank you.
Ms. Williams. Thank you.
Senator Martinez. Thank you.
Mr. Smith. Mr. Chairman, could I comment a little bit
further?
Senator Martinez. Yes, please.
Mr. Smith. There are other things that one can do before
getting all the titling right, everywhere, if I may. Our work
with ShoreBank International in South Africa and Morocco is
looking at Microfinance Housing.
Senator Martinez. Please continue and touch on that,
because that was going to be another one of my questions of the
microfinancing opportunity.
Mr. Smith. And they're working with several banks in each
of those countries, to go down market as it were to find ways
of lending that involve the--you know, the microfinance
approach, which isn't a secured loan, but is based on
reputation of the borrower and so forth. It's been built up
over time through participation in microfinance. And so,
they're really helping the banks in Morocco and South Africa
become comfortable with lending through the microfinance
institutions and know their clients very well.
So, there is another approach to providing financing that
will not depend solely on getting the titling right everywhere.
Senator Martinez. Now taking it to the next step, are you
also working with institutions to create more of an environment
for individual lending and so forth? Which, I know is not
something we have to do here, but in other parts of the world,
you know the orientation to lend to an individual is not as
clear as it is here. Of course, it's not been an established
group of customers like here, so----
Mr. Smith. It's interesting, if I could switch to Latin
America for an example, which I know better----
Senator Martinez. Uh-huh.
Mr. Smith [continuing]. In terms of one example. The
microfinance institutions in Ecuador are finding that multiple
numbers of their group clients are also individual clients with
banks. And so, they found in the process that having credit
bureaus was a very important aspect of their financial system
that they hadn't had before. And we helped them develop the
regulations that then attracted five different credit bureaus
to set up operations in Ecuador and take advantage of this
market.
Clearly, the financial institutions were interested in the
credit histories of all these borrowers and you don't want
borrowers going from one group to another and one bank to
another without anyone knowing what their overall lending
profile is--borrowing profile.
So, yes. We work with--in a lot of places we work on the
overall regulatory system, so that the institutions can then
develop when the regulations are correct.
Senator Martinez. Have we developed, Ms. Williams, any
ongoing partnerships with others in terms of our international
ability to export some of our ideas and the things that have
worked for us as we developed housing for poor families?
Ms. Williams. Yes, sir. We have ongoing relationships. As
you're aware, the Housing Act of 1957, that does allow us to
work in this arena and as such, we are allowed to engage in
exchanges of information related to housing and urban planning.
We work obviously, in close coordination with the State
Department and other agencies.
But we also are working through assignments with foreign
government officials so that they can learn about our
techniques. And we do this again, with the support of the State
Department and under other agencies that have direct authority
for financial assistance and/or technical assistance----
Senator Martinez. Very good.
Ms. Williams [continuing]. To these countries.
Mr. Smith. If I could comment?
Senator Martinez. Yes, sir.
Mr. Smith. There's an important organization that we belong
to, along with a dozen other donors, and UN-HABITAT, and the
World Bank, and Cities Alliance. And the Cities Alliance
structure provides for a lot of exchange among the donors about
approaches. I think it's fair to say though, that housing
directly--housing has been less of a concern than
infrastructure, in general. But there's a coalition of donor
experts--expertise is a valuable form for sharing our
practices.
Senator Martinez. I think too often, we do focus on
infrastructure, forgetting that housing is such an important
part of a country's infrastructure and people's infrastructure
depends on housing. So, we need to develop a degree of
consciousness of the need for that, I think.
Let me suggest that we might have additional questions for
this panel when Senator Feingold might return, but I would like
to move on to the next panel, if we could. And I'm sure, he may
also have some written questions to submit if all of them were
not aired during the time. But in order to keep us moving,
we're in a--appreciate your appearance today, your remarks, and
I would thank you all profusely for being here and for the work
that you are doing, and invite the second panel to come
forward.
Mr. Smith. Thank you, Mr. Chairman.
Senator Martinez. Thank you.
Ms. Williams. Thank you.
Senator Martinez. Again, welcome to both of you. And Mr.
Reckford and Dr. Tabaijuka, it's so good to see you again. I'm
so honored that you are here with us. I really admire your
passion for housing in the issues relating to creating more
housing opportunities around the world. And I know the work of
Habitat is something that is making a real difference. I hope
that I can participate in some of your activities in the
African continent, sometime in the near future.
Mr. Reckford, I can't tell you how much I think of Habitat
for Humanity, and we worked so closely during my time at HUD. I
believe that engaging the spirit of volunteerism is such a
wonderful and powerful force--that it can be so around the
world.
And I just appreciate greatly Tom Jones being here and the
work that he and I were pleased to do together. I hope we'll
have made a difference and leave a lasting legacy of Mr. Jones'
work. And I also want to just welcome you both to the hearing.
So, let me begin with Dr. Tibaijuka. If you could begin your
remarks.
STATEMENT OF DR. ANNA KAJUMULO TIBAIJUKA, UNDER-SECRETARY-
GENERAL AND EXECUTIVE DIRECTOR, UN-HABITAT, NAIROBI, KENYA
Dr. Tibaijuka. Thank you, Chairman Martinez, ranking member
Feingold, distinguished Senators, ladies and gentlemen, and my
colleagues on this hearing. Let me start by saying it is an
honor for me to be invited to brief the African Affairs
Subcommittee of the Senate Foreign Relations Committee. Thank
you also for placing before the United States Senate the
subject of urbanization and housing in Africa.
African Governments and the international community, Mr.
Chairman, as you have said already, face a daunting challenge
addressing the social, the economic, the political, the
cultural, and the environmental implications of rapid
urbanization taking place on the continent.
We are witnessing a challenge of such magnitude that it
warrants serious attention at local, national, regional, and
international levels. It is worthy of consideration, Mr.
Chairman, by the distinguished Members of the United States
Senate.
Fully cognizant of the huge challenge facing them, the
African Heads of State Summit adopted in July 2003, in Maputo,
Mozambique, a special decision on the issue of urbanization and
chaotic urban growth, and requested me, in my capacity as
Executive Director of UN-HABITAT to help them in their efforts
to turn around African cities and towns.
A direct outcome of that meeting was the establishment of
the African Ministerial Conference on Housing and Urban
Development, AMCHUD. Chaired by South Africa, AMCHUD is a
vehicle for governments to improve African cities, enabling
them to realize their full potential as centers of hope and
prosperity for their peoples, rather than as concentrations of
deprivation and squalor.
Mr. Chairman, I have just given you a glimpse of what it
can look like in Africa. There is a picture there of some of
the contiguous slum settlements in Africa and what they look
like. It is really an eyesore.
AMCHUD, therefore, provides a continent-wide platform to
share ideas, exchange best practice, and discuss effective
strategies to achieve sustainable urbanization in Africa. As a
further demonstration of political will, which has been
urbanized now on the continent, urban concerns have now been
integrated into the overall New Partnership for Africa's
Development, NEPAD.
Specifically, the Sustainable NEPAD City Initiative has
been launched under cluster 4 on Environment, Population, and
Urbanization that is chaired and convened by my agents UN-
HABITAT.
Mr. Chairman, in this presentation which I will submit in
full, a written submission will be given, and here I can only
give the highlights of it. I shall narrate the response of my
agency, UN-HABITAT in assisting African Governments and African
peoples in their current efforts and struggles to improve the
conditions in urban areas where HIV/AIDS is spreading so
rapidly and where all residents, but specifically women and
children face constant fear for their safety and their
security.
It is my hope that this presentation will elucidate the
tremendous efforts being made by Africa itself to achieve
sustainable
urbanization and affordable housing, as well as highlight the
supplementary efforts required from its development partners to
accelerate progress being made. I wish to submit, Mr. Chairman,
that if the international community does not act now to support
African initiatives, we will pay dearly in the future in terms
of the social upheaval, that rapid chaotic urbanization is
bound to unleash both in Africa and beyond.
There is a question. Let me start with urbanization trends
in Africa and the world. In the interest of brevity, I will say
that in my written submission I have presented a table which
shows that the challenge of urbanization with about 1 billion
slum dwellers in the world now, is not only an African
phenomena. It is a global phenomena, but it is in sub-Saharan
Africa where the challenge is deepest, with 72 percent of the
urban dwellers in sub-Saharan Africa now living in slum
settlements.
Africa, as we've observed, is the fastest urbanizing
continent in the world. And by 2030, we will cease to be a
rural continent. So, Africans are on the move and the rapid
urbanization of the continent has to be recognized both for its
potential problems but also for its genuine possibilities.
Already, and in spite of all the difficulties, urban areas in
Africa can be credited with producing 60 percent of the Gross
Domestic Product of Africa. If managed properly, African cities
and towns could provide the critical link between the
development of rural areas and the larger global economy.
So the challenge then, is how do we meet this challenge
promoting sustainable urbanization in Africa? Mr. Chairman, I'm
just going to narrate a package of interventions which UN-
HABITAT is convinced that if undertaken as package, we actually
mean that the cities of Africa because centers of hope, rather
than despair.
We have considerable experience working in cities all over
the world since we were established in 1978 and particularly,
Mr. Chairman, after my appointment in the year 2000, I took the
view that we have to bring the world's attention to the
problems of urbanization all over the world. So the agency has
worked intensively to raise the profile of the urban poor on
the global stage. The Government of the United States, Mr.
Chairman, played an instrumental role in this regard. We were
with you, Hon. Chairman, when you addressed the United Nations
in Assembly in 2001 and gave impetus to a decision by the
General Assembly to transform the UN-HABITAT into a full
program of the United Nations.
After it was recognized that there was 1.2 billion slum
dwellers and increasing, the United Nations required a very
effective organization to assist its member states to come to
terms and grips with the challenge of chaotic urbanization.
This briefing, Mr. Chairman, in the United States Senate is
a follow-up on the strategy of raising awareness to the
challenge of urbanization. The problem cannot be tackled head-
on unless it is fully understood by all interested parties and
stakeholders, and especially decision makers both within and
without Africa, like yourselves.
Second, consequent to the adoption of the Habitat Agenda, a
comprehensive strategy for sustainable urbanization and
affordable housing which was adopted in 1996 by the United
Nations. UN-HABITAT has been working with donor agencies and
with its partners in African cities to design innovative models
that will change the way urban areas are managed. The aim is to
provide local authorities with the skills and confidence to
encourage greater participation of ordinary citizens in the day
to day management of their cities and towns. Gone is the
assumption that central governments will provide free housing
for the urban poor. The traditional welfare state model has
given way to partnership and participation, at all levels. Free
public provision has given way to affordability of housing and
services, as the only tested means for sustainability and for
moving to scale.
In order to achieve this goal, Hon. Chairman, UN-HABITAT
has launched the Global Campaign on Urban Governance and the
Global Campaign for Secure Tenure or land and property
administration, which we discussed before. Most people call it
titling. We advocate for a balanced approach to territorial
development that
fosters rural-urban linkages. The strategy therefore is to
change the mind-set of both stakeholders and leadership at all
levels.
These three initiatives constitute the normative work of
the agency. They offer a framework to assist African
Governments to implement more effectively a strategy for
sustainable urbanization, guiding their operational activities
and public and private investment into affordable housing and
pro-poor urban infrastructure. The normative agenda also
facilitates the coordination of international development
assistance, trade, and investment.
The Global Companion of Urban Governors, Mr. Chairman,
basically promotes their principles of participation of
transparency over inclusivity, of world governance over agenda,
equality, and empowerment. Across Africa, the campaign has
worked at a number of levels that includes getting governments
to accept the basic tenants of good governance.
And then, we have launched a campaign on security of tenure
or the issue to get land into proper tenant station systems
sorted out. Cities cannot be inclusive or sustainable if the
poor live without adequate shelter or basic services. And if
they are living in permanent fear of being evicted from their
premises.
Senator Martinez. Dr. Tibaijuka, I hate to interrupt you,
but I have to go vote. They are looking for me and everyone has
voted but me at this point, so I'm going to have to go. So, if
we recess until Senator Feingold returns.
Thank you.
Oh, he's here. We don't need to recess, but they are
looking for me.
Senator Feingold [presiding]. Thank you for your testimony.
And just as I apologized to the other panelists for any
confusion here, I appreciate your being here.
Your organizations have highlighted property rights as an
important issue in addressing the problems of slums and I think
it's important that we try to get an idea of what we can do to
establish property rights in African nations. How can the U.S.
Government assist in efforts to create, implement, and enforce
property rights laws? Mr. Reckford?
Mr. Reckford. We would certainly actively support--I think
that primarily we should be setting good guidelines and
creating reinforcement and support for governments that are
trying to move in the right direction. We're seeing it's
extremely complex to get formalized, and secure, and viable
tenure for and probably rights for so many families across all
of the world. I think if USAID had recommended and we would
certainly support, system support in infrastructure to help
countries who want to do that and put in good housing policies
around property rights, to actually be able to put in the legal
infrastructure and follow through to implement those property
rights. Because many countries today don't have the ability,
even if they have the desire, to follow through. But step one
is the reinforcement in creating incentives to create good
housing policy in terms of support of property rights.
Senator Feingold. Okay.
Dr. Tibaijuka.
Dr. Tibaijuka. Yeah. Thank you, Hon. Chairman, the whole
question of property rights and property administration systems
in Africa finds itself at a rudimentary stage. African
societies culturally are collective--have collective tenure
systems, and at the moment, the modern economy weighs on the--
you know, modern notions of individual property rights. There
is a scope therefore, for introducing individual property
rights, but that it also needed to observe the cultural
realities of Africa in the traditional systems to protect for
example, a collective property system. So, it is an issue which
we are working, as I was already testifying, that will have a
campaign that we call the Security of Tenure.
The question is how do we modernize a traditional tenure
system? To render them for example, for bank operations, to use
them to get collateral. So, it is a very--it is not a simple
issue. It's a complex issue, but it is an issue that must be
sorted out. And the UN-HABITAT, my agency, is working hand-in-
hand with governments to sort out the question of property
rights.
But also, there is the question, of course, of legal
framework. For example, titling and mortgage systems afraid to
be made, because sometimes the appropriate rules are not in
place. For example, foreclosure laws do not exist. In
situations like that, it becomes very difficult for--you know,
a private sector, a participant to be active into the housing
marketplace.
Senator Feingold. Let me ask you about the HIV/AIDS issue
in this context. Obviously, it's a huge problem and it's a
barrier to home lending opportunities for those infected. Is
HIV/AIDS a factor that should be addressed in any long-term
housing development plan, and do you think that the spread of
HIV/AIDS could be stemmed by the creation of more permanent
urban housing options?
Dr. Tibaijuka.
Dr. Tibaijuka. Yes. Thank you, sir. HIV/AIDS is of course a
pandemic which has many, many dimensions and ramifications. As
we speak now, the number of orphans in Africa is crossing the
15 million mark. Most of these orphans require housing. They
have to be taken care of. Some of the children, particularly
the children in households, are losing their houses through
collapse. After some time, the parents might have left them
with houses, but they are not able to take care of them.
So, I would like to say that any development intervention
in Africa cannot lose sight of the reality of HIV/AIDS. It cuts
across society and more so in housing. UN-HABITAT has initiated
with the support of the Rockefeller Foundation, a community-
based initiative for HIV/AIDS or funds. It's the program which
is trying as hard as possible to keep the orphans where they
are, instead of taking them in community care. But this a very
strong shelter component to be able to repair the homes of the
orphans or to support the families, the traditional families
that are absorbing the orphans. Sometimes families are waiting
to help, but they might not have the space that you need as
more orphans are absorbed into the households. So, it is
something that is very rampant and there in no intervention in
Africa which would not touch on HIV/AIDS.
Senator Feingold. Mr. Reckford, do you have any comment on
that?
Mr. Reckford. We have actually--with support from a PEPFAR
grant--we are working with AIDS and vulnerable children in
three African countries right now. And there is a clear shelter
component tied to your earlier question. There's a protection
issue which is protecting the rights particularly of widows and
orphans both, in terms of helping them retain property. And
that's been a challenge, particularly in Africa.
But beyond that, we are seeing the desperate need for
support and shelter. We're doing a partnership with a
combination of Habitat for Humanity doing shelter and Micro
Lending Group providing training and equipping in small capital
to help these older orphans to be able to begin earning--having
the ability to have an economic ability to stay in their
communities.
We have just begun all of these programs in the past year.
So it is too early to claim victory, but we're seeing
meaningful success in partnerships with other groups that are
providing medical care with our providing housing intervention.
It creates a stable environment and as I'll talk about in my
testimony, meaningful environment--a much better environment
for both the health and education of those children.
Senator Feingold. Mr. Reckford, I was just informed that
you did not have a chance to give your opening statement, which
I did not know. Would you please proceed with that?
Mr. Reckford. And I don't know if----
Senator Feingold. Did you give any opening statements?
Mr. Reckford. No. And Dr. Tibaijuka had not quite finished
hers, as well.
Senator Feingold. Well, let's get back to that. Let me see
if the record can be put in some kind of rational order.
Dr. Tibaijuka, please proceed with the rest of your
statement.
Dr. Tibaijuka. Mr. Chairman, thank you. I was in the
process of explaining, indeed, that our strategy is also to
stabilize and deliver sustainable development in Africa. There
is concern at the place at which people are flocking into
larger cities. A number of them becoming megacities.
The United Nations defined a megacity as a city which has
more than 10 million people and these are huge cities which are
growing very rapidly. Particularly when housing is not
available, it becomes a problem.
So, we are encouraging African Governments also to invest
into secluded towns and cities, so that this becomes a
sustainable way to achieve balance in territorial development.
Africa remains an agricultural continent, but it will be
very difficult for Africa to prosper without sufficient
investment and transport infrastructure as a mechanism to
keep--to revitalize the rural economies and to stem the exodus
of people into the capital cities. Most of them normally are
around the coast.
So we are also working with other sister agencies to
promote small- and medium-sized towns as gross modes for
community development and also, as sources of offering rural
communities seasonal or off-seasonal employment, so that they
don't all end up flocking into the big cities.
We have also in this regard, therefore, worked very hard
and we believe that we have made some successes and there is
justification, Mr. Chairman, for enhancing international
support to the process of urbanization in Africa. I can quote a
number of examples from Nigeria, to Burkina Faso, to Uganda, to
South Africa. We have launched the campaigns on urban governors
in Secure Tenure. This has led to changes in policy and
practice.
In Nigeria for example, the federal government is
strengthening its statistics government in 774 local
authorities by giving them a greater fiscal economy and greater
support this annuity created an issue of urban development.
This did not exist before we introduced our campaign.
In Burkina Faso, the government is promoting the
recognition of land tenure and promoting a poverty reduction
strategy within urban areas. Now maybe as a first country in
sub-Saharan Africa to introduce a block title, an alternative
form of security of tenure that protects the urban poor from
dislocation and satisfies the needs of private banks for
verifiable collateral, as I said earlier.
In South Africa, a partnership between the Government,
local authorities, and NGOs like the South African People's
Federation has been working hard to find solutions to problems
of inadequate housing and landlessness. I think the famous 1.4
million houses of the African Government in South Africa is
well known.
More recently, Mr. Chairman, the Kenya Government--we are
located in Kenya--has embarked on the Kenya Slum Upgrading
Program which is targeting slums nationwide and includes
upgrading Kibera, one of Africa's most notorious slums.
Kibera--this satellite imagery shows Kibera, and Mr. Chairman,
you can see the shame of our times. Very close to Kibera is the
Nairobi golf course.
Senator Feingold. How many people would you guess live in
Kibera?
Dr. Tibaijuka. Kibera is the largest contiguous slum in
Africa. It has a population of about 750,000 people on only
20.4 acres of land. My understanding, that it is more than--
it's more than Capitol Hill. So, this is the highest
concentration of human beings, some of the highest in the
world. And the situation is quite appalling.
In Mozambique we are also working, including in my own
country, Tanzania, where the Cities without Slums Initiative
has been launched under the Cities Alliance Framework, already
described before. I would like to say that the new President of
Tanzania, Mr. Jakaya Kikwete has defined, as a key policy
priority, the revival of housing finance mechanisms that can
reach low-income households with affordable mortgage systems in
the country. At the moment, there is no single housing
financing institution of any sort in Tanzania, for example.
So the challenge, Mr. Chairman, honorable Senators, is
investing in housing and urban infrastructure in Africa. The
housing is a source intensive sector. It is an investment
sector and unless we acquire--we get the sources we need to
establish mortgage systems--it will not be able to deliver the
Millenium Development target.
So, there is no free money. We do not believe and UN-
HABITAT does not encourage African Governments to talk about
free housing, because it is not possible. We are therefore
struggling to make sure that what we need is affordable housing
through mortgage systems. So the establishment of mortgage
systems is a business that we are promoting across the
continent. No aid mechanism could begin to provide enough
resources. In fact, it has been estimated that in recent years,
the total combined overseas development assistance, public and
private investment set aside for low-income housing, was only
$4 billion. So, we have to go to the
community for resources.
The General Assembly decision in 2001, in which Mr.
Chairman, you yourself participated, was that we have to
upgrade the habitat in Human Settlements Foundation, which was
established in 1974 as a Global Shelter Facility for housing
and subnational level lending without public guarantee, but was
never capitalized.
I was tasked with the mission of reviving this facility.
The new vision of the slum upgrading facility. We are now
trying to see how and whether the slum upgrading facility could
be capitalized. Therefore, as a means to establish greater
enhancement mechanism to leverage local funding, which we think
we need.
The good news, Mr. Chairman, is that the poor in the urban
areas, they pay highly for the shacks in which they live. All
those shacks you see in the picture, they are actually high,
very profitable real estate business. In the slums of Nairobi,
our rental economic surveys have shown that the payback period
for the people that invest in the shacks, is only 9 months. So,
a slum upgrading, therefore, becomes a highly political
activity. There are people who are making a lot of profits in
the real estate business in the slums.
The slum dwellers also buy water because they are not
connected to municipal supplies and it is very sad. Sometimes
they pay up to 20 times more for water than the people who are
connected to subsidizing municipal supplies.
The good news is that statistics show that it is possible
to put up decent housing and decent services in the slum areas
by charging the people what they can afford. So, it is a
question of sorting out these issues, but the economics show
that we should be able to succeed.
So, the sum of getting facilities, a mechanism we have
used, I would like you, Mr. Chairman, to conclude by saying,
that all this I have narrated--it requires strategic
partnerships. UN-HABITAT's mandate to, within the U.N. family
of programs, coordinate the activities. Coordination of
different partners, including donor agencies, who are working
in this sector.
And that is why I would like to end by inviting all of you
to attend the World Urban Forum which will be convened in
Vancouver, June 19, where again, the international community
will meet to exchange and share knowledge of best practices in
this challenge of affordable housing and decent shelter for
everyone, which I again would like to emphasize is not only an
African phenomena, but in Africa, that's where the needs are
greatest.
Thank you.
[The prepared statement of Dr. Tibaijuka follows:]
Prepared Statement of Dr. Anna Kajumulo Tibaijuka, Under-Secretary-
General and Executive Director, UN-HABITAT, Nairobi, Kenya
Honorable Chairman Mel Martinez, ranking member Feingold,
distinguished Senators, ladies and gentlemen. It is an honor for me to
be invited to brief the African Affairs Subcommittee of the Senate
Foreign Relations Committee. Thank you also for placing before the
United States Senate the subject of urbanization and housing in Africa.
African Governments and the international community face a daunting
challenge addressing the social, economic, political, cultural, and
environmental implications of rapid urbanization. We are witnessing a
challenge of such magnitude that it warrants serious attention at
local, national, regional, and international levels. It is worthy of
consideration by the distinguished Members of the United States Senate.
Fully cognizant of the huge challenge facing them, the African
Heads of State Summit adopted in July, 2003, in Maputo, Mozambique, a
special decision on the issue of urbanization and chaotic urban growth,
and requested me, in my capacity as executive director of UN-HABITAT,
to help them in their efforts to turn around African cities. A direct
outcome of this meeting was the establishment of the African
Ministerial Conference on Housing and Urban Development (AMCHUD).
Chaired by South Africa, it is a vehicle for governments to improve
African cities, enabling them to realize their full potential as
centers of hope and prosperity for their peoples, rather than as
concentrations of deprivation and squalor. AMCHUD provides a continent-
wide platform to share ideas, exchange best practice, and discuss
effective strategies to achieve sustainable urbanization in Africa. As
a further demonstration of political will, urban concerns have now been
integrated into the overall New Partnership for Africa's Development
(NEPAD). Specifically, the Sustainable NEPAD City Initiative has been
launched under cluster 4 on Environment, Population, and Urbanization
that is chaired and convened by UN-HABITAT.
In this presentation, I shall narrate the response of my agency,
UN-HABITAT, in assisting African Governments and African peoples in
their current efforts and struggles to improve the conditions in urban
areas where HIV/AIDS is spreading so rapidly and where all residents,
but specifically women and children, face constant fear for their
safety and security. It is my hope that this presentation will
elucidate the tremendous efforts being made by Africa itself to achieve
sustainable urbanization and affordable housing, as well as highlight
the supplementary efforts required from its development partners to
accelerate progress being made. I wish to submit, Mr. Chairman, that if
the international community does not act now to support African
initiatives, we will pay dearly in the future in terms of the social
upheaval that rapid chaotic urbanization is bound to unleash, both in
Africa and beyond.
urbanization trends in africa and the world
With 3 out of 6 billion people now living in cities and towns, the
world is primarily urban. By 2030, Africa will also follow this
urbanization trend, and cease to be a rural continent. For brevity, the
table that follows shows that there are about 1 billion slum dwellers
in the world, and that the slum challenge is not only an African but a
global phenomena, underscoring the need to work together to address the
issue. Sub-Saharan Africa, however, is most challenged, with 72 percent
of its urban dwellers living in informal settlements--most of them
slums. Africa is the fastest urbanizing continent in the world. In
1980, only 28 percent of the African population lived in cities. Today
it has risen to about 37 percent. The annual urban growth rate in
Africa is 4.87 percent, twice that of Latin America and Asia. Cities
and towns in Africa are also growing at twice the 2.5 percent growth
rate of the rural population in Africa. In terms of numbers, currently
about 300 million Africans live in urban settlements. This figure is
expected to reach about 500 million by 2015. UN-HABITAT estimates that
in the next 25 years, 400 million people will be added to the African
urban population, putting tremendous pressure on cities and towns.
Africa is on the move and the rapid urbanization of the continent
has to be recognized both for its potential problems but also for its
genuine possibilities. Already, and in spite of all the difficulties,
urban areas in Africa can be credited with producing 60 percent of the
Gross Domestic Product (GDP). If managed properly, African cities and
towns could provide the critical link between the development of rural
areas and the larger global economy.
TABLE 1.--SLUM POPULATION BY MAJOR REGIONS, 2001
----------------------------------------------------------------------------------------------------------------
Total Urban Percentage Percentage Slum
Major area, region population population urban slum population
(millions) (millions) population population (thousands)
----------------------------------------------------------------------------------------------------------------
World.......................................... 6,134 2,923 47.7 31.6 923,986
Developed regions.............................. 1,194 902 75.5 6.0 54,068
Europe....................................... 726 534 73.6 6.2 33,062
Other........................................ 467 367 78.6 5.7 21,006
Developing regions............................. 4,940 2,022 40.9 43.0 869,918
Northern Africa.............................. 146 76 52.0 28.2 21,355
Sub-Saharan Africa........................... 667 231 34.6 71.9 166,208
Latin America and the Caribbean.............. 527 399 75.8 31.9 127,567
Eastern Asia................................. 1,364 533 39.1 36.4 193,824
South-central Asia........................... 1,507 452 30.0 58.0 262,354
South-eastern Asia........................... 530 203 38.3 28.0 56,781
Western Asia................................. 192 125 64.9 33.1 41,331
Oceania...................................... 8 2 26.7 24.1 499
Least Developed Countries (LDCs)............... 685 179 26.2 78.2 140,114
Landlocked Developing Countries................ 275 84 30.4 56.5 47,303
Small Island Developing States (SIDS).......... 52 30 57.9 24.4 7,321
----------------------------------------------------------------------------------------------------------------
Source: UN-HABITAT, 2003.
meeting the challenge: promoting sustainable urbanization in africa
With considerable operational experience gained since it was
established in 1978, and particularly with my appointment in September,
2000, to lead the agency, UN-HABITAT has radically altered the way it
works in promoting sustainable urbanization. First, the agency has
worked intensively to raise the profile of the urban poor on the global
stage. The Government of the United States played an instrumental role
in this regard. We were with you, Honorable Chairman, when you
addressed the U.N. General Assembly in 2001 and gave impetus to a
decision by the General Assembly to transform our agency into a full
program of the United Nations. This briefing to the United States
Senate is a follow-up on the strategy of raising awareness to the
challenge of urbanization. The problem cannot be tackled head-on unless
it is fully understood by all interested parties and stakeholders, and
especially decision makers both within and without Africa.
Second, consequent to the adoption of the Habitat Agenda--a
comprehensive strategy for sustainable urbanization and affordable
housing adopted by all member states in 1996--UN-HABITAT has been
working with donor agencies and with its partners in African cities to
design innovative models that will change the way urban areas are
managed. The aim is to provide local authorities with the skills and
confidence to encourage greater participation of ordinary citizens in
the day-to-day management of their cities and towns. Gone is the
assumption that central governments will provide free housing for the
poor. The traditional welfare state model has given way to partnership
and participation, at all levels. Free public provision has given way
to affordability of housing and services, as the only tested means for
sustainability and for moving to scale.
In order to achieve this goal, UN-HABITAT has launched the Global
Campaign on Urban Governance and the Global Campaign for Secure Tenure
(land and property administration), and advocates for a balanced
approach to territorial development that fosters rural-urban linkages.
The strategy therefore is to change the mindset of both stakeholders
and leadership at all levels. These three initiatives constitute the
normative work of the agency. They offer a framework to assist African
Governments to implement more effectively, a strategy for sustainable
urbanization, guiding their operational activities and public and
private investment into affordable housing and pro-poor urban
infrastructure. The normative agenda also facilitates the coordination
of international development assistance, trade, and investment.
the global campaign on urban governance
In operational terms the governance campaign is a capacity-building
program in local self-government. This campaign envisions the inclusive
city as a place where everyone, including the urban poor, and among
them women, can contribute productively and enjoy the benefits of urban
life. The premise of the campaign is that inclusiveness is not only
socially just, but is also good for growth and central to sustainable
development. Social inclusiveness must be an important goal for
municipal governance: It is just, it is democratic, and it is
productive.
Across Africa, the campaign has worked at a number of levels that
includes getting governments to accept the basic tenets of good
governance which include transparency and accountability. The campaign
also encourages greater decentralization and autonomy for local
authorities and gender balance.
The fact is that national governments, because of the scale at
which they operate, cannot be sufficiently responsive to local problems
and issues. They operate best at the level of policy, standards
setting, oversight, and assessment. Local authorities, on the other
hand, are closer to their constituents whom they must see politically
as individual human beings with specific needs. Local authorities are
moreover a decision-making platform that can ensure that resource
allocations are in the general interest of all their citizens, leaving
no one behind.
the global campaign on secure tenure (land and
property administration systems)
Cities cannot begin to be inclusive or sustainable if the poor live
without adequate shelter or basic services, and if they live in
permanent fear of being evicted from their premises. In most African
cities, hundreds of millions of poor people are not considered in city
plans to provide essential services such as water, sewers, and garbage
collection. With no land and nowhere to go, the urban poor are forced
to squat and manage as best they can. Rather than harnessing the energy
and survival skills of the poor, most governments fail to recognize
that the poor have a right to the city.
The Global Campaign for Secure Tenure rejects illegal, arbitrary,
forced evictions and takes the position that local authorities should
help the poor achieve their right to adequate shelter through a
negotiated package of policy options that includes access to land and
shelter with some form of security of tenure. In particular, the
campaign encourages a range of tenure options underwritten by the rule
of law and that are sensitive to the cultural realities of the
continent. These range from home ownership to rental arrangements,
individual or collective tenure, and private, public, or mixed tenure.
What matters most is the security and long-term certainty for the urban
poor and disenfranchised groups such as women. The secure tenure
campaign encourages local governments to recognize the urban poor as an
asset rather than a problem. It assists governments to devise policies
and programs that can empower the urban poor to solve their own
problems, discouraging governments from getting locked in a futile
attempt to evict the urban poor from one place, knowing quite well they
will end up in another. The events in Zimbabwe and similar evictions
elsewhere in Africa are a case in point.
promoting balanced territorial development: urban-rural linkages
Rather than treat rural and urban as different and competing
development spaces, UN-HABITAT encourages national governments to see
urban-rural linkages as a whole--as a dynamic system--so that their
linkages can be strengthened. One cannot do without the other.
Strengthening this linkage requires, in many countries,
decentralization through the promotion of medium-sized cities and
hierarchical networks of places. These can increase the accessibility
to agricultural inputs by rural producers while at the same time
provide the necessary marketing infrastructure such as bulk collection
points and periodic markets. An effective rural-urban linkage
development program has great potential in reducing the pace of
migration from rural to urban areas and in delivering balanced
territorial development. Small and medium sized towns serve as nodes
for economic growth when they are well linked to each other and to
larger urban centers. They offer not only markets for farm produce, but
also seasonal off-farm employment to the rural poor and landless--
people who would otherwise flock to the slums in the ever-expanding
capital cities.
It is clear that policies that encourage horizontal and vertical
linkages among settlements at the subnational, national, and
international levels lead to the increased viability of small towns and
rural regions. It is, therefore, no longer a question of how rural
areas and towns will integrate into the national economy, but how they
do so in the global economy as well.
progress in implementation and justification for
enhanced international support
Judging from what is being written and done around the continent
and from the experience of UN-HABITAT in the region, Africans are
waking up to the possibilities offered by urbanization. They are
turning a problem into a solution in concrete ways. I believe these are
precisely the types of initiatives that warrant the attention of the
international community. Supporting African initiative is not only a
good investment for Africa, but it is also a good investment for global
security and economic development. Mr. Chairman, consider, in the time
remaining, a few initiatives currently underway on the continent.
Nigeria, Burkina Faso, Uganda, and South Africa have
launched campaigns on urban governance and secure tenure. This
has lead to changes in policy and practice. In Nigeria, for
example, the federal government is strengthening its 36 state
governments and 774 local authorities by giving them greater
fiscal autonomy and greater support through a newly created
Ministry for Urban Development.
In Burkina Faso, the government is promoting the
regularization of land tenure and promoting a poverty reduction
strategy within urban areas. Namibia is the first country in
sub-Saharan Africa to introduced block title, an alternative
form of security of tenure that protects the urban poor from
dislocation and satisfies the needs of private banks for
verifiable collateral.
In South Africa, a partnership between the government, local
authorities, and NGOs like the South African People's
Federation has been working hard to find solutions to problems
of inadequate housing and landlessness. Through a policy mix of
security of tenure, public savings schemes, and community
participation, the South African Government has managed to
provide over 1 million houses, while the community water supply
program has also increased its delivery of water connections
from 62,249 in 1995 to over 6 million in 2000.
More recently, the Kenya Government has embarked on the
Kenya Slum Upgrading Program which is targeting slums
nationwide and includes upgrading Kibera, one of Africa's most
notorious slums. This initiative is based on a strategy that
includes the provision of land and security from the
government, capacity and personnel from UN-HABITAT, financing
from agencies like Cities Alliance, other bilateral donors and,
finally, savings schemes involving the poor themselves. It also
introduces innovative financing mechanisms that build on
community savings organizations and microfinance institutions
to tap domestic private capital from pension funds and
insurance companies. The project, which is being designed in
phases, will begin with the provision of basic infrastructure,
especially clean water and adequate sanitation.
In Mozambique, the government has committed itself to
establishing a post conflict strategy that addresses the needs
of all urban communities. Efforts are underway to prepare a
territorial planning policy and a housing policy that will
complement the existing Land Law and Autarchic Law. This
exercise includes researching into the existing land tenure and
land market options with a view to design locally relevant
forms of security of tenure and market access to land. In terms
of national urban planning, it will also include integrated
solutions linking urban and rural settlements.
In Tanzania, a ``Cities Without Slums Initiative'' has been
launched under the Cities Alliance Framework and linked to the
financed urban upgrading initiative of the World Bank Group.
The new President, Jakaya Kikwete, has defined as a key policy
priority the revival of housing finance mechanisms that can
reach low-income households with affordable mortgage finance.
The Bank of Tanzania, the Ministries of Finance and Housing
(Lands and Human Settlements), and the Association of Bankers
work on the standing committee of the second generation
financial sector reforms to translate this political priority
into policy reform and affordable housing loan products.
South Africa, which has been a leader in providing decent
housing to its peoples, is now working with support from the
United States to establish primary and secondary mortgage
institutions.
investing in housing and urban infrastructure in africa
Mr. Chairman, I would like to conclude by underscoring the
importance of investment. Advocacy and capacity-building is essential
but so too is financial follow-through that can realize sustainable
urbanization and housing at scale.
There is not enough money in the world available to upgrade all the
slums in Africa. In a recent simulation it was estimated that meeting
the MDG Goal 7 Target 11, of improving the lives of 100 million slum
dwellers by 2020, could cost anywhere between an estimated $70 billion
to over $100 billion over 17 years.\1\
---------------------------------------------------------------------------
\1\ This simulation has estimated that the average cost of
providing housing and the full range of basic urban services on new
sites in developing countries is $1,759 per person, or $926 net of cost
recovery. For slum upgrading, the full cost is $1,187 per person, or
$773 after cost recovery. Costs are divided across broad intervention
types, after cost recovery, as--house and land (17 percent),
infrastructure (41 percent), social services (34 percent) and planning
(9 percent).
---------------------------------------------------------------------------
Clearly, such figures are prohibitive. No aid mechanism could begin
to provide enough resources. In fact, it has been estimated that in
recent years, the total combined overseas development assistance,
public and private investment set aside for low income housing in
developing countries and related infrastructure is estimated to be less
than $4 billion.
But Africa is not seeking charity. What is required is the design
and innovation of financing mechanisms that allows for the full
participation of slum dwellers, the private sector, and the
international community.
Alarmed at the rate of slum formation in the developing world,
including Africa, in 2001 the U.N. General Assembly, while transforming
UN-HABITAT into a fully fledged program, called upon its executive
director to revive and revitalize the Habitat and Human Settlements
Foundation, established since 1974 as a Global Shelter Facility, but
regrettably to date yet to be capitalized.
As a follow-up to this GA decision, UN-HABITAT has launched a pilot
slum upgrading facility, SUF, to field test workable models for pro-
poor housing and urban infrastructure development finance. Established
through funding from the United Kingdom and Sweden, the new initiative
offers technical assistance and limited bridge financing to scale up
the innovations slum dwellers and banks. Specifically, it seeks to
develop financial instruments that can help make slum upgrading
projects more attractive to private investors. The SUF will draw from
emerging innovations by slum dwellers in the form of daily savings
associations and self-help groups to show that even the poor can help
finance their own progress and development. After all, it is a well-
known fact that the poor pay more per square meter for a room. They pay
between 10 to 100 times more for water, and are known to spend up to 15
percent of their monthly incomes on accessing toilet facilities. UN-
HABITAT rental studies in the slums of Nairobi have also established
that those who invest in slums and own the shacks rented out to the
poor make excessive profits. The payback period for slum real estate
investors in Nairobi was established to be only 9 months on average.
With 80 percent of slum dwellers in Nairobi as tenants, this is not
small business and slum landlords own several hundred shack units. This
does not only expose exploitation of the poor and resistance to slum
upgrading by those who stand to lose their huge profits, but also shows
that decent rental or cooperative housing could be organized provided
there is political will to do so by getting initiatives like the SUF
off the ground and to appropriate scale.
Clearly, initiatives like the SUF, if they are to mobilize and
capitalize on savings from the poor, will need to tackle complex issues
of land, housing, water, and large-scale infrastructure investments.
But with legislative reform, it is possible to encourage banks to take
a larger role in lending to slum upgrading projects. What is required
is a process of making the banks understand that the poor pay back
their loans and pro-poor housing investments are bankable.
The slum upgrading facility is part of a larger series of actions
that UN-HABITAT is taking to establish trust funds and financing
mechanisms to fund slum upgrading initiatives. For example, much of the
funding for Water for African Cities reviewed above is now coming from
a trust fund established specifically for the purpose of supporting
investment in water and sanitation projects.
One of the most innovative solutions to human settlements problems
in urban areas was a recent and unprecedented debt for land swap
brokered by UN-HABITAT. Briefly, the Kenya Government was forgiven debt
by the Government of Finland on condition that they provided public
land for the specific purpose of housing the urban poor. To ensure that
the land goes to the target group, land was allocated to the slum
upgrading program in trust to the eventual beneficiaries. This could
provide an excellent model for future debt swap that could directly
benefit the homeless.
strategy 8: forging strategic partnerships
Distinguished Senators, I would like to conclude my statement by
focusing on strategic partnerships. UN-HABITAT is responsible for
coordinating the implementation of this agenda for sustainable
urbanization that I have outlined, what we refer to as the ``Habitat
Agenda.'' As a small agency with a huge mandate, our task is to form
strategic partnerships with sister U.N. agencies, international
financial institutions, and key member states, not least the Government
of the United States. We view ourselves as honest brokers that utilize
the convening power of the United Nations both to raise awareness and
harness the political will and technical competency to address the
daunting urban challenge of the 21st century.
Regarding post-conflict and post-disaster reconstruction, we
partner with the Office for the Coordination of Humanitarian Agencies
(OCHA), serving on the executive committee of Humanitarian Agencies
(ECHA), and working as housing focal points on United Nations Country
Teams. We have a memorandum of understanding with the UNHCR to move
from tents to permanent housing in several post-conflict settings. UN-
HABITAT has served as an implementer of USAID housing projects in
Afghanistan.
Concerning security of tenure and property rights, we work closely
with the World Bank in a partnership known as the Cities Alliance,
cochaired by UN-HABITAT and the Bank. A senior professional of our
staff serves as an expert on forced evictions and slum upgrading at the
secretariat of the Cities Alliance in Washington. We work with the
World Bank and FAO on Land Tool Network, and I serve as an advisor to
the Commission for Legal Empowerment of the Poor, chaired by Madeline
Albright. The Water for African Cities and Lake Victoria Initiative, as
mentioned, bring together the African Development Bank, FAO, ILO, and
potentially in the future, USAID. Our global campaign on good urban
governance and a myriad of urban management programs has nurtured the
African Ministerial Conference on Housing and Urban Development to
establish the United Nations Advisory Group on Cities and Local
Authorities. The United Nations Habitat and Human Settlements
Foundation and its Slum Upgrading Facility are built on partnerships
with all major international financial institutions, including the
World Bank, USAID Development Credit Authority, and the Private
Infrastructure Development Group (PIDG). We have, as well, worked
closely with the U.S. Department of Housing and Urban Development to
promote private lending for affordable housing through high-level peer
exchanges that have offered partners in the private sector and
government to learn from the housing experience in the United States.
In our efforts to address urban safety and security through our Safer
Cities Program, UN-HABITAT works in close cooperation with the United
Nations Office of Drugs and Crime. The rural-urban linkages initiatives
to promote balanced, territorial development benefit from close
collaboration with FAO and ILO.
In summary, UN-HABITAT assists member states and their partners at
community, municipal, and national levels. We work in partnership with
other multilateral agencies, development banks, and bilateral
development agencies, as well as with federations of slum dwellers and
with private sector entities. We also work in partnership with other
U.N. agencies. To increase our effectiveness, we need international
support to scale up such initiatives, and that is why I have
appreciated very much this opportunity to present to you both the
problem and also our work.
Mr. Chairman, let me conclude by thanking the distinguished
Senators and professional staff for your kind attention--and by
inviting you to attend the third session of the World Urban Forum in
Vancouver, Canada, from 19-23 June 2006. This open U.N. meeting for the
world to take stock of the progress and challenges in the
implementation of the Habitat Agenda and advance a shared mission of
adequate shelter for all, and sustainable human settlements development
in an urbanizing and globalizing world. I was so pleased to get
confirmation earlier this week that Honorable Secretary of Housing and
Urban Development, Alphonso Jackson, will lead the U.S. delegation to
the forum that is expected to attract over 8,000 participants from all
over the world. It would be good to have some of you there to join the
global parliamentarians for Habitat to make your mark on the noble
mission of shelter for all.
I thank you very much.
Senator Feingold. Great. Thank you very much, Dr.
Tibaijuka. And we will try to get the details of the Urban
Forum. I think it would be something I would love to attend if
it was in any way feasible for me to do so. And perhaps, the
ranking member and I, who have been wanting to find a way to go
to Africa, maybe this would be a great way to do it. And so,
thank you.
Some of the things you have pointed out to us are
remarkable indeed and I would look forward to a few questions
as soon as we hear from Mr. Reckford.
Mr. Reckford, we'll hear your remarks at this time and
thank you very much for being here and for waiting.
STATEMENT OF JONATHAN RECKFORD, CHIEF EXECUTIVE OFFICER,
HABITAT FOR HUMANITY INTERNATIONAL, AMERICUS, GA
Mr. Reckford. Great. Good afternoon, Mr. Chairman, ranking
member Feingold, and members of the committee. We're grateful
for this opportunity to share with you the plight of millions
of people in Africa who lack adequate shelter and to make
recommendations for addressing this growing crisis.
Before I begin, I want to acknowledge my fellow panelists
from UN-HABITAT, as well as USAID, and Housing and Urban
Development. With operations in the United States and nearly
100 other countries, Habitat for Humanity has partnered with
HUD, USAID, and UN-HABITAT in many shelter programs around the
world.
Habitat for Humanity, itself, has been building decent
homes with African families for 30 years now. In fact, the
first Habitat for Humanity house was built in Zaire--now the
Democratic Republic of Congo, in 1976.
As of January 2006, 235 local Habitat for Humanity
affiliates have built more than 35,000 homes in 21 African
countries. We have developed a successful housing delivery
model, which relies on community engagement, mutual help, sweat
equity labor from volunteers and homeowners, inflation linked
housing finance, and appropriate housing design.
I had the opportunity to visit both some of our rural and
urban projects last year when I visited Habitat for Humanity
projects in Ghana, South Africa, and Egypt. In Ghana, I had the
privilege of meeting Bernard Botwe and his wife Joanna, who
were the very first Habitat home owners in Ghana. And Bernard
is now a hospital administrator, 18 years later, and it's very
touching. They have moved up and are doing very well, but he's
held on to his original Habitat house and is very active in
helping other families now get into decent housing. But he's a
shining example of the difference that both secure tenure and a
decent shelter can make in transforming the lives of families.
From Ghana I went to Johannesburg, Cape Town, Durban, and
Cairo, where I encountered truly, abysmal housing conditions
that people are enduring near the heart of these large cities.
That's why I am pleased to be here today with you, to talk
about both housing and urbanization issues in Africa and to
work with you and our fellow panelists to identify solutions.
To that end, I would like to address three issues: the
growing problem of urbanization in Africa, the ramifications of
urbanization on those who live in the informal settlements, and
Habitat for Humanity's recommendations on how the United States
and the international community can address these challenges.
First, many people in the developing world now benefit from
better health, education, and general well-being. But many more
have been left outside of the development process. While
African economies have grown by nearly 5 percent over the last
decade, the current rate of growth will bring an increase, not
a decline, in poverty over the next 10 years.
For the most part, the urban poor have been overlooked by
any measure of progress in their cities. In the few cases where
land is provided, it's poorly located, beyond the range of
social services and employment. Therefore, the majority of
people who need housing in urban areas, must settle in informal
settlements that are closer to possible employment and public
transportation, but often unsuitable for human habitation. They
don't have legal property rights, basic services, or even
proper building materials, in many cases. They settle wherever
they can find space, as long as the site is marginal enough to
deter displacement and close enough to transportation and
employment opportunities. These informal settlements soon
became established communities with poorly constructed houses,
overcrowded conditions, and either inadequate or no public
services.
Second, the urbanization of poverty has numerous
ramifications. Densely populated urban settlements, such as the
one you just heard about, are breeding grounds for illness and
disease. But decent housing makes a significant difference. An
Emory University study indicates that children under 5 living
in Habitat for Humanity houses showed a 44 percent reduction in
malaria, respiratory, or gastrointestinal diseases, compared
with children living in substandard houses in Malawi. The
researchers concluded that the effect of improved housing on
the health of young children was as high as that of water and
sanitation programs. With irregular incomes, food is sometimes
scarce; yet, there are rarely opportunities for self-sustaining
urban agriculture. These families lack access to social
facilities such as schools, clinics, and libraries.
For the United States, helping the world's poor develop has
become a national security issue as well. According to the 2002
National Security Strategy, and I quote, A world where some
live in comfort and plenty, while half of the human race lives
on less than $2 a day, is neither just nor stable. Including
all of the world's poor in an expanding circle of development
and opportunity is a moral imperative and one of the top
priorities of U.S. international policy, end quote. And yet
housing remains an underserved area in the field of
international aid and development.
For example, none of the eight Millennium Development Goals
directly addresses the lack of affordable housing. Although
there's a focus to improve the living conditions of at least
100 million slum dwellers by 2015, the development of new or
improved housing is not mentioned as a means of meeting that
end. Also, housing is not one of the major sectors identified
by the African Development Bank. And the focus given to housing
by U.S. foreign assistance has dramatically declined in recent
years.
For many years, USAID had a housing guarantee program that
annually provided $100 million in loans to developing
countries. In addition, it staffed a network of regional
offices that provided assistance in housing policies and
programs with particular attention to the needs of lower income
groups. And these programs have been essentially eliminated.
Housing, however, is a key instrument for generating wealth
and stability in developing countries, including those in
Africa, and thereby alleviating urban poverty. My earlier story
of the first Habitat for Humanity homeowner in Ghana, is just
one of many, many anecdotes of families being economically
transformed by a decent home.
According to the World Bank, strengthening poor people's
land rights and easing barriers to land transactions can
illicit a range of social and economic benefits including the
empowerment of women and other marginalized people, and more
rapid economic growth. Last thing, in light of these findings
and Habitat for Humanity's experience in Africa, I'd like to
point out three critical changes that can impact urban poverty
housing. One, we must improve land tenure and property rights
systems for the poor, as I said earlier, so they can secure
occupancy and then collateralize their assets to obtain loans
for education and enterprise creation. Second, local
governments must provide services and infrastructure to poor
communities in informal settlements and slums. And third, it's
critical to secure affordable urban land in appropriate
settings, so Habitat for Humanity and other organizations can
build desperately needed housing for low-income families.
Habitat for Humanity recommends the following two
significant actions this committee can take to address the
issue of poverty housing in Africa. First, reestablish housing
issues as a major priority of the U.S. Government foreign aid
package by allocating more funding to USAID and other agencies
for programs that address affordable housing, city planning,
service delivery, financing--especially microfinancing for the
poor, and local economic development. And second, create a
commission to study the critical issues of affordable housing,
especially urban poverty and slums and seek ways to improve the
lives of the millions of people worldwide in need of adequate
and affordable shelter. With funding support, Habitat for
Humanity is prepared to lead both this comprehensive study of
the impact of housing on poverty reduction and the monitoring
process to support policies that encourage increased access to
affordable shelter.
Mr. Chairman and ranking member, this hearing is an
important step in what could be a significant and successful
effort to address poverty housing in Africa. Your invitation
for this panel to present recommendations is evidence of this
committee's recognition of the critical role housing plays in
international development.
Thank you again for this opportunity to share these
recommendations. Habitat for Humanity looks forward to working
with this committee to ensure that people in Africa and around
the world have access to safe, decent, and affordable housing.
I'd be pleased to answer any additional questions you might
have.
[The prepared statement of Mr. Reckford follows:]
Prepared Statement of Jonathan T.M. Reckford, Chief Executive Officer,
Habitat for Humanity International, Americus, GA
Good afternoon, Mr. Chairman and members of the committee. I
appreciate this opportunity for Habitat for Humanity to share with you
the plight of millions of people in Africa who are without adequate
shelter and to make recommendations on policies and actions to address
this growing crisis.
Before I begin, I want to acknowledge my fellow panelists from the
U.S. Department of Housing and Urban Development, the U.S. Agency for
International Development, and UN-HABITAT. With operations in the
United States and nearly 100 countries around the world, Habitat for
Humanity has been privileged to partner with HUD and USAID in many
shelter programs around the world.
In addition, we have a strong and growing relationship with UN-
HABITAT, including an agreement of cooperation signed in September 2004
to work together to upgrade slums, improve housing conditions, and
provide basic human services, particularly in countries ravaged by
political unrest and natural disaster.
Regarding Habitat for Humanity's own work, we have been supporting
families in Africa to increase assets through affordable housing for 30
years. In fact, the first Habitat for Humanity house was built in
Zaire--now the Democratic Republic of Congo--in 1976.
As of January 2006, more than 35,000 affordable houses have been
built in 21 African countries in partnership with our national
organizations and branches and through 235 local affiliates. A
successful housing delivery model has been built based on a community-
based approach, mutual help, sweat equity through labor provided by
volunteers and homeowners, inflation-linked housing finance, and
appropriate housing design.
While I am here today to speak mostly about housing in urban
settings, I do want to emphasize that programs with a rural focus
remain an extremely important part of Habitat for Humanity's mission.
However, in recent years, Habitat for Humanity has begun to
strategically focus on urban housing in response to the rapid growth in
slums at the periphery of every major African city.
I had the opportunity to see some of our rural and urban projects
last year when I visited Habitat for Humanity programs in Ghana, South
Africa, and Egypt. In Ghana, I met Bernard Botwe and his wife Joanna.
They and their two children were the first Habitat for Humanity
homeowners in the country. Now, 18 years after their humble beginnings
in their Habitat for Humanity home, Bernard is an administrator at a
hospital and rising in his career--a shining example of the difference
that secure tenure and decent and affordable shelter can make in the
lives of families.
From Ghana I traveled to Johannesburg, Cape Town, and Durban and on
to Cairo, where I saw firsthand the rundown, ramshackle, and decrepit
conditions people live in near the heart of what are otherwise
beautiful cities.
And this is why I am pleased to be with you today, to talk with you
about housing and urbanization issues in Africa and to work with you
and my fellow panelists to identify solutions.
Specifically, I want to spend my time with you to address three
broad issues: the growing problem of urbanization in Africa, the
ramifications of urbanization on those who live in the informal
settlements, and Habitat for Humanity's recommendations on how the
United States and the international community can help address these
challenges.
africa's urban housing crisis
While it can be acknowledged that substantial numbers of people in
the developing world now benefit from better health and education, and
from attaining personal well-being in a more prosperous world,
significant numbers have been left outside of the development process.
African economies have been growing by close to 5 percent over the last
decade and democracy has been gradually taking root, according to the
United Nations Development Program. Yet at the current rate of
progress, poverty in Africa will increase over the next 10 years
instead of being halved. This makes African countries unlikely
candidates for more conventional forms of development cooperation in
the new U.S. foreign aid framework.
Within this century, Africa will shift from a predominately rural
continent to an urban one. More than half of Africa's nearly 750
million people will live in cities within 20 years. And as nearly 70
percent of the rural population is expected to migrate to cities, the
combined population of African cities is expected to double every 14 to
18 years, according to the United Nations. Because most of these people
are coming into the city from poor rural regions to find work,
opportunities, and a better life, they bring very little with them but
their hopes and dreams. As a result, the systems that have
traditionally held cities together are failing.
What does poverty look like in the cities? I think we have all
witnessed it. For the most part, the urban poor are left outside of the
progress in the cities. In the few cases that land is provided by the
governments for the masses of people entering the city each day, it is
poorly located, out of the range of social services and employment, and
too expensive for the poor to acquire. The majority of people who need
housing in urban areas in Africa, therefore, settle in informal
settlements that are closer to possible employment and public
transportation, but often unsuitable for human habitation. They do not
have legal property rights. They do not have basic services. They
usually do not even have proper building materials. They build shelters
using the materials they can obtain.
It has been reported that households generally allocate 10 to 15
percent of their income to shelter--whether it's a tent, a hut, or
collection of discarded materials or an abandoned car. They settle
wherever they can find space--on pavements, ravines, garbage dumps, or
drainage channels--as long as the site is marginal enough to deter
displacement and close enough to transportation and employment
opportunities. Even if their incomes rise, they won't increase their
allocation to shelter above 15 percent unless they have some security
of occupancy as owners or renters.\1\
---------------------------------------------------------------------------
\1\ The Center for Urban Development Studies, Harvard University
Graduate School of Design, Housing Microfinance Initiative, May 2000.
---------------------------------------------------------------------------
These informal settlements soon became established communities--
communities of families living in poorly constructed houses, in
overcrowded conditions, and with inadequate infrastructure services.
And the number of these communities continues to grow each day.
ramification of urbanization
There are numerous ramifications to this rapid growth of urban
poverty--from the individual level to the global.
Densely populated urban settlements with poor sanitation, vermin,
and poor shelter from the rain are ripe breeding grounds for illness
and disease. An Emory University research study on Habitat for
Humanity's work in Malawi provided evidence of the impact of improved
housing on social indicators. Children under 5 living in Habitat for
Humanity houses showed a 44 percent reduction in malaria, respiratory,
or gastrointestinal diseases compared to children living in traditional
houses. The researchers concluded that the effect of improved housing
on the health of young children was as high as that of water and
sanitation programs.\2\
---------------------------------------------------------------------------
\2\ Wolf et al., The Effect of Improved Housing on Illness in
Children Under 5 Years Old in Northern Malawi: Cross Sectional Study,
BMJ 322; May 19, 2001.
---------------------------------------------------------------------------
With irregular incomes, food is sometimes scarce; yet there are
rarely opportunities for self-sustaining urban agriculture. As
residents of informal settlements, these families lack access to social
facilities such as schools, clinics, libraries, and recreational
facilities. This often leads to a survival of the fittest mentality,
with communities competing for scarce opportunities and resources.
The lack of secure tenure also contributes to the inhabitants'
inability to invest privately in their own home or in public
infrastructure. Thus, the potential for social stabilization and wealth
creation is absent.
For the United States, helping the world's poor develop has become
a national security issue as well. As is stated in the 2002 National
Security Strategy and reinforced in the 2006 strategy, ``A world where
some live in comfort and plenty, while half of the human race lives on
less than $2 a day, is neither just nor stable. Including all of the
world's poor in an expanding circle of development--and opportunity--is
a moral imperative and one of the top priorities of U.S. international
policy.''
And yet housing--a stabilizing force in its own right--remains an
underserved and often ignored area in the field of international aid
and development. While education, health, the environment, good
governance, and economic growth--all sectors that are critically
connected to and dependent on adequate housing--are addressed in
bilateral, multilateral, and nongovernmental organization strategies
for development, housing is not.
Let me give you a few examples.
None of the eight Millennium Development Goals (MDGs)
adopted by a majority of the world's countries at the U.N.
Conference in 2001 and all of the leading development
institutions, directly address the critical issue of lack of
affordable housing. Although Goal 7 Target 11 of the MDGs
focuses on improving the living conditions of at least 100
million slum dwellers by 2015, the development of new or
improved housing is not mentioned as a method to meet that
goal.
Housing is not one of the major sectors identified by the
African Development Bank, and they made no loans or grants in
the area of urban development between 2001 and 2003.
The focus given to housing by U.S. foreign assistance has
dramatically declined in recent years. For many years, USAID
had a housing guaranty program that provided $100 million or
more each year in loans to developing countries and a network
of regional offices that provided assistance in housing
policies and programs with particular attention to the needs of
lower income groups. These programs have essentially been
eliminated.
With the increasing needs, both in Africa and globally, for
improved housing and the specific challenges faced with the rapidly
increasing population of urban poor, an increased focus on housing is a
critical need.
The inhabitants of these informal settlements possess focus,
talent, and enthusiasm. The rise in the large informal sectors in urban
areas of the developing world, including Africa, is evidence of the
abundant entrepreneurial capacity of those who reside in these areas.
And they have an astonishing ability to wring a profit out of very
little.
The value of savings and assets they have accumulated is immense--
calculated to be as much as 40 times the foreign aid received
throughout the world since World War II.\3\ Unfortunately, these assets
and resources are held in defective forms--such as houses built on land
with no recorded ownership rights, that are unserviced, poorly managed,
and with little appreciable value.
---------------------------------------------------------------------------
\3\ DeSoto, Hernando, The Mystery of Capital: Why Capitalism
Triumphs in the West and Fails Everywhere Else. New York: Basic Books
(2003).
---------------------------------------------------------------------------
Housing, however, presents a key instrument for generating wealth
and stability in Africa and thereby alleviating urban poverty. For
example:
Housing provides a fundamental precondition to personal
wealth creation. It provides the collateral necessary for
credit and the development of local and national financial
institutions.
Housing provides a nexus for economic development by
providing access to an array of construction jobs, which
enables recent migrants' entrance to the urban economy. It also
provides a stimulus to the production of construction
materials, construction services, and housing related to
enterprise development.
Finally, housing is the locus of individual, familial, and
community stability. And it can be the catalyst for social and
democratic development.
The success story of the first homeowner in Ghana, as I mentioned
earlier, provides anecdotal evidence of these facts.
In addition, World Bank policy research indicates that
strengthening poor people's land rights and easing barriers to land
transactions can set in motion a range of social and economic benefits
including improved governance, empowerment of women and other
marginalized people, increased private investment, and more rapid
economic growth.\4\
---------------------------------------------------------------------------
\4\ World Bank; Land Policies for Growth and Poverty Reduction,
Volume 1; June 2003.
---------------------------------------------------------------------------
critical needs and recommendations
These findings and Habitat for Humanity's experience in Africa
leads me to point out three critical changes that can impact urban
poverty housing:
First, we must improve land tenure and property rights
systems for the poor so they have security of occupancy and the
ability to collateralize these assets to obtain loans for
education, enterprise creation, and other life-enhancing
pursuits.
Second, local governments must provide services and
infrastructure to poor communities in informal settlements and
slums.
Third, it is critical to secure affordable urban land in
appropriate settings so Habitat for Humanity and organizations
like ours can build communities of low-income housing that
allow people to become healthy, contributing members of
society.
With these broad goals in mind, Habitat for Humanity recommends the
following two significant actions this committee can take to address
the issue of poverty housing in Africa.
Reestablish housing and shelter issues as a major priority
of the U.S. Government foreign aid package by allocating more
funding to USAID and other agencies for programs that address
affordable housing, city planning, service delivery,
financing--especially microfinancing for the poor, and local
economic development.
Create a commission to study the critical issues of
affordable housing, especially urban poverty and slums, and
seek ways to improve the lives of the millions of people
worldwide in need of adequate and affordable shelter. With
funding support, Habitat for Humanity is prepared to lead both
this comprehensive study of the impact of housing on poverty
reduction and a monitoring process to support policies that
encourage increased access to affordable shelter.
conclusion
Mr. Chairman, this hearing is an important step in what could be a
significant and successful effort to address poverty housing in Africa.
Your invitation for this panel to present recommendations is evidence
of this committee's recognition of the critical role housing plays in
international development.
I thank you again for this opportunity to share these
recommendations. And Habitat for Humanity looks forward to working with
this committee to ensure that people in Africa and around the world
have access to safe, decent, and affordable homes. I would be happy to
take any questions you might have.
Senator Feingold. Thank you both for your presentations. If
it makes you feel any better, when lawyers go for the Supreme
Court, they prepare very carefully their presentations. Within
about a minute, they are interrupted with questions and never
get to finish them.
So anyway, I appreciate it. And you know, the Chairman has
a tremendous background obviously in the housing area. I've
been a member of this subcommittee, now it's my 14th year. So
together, we do care about the valuable information you
provided us. He necessarily had to leave. So, I am going to ask
a few more questions before concluding the hearing.
First, a more general question for both of you. You've
painted an important picture for us. I guess my base question
is what are the priorities? Given that resources are finite, my
question for you is where do we begin? I appreciate all the
work that's going on, but do we start with infrastructure? Do
we start with rural economic development to prevent migration
to urban centers? Do we start with appropriate legal systems or
frameworks? And I realize that, you know sometimes you do more
than one thing at a time. But realistically, lay out for me
what an appropriate sequencing of programs would look like. And
let's start with Dr. Tibaijuka.
Dr. Tibaijuka. Thank you. Mr. Chairman, I narrated in my
presentation, a simple package of clear interventions on the
normative and operational front. The normative front is very
important,
because you have to put the policy environment right for decent
housing to emerge at any scale, whether that is financed by the
homeowners themselves or that is rental housing, but the legal
framework has to be there. And that's why in our work we
approach a policy framework as part of good urban governance.
Because without that, it would be very difficult.
The many banks in Africa are swamped with excess liquidity.
It is not always shortage of money. It is shortage over
environment in which investments can take place. So, when you
pair along with that, you build into institution building. The
institutions are not in place. And without the institutions it
becomes very difficult to move to scale. You can have small
pilot projects here and there, but from the United Nations
perspective, we are talking about the Habitat Agenda, which is
adequate shelter for all. So, scale matters.
And for scale to matter, we need institution building. So,
that's why technical assistance, capacity building, and policy
reforms become important, then to unleash and make it possible
to invest in housing. So when the policy environment is right,
the institutions are supported. Then we need realty investment.
And that investment could also come very easily from the
private sector. There is much that needs to be overcome and
that's where the countries--the leading countries like the
United States--come in. Because for example, the biggest
challenge to creating enhancement in Africa and you know,
international participation, is the foreign exchange risk.
Because if you bring dollars into African economies, after some
time it can be very tricky. So you have to give local
currency--you know, loans. And that is a very key issue on
which we are looking for solutions to go around this.
But therefore I would like to say, to answer the question,
is that we need both the hardware and software of things. And
the software of things is the policy, the institutions, and
then the investment.
Senator Feingold. Well said. Very well said. Mr. Reckford
Mr. Reckford. Sir, we would certainly support that. I think
there are two sides from our perspective, as well. One side is
really on demonstrating we would stipulate that if we're
serious about poverty, we would certainly support that we need
to deal with water issues, food issues, education, and
healthcare. What we would like to--what we have seen
overwhelmingly, is that decent shelter becomes a precondition
or an enabler of all of those in other improvements. And so, we
would like, on a very practical side, to in a comprehensive way
globally, to demonstrate and prove that case to move more
international assistance into shelter, so that we create more
permanent transition for families out of poverty.
And so, we would be pleased to help in that process of
first, proving the case for how shelter does break the cycle of
poverty. And then on the second side in supporting the policy
is, we are trying to create a global housing index, which would
then monitor these housing policies country by country and try
to create some accountability for good housing policy and
changing the conditions that allow more creation of affordable
housing.
Senator Feingold. Now, I've seen how those indexes or
indices can work very well as has with the Transparency
International and others. It's really something I've found
useful in my work, especially with African countries.
Shouldn't there be concern about potential unrest or
violence when developing initiatives to reduce slums? If so,
how are these concerns or threats being reduced? And if not,
why do you think this is so?
Dr. Tibaijuka. Yes. I would like to say, that indeed when
you have very high concentrations of you know, populations and
very precarious and appalling living conditions, things can
become very tricky. In fact, some upgrading itself was a highly
political activity. We are trying to--that's why I emphasized
in my presentation the role of governments, but who are the
heads of states. In many
African countries we are encouraging the head of state to be
himself--now we have one lady and maybe herself--a patron of
the slum activity. Because people are surviving, slum dwellers
are very hardworking and decent people. They take care of
themselves, as I have already testified. But they can be easily
manipulated. A number of young people in slums are sucked into
unsocial behavior and not because they are decided by the
people, but because of violence and a lack of alternative
activity.
So, we would like to say that--I talked about safety and
security, and that's why it is in the interest of following the
word of advice: to empower the urban poor. The urban poor not
clearly knows, but of course, if people idle they can be easily
distracted.
I would like to say that in our approach on the--our Global
Campaign for Security of Tenure, we encourage city governments
to enter dialog with urban poor. Because the urban poor need to
be empowered, not be harassed. They should be supported because
they are trying to survive and they have adopted very ingenious
survival strategies, themselves. So when you dialog with them,
you can go very far. You can locate them sometimes. For
example, if you can see the one in Kibera, they are just
staying very near anyway. There is a case for relocation of
that population. But we do not support the United Nations in
our campaigns. We do not support arbitrary forced evictions.
I was recently working in Zimbabwe on that very difficult
question. What we recommended is a dialog, so that you can
listen to people, you know by balancing interest of all
parties. So, a win-win situation for everybody. Otherwise, they
can become quite chaotic.
Senator Feingold. Thank you. Mr. Reckford.
Mr. Reckford. One of the reasons we're so passionate about
home ownership is because we see that when people own a home
and then have a stake in their community, it changes that view.
And so, we strongly support Secure Tenure, because we see the
evidence. We believe very much in the ability of people to
solve their own problems if they're given the chance. So, small
home improvement loans as well as building houses, so that the
combination of very small amounts of capital available with
Secure Tenure, these are very entrepreneurial people and then
can actually change these communities quite dramatically. And
the problem is, if they are moved to places where they don't
have access to transportation and jobs, it doesn't solve the
problem and then we end up in the same cycle.
But what we have seen, there is a wonderful study in
Argentina that was done accidentally. They tried to give Secure
Tenure to an entire settlement and only about half of the
homeowners received legal title, the other half didn't. So, you
had a 20-year horizon where half of a community had security in
their homes and the other half never knew if they could stay.
It was fascinating. Over 20 years, not only were the homes
dramatically improved on all the markers of quality of life,
education, success of their children, and health that half of
the families did better as well----
Senator Feingold. What--the one's with the tenure?
Mr. Reckford [continuing]. That owned the--that had
security in their homes.
Senator Feingold. Well finally, are you hampered by
domestic or foreign legislation outside of issues of lack of
funding that prevent you from completing or more successfully
implementing your programs?
Dr. Tibaijuka.
Dr. Tibaijuka. Mr. Chairman, the legislation, as I said,
there are areas where sometimes the legislature, their
framework is not enabling you on the table to do your
activities. Now for us, as the United Nations agents of course,
we work across--we work on all parts of the world and we can--
we are discussing Africa today, but we are also working in
Latin America, where there are also a set of challenges.
Particularly, the land ownership there in most of the
municipalities don't own most of the land. The land belongs to
some families and you know, regularization becomes a trick
activity. If the mayor tries to do something, it can be easily
taken to court and you know to win the case, it is very
difficult in many cities in Latin America, for example, to put
up what we normally recommend, the prohibitive tax to be able
to take away people who are just absentee owners of land which
are now for villas. But you will find that sometimes the
judicial systems are maybe conservative, so that they may not
win the case, and then it becomes very difficult.
In Africa there is a lot of public land, but the problem's
infrastructure, it can be very restrictive. That land is
available but it is far away and there is no infrastructure to
come into the business district, so people don't want that
land. As the United Nations, we adapt ourselves to the laws of
the land. But where the laws are restrictive, we try to
advocate to promote a more progressive regime.
Senator Feingold. Thank you.
Mr. Reckford.
Mr. Reckford. What we're finding is a full range, as you
look worldwide, you know, at where we are, there are places of
where the governments are a wonderful partner in the solution.
I think there are also places where it would be safe to say, we
are almost working in spite of the conditions or doing our best
despite conditions.
The biggest places for us would be around issues of getting
title to build with families. So actually being able to--it's
not finding land, but finding land that will be secure. And
then in the urban areas, it is actually just finding land
period, increasingly, to be able to build on. And we're finding
at the extremes, governments that say everyone should have a
free house and then don't do anything about it, sort of create
a disastrous environment for attempting to create an ownership
society and with accountability.
At the other extreme, systems, or level of enforcement, or
judicial issues that really are stacked against the poor being
able to own property of any kind and lots of manipulation in
those processes. But it is--so we think it's both--I mean, that
we recognize at Habitat, our primary role is to work with these
families to build as many homes as possible. But increasingly
we're finding if we don't get involved in advocacy to impact
the conditions that are causing poverty housing, we're losing
ground despite the tens of thousands of homes we build.
Senator Feingold. Well first to conclude, let me thank
Chairman Martinez for his leadership in calling a hearing of
this quality, on this issue. Second, I want to thank all the
panelists, not only for your leadership in this area, but your
testimony. But also, for your patience today with the somewhat
confused hearing in terms of the back and forth.
But third, let me just say that even though I've a lot more
to absorb on this, having worked on issues related to Africa
for 14 years, having been I believe, to Kibera, having seen
places like this in Cape Town, and in Angola, Ghana, and other
places. It is helpful, encouraging, to hear people talk about
ways that we might make this better, make it work. Because
that's one of the hardest things when you're in Africa--to see
those slums. It just gives you a feeling sometime of
hopelessness. And your testimony today combats that and so I'm
inspired by it, I appreciate it. And I know the Chairman feels
the same way, as well.
So, we look forward to working with you. That concludes the
hearing.
[Whereupon, at 4:04 p.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Jonathan Reckford and Darlene Williams to Questions
Submitted by Senator Obama
how is the u.s. government organized?
Question. As this panel points out, the causes of housing and
urbanization problems stem from a range of factors--poverty, lack of
government capacity, stagnation of rural income level, employment
opportunities in urban areas, lack of political will to tackle the
issue, high fertility rates, and underdeveloped property markets and
finance systems.
I could go on but this gives you an idea of complex factors
involved. These factors cut across a number of different agencies in
our foreign assistance structure from AID to Treasury to the State
Department to HUD to OPIC.
I have made the point in previous hearings that our foreign aid
structure is increasingly disjointed. In the panel's view, is the U.S.
Government properly organized to deal with these complicated, cross-
cutting issues? Is there an effective strategy? Is there proper
coordination?
Answer by Jonathan Reckford.--In recent months, the administration
has been moving to reform the foreign aid structure and the strategic
direction of foreign assistance to improve coherence. This is still an
on-going process making it difficult to comment on the structure of an
emerging aid framework. The new perspective, however, is to define the
challenges and opportunities for global aid from the viewpoint of U.S.
security. What has emerged thus far is an intense effort to form a new
alignment between the U.S. security, defense, foreign policy, and aid
communities in response to dramatic changes in the world over the past
two decades. Under this realignment, the lines between USAID and State
Department and the military are becoming blurred.
In terms of what to expect at the end of the reform process, it is
now clear that the Secretary of State is to play a more significant
role in providing strategic guidance to U.S. foreign assistance, and
aid-receiving countries are to be categorized based on an as yet
unclear set of development conditions. Aid resources will be deployed
based on U.S. assistance objectives as determined by State beginning
fiscal year 2008.
In principle, this should improve the coordination of our global
aid strategy. Nevertheless, we are concerned that more resources are
being channeled through special initiatives like the Millennium
Challenge Account and the President's Emergency Plan for AIDS Relief
(PEPFAR) and away from the USAID country missions. We are also
concerned that with State being more engaged, short-term political
considerations will trump longer-term development needs. This, combined
with the continuing staff reductions at USAID, makes it increasingly
difficult to see how all of this leads to improved U.S. Government aid
effectiveness.
The fact that the administration is undertaking these far-ranging
changes is an implicit admission that the U.S. Government is not well
organized to deal with the complex issues and there is a need to
formulate a more effective strategy and to better coordinate foreign
assistance. How this will work in practice, however, remains very
unclear.
Answer by Darlene Williams.--Yes, presently all of HUD's
international activities are undertaken in close coordination with the
State Department and frequently with other U.S. Government agencies
such as the U.S. Agency for International Development (USAID), the
Millennium Challenge Corporation (MCC), the Overseas Private Investment
Corporation (OPIC), the Department of Transportation, and the
Department of the Interior. As the new framework for foreign assistance
reform is implemented, HUD will be working with the State Department's
Office of the Director of Foreign Assistance. Because housing and safe
and functioning cities play an important role in the five priority
objectives of the new foreign assistance strategic framework, HUD will
coordinate all its international activities with the new Office of the
Director of Foreign Assistance.
Because HUD's legislative authority for international affairs
limits HUD activities to ``exchanges of data and experiences'' in
support of U.S. foreign policy, most of HUD's international activities
take the form of meetings and conferences. It is not unusual for a U.S.
Ambassador to ask the Secretary of HUD to visit a particular country
for these purposes.
Frequently HUD's participation is requested by the Department of
State as in the case of representing the United States on UN-HABITAT's
Governing Board and the Human Settlements Committee of the U.N.
Economic Commission for Europe. In addition, the State Department has
asked HUD to participate with other U.S. Government agencies in the
U.N. Committee for Sustainable Development.
Some activities are initiated by HUD, for example, a series of
government-to-government forums with the Government of Spain. These
forums were proposed and agreed upon by the Spanish Minister of
Infrastructure and the HUD Secretary (at that time, Secretary Mel
Martinez). The forums were cleared and supported by the State
Department and they attended both forums held in Spain. Depending upon
the topic of the forum, HUD partnered with other U.S. Government
agencies, e.g., with the Department of Transportation on the finance
and construction technology forums and with the Department of the
Interior on the historic preservation forum. HUD and UN-HABITAT
recently sponsored a forum in East Africa on housing finance. USAID
participated in the forum. HUD has invited the MCC to participate in a
HUD panel on Donor Coordination at the World Urban Forum in Vancouver,
Canada, June 2006.
All Memorandums of Cooperation which HUD enters into with other
countries are cleared and translated by the State Department.
Representatives of the State Department are present at the signings.
role of chicago community development bank
Question. One of the problems associated with rapid urbanization in
Africa is unemployment or underemployment. A key to dealing with this
problem is ensuring that lower-income entrepreneurs have access to
credit.
My understanding is that all too often African banks demand large
amounts of collateral before granting loans, preventing lower-income,
small-scale entrepreneurs from gaining access to capital to grow their
businesses.
I know that ShoreBank--a community development bank that started on
the south side of Chicago--is working on this issue. They are trying to
get financial institutions to change their approach by looking at other
factors, such as cash flows, when making loans. This can be a win-win,
with the institutions making high-performing loans while providing
smaller businesses with the capital to fuel their growth. Mr. Smith, I
am glad to see that you note the good work of ShoreBank in your opening
statement.
Can the panel speak to this issue? What are some other things that
we can be doing to ensure more widespread access to capital?
Answer by Jonathan Reckford.--Ensuring more widespread access to
finance by middle- and lower-income groups involves not only a change
in approach by private lenders but also significant changes in the
legal framework as it relates to contract enforcement in many African
countries. In some countries it may also mean cleaning up the banking
system and strengthening the regulatory and supervisory system for the
entire financial sector. The banking system in many African countries
is faced with a large amount of bad debt and/or liquidity constraints
and cannot provide wholesale or individual long-term funds at an
efficient rate for housing finance or for small enterprise operators.
Moreover, high inflation levels in some countries exacerbate interest
rate and liquidity risks associated with providing financing to groups
perceived as high risks.
An additional constraint related to housing finance is the high
cost of housing and land in urban areas, in relation to incomes. As a
result, incremental single family house acquisition is the prevalent
way to accumulate assets in rural areas and in urban informal
settlements. Only a small proportion of all required houses are built
by the formal sector in many countries.
In view of the foregoing, many NGOs are now involved in providing
noncollateral-based loans on the basis of established membership in
lending programs to expand access to capital. Habitat for Humanity has
become, in effect, a non-bank lender providing no profit loans to
enable the poor to purchase homes.
To ensure more widespread access to capital requires a two-prong
approach for future U.S. Government assistance. At one level, countries
need assistance to create policy environments that reduce the risk
associated with lending. At another level, formal primary mortgage
systems need to be developed to increase the number of households that
have access to formal construction finance; extend credit to lower-
income small-scale entrepreneurs that already own a house in the
informal sector; and enhance rural land tenure.
Answer by Darlene Williams.--New enterprises in Africa are vital
for the expansion of employment and economic growth. Credit sources
must be expanded. A growing number of lending institutions in a market
environment of freedom and competition can assist entrepreneurial
ventures and support the further extension of credit to smaller,
inherently riskier business ventures. Banks that broaden their
underwriting guidelines to include cash flow and other factors would be
helpful. To increase access to much needed capital, African Governments
should make greater
efforts to reduce restrictions on financial flows and promote
incentives that will attract both foreign and domestic capital and
credit.
In this regard, we are pleased to enclose HUD's new publication on
the Evolution of the U.S. Housing Finance System: A Historical Survey
and Lessons for Emerging Mortgage Markets. This history provides useful
lessons for governments in developing countries, including Africa, on
how the United States developed policies and programs which vastly
expanded the availability of housing credit. This document is now being
translated into French for distribution in French-speaking African
countries.
In addition, HUD is planning to publish, next year, a guide for
policy analysis, Reforming African Housing Markets. This is the second
such guide--the first was a cooperative effort between the Inter-
American Development Bank and HUD entitled, Reforming Latin American
Housing Markets. The Guides examine the economic, social, and legal
dimensions of housing markets in Africa and Latin America and show how
more available financing and a greater role for the private sector can
help a developing country move its housing sector to function more
effectively as a market.
Further information on microfinance in the United States can be
obtained through the Community Development Finance Institution (CDFI)
program at the Department of the Treasury.
role of legal structures
Question. My understanding is that over 60 percent of people in
Africa living in urban areas reside in slums and informal settlements.
Countless people also make their livings in the informal or ``grey''
economies where they don't have the formal legal rights or protections
to engage in these types of economic activities.
In ``The Other Path'' and ``The Mystery of Capital,'' Hernando
DeSoto notes that many developing countries lack an integrated formal
property system, leading to only informal ownership of land and goods.
This causes a number of distortions such as the undercapitalization of
businesses, the inability to enter into and enforce complex contracts,
and inhibits investment in homes and property.
Mr. Smith, in your opening testimony, I noticed that AID is working
with Mr. DeSoto's organization.
I am wondering what the panel thinks of these types of efforts?
What is the role of property and business rights in dealing with the
challenges of housing and urbanization in Africa?
Answer by Jonathan Reckford.--The World Bank notes that housing
investments typically account for 2 to 8 percent of a country's GNP
while residential real estate represents 30 percent of the world's
wealth. UNCHS \1\ estimates that only 3 percent of outstanding credit
in low-income countries is held in the form of housing loans (compared
to 27 percent in high-income countries), signifying a severe scarcity
in affordable loan products for the housing sector. And yet, housing is
a major component of wealth, forming the major portfolio asset for most
households. In addition to increasing the personal assets of the
family, investment in housing can also mean an investment in small and
microenterprises. Industry experts believe that between 30 to 60
percent \2\ of all Small Medium and Micro Enterprise (SMME) operators
use their homes as the primary place of business.
---------------------------------------------------------------------------
\1\ UNCHS--United Nations Human Settlement Program.
\2\ Cities Alliance; Shelter Finance for The Poor Series; April
2003.
---------------------------------------------------------------------------
These statistics support the conclusion of DeSoto's organization.
Nevertheless, the core of DeSoto's work is not about property or
business rights in a Western sense but about systems that transform
informal methods of giving recognition to title into more formal
instruments that are tradable and that can be collateralized. In this
respect, it is the recognition of the right to property that forms the
basis of asset-backed loans. Imposition of a titling system based on
the U.S. model, and not taking into consideration the process outlined
by DeSoto, is a short-term measure that is bound to create as many
problems as it resolves.
Notwithstanding, a move toward more secure tenure and greater
ownership of housing assets can contribute significantly to the effort
to bring the poor into the formal economy. But this is just one aspect
of the challenges of housing and urbanization in Africa. Most African
urban centers now host populations two to three times the capacity of
the social infrastructure. Considerable investments need to be made to
expand the social infrastructure and improve human capital. More
enabling environments need to be created to allow small- and medium-
size entrepreneurs to thrive. And the vast social inequality needs to
be addressed.
Answer by Darlene Williams.--The DeSoto studies are among the most
original and insightful research in the problem of ``informal'' or
``grey'' economies of nations where governments overregulate labor and
capital investment. They show that informal economies arise and develop
among poor and low-income populations for the purpose of meeting their
need for housing, transportation, and other basic goods and services
which are not being met in the formal economy because of legal barriers
to enterpreneurism and ownership. Unfortunately and tragically,
ownership, investment, and contracts in ``informal'' sectors are
unrecognized and unsupported by governments and therefore remain
unsecured and unenforceable by law.
Private property rights, the enforcement of contracts, lower
taxation, and reducing regulatory burdens such as price controls and
licensing procedures are all either foundational or very helpful for
the purpose of expanding the availability of affordable housing and
increasing employment and enterprise in Africa and other nations with
large informal economies.
dramatic changes on the african landscape
Question. It seems that Africa is on the brink of a dramatically
changed landscape--it is experiencing the fastest rate of urbanization
in the world. As a result, more than half of Africa's 750 million
people will live in cities within 20 years and the combined populations
of Africa's cities will double every 14 to 18 years.
Mr. Reckford, in your opening statement you say that because of
these dynamic changes ``the systems that have traditionally held cities
together are failing.''
Can the panel elaborate on what the African urban landscape will
look like over the next two decades and how African and United States
strategies should shift to deal with these dynamic changes?
Answer by Jonathan Reckford.--Some interesting statistics were
presented in the statement by Dr. Anna Kajumulo Tibaijuka, the
Executive Director of UN-HABITAT. She pointed out that Africa is the
fastest urbanizing continent in the world. With an annual urban growth
rate of 4.87 percent, Africa's cities are growing twice as fast as
those of Latin America and Asia. In 2001, nearly 72 percent of city
residents lived in slums. In the next 25 years, 400 million people will
be added--about four out of every five will find their way into slums
unless there is a dramatic change in the way African cities are
developing. Land prices will increase in the face of rising demand. How
the African urban landscape will look over the next two decades depends
on the level of priority given to the emerging challenges over the
short to medium term.
African cities are generally unable to cope with high rates of
urbanization. Experience shows that slum upgrading alone is not an
effective response. Forward spatial planning is required, but rarely
done. Provisioning for affordable housing is hopelessly inadequate.
When land is allocated, it is never adequate and is located on the
periphery or on marginal locations where the poor are placed at
permanent disadvantage in access to income-earning opportunities, basic
services, and transport. Colonial systems of land titling and
allocation have not been updated.
The migration to urban areas, however, presents unique
opportunities. One of which is that the per capita cost of delivery of
assistance will drop because of the high population concentration.
Moreover, unique market opportunities will emerge for goods and
services that could not be provided to disparate rural populations.
Those who migrate to cities are invariably the more entrepreneurial,
and programs that build their capacity to establish and run small
businesses will have a greater chance of success.
United States assistance strategies should, first of all, recognize
these dynamic shifts. Programs that place greater emphasis on rural
development could slow, but certainly will not stop, the urbanization
trend. The U.S. Government has been in many cases reluctant to support
scaling up of urban programs under the impression that these programs
benefit the urban elite or fuel urbanization. But urban centers will
provide the engine for private sector-led growth over the foreseeable
future. A strategy shift that recognizes this reality and channels
resources into strategic, physical, and operational planning, and at
the same time seeks to link rural areas to the opportunities of the
urban marketplace will establish the basis for sustainable growth in
Africa.
Answer by Darlene Williams.--It is widely accepted that the future
of Africa will be determined in its cities where the majority of the
people will live and where the political and economic decisions
affecting all Africans, whether urban or rural, will be made. The
question then is, how best can the United States Government assist the
African Governments to cope with the vast tide of people in these urban
regions and to help them meet their expectations for a better life?
In regard to HUD's potential role within the new framework guiding
U.S. foreign assistance, the Department can draw on the extensive
American experience and research affecting housing markets and urban
governance. While HUD is prohibited by statute from engaging in
international technical assistance, the Department has the authority to
organize forums and conferences where American experts, both from the
Government and private sectors, can interact with African Government
officials, planners, and developers on many key development issues in
housing and urban policy.
An example of this approach was the High-Level East Africa Peer
Exchange on ``Government Enablement of Private Sector Lending for
Affordable Housing,'' which was held in Kampala, Uganda, in November
2005, jointly organized by HUD, the Government of Uganda, and UN-
HABITAT. By limiting participation to a select number of officials and
financial sector executives from Uganda, Kenya, and Tanzania, and
involving them in intense discussion with American experts, this forum
provided for an exchange of policy ideas and practical problem-solving
experience in technically difficult areas. Using this template, HUD is
planning a similar ``Peer Exchange'' on this topic in Accra, Ghana, in
November 2006, in concert with both UN-HABITAT and the Ghanaian
Government.
In regard to issues in urban policy, an example of HUD's approach
is illustrated by the conference on ``Cities in Change,'' held in
August 2004, in Johannesburg, South Africa. HUD, through a contract
with the U.S.-based International Downtown Association (IDA), was the
prime organizer of this event. Experts from the United States and the
United Kingdom worked closely with their counterparts in South Africa
to highlight the importance of international comparative experiences in
addressing common urban problems, such as community economic
development, public-private partnerships, and social issues in housing.
It should be noted that South Africa's experiences have a strong
``multiplier effect.'' What is done there influences thinking
throughout the African continent on ways to modernize national and
local economies.
Through exchanges of this type, HUD is also able to introduce a
number of useful policy research studies from the United States to
assist African policy makers think through some of the more difficult
housing policy issues. For example, HUD has just published a study,
Evolution of the U.S. Housing Finance System: A Historical Survey and
Lessons for Emerging Mortgage Markets, and is planning another report
on Reforming African Housing Markets: A Guide for Policy Analysis,
based on a similar study on Latin American housing markets published by
the Inter-American Development Bank (IADB) in 2004 with HUD's technical
assistance.
poverty on the rise in africa--a new approach
Question. Mr. Reckford, you note in your opening statement that
despite the fact that African economies have been growing at 5 percent
a year, poverty in Africa will increase over the next 10 years. And
that this makes African countries unlikely candidates for more
conventional forms of development cooperation in the new United States
foreign aid framework.
Can the panel elaborate on this issue? Should we be thinking about
different types of assistance programs to deal with this issue? What
would these programs look like?
Answer by Jonathan Reckford.--In his remarks, Mr. Reckford alluded
to the 2004 White Paper and the subsequent USAID/State Department
Policy Framework for Bilateral Aid published in January 2006. The
documents laid out the scope and nature of the challenges we face in
the next 10 to 20 years, defined the adjustments that need to be made,
and outlined five core operational goals for U.S. foreign aid.
Furthermore, aid-receiving states are placed into three categories--
transformational development states, fragile states, and strategic
states. It is our view that this narrow categorization would classify
most African countries as fragile states and unlikely candidates for
conventional forms of development cooperation.
We are pleased to note, however, that subsequent presentations of
the new USAID Administrator and Director of Foreign Assistance,
Ambassador Randall Tobias, seem to recognize the difficulty of this
form of classification given the concurrent and mutually reinforcing
challenges evident across the developing and transitional countries--
Africa included. In his April 26 presentation to the House
Appropriations Committee, Tobias announced that the 154 developing and
transitional countries have now been placed into five categories. The
new strategy is to design aid programs in those countries on the basis
of specific challenges to achieving the priority goals of U.S.
assistance.
But a shift in resources to special initiatives such as the
Millennium Challenge Corporation is likely to have a negative impact on
funding for NGO's. Moving from community-centered to government-
centered funding will limit the participation of civil society and NGOs
in U.S. Government-funded programs because there is a low level of
interest in funding NGO's and civil society activities in most of the
countries eligible for MCA assistance. More resources need to be
channeled to assistance programs that build relationships with and
capacity of NGO's in the delivery of U.S. foreign aid.
Answer by Darlene Williams.--This is outside HUD's purview.
rural agricultural component
Question. It seems that there are two parts of the urbanization
issue. One part is the ``pull'' factors which include: possible job
opportunities, city-based education, limited social services, and
infrastructure.
The other part deals with the ``push'' factors such as rural
poverty caused by soil degradation, overgrazing, poor farm marketing
outlets, and lack of access to farming inputs.
Shouldn't a large part of our strategy to deal with this issue
involve rural agricultural development and conservation of farmlands? I
know Mr. Natsios made this a priority when he was AID administrator,
but will this issue continue to receive increased time, attention, and
resources now that he has departed?
Answer by Jonathan Reckford.--There was a fundamental flaw in the
belief that rural agricultural development and conservation of
farmlands will stem the flow of urbanization. The underlying assumption
is that efforts to mitigate the effects of the ``push'' factors will
counterbalance the ``pull'' factors, but the evidence in urbanizing
countries does not support that. When examining rural out-migration in
Africa, complex factors come into play. In fact, as rural agricultural
production becomes more efficient and farming communities earn more for
their labor, there is a release of surplus labor from the agrarian
economy. This surplus labor eventually finds its way among the urban
poor. Moreover, rural dwellers, as they become better off, tend to send
their offspring to urban areas in search of different nonfarm skill
sets and opportunities.
There has to be a balanced approach to urban and rural development
with one major goal being to adjust markets that are skewed against
rural dwellers and change the fundamental relationship between urban
areas and their periphery to one that is more symbiotic. Furthermore,
in most African countries, one or two urban centers become the lifetime
destination of a large proportion of the rural population. Other nodes
of ``development'' need to be established in the geographic space. More
support for spatial planning should be provided to begin to address
these complex issues.
In this respect, we are pleased to note that USAID intends to make
urbanization a cross-cutting theme in its new strategic framework for
Africa. It would be important to continue the dialog with key partners
at all levels, especially NGOs, to develop new approaches to achieving
more balanced spatial development.
Answer by Darlene Williams.--This is outside HUD's purview.
access to water and public health issues
Question. One of the key challenges faced by growing urban centers
is the provision of water and sanitation services to their residents.
Lack of access to clean drinking water, as well as water for
irrigation, is also an important factor in driving rural residents to
cities. The increased pressure on already limited sanitation services
in those cities is in turn resulting in dangerously contaminated water
supplies and increased incidences of water-born diseases--dysentery and
cholera.
In many places, communities have organized themselves to provide
their settlements with sewage removal services or an informal water
supply system. What efforts are being undertaken to work with more
community organizations on this critical public health issue?
Answer by Jonathan Reckford.--Part of United States Government
assistance should be directed to helping African Governments at the
national and subnational levels to create decent and viable
communities. This includes creating sustainable models for long-term
development and management of water and sanitation systems and
affordable housing. While local participation might take care of
immediate needs, there are multiple players (including the private
sector) involved in the sustainable delivery of water and sanitation
services. Habitat for Humanity already has a strategy to address
sanitation needs of its partner families and is looking at ways to help
participate in resolving issues related to water provision.
Answer by Darlene Williams.--This is outside HUD's purview.
microfinance
Question. We have all heard about the impact that micro-loans can
have for many in the developing world, particularly women. In recent
years, the microfinance movement has expanded beyond the traditional
model of providing small loans for women to invest in their farms or
small businesses.
For example, there are now innovative projects that help women
establish savings accounts at banks that only they can access using
fingerprint identification technology. Other projects are looking at
providing insurance to farmers whose crops are vulnerable to drought,
or life insurance for families. Some programs are even looking at ways
to support the efforts of groups of women who are caring for orphans,
providing them with opportunities to save their funds collectively.
What further role could the expanded use of microfinance projects
like this play in addressing urbanization and housing issues in Africa?
What more can we do to support those efforts?
Answer by Jonathan Reckford.--Because of the high cost of
homeownership in relation to income among Africa's urban poor, formal
banking sector financing will continue to remain inaccessible.
Financial services will have to be delivered via microfinance
institutions. What is missing in most programs, however, is a process
whereby successful entrepreneurs can graduate from microfinance to the
formal banking sector to access larger loans for larger projects. More
investment in housing microfinance can fill the gap by helping to build
assets that can, at some point, be collateralized.
Experience in Africa, where Habitat is using a grant from PEPFAR to
build assets of families impacted by HIV/AIDS, also reveals that
microfinance can meet the needs of special groups. It brings the poor
into stable income, asset ownership, and the formal economy. It can
also create the environment for the proper delivery of care and
prevention services and restore family assets lost due to the impact of
HIV/AIDS.
Capitalization of funds for lending to the poor, however, remains a
challenge. Due to interest rate and liquidity risks associated with
lending in Africa, most commercial banks cannot funnel needed capital
into housing microfinance. Therefore, the technical assistance provided
to microfinance institutions to improve processes and procedures for
loan origination and servicing need to be matched with more funds for
working capital and housing loans to the poor.
Answer by Darlene Williams.--Normally, HUD's international
activities are limited by legislation to ``exchanges of information''
in support of U.S. foreign policy. However, in 1999, under instructions
from Congress and authority from the U.S. Agency for International
Development (USAID), $10 million was transferred from USAID to HUD to
respond to the widespread hurricane damage in Central America and the
Caribbean in late 1998. HUD then designed and managed what was to
become the only international reconstruction effort ever undertaken by
the Department. All funds were obligated by early 2002.
As part of this program, HUD dedicated $1.6 million for
microfinance projects in Central America and the Caribbean. The
microfinance program capitalized two new revolving micro-loan projects
for both housing repair and microenterprises in the Dominican Republic
and in El Salvador.
Housing microfinance looks to merge the elements from microfinance
and traditional housing finance (e.g., mortgages). HUD designed a
program to help poor families build and repair incrementally through a
process commonly known as progressive build. The first loan may replace
a leaky roof in desperate need of repair; the second loan may give a
family a concrete floor for the first time; and eventually a third loan
might add an additional room for a large family.
In addition, sweat equity was utilized toward the purchase of homes
and the program specifically assisted by making available housing
grants to numerous poor families through small financial institutions
in the Caribbean.
HUD also effectively looked to enhance the local population's
capacity through the microfinancing program. Microfinance projects can
compensate the lack of the ``formal'' banking sector's ability to
service people with limited resources. HUD's microfinance projects,
with an average loan size of about $1,300, were geared to the single
head of household, the majority being women. By improving women's
economic conditions, HUD sought to increase employment productivity,
family incomes, and holistically general living conditions.
In strengthening the microfinance lending institutions, HUD funded
training for both the lenders in best practices in loan administration
and borrowers in debt management. Handbooks were also developed for
training the institutions in basic mortgage origination, underwriting,
and servicing to guide bank-lending activities and to help establish a
mini-secondary mortgage facility. These handbooks are especially geared
toward lower-income households, and may be adapted for use by mortgage
lending institutions in many countries.
HUD has the experience and the ability to expand on the innovations
in microfinance, not only by working in housing and microenterprise
development, but also by moving beyond the traditional and building
stronger economically viable communities.
______
Letter From the International Housing Coalition
International Housing Coalition,
Washington, DC, May 2, 2006.
Hon. Mel Martinez,
U.S. Senate,
Washington, DC.
Dear Senator Martinez: The International Housing Coalition (IHC)
submits this letter for the record in support of the efforts of your
subcommittee to better understand and highlight the problems of poor
and inadequate housing conditions in Africa in a hearing of the
Subcommittee on Africa on May 4, 2006. The IHC, a private, nonprofit
organization, was recently set up by the National Association of
Realtors (NAR), Habitat for Humanity International (HfHI) and the
Canadian Real Estate Association (CREA) to seek to raise the priority
among international donors and governments in developing countries of
housing the world's poor and slum dwellers in support of the Millennium
Development Goals of the United Nations.
Rapid urbanization throughout Africa is creating a serious housing
shortage and intensifying the problem of tens of millions who live in
poor and unsanitary housing conditions and lack access to basic
services. There are many reasons why housing problems in Africa are so
severe:
Incomes in developing countries in Africa are low and only
the small middle class can afford a complete house without
unaffordable public subsidies.
Many countries lack the capital, capacity, policies, and
resources to invest in infrastructure to develop and make land
available for housing for low- and moderate-income families on
a large scale.
Many countries have a policy environment that prevents or
discourages the development of affordable housing and housing
for the poor, most of which has to be done by the private,
formal and informal business and NGO sectors. A major
constraint is the widespread lack of a rule of law.
Generally, African housing development and finance
institutions are young and weak; in some cases, unwieldy and
inefficient public development organizations are given
preference over more efficient and capable private
entrepreneurs.
There is imprecise and uneven information on the magnitude
of the housing problem in particular countries and the extent
of donor interest and involvement in housing in the region.
In spite of the need for housing and lack of good data, it
is clear that donors for the most part are currently investing
less in the housing sector than they did 10 or 20 years ago. It
is not clear why this is the case because housing is more than
better shelter. Housing generates jobs, provides an investment
vehicle for homeowners, impacts on matters of health and
safety, and fosters stability.
On the positive side:
In some countries capital markets are developing, creating
opportunities for domestic investment and particularly for
long-term finance which could provide unsubsidized financing
for an unserved portion of the market.
In some countries, microfinance institutions are increasing
their lending for housing improvements, tailored to meet the
needs of most slum-dwellers.
In some countries, as democracy spreads, there is
recognition that the rule of law and legal remedies for
nonpayment are critical.
USAID's Development Credit Authority is an important credit-
enhancement tool to support viable housing finance institutions
if supported by adequate technical assistance resources.
Here are some actions that could be taken to improve the housing
situation in Africa:
An important first step in addressing the problem would be
to get a better understanding of the housing situation in
particular countries in Africa by investing in the collection
of better information about housing conditions and needs. There
also is a need to develop better measures and definitions and
methodologies for assessing housing conditions.
At the same time, we need to have a clearer understanding of
what the donor community is doing to improve housing conditions
in Africa in terms of both technical and capital assistance.
The international donor community should be giving more
attention to the issue of housing. Donor programs can help to
improve the institutional capacity of public and private
stakeholders. Donors can invest more in housing in recognition
of its direct and indirect importance to national economic
development activity, political stability, and social welfare.
Assistance programs should be giving more attention to the
linkages between better housing and more jobs and better
health, education, and welfare.
There is a need to facilitate and improve the exchange of
information, ideas, and best practices among counties of the
region and provide technical training to different housing
sector actors.
USAID has a very small staff involved with housing matters
and there is a lack of priority for housing assistance despite
the fact that housing improvement can be a major development
tool. USAID needs to recognize the increasing opportunities for
slum dwellers and the poor is complicated and requires a long-
term commitment (i.e., 10 years).
USAID should expand its use of Development Credit Authority
to help build the essential housing finance institutions. This
effort needs a significant technical assistance component.
The IHC believes that greater efforts to improve housing in Africa
will result in important development and economic benefits in the
region. The IHC is prepared to contribute to those efforts by helping
to develop effective housing policies, programs, and institutions;
facilitating the exchange of information; and building coalitions to
address developmental problems.
Sincerely,
Peter Kimm,
Chairman of the Board IHC.