People migrate to cities in search of economic opportunities and cities attract firms and investment because of the concentration of a diverse labor pool. With the productivity gain of agglomeration, urbanization and per capita income growth tend to happen concurrently. For most households, purchasing or building a house is the single largest expenditure they will ever make. A home is also typically the most important household asset and an investment that can appreciate in value over time, be used for collateral for borrowing and be an important component of intergenerational wealth transfer through inheritance. Where housing is located in proximity to schools, jobs and transit access, this directly impacts the quality of urban life and prospects for social mobility*.
However, Africa, urbanization is not accompanied by the level of per-capita economic growth or housing investment that is observed elsewhere in global trends. Incomes in Sub‐Saharan.
Housing stocks, along with investment and employment in related construction and finance industries, constitute a major component of national economic wealth. The key challenge for African cities, however, has been the comparatively low growth in per‐capita income, which limits the resources that households have to consume or invest in housing.
At the same time across the region, the formal channels through which quality housing is produced and financed face major constraints that limit access to a large share of urban households. Hence, the formal housing sector is only a small part of the economy because the construction and finance services have very little effective demand, evidenced by the lack of formal investment in housing across the region.
As urbanization continues, investment in formal housing is failing to keep up with increasing housing needs. Urbanization, driven both by the migration of people to cities and by natural population growth within cities, will continue to be the key demographic force shaping housing needs.
The majority of housing investment in most African countries currently comes from government investment or domestic savings rather than finance obtained through international capital markets as is the case in developed economies.
The housing sector, including housing finance, construction and development activities, can contribute to a substantial portion of the domestic economy. It can catalyze employment across these industries, which will further enhance growth.
Urbanization also shapes the supply and demand for housing beyond cities; as rural residents typically leave behind self‐built homes and migrate to cities in search of a better life and future, they find that they cannot build or afford urban housing. The key challenge is to resolve a spatial mismatch in which the concentration of population and employment exists withinthe city, but housing costs tend to be lower on the urban periphery or in rural areas because such locations are farther away from jobs and services and these units largely do not have infrastructure connections.
Due to lower land costs, peripheral urban areas attract migrant sand settlers despite the lack of government capacity to extend roads, water and sewer pipes, and electricity grids into these new expansion areas.
While housing options in these areas may be affordable to the urban poor, the additional burdens imposed by long commute times, public health problems from inadequate water and sanitation and the lack of education and health services represent substantial indirect costs to the households and the economy.
The UN estimates that more than 200 million people in the region are living in slums by 2020. The slum population is growing at 4.5 % annually, a rate which will result in doubling the slum population in 15 years. After this period, the majority of the world’s slum dwellers will live in African cities; currently all other regions are experiencing a rapid decline in the prevalence of slums.