Affordable Housing | View of Potrero
“Building an ‘affordable’ house costs as much as a house at market price” my friend Chris Block, currently director of the Chronic Homelessness Initiative in San Francisco, told me almost two decades ago.
This is still quite true. Modest savings can be achieved by deploying different construction techniques, materials and modular units, such as those manufactured by Factory_OS. Most of the time, however, the only way to cut costs significantly is to build (much) smaller units, with common amenities (shared bathrooms and kitchens), thus reducing the number of appliances and fixtures. to install ; reduce borrowing rates; or obtain subsidies, such as tax exemptions, credits or the direct provision of land or services.
Although knowing these challenges, several years ago I helped start an affordable housing company in Rwanda, an East African country that is home to over 13 million people. The quality of shelters varies greatly depending on income and location. The poorest people in rural areas mostly live in houses with mud walls, with little access to indoor plumbing or electricity. In contrast, over the past decade the capital, Kigali, has grown from a city of dirt roads, traditional houses with thatched and clay roofs, and a handful of stylish cafes and restaurants. westerners to a city in which even a five-star tourist is comfortable. While the asphalt cobblestone streets are not universal, the urban area now offers a mix of sleek, mid-rise modern villas and basic tin-roofed brick houses that could fetch $ 100,000 or so in Detroit or Dayton. . Few units are available for less than $ 60,000; almost none below $ 30,000.
See Far Housing – named after a Rwandan saying, “if you see far, you will go far” – was determined to build medium quality residences in Kigali, at an affordable price for working class families: teachers, civil servants , tradespeople . We planned to offer a mix of studio to four-bedroom apartments which, if they didn’t meet San Francisco standards, would be considered solid entry-level homes in Michigan or Ohio, to the reach of families with an annual household income of approximately $ 15,000. With apartment ownership roughly as desirable to Rwandans as it was to Americans in the 1950s, community amenities – playgrounds, sports fields, gardens, even a one-of-a-kind car-sharing pod – would be important selling characteristics.
Neither I nor the rest of the management team were paid or even reimbursed for the 20-25 hour flight to Kigali from the east coast or the west coast. But we wanted to make a profit, mainly to be directed to the Agahozo-Shalom youth village, which had emerged from the genocide of the mid-90s in Rwanda to care for over 500 vulnerable young people, and for which I was a member. founder of the board of directors.
When See Far started, the Rwandan government offered to provide public infrastructure – roads, water, septic tanks, etc. San Francisco, where homes sell as soon as they’re built, doesn’t require more than 30% of new homes in a complex to be affordable. Obtaining infrastructure grants was essential for the project to be profitable. See Far eagerly opted for the medium density regime, voluntarily proposing that more than half of the units meet the government’s affordable criteria. This was possible, in part, through the use of an efficient brick technology pioneered by the Swiss Agency for Development and Cooperation, SKAT bricks, with the cheapest units of three bedrooms or less.
To build houses See Very Necessary Land. Our team identified a beautiful 7.5 hectare plot not far from Kigali International Airport, for sale at a very reasonable price, mainly because it was zoned industrial. The city of Kigali was considering using it as the first central wastewater treatment plant, an unlikely outcome given that another site was already being developed for this purpose. Fortunately, the general plan was being revised, with a strong interest in increasing the supply of housing. See Far was able to rezone the property, for which we had purchased an option, for mid-density residences, greatly increasing its value.
We secured funding from sympathetic and extremely patient American and Swiss investors, and began building our first 52 units on half a hectare, a decisive step towards building another 600.
Every developer on the planet knows that nothing is going as planned. The trick with building is knowing when to zigzag, when to zag, and sometimes, when to stop. The first brick in the See Far wall, so to speak, was SKAT. Brick is beautiful and can be made in Rwanda using widely available clay. But SKAT’s approach was not designed for the up to five-story buildings we were developing, civil engineers in Rwanda knew little about its design capabilities, with the blocks being significantly more expensive than SKAT expected and hard to find. Masons tended to spread too much mortar, creating an uneven effect that spoiled the cement, imported at high prices for gold from Tanzania, degrading any lingering savings that could have been taken out of the process. Our expected profits have gone down a notch.
Not that there are many alternatives. A landlocked country without rail access, importing anything into Rwanda is expensive. Apart from clay, few natural resources are available: no significant forests for harvesting wood, limited capacity to produce cement, ceramics, even metal frames. Experiments are underway to develop bamboo and recycled plastic as roofing material; adobe offers niche opportunities. The only cost effective substitute available for bricks is CLC block, which depends on the imported binding material and is only recently available. Unskilled labor is cheap, accomplished workers are hard to finance.
Construction was going well, managed by a fairly knowledgeable South African, Johan Geldenhuys, with procurement managed by a dedicated and knowledgeable Rwandan, Eric Kalisa. There were manpower issues, of course, with a shortage of really skilled tradespeople and middle managers. The government was moving slowly with our request for an infrastructure grant, asking for multiple and repetitive rounds of requests for recasting and clarification.
Almost half of the units were pre-sold, with small deposits falling. We had hired a lively team of volunteer architects in Monterey and San Francisco who carefully planned the next phase.
Then COVID happened.
Supply chain disruptions; blockages; curfews; rapidly escalating material prices; no more blockages. See Micky Padway, Far’s immunocompromised (volunteer) CEO, contracted COVID. After more than a week of terrible worry, she regained faltering health, but was largely grounded in New York City, unable to risk travel. I flew to Rwanda several times during the pandemic, getting tested several times, but left a trip early in the fall of 2020, fearing that I would be trapped in the country for fear of being exposed to the virus. Did I mention the blockages?
After giving its preliminary approval for our medium density project to receive infrastructure grants, the Rwandan government informed us that, given the ruin of their general fund, this was no longer possible. We should achieve 70 percent affordable, which would open up access to a largely unused pot of money for affordable housing from the World Bank.
We have reworked our prices to reach 70%. It was impossible, especially since apart from an injection of international funding, the global pandemic had devastated the Rwandan economy. The number of pre-sold units fell to a small handful. The government has not responded to our requests for infrastructure Hail Mary. Our homes wouldn’t sell unless the toilets flushed the toilet and the lights were on, at a cost of about $ 1 million.
Insert the curse of your choice here.
We zapped, getting infrastructure funding from a sympathetic social investor, betting the government would eventually revert to its original medium-density deal. Supported by US and EU donors, the government removed value-added taxes for investors, a conceptual savings of 18% on materials, although difficulties in obtaining the exemption and eligible suppliers raising their prices reduced half that value.
Construction delays, material price inflation, the extra expense of a futile attempt to obtain government grants had eroded the profits of our 52 units. But the value of our land has increased, potentially offsetting these long-term losses.
We hope to complete the units next month. We do not (yet) have the $ 100,000 needed to include a children’s play area and sports fields, amenities that would fully demonstrate the benefits of medium density living. Sales are accelerating, although the more expensive units, the four bedrooms, have yet to attract buyers. We are optimistic that once the homes are fully equipped with doors and windows, lighting fixtures and water, they will sell. Then again, if we weren’t optimistic, we wouldn’t be building affordable houses in East Africa.
Like many developers, if we knew how difficult the journey would be, we never would have started it. But then, 52 Rwandan families would not have a nice place to live, many of them their first step on the homeownership ladder.
As hardly any other affordable housing developer is active in the country, the government plans to reduce its accessibility percentage to 40% for medium density complexes, building on its original infrastructure offering. Our fingers are crossed as our minds anxiously consider what to do next.
See Far is raising funds for a playground; please email email@example.com.