National Housing Authority Program for the Construction of 5000

AcknowledgementsThe National Housing Authority extends its thanks and appreciation to the President of Liberia,Her Excellency Mrs. Ellen Johnson Sirleaf for her vision in directly establishing this deliverableas part of her 150-Day Action Plan.We are also grateful to all those who have helped to make this Program document a reality. Weare particularly grateful to the members of the Housing Sector Working Group that was formedto develop the Program for their time and valuable contributions to the effort. The WorkingGroup Members are as follows:Central Bank of LiberiaMinistry of Internal AffairsMinistry of Planning & Economic AffairsMinistry of Public WorksWe also acknowledge the invaluable suggestions received from the UN Habitat during thedevelopment of the document plus photographs from Ecohomes Liberia Inc.i

A HOUSING DEVELOPMENT AND HOME OWNERSHIP PROPOSALFOR LIBERIASatellite photograph of Steven A. Tolbert Housing Estate, built in 1979I. OVERVIEWHousing is a social good, an asset which promotes individual and collective dignity, privacy andsecurity. In the economic sphere, housing contributes to employment creation and, laborproductivity, community economic development and capital formation at both the micro andmacroeconomic levels. Housing also has impact on environmental management.Housing is an important component of the economic and social development of Liberia and theworld at large. It is an important part of national infrastructure development and is pivotal tosocial development, national competitiveness and economic growth. Availability of affordablehousing remains one of Liberia’s most pressing social/development problems. While somemiddle income and most upper-income housing are comparable to that in neighboring countriesof West Africa, facilities for low-income groups are substandard. However, across all incomecategories, the development of housing in Liberia has generally been unplanned with very littleattention paid to zoning and the provision of communal sites and services such as electricity,water and sewage treatment/disposal. The problem has been aggravated by constant migrationfrom the rural areas to the cities due to the civil crisis and the search for better economicconditions, causing a rapid growth of urban slums. Much of the demand for housing is related topopulation growth and accumulated unmet needs.According to the LISGIS National Population & Housing Census 2008 Report, the totalpopulation of Liberia in March, 2008 was reported as 3,476,608 persons (see Appendix I). Theprojected growth in population is expected to double the 2008 figure by 2041 if the averageannual growth rate of 2.1 percent persists into the future. It can be said that this is a relativelyshort period of time within which the provision of all public goods and facilities should alsodouble, if only to maintain the current standard of living and provision of services to thepopulation. Furthermore, if every Liberian household of average 5.5 persons were to have aseparate unit of housing out of a population of 3,476,608 persons, Liberia will need a total of1

Workmen laying laterite & sandcrete bricks at Ecohomes Schiefflin Town Projectsuch as architects, civil engineers, masonry, carpenters, plumbers, electricians, etc. Generally,housing constitutes a major component of household wealth, especially for low-incomehouseholds, and no doubt, housing wealth is increasingly gaining importance in the Liberianeconomy. For many households, it is the most important form of savings as homeownership isconsidered as a hedge against inflation in the medium term. In other instances, it is utilized ascollateral for borrowing by homeowners, thereby generating funds for other investmentopportunities and wealth creation.The very powerful role the housing sector can play in economic growth, recovery and sociopoliticalstability is what has underpinned efforts by the USA, Sweden and other developedcountries to place a very special and sustained policy focus on the housing sector throughsupport for construction and mortgage lending as discussed below. In Africa, the South Africanshave also clearly understood this linkage as indicated by Vuyisani Moss in his analysis ofvarying policy approaches adopted by the four African countries included in his study 1 .Whereas, Ghana had a very low ratio of Mortgage Debt Outstanding to GDP of only 3.9% in2006 versus the normal 7-15% range for most Middle Income countries, South Africa is high upat close to 40%, next to the USA and Sweden per the below table 2 :1 Vuyisani Moss, Preview of Housing Finance Systems in Four Different African Countries: South Africa, Nigeria, Ghana andTanzania, 2003, p. 92 Monica Hjeds Löfmark, Growth, Housing Finance & Land Administration Chain, National Housing Credit Guarantee Board(BKN), Sweden, 2010, p.53

The above analysis makes a very strong case for affirmative action by GoL aimed at improvingthe lifestyles of the Liberian people by injecting long term liquidity into the banking system, andtaking additional targeted affirmative action such as sharing of lending risks with the bankingsystem through credit guarantees and providing subsidies to low income housing via directbudget support for sites and services in order to remove impediments to effective demand forhousing, and stimulate growth and employment through this vital economic sector.A house does not only provide shelter but also serves as a measure of social standing andprestige. The lack of long term finance to enable low and medium income earners own theirhomes is one of the major issues that limit housing construction and delivery. This has a directimpact on the socio-economic development of the country. Accordingly, the rationale for thispolicy document is to chart a new path towards improving the socio-economic standards of ourcitizens and residents and the infrastructure of our country through a robust and dynamic housingdevelopment policy that will promote massive home construction, stimulate economic growthand create jobs throughout Liberia.III.AIMS AND OBJECTIVESThis Program aims to ensure the achievement of economic justice by making a large quantum ofaffordable housing available to Liberians in the low-to-middle income brackets for homeownership within the next 3-6 years. It proposes to start a new trend of well zoned and betterplanned housing developments across Liberia, to counteract the current pattern of rapidunplanned urban sprawl and slum creation due to a prior lack of a policy focus and poor interagencycoordination.The Program will strongly support the new Decentralization Policy of the Government of Liberiawhereby modern administrative hubs will be built to facilitate taking various public servicescloser to the people in the counties, by providing homes and ancillary facilities such as shopping,leisure and recreation, schools, police stations, etc., for civil servants who will work in the hubs,public schools, health centers, police, immigration, courts, local government and other facilities.Civil servants plus other Liberians and residents would be able over time to relocate to wellplanned communities nationwide. This will contribute to reversing the trend of rural-to-urbanmigration by creating viable alternative living environments outside of Monrovia.The implementation approach would be via Public-Private Partnership whereby GoL facilitatesaccess to title-free land through the NHA, contributes to the cost of sites and servicesinfrastructure that is planned with the technical support of the Ministry of Public Works (MPW),Liberia Electricity Corporation (LEC) and Liberia Water & Sewer Corporation (LWSC), andgrants investment incentives such as import duty exemptions to encourage experienced privatehousing investors/developers to provide complementary funding and construct the housingestates. The NHA would foster collaboration among the various parties mentioned above. GoLfunding through an integrated project budget in the Medium Term Expenditure Frameworkwould be placed under the NHA which would coordinate disbursements to relevant sectoragencies in collaboration with the MoF. This plus Corporate Social Responsibility fundingwould subsidize the low cost housing component of the projects by covering the significant sitesand services cost element which would not be passed on to the low income houses in the estates.4

network extends to them. This will lead to an increase in the number of civil servants seekinghomes to man the hubs in these counties, along with other value chain players.Increased economic and administrative activity will mean a stronger base of gainfully employedpersons who can enter into home mortgage programs and rental/lease-purchase of a significantlyincreased stock of apartments. The provision of viable urbanized environments in areas outsideof central Monrovia will also be more attractive to Liberians in Diaspora as a target for homeacquisition. Given the high and increasing level of Workers’ Remittances from US$260.0Million as of November 2010 to US$ 435.4 Million as of November 2011 12 , this could become akey source of funding to purchase the homes to be constructed under this program.B. Replication and ExpansionThe implementation approach of a Public Private Partnership that has been discussed above canbe replicated throughout the country. GoL seed capital for the zoning, layout and development ofsites and services in the cities can be provided either through direct MTEF budget programmingor from County Development Funding allocations. Additional subsidies could be providedthrough Corporate Social Responsibility programs of GoL Agencies such as NOCAL andNasscorp and/or entities like Mittal, Firestone, Chevron, China Union, Sime Darby, Putu IronOre and Golden Veroleum for their employees. We recommend that GoL engages theseentities to seriously consider this option versus higher outlays to build worker housing in thevarious concession areas. Soft loan funding will also be sought over the current MTEF periodto supplement the above funding for sites and services in consultation with the DebtManagement Committee of the Ministry of Finance.To overcome capacity constraints, construction work would be implemented by privatecontractors and/or experienced housing developers (e.g., CICO - China, Enable Properties/NovoDomus – S. Africa, Green Solar Companies - USA) under supervision of Project ManagementCommittees involving the GoL infrastructure agencies (i.e., MPW, LEC and LWSC), NHA,Ministry of Internal Affairs (MIA) representatives and private entities mentioned above. Thisapproach is very replicable and can be expanded across the country.C. Sequencing of Housing Development ProgramWe believe that as a minimum condition two main criteria should determine the timing and thefocus of the Housing Development Program. They are: a) population density of the county andb) location on the Vision 2030 growth corridor. However, as the GoL’s resource positionimproves and as the country’s capacity to simultaneously implement several housingconstruction projects through the PPP model is proven, the pace of the Program could beaccelerated. We should note, however, that in Montserrado, Margibi and Bomi Counties, basedon recent expressions of interest and ongoing discussions between the NHA and private housingdevelopers, the overall numbers could exceed 5,000 homes throughout the country over the next5-6 years if adequate funding can be sourced to make the contemplated investments. Below isthe tentative sequencing of the Program with the minimum number of houses per county formixed income housing estates with commercial facilities and other public facilities (e.g., policestations, schools, parks, etc.) as follows:12 Central Bank of Liberia, Annual Report 2011, p. 279

PROPOSED NATIONWIDE HOUSING DISTRIBUTIONNO COUNTY/LOCATION ACREAGE STATUS NO. OFUNITS1 MONTSERRADO Jah-tondoh/ 50 58 units being built on part of 20 250Brewervilleacres for low to middle incomelevel via CSR from NASSCORP;over 30 acres undeveloped. Privateinvestor EOI received. Fendall 100 20 acres developed with 50 units for 400middle to upper income level bySinlib Liberia a Chinese Developer,80 acres available to Sinlib or otherdeveloper subject to performance2 MARGIBI Schiefflin 300 Phase 1 covers 100 mixed income 600Townunits by American developerBroadcove (EcoHomes). Fundingof US$ 30 Million approved by USOPIC. Du River 500 Private investor EOI received. GOL 1,000has budgeted US$ 11.5 M in MTEFfor bridges and roads to and withinsite. Conservative estimate subjectto Ministerial Complex being built. Kakata 50 Land identified by County 200authorities and NHA on 14 Roadand Bong Mines Road. Privateinvestor EOI received. Firestone,China Union, BRE, MARCOemployees and civil servants aretargets.3 BOMI Tubmanburg 40 15 acres purchased on Ellen200Avenue and deed presented toPresident for signature. Other sitesidentified in Dewein District nearthe Po River and in Gbaa, next toSime Darby. Western Cluster ironore activities will support housinggrowth4 BASSA Buchanan 52 10 low income units already built 250by NHA. Shelter Afrique issponsoring business plan for mixedincome estate targeting Mittal,BRE, LAC and oil companyemployees.5 BONG Gbarnga 50 Two sites being considered onVoinjama Road and Meleke for2506 NIMBA Sanniquellie-Gantalow-to-middle income housing50 2.5 acres developed in Sanniquelliewith 10 units for low income thruCSR via NOCAL. Land to beidentified in Ganta on Monroviahighway for low-to-middle income30010

housing.7 LOFA Voinjama- 50 2.5 acres developed with 10 low 250Foyaincome units thru CSR fromNOCAL. Land to be identified inFoya (cross border trade activity).8 MARYLAND Harper-50 Land to be identified between the 250Pleebotwo urban areas for developmenttargeting Cavalla Rubber & DecorisOil Palm employees plus civilservants9 CAPE MOUNT Robertsport- 50 Land to be identified in the various 250Sinje-Madinasites.10 GRAND GEDEH Zwedru 50 Land purchased near Zwedru Sea. 250Deed before President for signature.Other sites identified on Greenville& Konobo Roads. Putu Iron OreCompany activities paramount tosuccess of this; also large Diaspora.11 SINOE Greenville 50 Land to be identified. High 250potential due to Golden Veroleumoil palm, logging and newlydredged port facilities plus PutuIron Ore export activity.12 GBARPOLU Bopolu 25 Land to be identified. Western 75Cluster and logging activity arefactors.13 RIVER CESS Cestos City 25 Land to be identified. 7514 RIVER GEE Fish Town 25 Land to be identified. 7515 GRAND KRU Barclayville 25 Land to be identified. 75Note: Distribution of units is based on demand driven criteria such as:1. Location on Growth Corridor2. Level of Economic Activity3. Decentralized Administrative Seat4. Population DemandGRAND TOTAL 5,000PROJECT SEQUENCINGThe project will be implemented in three phases. Phase one will target 750 mixed incomehousing units in the first 18 months. The second phase will target 2000 units in 24 months whilethe third phase will target the rest 2250 units in 30 months. It is anticipated that phase one willconstitute a pilot stage of the program where best practices and adequate financing arrangementscan be concluded to ensure the successful rollout of phases two and three.It is also worth noting that justifications for selection of targeted sites for Phase 1 and subsequentphases are based on the following:1. Economic potential2. Population concentration3. Administrative function11

Phase Duration Type/Number ofUnitsOne 18 Months 750 mixed incomelevelTwo 24 Months 2250 mixed incomelevelThree 30 Months 2000 mixed incomelevelSelected AreasFendallKakataBrewervilleSchiefflinTubmanburgBuchananGbarngaSchiefflinDu RiverSanniquellie-GantaZwedruGreenvilleHarper-PleeboGreenvilleVoinjama-FoyaCestosFish TownRobertsportBopoluBarclayvilleRemarksPilot-The number of units at anydesignated location will be builtincrementally based on demandSame as above except that areaswithin earlier Phase can be broughtforward if the demand is still highSame as aboveNOCAL funded low income housing project in Voinjama, Lofa CountyD. Stake Holder Contributions/InputsThe various key Development Partners required to contribute their expertise or provide supportfor the success of this Program are as follows: National LegislatureGiven the importance of the housing sector, the Legislature should be requested to considersetting up oversight Committees on Housing. The Legislature would also be instrumental in12

crafting and enacting various legislations on a National Housing Policy, the creation of aNational Housing Trust Fund plus other legislation that may be required, based on a reviewof the current and future roles of the NHA in ensuring a more vibrant housing sector. Ministry of Finance (MoF)The MoF will provide MTEF budget allocations for the Housing Sector through integratedproject budgets to be placed under the NHA and coordinate allotments to variousinfrastructure agencies in collaboration with the Project Management Committee. The MoFwill also coordinate the sourcing of external soft loan funding for the Housing Sector andreview/approve all borrowings by the NHA through its Debt Management Committee. National Housing AuthorityThe NHA will acquire the land, do the land distribution for each site, design the buildingsand lay out the plots in collaboration with the MPW, LEC, LWSC and private developerswhere applicable, with respect to various aspects of access/internal roads plus sites andservices infrastructure. It will also coordinate the provision of investment incentives toprivate developers in collaboration with the National Investment Commission and theMinistry of Finance. The NHA will head the Project Management Committee. Ministry of Internal Affairs (MIA)Land being the prime factor in the provision of the homes, the Ministry of Internal Affairsshall provide thru the Land Commissioner of each county the quantity of land for housing asprescribed in the Poverty Reduction Strategy (PRS) document. The MIA shall alsocoordinate the provision of funding by each County administration out of its CountyDevelopment Funding allocation for the Decentralization Program. Ministry of Public WorksMPW shall be responsible to adequately administer the Engineering component of the Statein terms of zoning, approval of building plans, surveying, drafting/designing, constructionand supervision, to improve and maintain, direct or by contract all highways, bridges, roads,streets, airports, seaports, and all other public infrastructure including rain waterrunoff/drainage infrastructure in the Republic of Liberia. They shall also take part in thevetting and selection of contractors to undertake the works. Liberia Water and Sewer Corp (LWSC)The Corporation is empowered to construct, install, establish, operate, manage and supply toall parts of Liberia, safe drinking water and perform all sewerage services, as well as tomaintain such water and sewerage facilities. The water and sewage disposal infrastructureshall be the sole responsibility of LWSC according to the location and scale of the project.They shall also take part in the vetting and selection of contractors to undertake the worksand, where the entity is not in position to directly provide the services, in the selection ofindependent private service providers for a given estate. Liberia Electricity Corporation (LEC)The LEC has a mandate to plan, generate transmit and distribute electric energy throughoutthe length and breadth of the Republic of Liberia. They are responsible for the design anddevelopment of electricity infrastructure for the settlements either connected to the NationalGrid or by other economically viable renewable energy scheme suitable to the location, scale13

and demand of the project. They shall also take part in the vetting and selection ofcontractors to undertake the works and, where the entity is not in position to directly providethe services, in the selection of independent private service providers for a given estate. Environment Protection Agency (EPA)The mandate of the EPA is to monitor and assess projects and activities including activitiesbeing carried out by relevant ministries and agencies to ensure that the environment is notdegraded by such activities, that environmental management objectives are adhered to andadequate early monitoring on impending environmental emergencies are given proper focus.The EPA shall ensure that all housing developments conform to sustainable eco-friendlyconstruction methods, materials, programs and processes in keeping with its policies. Ministry of Planning & Economic Affairs (MoPEA)The MoPEA is developing a National Monitoring & Evaluation Framework to track progress onvarious development projects through its network of County Development Officers who in turnsupervise Field Monitors. Private Contractors and Housing DevelopersPrivate contractors can be segmented by Category according to the Ministry of Public Workscertification system for building construction which ranges from Categories A to E. Roadbuilding contractors on the other hand are segmented by the same certification system. Thereare several foreign road building contractors operating in Liberia including: CICO, SEK andCHICO.Housing Developers include CICO who have expressed interest in developing a middle-toupperincome community in Caldwell along the newly paved road being constructed bythem, Premier Homes JV (Liberian owned), Mamawa & Sons (Liberian), BroadCovePartners (American), Enable Properties/Novo Domus (S. African), Green Solar Inc. (USA)and a long list of other developers from Ghana and Nigeria, some of whom have submittedEOIs. The American and South African developers also have road building capacity. Project Management Committee (PMC)The Project Management Committee will comprise the NHA (Project Manager) plus localrepresentatives of the MPW (Resident Engineer), LEC, LWSC, MIA (DevelopmentSuperintendent) plus the private developer for each project where applicable, in order toensure proper coordination.ORGANIZATION CHART OF PMC14

E. IMPLEMENTATION APPROACHThe most efficient approach, in our view and given the capacity constraints within the GoL, isthe Public-Private Partnership (PPP). In close collaboration with the requisite GoL InfrastructureSector agencies (i.e., MPW, LEC & LWSC), the NHA will coordinate the design, tendering andmanagement of the construction of the sites and services plus the housing units through the PMCwhich may include a private housing developer in sites that are deemed attractive by suchpartners. In such cases, the private developers will be charged with implementing theconstruction program under the direct supervision of the PMC. Otherwise, the PMC which willbe headed by the NHA will conduct the tendering process for various project works inconformity with the Public Procurement and Procurement Commission guidelines, to be carriedout by private contractors. We believe that through this approach, it will be easier to have morethan one estate construction project in progress around the same time.The MoPEA will perform project M&E through its County Development Officers under the newNational Monitoring & Evaluation Framework now being developed.Where feasible and according to their respective delegated responsibilities and deliverables asmandated, the Infrastructure agencies will either manage the provision of utility services for thecompleted housing estates or outsource to private sector entities or individuals, in light of theircapacity constraints.Two basic approaches will be adopted for the provision of planned urban settlements in thevarious counties:1. Sites and Services ProgramThis approach is a lower cost alternative for GoL to accomplish its overall aims andobjectives at a lower cost by providing for paved internal roads, electricity, water & sewage,and drainage infrastructure to make service plots available either as a means of attractingprivate housing developers/investors to complement by building the actual houses for sale toend buyers, or to sell serviced plots to individuals who would construct their homesaccording to a series of design options agreed upon by the PMC. This approach will be verysuitable for informal sector workers or self employed business people. It would work asfollows:a) The NHA shall acquire parcel(s) of land in each county of not more than 50 acres perlocation.b) Prepare a Master Plan for the site in collaboration with other PMC membersc) Prepare all designs and drawingsd) Conduct project tendering for various workse) Clear site and do plots layoutf) Construct basic roads and drainagesg) Construct a sample of each type of dwelling to confirm the cost, material quality andmanpower required, with options.h) Determine construction milestonesi) Effectively supervise to ensure quality control and avoid repeat works.j) Have a robust project management-planning, scheduling, implementation, coordination,monitoring mechanism in place15

k) Solicit private investors to either purchase the serviced plots or construct homes on aJoint Venture basisl) Sell serviced plots to individual buyers to build their own homes according to designoptions provided by the NHA2. Construction of Turn Key UnitsThese types of projects are more capital intensive and would therefore require partnering inorder to deliver on larger projects. They would be implemented as follows:a) Acquire up to 50 acres of land in economically viable areas (greater acreage could bepurchased depending on the scale of project to be executed).b) Prepare a Master Plan for the sitec) Prepare all designs and drawings, BOQ for the various types of dwelling to confirmthe cost, material quality and manpower required, with options, and prepare tenderdocumentsd) Hire contractors thru the bidding process to:-i. Clear site and do plot layoutsii. Construct basic roads and drainagesiii. Construct the various types of dwellingse) Develop Housing units along with infrastructure and amenities.f) Effectively supervise to ensure quality control and avoid repeat work.g) Have a robust project management-Planning, Scheduling, Implementation, Coordination,Monitoring mechanism in place.For smaller projects in areas that are not as economically viable, are under populated or whereGoL is obliged to provide housing in line with its PRS and Decentralization objectives, theamount of land acquired would be smaller and the NHA would opt simply for tenderingconstruction activity to private qualified and vetted contractors per PPCC guidelines. For largerscale projects, this approach will require proper due diligence on the reputation, experience,financial means and technical implementation capacity of the proposed private partner(s) in orderto avoid a repeat of a few poor experiences recently undergone by the NHA and to ensuresmooth project delivery.The PPP approach will also apply to the arrangement of investment consortia involving GoL,various mining, agricultural and petroleum concessions, financial institutions and housingdevelopment companies that might be interested in a given site. It will be especially crucial tothe successful implementation of the mortgage financing program discussed below.F. FINANCINGThe estimated total cost of a well constructed estate of 100 low income housing units withinfrastructure and amenities is around US$2.7M. Notwithstanding, in view of the importance ofthe housing sector to job creation, the achievement of economic justice and improved urbanplanning, it is imperative that we employ alternative(s) using what minimal funds are available toprovide affordable homes.There are several financing options for these projects and namely:16

OPTION 1: Direct GoL FundingThis process involves direct budget financing of the project(s) by the National Government. Itcould also include allocations from County Development Funds. The main requirement ispolitical will and Legislative support for rapid authorization.OPTION 2: Foreign FundsFunding from these sources are usually cheaper than local funds with interest rates rangingbetween between 0.5-7.0% per annum and tenors of up to 40 years from the soft loan sourceslike the IDA and African Development Fund. Some of these sources are outright grants or havea high grant element in present value terms (i.e., the Net Present Value of annual debt servicepayments required over the life of the loans can be as low as 35% of the original loan principal)These sources could include the following:Multilateral SourcesWorld Bank (IBRD)International Development Association (IDA) – soft loan window of W. BankAfrican Development Bank & Fund (AfDB)Shelter Afrique (SHAF)Islamic Development Bank (IDB)Arab Bank for Economic Development in Africa (BADEA)Indian EXIM BankBilateral Loans & GrantsUS Agency for International DevelopmentChina Africa Development FundChina Development BankEuropean UnionKuwaiti FundOPTION 3: Other Sources- Private Equity Funds- Trust Funds- Corporate Social Responsibility (CSR) funding from entities like NOCAL,NASSCORP, Chevron and other corporate names- Insurance CompaniesLocal bank Commercial Loans are usually much more expensive with interest rates ranging from10-14% p.a. excluding fees and commissions. They would make the cost of the homesprohibitive. Furthermore, such loans may not likely meet the country’s post-HIPC debtsustainability criteria.The NHA is currently facilitating access by three local banks and namely: LBDI, GT Bank andFIB for a US$ 29.2 Million line of credit from SHAF for on lending in form of constructionloans and mortgage loans. A separate proposal is also being prepared by the NHA to submit tothe African Development Bank for a Housing Sector line of credit of up to US$ 50 Million forthe same purpose, to be made available to local financial institutions. More on this below, interms of supportive actions required by GoL and especially on the mortgage finance strategy.17

The Liberian Bank for Development & Investment (LBDI) – HeadquartersThe Financing Strategy to support the Program for the Construction of 5,000 Homes is toengage in direct borrowings from soft loan sources to supplement GoL budget funding forinvestment in the Sites & Services and Turnkey Programs. The NHA will coordinate its searchfor soft loans with the Debt Management Committee of the Ministry of Finance which willreview specific proposals for conformity with post-HIPC debt sustainability criteria. With thiscombination of funding, the NHA will also source private equity and grant funds through aconsortium approach that addresses the interest of each partner. It is hoped that some of themining, agricultural and petroleum concessions would buy into the concept as an added incentiveto improve worker benefits and behavior through a home ownership scheme.V. MORTGAGE PROGRAM FOR LOW-TO-MIDDLE INCOME EARNERSMORTGAGE PROGRAM PARAMETERSIn order to build confidence and ensure that the Mortgage Program records successes that can bebuilt upon and expanded, it will be important to target the beneficiaries based on underlying riskmanagement dynamics. We believe that the most important attributes of the target populationshould be as follows:1. TARGET BENEFICIARIESa) Borrower gainfully employed with direct monthly salary deposits or debt servicepayments to bank account confirmed by employer or Diaspora Liberians’overseas banksThese include employees of the Civil Service, major concessions such as Firestoneand Mittal Steel, public corporations, banks and other private sector employees (e.g.,cell phone companies) plus Liberians in Diaspora provided their bankers oremployers are prepared to formally domicile monthly debt service payments to banksin Liberia 13 .b) Combined monthly loan repayments including mortgage ≤ 33% of net income 14To ensure that a larger number of beneficiaries have access to the program the13 IFAD, Design and testing of a housing loan product for Senegalese migrants living in Italy, 201114 In cases where the cost of the house is such that the monthly loan payments are higher than 33% of net income,the employer may elect to provide a subsidy or housing allowance to enable employees meet this requirement.18

combined family income (i.e., income of both husband and wife from formalemployment domiciled at lending bank) should be considered in this calculation.c) Positive credit references and history in banking systemd) Minimum contribution of 6 months to the National Housing Trust Funde) The sum of Borrower’s current age plus 20 years for mortgage loan tenor fallwithin the number of years to reach his employer’s retirement agef) Net monthly income ranging from US$ 350 to US$ 1,250Note that initially, due to the difficulty to capture regular monthly salary payments into thiscategory of potential borrower’s accounts, the above criteria may likely exclude gainfullyemployed potential home buyers in the informal sector in order to reduce the risks to theProgram. The alternative approach which has worked so far for informal sector borrowers ismicro loans but they are very expensive and take some time before a borrower can graduallycomplete his/her house 15 . Thus, the very short loan tenors usually offered by microfinanceentities would constitute a hindrance to housing sector growth via the informal sector.The other approach is a phased deposit program linked to house construction milestones.However, as this option works best with wealthier informal sector home buyers who typicallypay for the house during the average construction period of 18-24 months to turnkey on a40/40/20 % basis. As such, lower income beneficiaries would not qualify.We believe that the best approach for lower income beneficiaries in the informal sector isoutright sales of serviced house plots to them for construction of their own homes at a pace to bedetermined by their revenue intake.2. MAXIMUM LOAN AMOUNTSThe maximum loan amounts should be determined by the estimated average selling priceof the housing units to be made available to the different classes of borrowers as follows:MODELAVG. SELLING PRICE Low Income House US$ 10,000 – 15,000 Middle Income House US$ 16,000 – 35,0003. COLLATERAL/SUPPORT Property acquired to be mortgaged to the lending bank Co-signature of spouse Comprehensive life, and property 16 insurance with loss payee endorsement in favor ofthe bank Domiciliation of monthly salary and cash benefits to the bank Pledge of terminal benefits4. MAXIMUM TENOR OF LOAN: 20 years15 Löfmark, p. 7.16 http://www.3investonline.com/opinion/housing-finance/articles/350-investment-opportunities-in-housingdevelopment-in-africa.Mortgage Insurance is currently not available in Liberia but could be developed on a PPPbasis in line with growth of the mortgage industry.19

5. MAXIMUM INTEREST RATE: 9.0% p.a.6. MAXIMUM PROCESSING FEE: 1.0% flat7. MORTGAGE PROGRAM CEILING: US$ 50 Million8. GUARANTEED PORTION: US$ 15 MillionIf, in addition to risk sharing by GOL and other partners, the lending rate can be kept withinsingle digits and, as has been done in South Africa, 17 be a fixed rate versus a floating rate, thiswill be a major boost to making loans more affordable.VI.CONCLUSIONS AND RECOMMENDATIONSThe old model of the NHA building housing estates to rent or directly collect monthly mortgagepayments and the lack of a viable mortgage finance system strongly supported by the GoL havehindered the growth of the housing market. In order to meet the severe need for affordablehousing in the country in a meaningful way, there is a need to establish a mortgage financeprogram that will enable a large number of low-to-middle income Liberians and residents toaccess mortgage arrangements with affordable payment terms, in order to make full upfrontpayment for homes constructed within safe and healthy environments in viable communities.Cash down payment of the selling prices of houses or serviced plots by mortgage loanbeneficiaries will encourage both the NHA and private housing developers to increase theirengagements in the program to build 5,000 affordable homes by ensuring the existence of aready market that ensures improved profits and cash flows for operators within the shortestpossible time frame. We believe that this feature will attract a larger number of players into thehousing developing market and contribute to a rapid growth of the stock of planned housingdevelopments envisaged by this Program.In order to achieve the two objectives of the President’s 150 Days Action Plan to (a) develop aprogram for construction of 5,000 affordable housing units and (b) a mortgage program for lowto-middleincome families (modification proposed and accepted during the Cabinet Retreat heldin Kakata, Margibi County on May 4, 2012), the subcommittee hereby recommends thefollowing:A. CONSTRUCTION OF 5,000 AFFORDABLE HOUSING UNITS1) Acquire up to 50 acres of land in economically viable areas on Vision 2030 GrowthCorridors or highly populated to develop and make serviced plots available to privatehousing developers/investors to build the actual houses for sale to end buyers, or sellserviced plots to individuals to build their own homes according to prescribed designoptions. For smaller projects in areas that are not as economically viable or are underpopulated but where GoL must provide housing in line with its PRS and Decentralizationobjectives, the amount of land acquired should be at least 25 acres.2) GoL should provide seed capital for the Program either through direct MTEF budget17 http://www.africainvestor.com/article.asp?id=88920

programming or from County Development Funding allocations, in order to subsidize theselling prices of the homes by not passing on the infrastructure costs to end buyers.3) GoL should encourage the provision of additional subsidies through Corporate SocialResponsibility programs of GoL Agencies such as NOCAL and NASSCORP and/orentities like Mittal, Firestone, Chevron, China Union, Sime Darby, Putu Iron Ore andGolden Veroleum.4) The complementary financing strategy to support the Program is to engage in directborrowings from soft loan sources to supplement GoL budget funding for investment inSites & Services and Turnkey Programs. The sourcing of soft loans will be coordinatedwith the Debt Management Committee of the Ministry of Finance which will reviewspecific proposals for conformity with post-HIPC debt sustainability criteria. Equitycontributions from reputable private sector developers and other investors should also beencouraged through the PPP approach and via tax and duty incentives.5) The various concessions should be encouraged by GoL to be a part of the Program inorder to improve worker benefits and motivation through home ownership.6) The PPP implementation approach should be adopted whereby infrastructure agencies(i.e., MPW, LEC & LWSC), MIA and the NHA plus reputable, experienced, financiallysound and technically equipped private developers who might be interested in a givenproject would form Project Management Committees headed by the NHA to conducttendering processes in line with PPCC guidelines and monitor construction works.7) As GoL’s resource position further improves and as the PPP approach proves capable ofimplementing several projects simultaneously, the pace of Program implementationshould be accelerated.21

B. MORTGAGE PROGRAM FOR LOW-TO-MIDDLE INCOME FAMILIES1) Long term liquidity should be provided by GoL to the country’s financial system at areasonable cost to ensure the availability of more flexible mortgage loan terms topotential home owners. The GoL should seriously consider placing up to US$ 20 Millionof long term liquidity at participating banks for up to 20 years at a maximum interest rate5.0% p.a., to complement 10-year funding now being made available to the Liberianbanking system by Shelter Afrique, the Ecowas Bank, etc., for on lending as constructionand mortgage loans to target beneficiaries.2) In order to make the loans affordable, the maximum interest rate on loans under theMortgage Program should be 9.0% p.a. with maximum fees charged by banks set at 1.0%flat.3) GOL should share the risks of the proposed Mortgage Program by providing a partialcredit guarantee of up to 30% of the combined Program loan portfolio exposure. GoLshould seriously explore involving major employers such as the mining and agriculturalconcessions in contributing to such a scheme on mortgage loan portfolios to low-tomiddleincome beneficiaries and employees of those concessions. Risk sharing willencourage mortgage lenders to take part in the Program while avoiding high loan lossprovisions that might normally be imposed on the 30% “at risk” portion of the lendinginstitutions’ portfolios, until foreclosures and/or credit workouts are concluded fordefaulting borrowers. This would be done within the framework of recently establishedCommercial Court using the Mortgage Law provisions of the Commercial Code.4) That a National Housing Trust Fund be established by Act of Legislature into whicheach gainfully employed Liberian and resident will be required to make a monthlycontribution of 2.5% of his monthly income which shall be interest bearing andrefundable to any contributor who has not obtained a housing loan and has (a) attainedthe age of 65 years; or (b) retired from his/her employment and becomes incapable ofcontinuing the contribution to the Fund. Complementary funding could be from banksand other financial institutions, insurance companies, the GoL and employers (similar toemployer contributions now being made to the National Social Security & WelfareCorporation scheme). The Trust Fund would mobilize funding for housing investment,provide long term funding for mortgage lending and provide some backing for the pilotcredit guarantee scheme. Contribution to the scheme for at least 6 months would be acondition for eligibility in the mortgage loan program.The Trust Fund should initially be managed by the National Social Security and WelfareCorporation, to be eventually transformed via legislative enactment.5) Encourage the revitalization of the National Housing & Savings Bank, the creation ofspecialized mortgage finance institutions and of Mortgage Programs within bankinginstitutions such as LBDI, GT Bank and FIB to provide the requisite expertise and focuson the housing market.6) Create a Mortgage Banking training program at the local School of Banking and theBusiness College of the University of Liberia in partnership with qualified regional andinternational training institutions in order to build the capacity of local bankinginstitutions.22

7) Conclude a Housing Sector Policy within the next 12 months to provide a comprehensiveinstitutional and regulatory framework that supports the replication and expansion of thisprogram, in order to exploit and encourage the full potential of the Housing Sector as anengine of economic growth, empowerment and socio-political stability.Given the urgent imperative to translate the gains measured by this Administration in stimulatingeconomic growth and foreign direct investment, into tangible benefits for the majority ofLiberia’s citizens and residents and the traditionally strong potential of the Housing Sector tostimulate economic growth and job creation, this Program document is recommending bold,targeted and affirmative policy actions similar to those being taken by countries like SouthAfrica, the USA and Sweden to unleash the tremendous potential of the Sector.Such action will provide strong support to the Government of Liberia’s Decentralization, PovertyReduction and overall long term development strategy, the Vision 2030, while improving theliving standards of a significant number of our citizens.23

APPENDIX I: NATIONAL POPULATION CENSUS - 2008Source: LISGIS24

APPENDIX II:PERCENTAGE DISTRIBUTION OF POPULATIONAPPENDIX III: AVERAGE HOUSEHOLD SIZECounty Average HouseholdSizeMaryland 7.0Grand Gedeh 6.8River Gee 6.5Sinoe 6.4Grand Kru 6.4Nimba 5.6Lofa 5.5Gbarpolu 5.5Grand Cape Mount 5.2Rivercess 5.0Montserrado 4.8Bong 4.7Grand Bassa 4.6Margibi 4.6Bomi 4.0Source: LISGIS, 200825

TABLESTABLE 1: EFFECT OF HOUSING LOAN TENOR AND INTEREST RATE ONAFFORDABILITYLoan Amount(In US$)InterestRate (%)Tenor(In Years)Initial MonthlyRepayment (US$)10,000 12 10 187 56610,000 12 20 145 43910,000 9 10 161 48710,000 9 20 119 36115,000 12 10 254 77015,000 12 20 218 65915,000 9 10 241 73115,000 9 20 179 54225,000 12 10 467 1,41425,000 12 20 363 1,09825,000 9 10 402 1,21825,000 9 20 298 90330,000 12 10 560 1,69730,000 12 20 435 1,31830,000 9 10 483 1,46230,000 9 20 358 1,08335,000 12 10 653 1,98035,000 12 20 508 1,53835,000 9 10 563 1,70635,000 9 20 417 1,284Minimum MonthlyNet Income (US$)26

Table 2 AAMORTIZATION TABLENAMEFacilityAmount10,000 USDTenor120 Months 10 yearsInterest 9.00%Tax 0%Disbursment date 1-Mar-10RepaymentMONTHLYGrace Period MinimumDATEREPAYMENTMonthly NetOutstanding Principal Interest Monthly IncomeMonth1 10,000 83 78 161 487.372 9,917 83 77 1603 9,833 83 76 1604 9,750 83 76 1595 9,667 83 75 1586 9,583 83 74 1587 9,500 83 74 1578 9,417 83 73 1569 9,333 83 72 15610 9,250 83 72 15511 9,167 83 71 15412 9,083 83 70 15413 9,000 83 70 15314 8,917 83 69 15215 8,833 83 68 15216 8,750 83 68 15117 8,667 83 67 15118 8,583 83 67 15019 8,500 83 66 14920 8,417 83 65 14921 8,333 83 65 14822 8,250 83 64 14723 8,167 83 63 14724 8,083 83 63 14625 8,000 83 62 14526 7,917 83 61 14527 7,833 83 61 14428 7,750 83 60 14327

Table 2 BAMORTIZATION TABLENAMEFacilityAmount10,000 USD240 Months (20 YRS)TenorInterest 9.00%Tax 0%Disbursment dateRepaymentMONTHLYGrace Period 9 Months MinimumDATEREPAYMENTMonthly NetOutstanding Principal Interest Monthly IncomeMonth1 10,000 42 78 119 361.112 9,958 42 77 1193 9,917 42 77 1194 9,875 42 77 1185 9,833 42 76 1186 9,792 42 76 1187 9,750 42 76 1178 9,708 42 75 1179 9,667 42 75 11710 9,625 42 75 11611 9,583 42 74 11612 9,542 42 74 11613 9,500 42 74 11514 9,458 42 73 11515 9,417 42 73 11516 9,375 42 73 11417 9,333 42 72 11418 9,292 42 72 11419 9,250 42 72 11320 9,208 42 71 11321 9,167 42 71 11322 9,125 42 71 11223 9,083 42 70 11224 9,042 42 70 11225 9,000 42 70 11126 8,958 42 69 11127 8,917 42 69 11128 8,875 42 69 11028

REFERENCES1. Vuyisani Moss, Preview of Housing Finance Systems in Four Different AfricanCountries: South Africa, Nigeria, Ghana and Tanzania, 20032. Monica Hjeds Löfmark, Growth, Housing Finance & Land Administration Chain,National Housing Credit Guarantee Board (BKN), Sweden, 20103. Bank of Ghana, The Housing Market in Ghana, Research Department, November 20074. Hans-Joachim Dübel, Size and Scope of Public Credit Guarantees in Housing Finance,20035. National Housing Trust Fund Act, Federal Government of Nigeria, 20056. Report sited from http://www.bkn.se/In-English/Credit-guarantee-programmes/ NationalCredit Guarantee Board (BKN), Sweden7. Report sited from http://www.ghana.gov.gh/index.php/information/speeches/5739Government of Ghana8. Central Bank of Liberia, Annual Report 20119. IFAD, Design and testing of a housing loan product for Senegalese migrants living inItaly, 201110. Report sited from http://www.3investonline.com/opinion/housing-finance/articles/350-investment-opportunities-in-housing-development-in-africa.11. Report sited from http://www.africainvestor.com/article.asp?id=88929