SOCIO-ECONOMIC STUDIES IN ASSESSMENT OF HOUSING FINANCE CAPACITY AND NEEDS OF HOUSEHOLDS IN INFORMAL SETTLEMENTS SOCIO-ECONOMIC STUDIES IN MWANANYAMALA KISIWANI, BUGURUNI MNYAMANI, AND MAKANGARAWE INFORMAL SETTLEMENTS IN DAR ES SALAAM, TANZANIA PRESENTATION TO AUHF-AGM SEPTEMBER 21, 2007 TUMSIFU JONAS NNKYA ARDHI UNIVERSITY, DAR ES SALAAM

TANZANIA Total population: 35 million people About 30% live in urban places where the average annual growth rate is 4.5% 30% of the urban population live in Dar es Salaam City All the land in Tanzania is state owned Formal access to urban land is thus through granted right of occupancy for 33 or 99 years government lease

INFORMAL SETTLEMENTS IN DAR ES SALAAM CITY Habitat for 70-80% of the 3.5 million city residents (different social and economic status) Recognized and earmarked for infrastructure upgrading since 1972 Permanent incrementally built houses as a result of secure land tenure Modest infrastructure upgrading through individual initiatives, sometimes in collaboration with local authorities Property registration and issuance of residential license (2004); infrastructure upgrading and regularization to follow

COVERAGE OF INFORMAL SETTLEMENTS IN DAR ES SALAAM CITY

A TYPICAL INFORMAL SETTLEMENT SHOWING FORMALIZED PROPERTY BOUNDARIES

A TYPICAL MULTI-FAMILY (6 ROOMS) SWAHILI HOUSE

ONE FAMILY HOUSE

INTRODUCTION Results from a housing survey of 3 informal settlements Data on the household capacity and demand for housing finance Purpose: to inform the development of appropriate housing finance products, a project by African Union for Housing Finance – AUHF with funding by Cities Alliance Selection of settlements There are differences which influence the demand and capacity for housing finance: Proximity to employment and income opportunities; Economic vibrancy; Tenure status of the residents; Level of investments in housing and hence quality

INTRODUCTION (cont.) MWANANYAMALA KISIWANI – a fair mixture of different house types, habitat for all tenure groups, substantial economic activities BUGURUNI MNYAMANI – a higher economic vibrancy, proximity to CBD and other employment centres MAKANGARAWE – urban fringe settlement Sample size: 380 households 8 enumerators trained, tested questionnaire Selection of houses from each housing cluster facilitated by up to date maps and property registers Interviewed all households in the selected houses

FINDINGS: HOUSEHOLDS DEMONSTRATED CAPACITY TO FINANCE HOUSING Land for housing was bought: 97% of all house owners bought land for building Houses were permanent: 85% of all the houses were built of sand-cement blocks, 90% of them with sand-cement floor and 97% roofed with CI sheets Houses had basic facilities: a private or shared cooking space, toilet, bathroom, electricity and connection to clean water (14%), from vendors or neighbours(68%), wells (12%) Household savings was the main source of finance: 87% of all the houses were financed by savings Savings financed also available infrastructure

HOUSEHOLDS HAD CAPACITY TO FINANCE HOUSING (cont…) 6. Informal and formal employment activities were the sources of income for 65% and 35% of households respectively regardless of tenure status 7. Average declared household income was Tshs. 132,175 while expenditure was Tsh. 198,907 8. The feeling of security was the corner stone of the demonstrated capacity to finance housing 9. This was most likely the outcome of the Government policy in support of informal settlements over the last 35 years 10. There was a huge unexploited potential for housing finance upgrading

Table 1: HOUSEHOLD SAVINGS AS THE MAIN SOURCE OF HOUSING FINANCE Mwana-nyamala % Buguruni Makanga-rawe Average Savings and selling of assets 87 84 90 Friends and relatives 1 5 2 Loan from employer 3 2.6 SACCOS Others 6 11 5.6

Table 2: HOUSEHOLD MONTHLY INCOME BY TENURE STATUS (Tsh Table 2: HOUSEHOLD MONTHLY INCOME BY TENURE STATUS (Tsh. 1,250 was equivalent to US$ 1 at the time of survey) Renter House-hold Owner Overall Settle-ment Mean (Tsh) (thousands) Median Mwana-nyamala 118.3 90.0 154.7 120.0 129.7 100.0 Buguruni 121.7 151.1 129.0 97.5 Makangarawe 122.1 87.5 197..2 96.0 142.6 119.8 162.1 110.0 132.2

Table 3: COMBINED EXPENDITURE FIGURES WERE MUCH HIGHER THAN INCOME, SUGGESTING UNDECLARED INCOME Buguruni (Tsh.) Makanga-rawe Mwana- nyamala Average of all Average income 129,039 142,591 129,692 132,175 Average expenditure 302,782 208,137 160,999 198,907

FINDINGS (cont.) 11. To supplement income, particularly for housing finance households borrowed money from friends, relatives and to some extent employers. 12. Borrowing from formal financial institutions, banks particularly was insignificant. However, if loans were to be available, 46% of willing borrowers would borrow up to Tsh. 5 mill; 24% Tsh. 5-10 mill; and the rest up to Tsh. 25 mill. 13. Households saved (about 70%), primarily for emergency purposes (41%). Others include to build a house including buying land (17%); to establish income source (15%), school fees (7%) and others (18%) 14 Saving in form of building materials did not count as part of household savings, yet it was a common practice among the house builders to accumulate building materials.

Table 4: SIZE OF A LOAN HOUSEHOLDS WISHED TO BORROW Amount (Tsh.) BUGURUNI % MAKANGA-RAWE % MWANA-NYAMALA % AVERAGE OF ALL % Up to 1,0000 2.6 5.3 2.3 >1,000,000 -10,000,000 28.9 48.1 46.6 43.5 >5,000,000-10,000,000 27.6 29.9 21.5 24.4 >10,000,000 – 20,000,000 22.4 13.0 15.9 16.6 >20,000,000 18.4 3.9 9.1 10.2

Table 5: CAPACITY FOR UPFRONT PAYMENT Amount (Tsh.) BUGURUNI % MAKANGA-RAWE % MWANA-NYAMALA % AVERAGE OF ALL % 10,000 -50,000 31.4 44.2 29.0 32.7 >50,000 -100,000 14.4 13.0 21.2 18.1 >100,000 -200,000 19.7 16.3 16.4 >200,000 – 500,000 13.2 10.4 15.9 11.9 >500,000 – 1,000,000 9.1 8.7 9.2

Monthly repayment (Tsh) Table 6: AMOUNT THAT HOUSHOLDS WERE ABLE AND WILLING TO PAY MONTHLY TO SERVICE A HOUSING LOAN Monthly repayment (Tsh) Buguruni % Makanga-rawe Mwananya-mala Average of all Up to 15,000 30.1 42.9 22.4 28.0 >15,000 to 50,000 52.6 56.8 53.3 >50,000 to 100,000 7.9 7.8 13.6 11.5 Above 100,000 5.2 3.9 3.0 3.7

CONCLUSION The relatively good quality of houses and infrastructure in the informal settlements demonstrates a capacity to finance housing and feeling of security to invest in housing. The demonstrated capacity to finance housing constitute a ‘building block’ for an innovative, affordable and sustainable housing finance system. Thus, there is a need to recognize, organize and build on this capacity as a way of addressing the thorny issue of housing finance for the majority of Tanzanians. However, appropriate housing finance upgrading strategy and action plan need to recognize the peculiar characteristics of the housing markets: the incremental and subsistence nature of housing delivery; the informal sources of employment and income; dynamic affordability and willingness to borrow and repay; and savings in form of building materials.

AUTHOR’S BIO DATA Tumsifu Jonas Nnkya (PhD), a Tanzania citizen educated as town planner, has 27 years of experience as a trainer, researcher and consultant in urban development planning, urban design and housing. He has published papers, books and contributed to several UN-Habitat publications as a member of the UN-Habitat Advisory Board on Human Settlements Research Network (HS-Net). His forthcoming planning practice research based publications include: Collaborative Turn in Planning Practice, and Why Planning Does Not Work in Tanzania. As a consultant and advisor, Dr. Nnkya has worked for the Government, International Development Agencies, Embassies and participated in several national and global meetings. He is a member of several local and international professional associations and policy making bodies.