[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

                               __________

       Printed for the use of the Committee on Foreign Relations


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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

                                 ------                                

                    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

                              ----------                              
                                                                   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

                              ----------                              


                         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.
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