A paper by Karol Boudreaux, published in the journal of the Institute of Economic Affairs, argues that government intervention in African housing markets may have contributed significantly to the growth of informal settlements. Boudreaux, a Senior Research Fellow at the Mercatus Centre at George Mason University, points out that in a relatively unencumbered market, entrepreneurs search for available real property, build housing and sell their products to meet the rising demand of housing consumers. However, in Africa a maze of regulations and administrative barriers has imposed high transaction costs on formal-sector housing entrepreneurs. By raising the costs of providing low-income housing, the paper argues, governments bear much responsibility for driving formal-sector entrepreneurs out of the housing market and for driving their citizens into slums.
African governments are increasingly recognising that the best strategy for improving slums is through upgrading projects that provide slum dwellers with improved tenure security and better infrastructure. However, Boudreaux notes that improved tenure security alone will not solve the housing problems of the poor. Her suggestions include that African governments reduce the regulatory and administrative burdens that formal-sector developers face, continue to control inflation, and improve the institutional environment so that the poor can access housing micro-finance and other financial tools. Governments must also allow local entrepreneurs to do more to provide much-needed services in informal settlements. By taking these actions, Boudreaux argues, African governments will go a long way towards empowering and improving the lives of millions of slum dwellers.
(Source: IEA Journal, Housing the Poor: The Role of Government (Volume 28.2), June 2008)