The main scope of the project paper is to critically address the issue of shortage of housing impact from short term, medium term and long term perspective and also focuses on the reduction of inflation measures in Malawi.
This project paper is aligned in two main sections one which addressees the Housing shortage element in Lilongwe, Malawi and the other looks at the monetary policy and fiscal measures to control inflation.
Section one commences with an Introduction and Background expressing the nature of the study area Lilongwe, the capital city of Malawi. It further highlights on the causes of housing shortages in Malawi with respect to several references such as the Malawi Housing Profile complied in Kenya for UN-Habitat. The proceeding segment entitled the effects of Housing shortages aims to address two main areas of concern. The first portion looks at the short, medium and long term effects of having inadequate supply of housing in the capital city of Lilongwe. The second segment of Section one looks at the short term and long term effect of the government placing a price ceiling on rental charges. The author argues that the short term effects are beneficial especially to a single group of customer/tenants as they are able to find cheap and affordable housing. However, looking from long term perspective, price ceiling appears would do more damage than good to the housing industry. New housing is not constructed since there is no inducement to build it. With the escalation of building costs (usually as a consequence of inflation), the old level of rentals will not return a revenue. Contingent on the magnitude of money reduction given that old rentals were legally petrified, rentals for the new housing might be ten or more times as high as rent in corresponding area in the old. As a result, existing renters in old houses are disinclined to relocate, no matter how much their families increase or their current housings deteriorate as is the case of Area 18 suburbs among others.
Section two looks at various monetary and fiscal measures by the Malawi government to control inflation. The monetary policy elements discussed includes control of bank lend rate, and direct control of credit creation. The fiscal policy looks at taxation and reduction in government spending as the key measures towards achieving a stable and reduced inflation figures.
1. Introduction and Background
1.1. Demography of Lilongwe City
Lilongwe is the capital city of Malawi with a population of about 1 million and it covers 456 km² land area. 78 percent of the city’s inhabitants is destitute and survive on less than 15 percent of the land area in such unstructured suburbs as Kauma, Mgona, Mtandire, Kawale, and Mchesi just to mention but a few. The Lilongwe city has an estimated total household of 247,379 and over 75 percent of the resident dwell in informal areas (NSO,2009). The housing typology comprises of low-density, medium-density, high-density permanent for intermediate wage earners, and Traditional Housing Areas (THA) for low-income employees. Additionally, there are the slum areas that are exceedingly high density (KRI/NIPPON Co Ltd, 2010).
The nature of poor land administration and the deficiency of a proper housing policy set hurdles for the housing situation. Formal housing is therefore insufficient and has caused the growth of population in the slum areas. The majority of slum inhabitants are residing in below par housing environments with scarce societal infrastructure and absence basic city services. Development associations functioning in Lilongwe for instance Centre for Community Organization and Development (CCODE) and Habitat for Humanity Malawi (HfHM) are contributing in the delivery of low cost housing in the urban areas as a remedy to the low supply of housing in the city. The Government is also functioning with these associations in providing low-income housing for public workers who have not profited from the Housing Scheme. The rate of the housing provision for the Government and associations seems slow and the housing units of all classes appear to have an enormously great demand. This is fundamentally as a result of the absence of reasonably priced housing finance which has caused large scarcity of housing units in Lilongwe.
It also appears that there is a substantial enormous variance in the rentals of units in the cities with Lilongwe recording the highest prices and sale prices and Zomba city having the least. It has been perceived that if the monthly rentals of Blantyre are K100,000, the same housing unit would draw an amount of about K250,000 same periods in Lilongwe City, K70,000 per month in Mzuzu and monthly rate of K50,000 in Zomba. The effect of the housing shortage in Lilongwe has not been taken earnestly into account in the development circles of the Lilongwe city council. Consequently, there is the necessity to assess its socio-economic effect to the inhabitants.
1.2. The Causes of Housing Shortage
The chief stumbling block to the delivery of sufficient shelter has not constantly been deficiency of funding but relatively an absence of will on the part of the government and also the rising cases of corruption as some authorities choose to thrive on chaos. LCC (2009) addresses that the government’s persistence that the remedy to the African housing crisis should come from within the monetary assets of the African population barred the consideration of the nation’s financial resources to the resolution of the problem.
UN-HABITAT (2009), stresses that variations in the quality of new housing being constructed may be credited to the broader political and social element which regulates how resources are dispersed amongst communities. So many causes have impacted to the less supply of housing in developing countries. In Lilongwe city, the capital of Malawi; the housing shortage emanated also as an effect of urbanisation. Urbanisation pressures arose from the city’s surrounding villages, and refugees from Mozambique as well as other neighbouring countries which intensified comprehension of household ownership desires, instigated by the lesser waged clerical and other employees.
A United Nations Report (2008), affirms that insufficient housing be regarded as a multi¬factorial plague, high rate of urbanisation, monetary and fiscal reforms, natural disasters and political measures such as the change of government ruling parties and wars, all have impacted to the shortage of housing problem. In Lilongwe, Malawi; research further shows that due to the high rate of urbanisation, the nation’s purposefully prejudiced investment policy hostile to the urban housing section, and the slow pace in enhancing housing building regulations are some of the major causes of housing shortages. The small salary payees in Malawi are side-lined and in extreme demand of sufficient housing because of the increasing costs and complexity to have access and security to mortgage finance. For instance, the challenge of housing encountered mostly by the poor has been primarily problematical by privation of access to land.
KRI/NIPPON Co Ltd, (2010); proclaims that Lilongwe’s backlog in housing supply is also aggravated by great rate of unemployment making a large number of people not having access to basic needs. It can be argued that the Lilongwe city council’s mandatory knocking down of houses have cause many people to be homeless. The Malawian government has constructed few houses which are not enough to accommodate those who were made homeless by its mandatory building demolitions as an urban clean-up programme by the local authority.