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Affordable housing: Where is it?
Published in The Saudi Gazette on 12 - 12 - 2012

THERE is not a housing shortage in the Kingdom. Plenty of houses and apartments are being constructed, as evidenced by the busy building sites we see throughout the country. There is, however, a serious shortage of affordable housing, especially for young couples seeking to buy their first home together.
The irony is that the lack of such lower-cost housing pushes up the price of the little that is available. Increasing the number of affordable housing units being built is the obvious solution, but unfortunately it is not so easily done.
The problem for residential developers is that they themselves are having to pay ever more for land on which to build. One company, which has run a land-bank of property acquired over time with a view to ultimate development, told a recent industry meeting that the value of some of the land bought, even ten years ago, had increased in value many times.
Clearly the developer will be banking that increase when he sells the housing at market prices. However, those in the industry who have not built up the cushion of a land-bank on which properties can be developed will have to pay top dollar for sites before they even start work. It is obviously more profitable to build expensive up-market homes than smaller properties. When all is said and done, the basics of building a compact house or a rambling mansion villa are pretty similar. It is only the extent of the structure that changes, and the returns to the developer increase disproportionately with the size of a housing unit.
Therefore, developers will not be interested in building affordable housing unless they can be persuaded. The new mortgage legislation in theory makes funding more easily available, but it is clear that only the already well-off are likely to benefit, if the affordable houses are not there to buy.
The obvious route, therefore, is for the government to specify that a percentage of every new development must be reserved for low-cost housing.
If builders protest that this could lower the exclusivity of the neighborhood, then they must build the low-cost housing elsewhere at exactly the same time as the expensive accommodation. Promises of future developments should not be accepted. If the low-cost housing is not finished by the time all the high-cost units are sold, then the developer should face a substantial penalty.
This ought to be a safe and efficient way to tackle the shortage of affordable homes in much of the Kingdom. However, the lack of reasonably priced accommodation in Makkah is a different challenge. Because of the huge seasonal demand, the base prices for even very modest apartments have reached absurd levels. Makkah's suburbs continue to expand as downtown properties become unaffordable. There is no obvious solution to this imbalance. The answer is certainly not to add extra floors to existing buildings, as is now being suggested. Unless the foundations and original design of these structures were made with an eye to eventual extra stories being added, any increase in the load and stress on a building is criminal madness. There will assuredly be disasters as buildings collapse. The authorities should resist this proposal vigorously and punish severely landlords who choose to go ahead anyway with this highly dangerous fix.


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