Housing subsidies in the public sector in Zambia

4 THE WORLD BANK yc. iDEVELOPMENT ECONOMICS DEPARTMENT / URBAN AND REGIONAL ECONOMICS DIVISION Tjrbal 'ndaS nal Report No. 81-6 HOUSING SUBSIDIES IN THE PUBLIC SECTOR IN ZAM4BIA DINH HItNH BISH SANYAL NELSON VALVERDER MICHAEL BAMBERGER July 1981 This Report was prepared as part of a program of Monitoring and Evaluation of Urban Shelter Programs which ic being conducted by DEDRB. The views reported here are those of the authors and they should not be interpreted as re flecting the views of the World Bank or its affiliated organizations.  PRESENTATION in late 1978 the Government of the Republic of Zambia requested the World Bank to conduct a study to estimate the extent and impact of housing subsidies on the Zambian economy, placing particular emphasis on their effects on the housing market. The study was designed and the field work executed by Dinh Hinh, a Young Professional assigued .to the Urban and Regional Economics Division and Bish Sanyal, an urban planner who was based in Zambia as part of a more general evaluation of the First Lusaka Upgrading 1/ and Sites and Services Project. Nelson Valverde and Michael Bamberger collaborated in data analysis and the preparation of this report. The primary purpose of the report is to provide an empirical base for the future discussion of policy issues related to housing subsidies. Although every effort was made to ensure that the research was conducted as rigorously as possible, a study of this kind can only indicate the relative orders of magnitude of the different types of subsidies rather than present very precise numerical estimates. This is due partly to the fact that public accounts do not permit a precise identification of all types of subsidy and partly to the fact that rent and price controls make it vek:y difficult to estimate the true market value of different types of housing and hence to comput,4 the real subsidy received. An additional source of error is caused by the fact that estimates were based on replies to questionnaires sent to local aahorities and parastatal organizations, not all of whom replied. As a consequence of the above factors the figures presented probably underestimate the true magnitude of the subsidies.  The authors would like to thank Jack Bahal and Terry Higham of the Provincial and Local Government Administration for the very considerable help given in assembling the data, and to the many local government and parastatal organizations who'were so generous in the provision if information. 1/ The evaluation was financed jointly by the Internati'onal Development Research Center of Canada (IDRC) and the World Bank, and was conducted by the Lusaka Housing Project Evaluation Team with technical assistance from the Urban and Regional Economics Division of the World Bank. A final report on this evaluation was completed in June 1981 (Bish Sanyal, Nelson Valverde and Michael Bamberger "Final Report on the Evaluation of the First Lusaka Upgrading and Sites and Services Project". DEDRB June 1981) and is expected to be published by the Government of Zambia.  TABLE OF CONTENTS Page No. I. History of Housing Subsidies in Zambia 2 II. Background and Methodology 6 III. The Total Magnitude of Housing Subsidies 12 IV. Who are the Beneficiaries of Housing Subsidies? 15 V. Differences in Housing Subsidies by Employment Sector and Type of Subsidy 23 VI. General Considerations and Conclusions 31 Appendix 1  2- 1. History of Housing Subi;idies in Zambia' The present housing subsidy policies in Zambia have their origins in the pre-independence era, and in order to understand them, it is useful to review briefly the history of housing subsidies in Zambia. The primary characteristic of the pre-independence period is the existence of two separate approaches to the housing problem of two different sets of people, spatially segregated on the basis of their color. The first group were the Europeans for whom subsidized or free housing was considered one of the pre-requisites of their employment. All of them were accommodated by their employers; either the Colonial Government, the British South African Company or the Copper-mines. The policy with regard to the housing of native Africans had two aims: (a) to provide an adequate supply of semi-skilled labor, and (b) to control urban migration. Thus, the .929 Employment of Native Ordinance signals the origin of the policy of tying housing to employment. This had the dual aim of placing on the employer the obligation of providing housing for the labor force and of ensuring that the loss of employment meant the loss of a house and consequently the return to the rural areas. Africans were expected to work in the cities during their productive years, and then retire to the rural villages. Although the requirements of a more stable labor force brought changes in the original policy of only providing short term housing for single men, the essential policy of tying housing to employment remained throughout the pre-independence era. 1/ This section is a summary of a longer report, "tHistory of Housing Subsi- dies in Zambia" by Bish Sanyal.  [3 As the demand for labor grew, families were permitted to move to the cities and women gradually began to enter the labor force. The growth of the native urban population lead to the founding of the African Housing Board in 1948 with the responsibility for "design and erection of housing for Africans throughout Zambia in collaboration with, or on behalf of,local authorities." Through lack of financial resources the Board was able to have little impact on the overall housing stock. As on later occasions, the attempt to stimulate home ownership failed, and virtually all of the native labor force continued tu live in rented or free accommodatiorsprovided by the employer. The tradition had by now become well established that employees had the right to housing at sub-econom