Urban infrastructure in Sub-Saharan Africa

Harnessing land values, housing and transport

Presented by Ian Palmer

Research by Peter Ngau, Liza Cirolia and Ian Palmer

21 July 2015

Nairobi case study

3.6 - 6 million people ?

Economic growth (GDP) 6.2% pa

Population growth 3.45 pa

Conceptual Framework:A VIRTUOS CYCLE

Planning

Infrastructure Development

Land Value Capture

Planning

Gain

Land Admin.

Good

Governance

High Exchange Value

Windfall

Sustainable

Development

High Use Value

High

Development

Value

Role of Taxation in Urban Development

• As urban areas grow and Cities become responsible for more decentralized services, they are equally faced with challenges to provide infrastructural and social services, for instance, transportation, water, sewerage, garbage collection, among others.

• One key area where local governments can achieve some level of self-finance in incomes is from land-based financing. These incomes can be achieved through widening the tax net for residential and non-residential buildings and land areas experiencing user change towards densification of development, such as rural-urban fringe.

Role of Taxation Cont.

• In the very ideal case value capture accounts for the land value increase or windfall emanating from contextual development dynamics, the latter attributed to public actions (primarily infrastructural investments), and not necessarily to the productive efforts of landowners.

• When governments carry out substantial public investments in new infrastructure and amenities, increases in ”land rents”, or rising land values in designated locations legitimately belongs to the creator of that value; in this case the government.

Role of Taxation Cont.

• In most developing countries, however, governments do not undertake substantial public infrastructural investments, at least in tandem with the needs of developers.

• What prevails instead is value additions that can be conceptualized to prevail when actions of private developers leads to densification of development, which in turn increases private property incomes.

• The additional stress to the existing infrastructures provides an adequate rationale for taxation of such increment in private gain.

Nairobi City County: Infrastructure Roles

SECTOR ROLES AND RESPONSIBILITIES

Lands, Physical Planning and Housing

Rating and valuation, property management, forward planning, development control, urban design, land survey, enforcement, rental housing development and management, low cost housing and slum upgrading

Roads, Public Works and Infrastructure

Transportation, engineering survey, roads construction and maintenance, highways, electrical, structural engineering and architectural services.

Agriculture, Livestock Development and Fisheries

Urban agriculture, food security, marketing, animal husbandry and fish farming

Water, Energy, Forestry, Environment and Natural Resources

Water and sewerage, street lighting, parks and open spaces and solid waste management

Institutional Context

• While the above functions may represent an ideal with the County taking responsibility for this range of services, the reality is that Nairobi has a complex institutional system largely due to the fact that most of the infrastructure intensive services are provided by parastatals with assets largely outside the control of the City.

Challenges for Nairobi

Solid waste

Roads and transport

Local roads Nairobi County

Kenya Urban Roads Authority

Public transport

Proposed Transport authority

Provincial/

regional roads

Kenya National Highways Authority

National roads

Note overlap

Water supply and sanitation

Regulator

Assetownership

Athi Water Board

Operations Nairobi City Water and Sewerage Co

Electricity distribution

Generationtransmission and distribution

Kenya Power

Public facilities

Health facilities Nairobi County

Emergencyservices

Communityand recreation facilities

KEY

Inner ring City Department

Middle ring City owned parastatal

Outer ringRegional or national parastatal

Integrated assets and operations

Operations only

Assets only

NAIROBI INSTITUTIONAL MAP

Summary of infrastructure access statisticsService % households

with access to infrastructure

Availability of bulk service

% of time service is

available, on average

Source

Watersupply

95% 70% NCC

18 hours (2012/13)

WASREB, 2014

Sanitation 60% NCC

72% WASREB, 2014

Sewered 28% WASREB, 2014

Electricity 80% Under-capacity (no data available)

Regular outages –variable across city (no data available)

KPLC

Access to services in Nairobi

• It is clear from the above statistics that the County faces serious problems. In the case of access to infrastructure, sanitation is the greatest concern. However, the existence of infrastructure at a property boundary is only part of the problem with the lack of continuity of service being of equal concern.

Kibera

Profile of infrastructure finance

Cape Town Nairobi Addis Harare

Population 3.74 3.60 3.5 1.8

Budget (US$ million) 2,179 224 930 261

Budget per capita pa 583 63 266 145

% budget on capital 30%? 10% 46% 2%

Dominant role of parastatals

Land based financing

• ‘In kind’ contributions common.

• Requirements to pay for electricity connector infrastructure.

• Infrastructure levy – but does not go to infrastructure.

• Informal land-based financing.

• Reverse value capture: City required to pay for internal services.

Valuing/rating land urban land

• In Nairobi, the valuation and rating system is of particular controversy

• According to Director of City Valuation:- Nairobi has about 250,000 titled properties

- Currently about 150,000 are rated

- A larger number is exempted

- Annual revenue from land rates Ksh. 2.5 billion

- Despite numerous attempts to revise the valuation roll (most notably in 2001 and 2005), 1982 roll is still used as the base for calculations

Property development in Nairobi

Extraordinary diversity of developers:

• Large international players.

• Local businesses.

• land buying and development companies (LBCs).

• Individuals

• Informal

construction of tenement housing

Tatu City

Conclusion

The potential for harnessing land values for Infrastructure Development in Nairobi exists. The challenges are:

• The lack of alignment between the roles and responsibilities of the County as per the new Constitution and current laws and policies

• There are weak mechanisms for land value capture. These include:

- persisting non-payment,

- plethora of rates exemptions granted to local and international institutions

Finally, political will is needed to ensure that money which is collected is used to finance infrastructure development.

Thank you

Urban infrastructure in Sub-Saharan Africa – harnessing land

values, housing and transport