Lack of proper planning blamed for Kingdom’s housing crisis

The Kingdom’s housing crisis, which experts say has occurred in three phases, continues to prevail due to the lack of centralization of real estate development projects and the absence of housing associations.
Social activists and specialists in housing affairs revealed that the Kingdom has undergone three major housing crises during a recent lecture entitled “The housing crisis and national social solidarity” led by Jamal Burhan, a famous social activist and journalist.
The recent housing crisis, Burhan said, is due to a lack of price control and investment, and insufficient cooperation between government and private real estate developers.
Burhan compared such modern day problems to strategic decisions taken by the late King Fahd during the first housing crisis, which occurred during the 1980s.
The mass migration of citizens from suburbs and village areas into major cities in search of employment and university education had caused a price hike at the time.
King Fahd ordered the provision of electricity to houses located on city outskirts for citizens who could not afford to buy houses or land in central locations.
“When we compare such a decision to today’s short-sighted plans to simply remove houses in so-called ‘slums’, we notice a departure from the strategic vision of the government to support housing initiatives,” said the lecturer.
A member of the Saudi Council of Engineers described the second housing crisis as a hidden, slow-paced phenomenon that began as early as 1990 and that went virtually unnoticed.
“The first and the second housing crises led to the consolidation and promotion of individual housing and construction rather than urban development projects. Around 90 percent of houses were built individually. This is in staunch comparison with developed states and countries, where around 80 percent of housing construction takes place through real estate development companies and cooperative housing associations,” he said.
One major cause for the second crisis, he said, was the lack of timely financial support from the Real Estate Development Fund (REDF). At the time, citizens had to wait up to 15 years to be granted a loan. The REDF also stipulated that citizens acquire ownership of land prior to being given a loan, which in turn led to a dramatic hike in property and land prices.
“The second major cause of the crisis was the emergence of land and property trade rather than the development of speculative and construction businesses,” he said.
The third crisis began in 2005 and continues to grow. This modern crisis is caused by the high prices of land, a recession in urban construction and investors redirecting their capital from real estate to the stock market, especially before its famous collapse in 2006.
The lecture addressed other major factors that have contributed to the housing crisis, including the establishing of the REDF and the unjustified high prices of land during the global financial crisis in 2008. This, he said, came at a time when land and property prices were on the decline globally. Another major factor contributing to the housing crisis is the absence of housing experts and professional contractors, which, he said, has led to decline in quality. Speakers called for more cooperation with regional Chambers of Commerce and encouraging youth to get involved in small and medium-sized housing projects.
The housing problem, they said, is to be considered a pressing national issue of top priority.
“We cannot dump the problem on the Ministry of Housing, which faces major challenges in facilitating housing for citizens located across 13 different regions and 3,000 cities and villages. Governmental and private bodies must liaise to reach a solution. We also call for establishing a housing authority for each region.”
A budget should also be allocated for the development of housing projects in each region with the participation of local businessmen and investors registered at the regional chamber.
Saudi Arabia ranks first in terms of the highest number of furnished apartments, with a 57-percent rental rate. In comparison, the USA has a 35-percent rental rate, Britain 30 percent, the EU 25 percent and Singapore 20 percent.