Housing development to enhance industrial growth

By FRED MSEMWA

IT is now widely accepted that that the construction sector can offer a great boost to job creation and overall economic development due to its pervasiveness and linkage with other sectors of the economy.

By its nature, the construction sector includes but is not limited to activities involved in the capital infrastructure development such as bridges, airports, mines, roads etc. It also includes activities taking place in the construction of commercial buildings, residential homes and other properties.
For the sake of today’s discussion, we will narrow down to the real estate sub-sector by dwelling more on the housing sector as it related to industrial development. Historical evidence from most industrialized countries such as the United Kingdom, USA, China, South Africa etc point to the existence of a strong but complex relationship between housing, urbanization and industrial development.
The obvious role played by the housing sub-sector in supporting industrial development and hence enhancing economic development revolves around enhancing the competitiveness of the industrial sector. The subsector provides a direct and indirect market for industrial goods as well as playing a key role in absorbing the shock resulting from the urbanization process which in turn supports a thriving industrial sector.
Enhancing industrial competitiveness Industrialization leads to urbanization as it creates economic growth and job opportunities that draw people to cities and urban centres. The urbanization process typically begins when a factory or multiple factories are established within a region, thus creating a high demand for to people to work in factories. People who work in industries need decent accommodation if they are to work productively.
Impliedly, the availability of decent accommodation near working places is an important component in attracting and retaining employees. When there is scarcity of affordable and decent housing two things are likely to happen namely; one, employees will be forced to acquire decent accommodation at a relatively higher cost hence reducing their monthly disposable incomes.
This can lower their disposable income and culminate into inability to meet their basic needs that can translate into stress to employees that may impair on their productivity at work. A reasonable employer will attempt to make employees more comfortable by being ready to spend more money to enable employees to access decent accommodation.
Correspondingly, as the employer strives to relieve employees of this stress, employees will have to be paid either higher salaries or housing allowances that can push operating costs for the industry upward. The soaring of employees costs will erode on the business’s competitiveness locally or internationally as such incremental costs have to be recovered through increased products or services prices.
In the event the scarcity of housing is such that employees cannot find accommodation within the locality even at higher prices, that would mean the factory will not be able to attain its production targets due to limited number of employees at the needed time.
Impliedly, the provision of affordable and decent accommodation is critical for industrial development as it provides accommodation for the working class hence guaranteeing on industrial competitiveness and sustainability. Market for Industrial Goods The importance of housing development in providing indirect and direct markets for industrial goods used in the process to produce houses has been well documented.
Likewise, maintenance housing estates will require continuous industrial supplies such as paints and other accessories through at lower quantities for a considerable future hence guaranteeing a sustainable market for industries. Major housing development involves deployment of a sizable workforce during and after construction hence creating demand for industrial goods such food and clothing within the locality.
Due to its multiplier effect, resulting from its linkage with other sectors of the economy, expenditure on public housing development stimulates expenditure in other sectors as well. A study in the USA titled ‘’ The role of Affordable Housing in Creating Jobs and Local Economic Development’’ reported that for every dollar of direct federal spending on capital and maintenance, an additional $1.12 in indirect and induced expenditures is generated by suppliers, vendors, and wage-earners.
Pro-housing policies aimed at enabling more people to own homes are poised to benefit local industries as the sector can absorb locally manufactured construction materials. This can have a positive impact on the performance of industries and the economy at large. Absorbing the shock of urbanization The United Nations projected that half of the world’s population would live in urban areas at the end of 2008.
It is predicted that by 2050 about 64 percent of the developing world and 86 percent of the developed world will be urbanized. That is equivalent to approximately 3 billion urbanites by 2050, much of which will occur in Africa and Asia. The United Nations has also recently projected that nearly all global population growth from 2017 to 2030 will be absorbed by cities, about 1.1 billion new urbanites over the next 13 years.
As it can be noted, throughout in the history of making, there has been a close relationship between housing, urbanization and industrialization. Housing development matters both because of the difference it makes to living standards and because of its centrality to industrialization and urbanization. The consequences for living standards are far-reaching.
In addition to directly conferring utility, decent housing improves health and enables the working class to participate in the industrial labor market. More subtly, a home and its environs affect one’s identity and self-respect. While the advantage of provision of decent homes to the working class has been discussed above, the availability of decent homes to the rest of the population is also critical as such a population could also be a good market for industrial products and other services. This means that lack of decent housing to support the urban population would indirectly affect industries as it has a bearing on the customer’s disposable incomes.
Urbanization has significant economic and environmental effects on cities and surrounding areas. As city populations grow, they increase the demand for industrial goods and services of all kinds, pushing up prices of these goods and services, as well as the price of land. As land prices rise, the local working class may be priced out of the real estate market and pushed into less desirable neighbourhoods.
It can therefore be argued that industrialization results into urbanization and development of cities and urban centres which need to be supported by deliberate housing development policy to holistically manage the associated dynamics. It therefore critical that housing development initiatives in Tanzania to be aligned with its resolve to build an industrial economy. To success in this tall ambition, all key stakeholders must join forces and adopt a coordinated approach so that housing can offer the needed support to the industrialization drive.
Dr Fred Msemwa is CEO of Watumishi Housing Company REIT responsible for management of collective investment schemes and provision of affordable homes in Tanzania: fredmsemwa@yahoo.com