The potential of property rate to positively impact internally generated funds in Ghana’s Metropolitan, Municipal and District Assemblies today is very enormous. That potential is an outcome of many years of growth in property developments over three decades of rapid urbanisation. However, MMDAs, even with a strong legal mandate, are yet to really realise the full potentials of property rate revenues.
Rapid Urbanisation
The country experienced a fast rate of urbanisation over the past few decades. According to report, Rising through Cities in Ghana Ghana Urbanization Review Overview Report, published April 2015 by the World Bank, urbanisation grew at an annual rate of 4.4 percent between 1984 and 2013. With that growth rate, Ghana’s urbanisation rose from 31 percent in the mid 1980s to 51 percent in 2013. Urban population more than tripled, rising from 4 million to 14 million. The rate of growth experienced in Ghana exceeded both West African and global averages for the period.
By the early 2000s, only few cities, metropolitan areas and many small towns existed. The total number of MMDAs in the whole of Ghana as of January, 2000 was a hundred and ten (110). Then emergence and growth of a multitude of cities followed around the year 2003 as a result of deliberate policy of further decentralisation carried out by Government. That lead to the elevation of many small towns to Municipal and District Assemblies. Consequently, the number of MMDAs rose from 110 in 2000 to more than 250 by the end the first quarter of 2019.
Along with the rapid urban trend came a high demand for housing for the rapidly growing urban population. The country began to experience rising pressure on public services. For instance, access to pip-borne water in Accra alone is reported to have declined by as much as 22.5 percent between 2000 and 2010. Other public services like sewerage and electricity, sanitation and waste management have seen declines also.
Of course, MMDAs for the new and expanding cities require adequate financial resources to provide the services that a city must provide for their residents. Like most cosmopolitan cities in the world, property rates and municipal taxes are crucial sources of finance for local authorities and city managers. Large cities like Accra and Kumasi require huge funds for waste and sanitation management annually. It is for this fact Ghana’s MMDAs ought to approach property rate mobilisation with new approach from what has pertained up to recent times.
A Period of Political And Economic Stability and Growth
During the same period of rapid urbanisation, the country experienced a relatively stable political climate and steady economic growth. GDP growth rates from 1984 to 2013 averaged 5.7 percent annually, and from 2005 to 2013 GDP growth averaged 7.8 percent. It has been observed that annual real GDP growth has not fallen below 3.3 percent. The economy got further boost for growth with the discovery of commercial oil in 2007 and the start of oil production around 2010. This positive economic performance was achieved over a period when the world experienced economic volatilities.
Naturally, the rapid urbanisation and economic stability of the period have been accompanied by a consequent growth in property developments. Government, business and individuals made massive investments in property and housing. Government’s investments in property grew in response to an expansion in public administration and social services and their resultant needs for offices and housing for its workers.
The high demand for housing encouraged businesses to invest in industrial, commercial and residential properties. Sights of construction of activity increased from the early 2000s as some multinationals especially in the financial and telecommunication industries started building new office complexes. The developments include high rise commercial and residential apartments and shopping malls for a growing middle class.
Similarly, individuals ownership of property grew over the same period as residents built houses for their families, and made small commercial properties investments for rent as shops and offices. Although a housing deficit of about a million units has been reported, that doesn’t negate the fact that Ghana is witnessing a property boom, and that boom is good for the nation’s property rate outlook.
This property boom being witnessed across the country offers big potential for property rate revenues. For a Metropolitan Assembly, annual property rate estimates are in the several millions in Ghana cedis. Municipal Assembly estimates range from several hundreds of thousands to a few millions.
Legal Mandate
Currently, there exist a very good legal regime in which property rate activities are done. The mandate for property rate administration by MMDAs is established soundly: firstly, in the 1992 Constitution of the Republic of Ghana, in Articles 240(2)(c) and 245(b), and secondly, Sections 144 through 146 of the Local Governance Act 2016, Act 936.
In addition to the sound legal mandate, there are established institutions like the Land Use and Spatial Planning Authority and the Land Valuation Division of the Lands Commission that have all the necessary technical capacity to serve MMDAs with property valuations. They have played key roles in valuations in the country including a recent large scale valuation for Accra.
In spite of the outlook of huge potentials, strong legal mandate, and available institutional capacity and support, many MMDAs have not successfully harnessed the full advantage of property rate. Unfortunately, they have not been able to improve their internally generated funds (IGF) and impact their annual budgets and development. For most MMDAs, each year, actual property rate revenues are less than their budgeted annual property rate revenue estimates by as much as tens of percentage points.
Low Revenues
One of the outcomes of many years low property rate collection is, that in certain cases, the arrears component of total annual estimates exceed current charges, and in some instances, by more than 50%. Another manifestation of weak property rate performance is that a significant numbers of properties exist outside property rate registers and databases, and are not assessed for property rates. This category of properties, identified as un-assessed, spans glittering multi-storey commercial properties, luxury apartments buildings to industrial properties and small extensions in urban-slum communities.
But, why are MMDAs unable to mobilise more revenues from property rate than they do now? We will discuss that in another post.
In their attempts to address the problem of low property rate revenues, it has been noted that MMDAs over the years choose among three courses of interventions. They include district-wide property valuations or revaluations as they case may be, or procurement of technology, or engagement of private revenue collection agents. The nature of solution a district chooses depends on its judgement of what the problems are how it thinks the solutions should be.
This is all for now; I’ll be back with more, and we’ll discuss the challenges to property rate administration here in Ghana.
Thanks for reading.
George can be reached on WhatsApp +233 24 479 0288