Sub-Saharan housing markets – The Property Chronicle
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Sub-Saharan housing markets

The Fund Manager

What Blackstone’s recent US housing deals tell us.

In late June 2021, Blackstone acquired Home Partners of America Inc (HPA), a company owning roughly 17,000 single-family homes across the US, which is as much of a rent escalation play as it is underwriting capital value appreciations.

This week, Blackstone expanded its US housing footprint by shelling out $5.1b to take over a portfolio of 678 rent-controlled housing communities from AIG across major metropolitan areas. The idea here is obviously to capitalise on the expectation of political support for expanded federally funded low-income housing tax credits, while keeping an eye on potential rent escalations once grace periods end.

Now, what are the parallels to sub-Saharan African markets? Well, the HPA deal, albeit an interesting blueprint to boost home ownership among the emerging middle-class in SSA, will be a tough one to replicate. That’s primarily due to the lack of functioning (mortgage) capital markets, in-flux land registers and title deeds, as well as the generally short-term view of SSA investors.

The second transactions, though, targeting the low-income housing market and in particular its taxpayer-induced risk backstops, is an interesting one.

How does the federal US rent-control scheme work? In a nutshell, it provides (dollar-for-dollar) federal tax credits for investments made in rental units with rents of max 20% of the local median income. Given the progressive nature of most tax systems, that obviously provides arbitrage opportunities for investors. 

The idea, while not always enjoying bi-partisan support, is an interesting mechanism that cuts to the core of the low-income housing issue: affordability. 

Ensuring affordability of housing is on the political agenda of pretty much every western society today, as it is in sub-Saharan Africa. The main difference is magnitude.   

Let’s take a look at South Africa, the continent’s most developed and industrialised country, to get a sense for the issue. The calculation is based on the lowest-cost house at $25k available in the 2019 market, as reported by the Centre for Affordable Housing Finance in Africa, an independent think tank.

The Fund Manager

About Martin Schwarzburg

Martin Schwarzburg

Martin Schwarzburg is arranging finance for emerging market infrastructure, energy and real estate projects as an emerging market banker with Brigg Macadam. He previously served as Global COO Real Estate for the Abu Dhabi Investment Authority (ADIA) .

Articles by Martin Schwarzburg

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