Mortgage Reforms Alone Won't Solve Uganda's Housing Crisis, Experts Say

Uganda’s recent introduction of the Mortgage Refinance Institutions Act is a significant step towards improving housing finance, but experts caution that it will not single-handedly resolve the nation’s deep-seated housing crisis. The act is designed to allow banks to sell off mortgage portfolios, freeing up capital for new lending by providing banks with longer-term funding.

However, structural issues such as low incomes and complex land tenure systems remain major impediments. With a housing deficit exceeding 2.4 million units, a substantial portion of the population lives in substandard housing. Most Ugandans earn below Shs200,000 monthly, making mortgage repayments at current rates of 16-22% unattainable. “The current mortgage market serves less than 5 percent of the population,” noted Emmanuel Kaganzi, Commissioner for Physical Planning.

Financial sector reforms often benefit formally employed middle-income households, leaving low-income and informal workers behind. This is because cheaper funding doesn’t address the core requirements for mortgage eligibility: stable income, verifiable credit history, and sufficient collateral. Moreover, over 75 percent of land in Uganda is held under customary tenure, making it difficult to use as collateral for loans.

“Financing alone would not fully resolve the housing crisis,” stated James Ssonko, a senior economist at the Ministry of Finance, highlighting interconnected challenges like limited land access and inadequate infrastructure.

A crucial missing piece, according to housing advocates, is a robust social housing system. Unlike countries that subsidize or directly fund low-cost housing, Uganda lacks a comparable public intervention. This leaves those who cannot afford market-rate housing dependent on private developers who typically cater to higher-income buyers, exacerbating inequality.

While the Mortgage Refinance Institutions Act addresses funding constraints for lenders, it does not tackle the fundamental issues of affordability, land accessibility, or the need for state-supported social housing programs. Without these complementary measures, the crisis is likely to endure for millions of Ugandans.

Source: Daily Monitor (Uganda)