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Thursday, 27 June 2019

Urban development and social justice

The expansion of the real-estate sector in Egypt has not been a source of genuine social and economic development

Dina Shehata , Wednesday 6 Mar 2019
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The March 2019 issue of Al-Malaf Al-Masry, a monthly publication issued by the Al-Ahram Centre for Political and Strategic Studies, examines the issue of housing and urban development in Egypt from legal, social and economic perspectives.

Anyone living in Egypt is aware that the housing and real-estate sectors have come to dominate the economy. Moreover, many of the government's development plans hinge on the creation of new cities and urban developments such as the New Administrative Capital and the New Alamein City.

Much of the investment in these new cities is geared towards luxury housing and real-estate development rather than industrial or agricultural development.

Thus, it is important to understand the impact of the growth of this sector on the overall process of economic and social development in Egypt and on access to affordable housing for the bulk of the Egyptian population.

According to an article written by Hussein Suleiman, an economist at the Al-Ahram Centre, the real-estate sector in Egypt has been growing at an average of 10 per cent since 2014 as compared to a national growth rate of 3.4 per cent in 2014, 2.3 per cent in 2015, 3.6 per cent in 2016 and 5.2 per cent in 2017.

Thus, the real-estate sector has grown at double and triple the rates of overall economic growth in Egypt. Moreover, the real-estate and construction sectors constituted 16.4 per cent of GDP in 2017/18 as compared to eight per cent in 2009/2010.

The real-estate and construction sectors are also the primary sources of new employment in the Egyptian economy. According to Suleiman, employment in these sectors constituted 13.1 per cent of total employment in 2017, up from 10.7 per cent in 2009.

In 2017, 3.4 million Egyptians were employed in the construction sector, which generated 52.4 per cent of all new jobs, compared to 29.7 per cent in 2010.

According to Suleiman, the significant expansion of this sector since 2010 is a function of a number of variables including increased political and economic volatility in the wake of the 2011 Revolution and the inflation and devaluation that resulted from the implementation of the International Monetary Fund (IMF) reform package.

These factors drove many Egyptians to convert their savings and to direct their investments into the real-estate sector. This in turn has led to a significant increase in the prices of land and housing, depriving many people of limited means from accessing affordable housing and encouraging greater speculation.

According to official statistics, there were 12.5 million unoccupied housing units in Egypt in 2017, which constituted 29.1 per cent of the total.

This demonstrates that real-estate investment has become largely speculative in nature, contributing to rising prices in the housing sector, to growing wealth inequality, and to declining access to affordable housing in Egypt.

In his article on the laws governing the housing sector in Egypt, Yahia Shawkat tackles a different aspect of the housing problem. He maintains that since the 1950s and with the significant increase in rural-to-urban migration, illegal construction on agricultural land has become a persistent phenomenon in Egypt.

While housing laws prohibit this phenomenon, in reality the government has adopted a series of “temporary” measures that have been in force almost continuously since the 1950s in order to recognise the de facto existence of these illegal settlements.

This has led to the creation of a gap between idealistic laws that are impossible to implement, on the one hand, and the reality on the other.

This gap has allowed the government to selectively apply the law when it needed to remove some of these illegal housing units in order to implement its own real-estate development projects, as in the cases of the Maspero Triangle and Waraq Island developments in Cairo.

Thus, rather than implement serious measures in order to protect agricultural land and to prevent its use for construction, the government has equally been responsible for legitimising this phenomenon.

Hanaa Ebeid addresses the question of housing inequality through the lens of gated communities and compounds, on the one hand, and shanty towns or informal settlements (ashwa’eyat) on the other.

She maintains that the growth of informal settlements and gated communities are two side of the same phenomenon of rising income inequality in Egypt and that they have grown in tandem with one another since the 1990s.

Official figures show that informal settlements constitute approximately 40 per cent of all urban development in Egypt. And while there are no official figures on the exact size of the gated communities in Egypt, an official housing survey conducted in 2017 shows that the number of villas has increased 12-fold since 2006 and that these tend to be concentrated in specific areas, most likely within gated communities.

The figures also indicate that public spending has been biased in favour of new housing developments with more than 20 per cent of total spending on housing directed to new developments that are inhabited by less than two per cent of the total population and consist primarily of luxury housing for the upper-middle and upper classes.

And while the government has in recent years implemented a number of projects to address the problems of informal housing settlements, these only constitute a partial solution.

Tackling the roots of the problem requires addressing questions of income inequality and the real-estate bubble that has biased public and private investment in favour of luxury versus affordable housing.

Ahmed Zaazaa and Ebtihal Abdel-Moaty address the question of the new cities and urban developments as solutions to Egypt’s urban problems.

Both maintain that these could constitute a partial solution to Egypt’s social and economic problems. However, they have usually been designed in a way that has failed to attract residents, and most have failed to attract the anticipated number of inhabitants.

In order to succeed, the new cities need to be distant from the capital or other major cities, self-sufficient in terms of infrastructure and social services, varied in their social and economic make-up, and subject to greater local governance.

Moreover, it helps when these cities serve a specialised economic objective such as industrial or technological development. Egypt’s previous experience with new cities such as Sadat City, Sheikh Zayed City, and Obour City has failed because these have simply become extensions or suburbs of the capital rather than free-standing cities.

Moreover, most have remained sparsely inhabited because they lack affordable housing, public transport, and affordable social services.

In conclusion, the significant expansion of urban-development projects and the real-estate and housing sectors in Egypt has thus far not been a source of real social and economic development, but has rather reinforced social and economic inequality, deprived the real economy of significant public and private investments, and driven real-estate prices up, rendering affordable housing a scarce commodity and encouraging greater speculation in the real-estate sector.

This has created a real-estate bubble that threatens to undermine the whole economy when and if it bursts.

*The writer is a senior researcher at the Al-Ahram Centre for Political and Strategic Studies

*A version of this article appears in print in the 7 March, 2019 edition of Al-Ahram Weekly under the headline: Urban development and social justice 

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