The practice of cost recovery in urban low-income housing: a discourse with experiences from Zimbabwe

Abstract

The paper is an attempt to revisit the practice of cost recovery in the context of urban low-income housing. The discourse begins by outlining the arguments for cost recovery in low-income housing projects. The discussion acknowledges that the principle of cost recovery is central to the establishment of replicable housing projects and sustainable housing finance systems. The paper then explores the salient issues in the principle of cost recovery. These are explored from the standpoint of the financier and the borrower. It is pointed out that the financier has obligations and responsibilities to depositors and shareholders. The paper then argues that awareness of obligations and responsibilities should be accompanied by practices and procedures that institutionalise and promote cost recovery. Regarding the borrowers the paper highlights the importance of their circumstances within the broader macro-economic sphere. It is then argued that the mode of cost recovery as reflected in the terms of repayment should as much as possible suit the situation and requirements of both the borrower and the lender. The discussion then introduces the role of “outsiders” in cost recovery and how politicians and busybodies can frustrate the efforts of the financier to recover funds invested in housing. The implications of cost recovery are then drawn out. In this case replicability and investor confidence are emphasised. The results of obsessions with cost recovery are also outlined. These points are then illustrated by examples from urban low-income housing in Zimbabwe. The study concludes by cautioning that the critical issues involved in cost recovery are not exclusively financial, technical and managerial. Most of the crucial issues relate institutional practices and procedures in the face of a multiplicity of direct and indirect stakeholders involved.