Homeward bound: Increasing the supply of affordable housing is a crucial concern

The housing shortage in Algeria has posed a key challenge to the authority of the government, igniting protests in cities across the country and highlighting stark disparities. Despite steady GDP growth, an increasing number of Algerians lack access to affordable housing, while many are left to take their chances in the informal housing sector. High demand and a scarce supply of housing have culminated in an estimated shortage of 1.2m units, representing “the biggest problem that confronts the government,” according to M’hamed Sahraoui, the CEO of real estate firm Société de Promotion Immobilière Raoudhet El Feth.

PLANS & PROGRESS: This problem is being addressed by the state with the implementation of a €40bn programme under the government’s current five-year plan to construct 2.4m homes by 2017. The housing programme envisions the building of 1m rental public units, 900,000 rural units and 550,000 state-aided housing units, with an estimated 240,000 new homes to be completed each year. Thus far, a number of new housing projects have been delivered in 2012, with 570 new social housing units (logements publics locatifs, LPL) allocated to the residents of Aoulef, while another 520 subsidised housing units (logements promotionnels aides, LPA) were distributed outside of Constantine as part of 8000 new LPAs expected by the end of 2012. Progress has been made in producing several rural housing projects, with 310 units completed in May 2012 in Mechraa Houari Boumediene. Additional initiatives exist to boost the number of high-end houses and clean up shantytowns with the slum eradication project Résorption de l’Habitat Précaire, which aims to demolish 553,000 illegal homes and replace them with 300,000 safe housing units.

DOMESTIC BLUES: Despite these accomplishments, much work remains to be done, with only an estimated 30% of projects launched despite the fact that the current five-year plan is more than half over. Though it is evident that several programme targets will not be met on time, the state’s ability to identify the reasons behind the slow implementation of projects will be crucial to future progress. For example, of the estimated 1800 building developers constructing new homes, approximately 1500 are Algerian local firms, the majority of which generally only take on smaller projects of 100, 200 or 500 units. These domestic companies are hindered by a serious lack of access to credit and affordable land, and often suffer from periodic interruptions in the provision of materials, namely cement. Local small and medium-sized enterprises (SMEs) also experience difficulties in acquiring skilled labour, while workers have problems commuting from the countryside to cities for work due to transport deficiencies. Such issues lead to serious delays in building completions across the system. One such example is a project in Oran to construct 8500 units: though originally set to be finished in 2004-06, construction is nevertheless still ongoing.

HELP FROM ABROAD: As a result of various obstacles, the government has increasingly turned to foreign construction companies to realise important, large-scale housing projects. “There are an enormous amount of possibilities and opportunities for projects in government programmes. Nevertheless, there is a serious deficit in qualified companies, therefore decision makers often rely on foreign firms,” Sahraoui told OBG.

Despite its reliance on international firms, the state has steadily integrated the lessons learned from local SMEs into its programmes to encourage the development of these businesses. Improvements in the regulatory and political environment are increasing the ease of doing business, expanding the project capacity of domestic firms, and attracting foreign investment through reforms in loan provision, land access and a number of other areas. The incorporation of these lessons should provide greater assistance to public and private firms in achieving government objectives more quickly and more efficiently, to every one’s benefit.