Housing Policy Contradictions in Ghana?

In 2015, a new National Housing Policy was promulgated after over 3 decades of policy vacuum (since the 1970s despite piece-meal attempts to recognise housing in some policy documents by succeeding Governments). Two of the policy objectives are:

1. To promote greater private sector participation in housing delivery;

2. To create an environment conducive to investment in housing
for rental purposes.

Policy initiatives to achieve the objectives include:

1. Provide fiscal and monetary incentives for increased private sector investment in housing infrastructure for those benefitting lower-income households. The details of these incentives are contained in the country’s investment code.

2. Review the Rent Act, Act 220 (1963) to streamline rent regulations and empower the Rent Department to encourage investments in the construction of rental housing as well as the protection of vulnerable households from abuse by house owners. 

While the Government has embarked on some laudable housing projects in some respect directly and in partnership with the private sector, the effect of two major Government actions on the nation’s ability to achieve these objectives require some careful analysis.

1. RENT TAX

The Income Tax Act, 2015 (ACT 896) introduces a RENT TAX – 8% in the case of RESIDENTIAL PREMISES and 15% in respect of COMMERCIAL PREMISES of the gross rent paid to Landlords/landladies – to be withheld by tenants and remitted to the Ghana Revenue Authority. Rent tax reduces investors cashflow and increases risk, which could make housing investment relatively unattractive.

2. REVIEW OF RENT ACT, 1963, (ACT 220)

There is a move to review the Rent Act in recent times. One of its propositions according to the Deputy Minister for Housing, Mr Sampson Ahi, is the reduction in the rent advance period from 6 months to 1 month. Already, most landlords require on average 2 years rent advance in the major cities because the 6 month rent advance may not be worth their investment. From an investment perspective, rent advance is a mechanism to reduce investors’ risk and increase their initial yield, to help them recoup upfront some portion of the substantial investment they have made in housing. A reduction in the rent advance period increases investors’ risk and reduces their initial yield, which make housing investment relatively unattractive.

Now, in spite of the need to rake in more revenue for Government, how and in what ways does a rent tax and a reduction in the rent advance period help to achieve the policy objectives of the new National Housing Policy?

Is the new National Housing Policy dead on arrival?

Kenneth A. Donkor-Hyiaman

Kenneth A. Donkor-Hyiaman

Dr Kenneth A. Donkor-Hyiaman is a Real Estate and Urban Economist and a Lecturer in Real Estate Finance and Real Estate Development at the Department of Land Economy, Kwame Nkrumah University of Science and Technology, Kumasi. kwakuhyiaman2@gmail.com +233(0)508043011

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