Housing Policy Reversionism and Contradictions in Ghana?

Housing Policy development can be traced as far back as the 1920s when the Dispossessed Person’s Housing Scheme was operationalized to provide some compensation to people whose houses were compulsorily acquired in the so-called public interest. After over 3 decades of policy vacuum, characterised by piece-meal attempts to recognise housing in some policy documents by succeeding Governments, a new National Housing Policy was promulgated in 2015. This brief article raises two main issues - policy reversionism and policy contradictions - for further consideration; shows their interconnectedness and how they combine to contradict the spirit of the current housing policy.

Housing Policy Reversionism

First, the issue of policy reversionism becomes clear after a review of housing policy change in Ghana from 1920 to 2015 (see Kugbega, 2015; Arku, 2009). Reversionism is the principle of reverting to the conditions, customs, ideals of an earlier era. This process is similar to reversionism and recidivism in theology and criminal justice theories respectively (Sarfoh, 2010).  In theology, reversionism is viewed as the process of a Christian backsliding after having been reformed. In criminal justice, recidivism entails the process of “reversion of an individual to criminal behaviour after he or she has been convicted of a prior offense, sentenced, and (presumably) corrected” (Malt, 2001:1).

So, what is the evidence of reversionism in housing policy development in Ghana? Between 1920 and 1984, housing delivery was largely state-led. However, the period was also characterised by reversionism. The Military Government led by the National Liberation Council (NLC) and the first civilian Government (Progress Party) after the overthrow of Nkrumah, liberalized housing policy through privatization, deregulation and non-budgetary allocations to subvented state enterprises. The idea was to encourage a private sector-led delivery of housing due to inadequate state resources. Privatization of state assets was however alien and unfavoured by the populace. Thus, coupled with economic hardship, ripe conditions returned the Military to power, led by the National Redemption Council (NRC) and subsequently the Supreme Military Council (SMC) I & II. It is believed that for populist reasons as a way of legitimizing their actions, these military governments reverted to state-led housing delivery in a grand style, despite inadequate state resources.

Secondly, during the Armed Forces Revolutionary Council (AFRC) regime (another military government in 1979), price, rent and exchange rate controls were stringently reinforced without recourse to legal systems (Jeffries, 1982). These draconian approaches and populism were meted out as punished to so-called economic saboteurs – essentially targeted at the rich, landlords and traders who were not necessarily rich (Sarfoh, 2010) - in the name of probity and accountability. Further, the Rent Act, 1963 (Act 220) forbade rent advance payments exceeding 6 months. Fast forward 2015, history is repeating itself. The Rent Act is currently under review. The Draft Rent Bill seeks to reform the existing rent regulations, remove inherent constraints on housing supply, while maintaining the protection it offers low-income and vulnerable tenants from abuse and arbitrary actions by landlords. One of its propositions according to the Deputy Minister for Housing, Mr Sampson Ahi, is to control rent advance period by reducing the rent advance period from 6 months to 1 month. This is a clear instance of housing policy reversionism to an ideal – rent control - established as debilitating to housing market development (cf Malpezzi et al, 1990; Willis & Tipple, 1991).

Housing Policy Contradictions?

Objective 1 and 2 of the new National Housing Policy are:

1.      To promote greater private sector participation in housing delivery;

2.      To create an environment conducive to investment in housing
for rental purposes.

Policy initiatives to achieve the objectives include:

1.      Provide fiscal and monetary incentives for increased private sector investment in housing infrastructure for those benefitting lower-income households. The details of these incentives are contained in the country's investment code;

2.      Review the Rent Act, Act 220 (1963) to streamline rent regulations and empower the Rent Department to encourage investments in the construction of rental housing as well as the protection of vulnerable households from abuse by house owners.

However, Government fiscal policy appear to stand in contradiction to the ideals espoused by the new housing policy. Two of such government actions are identified below:

Rent Tax

In the same year - 2015 - when the new Housing Policy with a beautiful vision was promulgated, the Income Tax Act, 2015 (ACT 896) was also passed to introduce a Rent Tax - 8% in the case of residential premises and 15% in respect of commercial premises of the gross rent paid to Landlords/landladies - to be withheld by tenants and remitted to the Ghana Revenue Authority. Rent tax reduces investors cashflow and increases the risk of profitability, which could make housing investment relatively unattractive and thus render the vision of the policy elusive.

Rent Advance Payment Reduction

As indicated earlier, there is a proposal to reduce the rent advance payment period from 6 months to 1 month. Already, most landlords require on average 2 years rent advance in the major cities because the 6 month rent advance may not be worth their investment. From an investment perspective, rent advance is a mechanism to reduce investors' risk and increase their initial yield, to help them recoup upfront some portion of the substantial investment they have made in housing. A reduction in the rent advance period increases investors' risk and reduces their initial yield, which make housing investment relatively unattractive. Empirical evidence shows that as rent control laws became restrictive, availability of rental accommodation declined with house owners unwilling to be subjected to excessive control over rent pricing (Sarfoh, 2010; Malpezzi et al, 1990; Willis & Tipple, 1991). Rent controls were historically adopted as political instruments whenever governments (the Socialist and Marxist political administrations- PNDC) wanted to garner support of the masses to legitimise their stay (Sarfoh, 2010). It appears the socialists and Marxists are back with a policy reversionism tactic in rent control, perhaps for the sheer populism to garner electoral votes since the polls are about two weeks away. A few important questions arise.

Pertinent Questions

1.      Now, in spite of the need to rake in more revenue for Government, how and in what ways does a rent tax and a reduction in the rent advance period help to achieve the policy objectives of the new National Housing Policy?

2.      Is the reversion to rent control an exercise of populism against the economic saboteurs – landlords and investors - or an act of exercise justice for poor tenants in a corrupt housing market?

3.      Was the new National Housing Policy dead on arrival?

Kenneth A. Donkor-Hyiaman, MPhil (Cantab)

Doctoral Researcher (Real Estate and Planning)

Managing Partner, MeTis Brokers (Private Equity Real Estate Investment Firm)