By Daniel Kontie – Founder and CEO, Africa Continental Engineering & Construction Network Ltd (ACECN)
.. continued from previous post.
Suboptimal Land Utilization
Moreover, land price hikes can also drive a misallocation of resources, with profit oriented developers seeking high-return projects rather than efficient land use for public infrastructure. Instead of focusing on building affordable housing, efficient transportation, or critical utilities, investment may be channelled toward speculative projects with higher margins. This often leads to inefficiency in urban planning, undermining long-term sustainable development. This is the situation we have reached in Ghana now where over 90% of the real estate investment is concentrated on high-end properties instead of distributing development uniformly across all sectors in the property economy.
Recommendations to Controlling Land Price Bubbles
As I write, I am just thinking about how weird it may sound to people for me to propose the idea of controlling land prices. Some may wonder what might have been my motivation to think that land prices can be controlled in an enterprise economy. But the question is, has it been done elsewhere before, if yes, then it can be done in Ghana. The most effective measures typically involve a combination of regulatory, taxation, and urban planning reforms. Below are some best practices and their application in different jurisdictions duplicable in Ghana taking into cognizance the Ghanaian context.
Zoning and Land Use Regulations
Governments can control land prices by adjusting zoning laws and land use policies. Restricting land use in certain areas and expanding zoning for residential development can help distribute land supply more evenly across urban areas, reducing scarcity and curbing price surges. The question is, is this feasible, yes, it is. In 1970 Singapore regulated speculative land pricing using zoning and land use Regulations. Singapore’s highly regulated land use and zoning policies have successfully controlled speculative land price inflation. The Urban Redevelopment Authority (URA) sets out long-term land use plans subject to review in every five years, which has helped in maintaining land supply for both public and private housing till date.
Vacant Home and Land Tax
This will be a tax that a land owner or landlord has to pay for leaving his or her land undeveloped or in the case of a home or commercial space. This tax will mitigate if not eliminate the issue of land hoarding as people who hoard huge parcels may be compelled to release them to ease the heavy tax burden on them. Similarly, the property vacant tax will compel home or commercial property owners to charge moderate rents affordable enough to increase the abysmal occupancy rate we have currently in Accra in particular. Just in 2022, Canada implemented this policy in Vancouver, Toronto and some other cities to control the general property price level across the country, and it worked perfectly. Why are we saying it cannot work in Ghana, anyway this is a rhetorical question to all of us.
Public Land Banks
Additionally, the government by policy can engage in direct land acquisition for public housing projects, preventing inflationary pressures on land prices. By establishing public land banks, the state can acquire, manage, and sell or lease land. This will help stabilize land prices by controlling the flow of land into the market. The state can acquire underused or vacant lands and release it in a controlled manner to prevent speculative price hikes. The United States of America in various cities such as Cleveland, Detroit etc has implemented this policy to stabilize land markets in areas that were hit by economic decline. These land banks allow the local government to acquire and redevelop land, eventually selling it for the purpose of affordable housing or infrastructure development, this helps keep the land prices relatively stable. We still have huge parcels of uninhabited lands around the Tema-Aflao stretch, Apollonia City, Prampram, East Legon, East Legon Hills, Tema, Aburi, Pokuase located in and around Accra, Ghana etc. Government may consider if it so wishes to consider our recommendations in this regard.
Speculative Land Holding Regulations
Government can implement speculative land holding laws that will prevent excessive land hoarding and price manipulation. By this regulation, we can place a caveat on the number of parcels of land an individual or a corporate organization can acquire and for how long they can hold these lands undeveloped. This will put pressure on investors to acquire parcels they only develop hence eliminating the canker of land grabbing and hoarding we face as a country today. In furtherance of this, the law may consider placing restrictions on foreign land ownership, one of the major variables contributing to the land price inflation in Ghana. A classic case in this is New Zealand. In 2018, New Zealand introduced the “Foreign Buyer Ban” law restricting the ability of foreign buyers to purchase existing residential properties. The aim was to regulate price bubbles driven by foreign direct speculative investors. This policy has contributed to more stable land prices and greater affordability for local buyers in New Zealand today.
Conclusion
In conclusion, land price bubbles or hikes pose a significant challenge to housing and infrastructure affordability particularly in rapidly growing cities and urban centres. Through the implementation of international best practices and some home-grown policies, we are very optimistic that the situation can be reversed. While each country may have different challenges and unique contexts, the global trend toward stricter land price controls, responsible land use, planning, and land regulations offers important insights in mitigating the negative effects of land price bubbles. A careful and strategic approach to land management will be crucial in ensuring sustainable housing development and robust urban infrastructure in the years ahead. A detailed and comprehensive expert’s report will be made available to any interested person by the Africa Continental Engineering & Construction Network Ltd if they are willing to pay for this consultancy service.
See more on www.acecnltd.com
