Causes, Consequences, and Possible Solutions

With
old and new residents moving back to Mogadishu after the relative
peace, it is obvious that not everyone does have land or a house in the
city and cannot afford to buy one. This leaves them no choice but to
rent residences and become tenants. Moreover, due to the weak economy of
the country, unpredictable and expensive land prices in Mogadishu, and
the low income of the society, it is not easy for many families to own
houses or become permanent residents. Consequently, they are compelled
to remain tenants for a long time. However, being a renter is also
becoming difficult to bear because of the current skyrocketing rent
prices in Mogadishu.

It is against this
background that Somali Public Agenda (SPA) held a forum on October 13,
2022, to understand the forces underlying the steep increase in house
rent prices, their impact on the poor and low-income people in
Mogadishu, and possible policy considerations on this important issue.
Many participants attended the discussion including lawyers, real estate
workers/owners, tenants, public notary workers, researchers, real
estate brokers, and members of local youth associations. Furthermore,
representatives from the FGS Ministry of Public Works and Housing and
the Mogadishu Municipality were present at the forum.

Causes of the Rise in House Rents

Many
factors cause the high rent rates in Mogadishu. These include
insecurity in some parts of the city, relative security in other parts,
and the increasing population and rapid urbanization of Mogadishu.

(In)security: Although the al-Shabaab was driven out from Mogadishu in late 2011, the overall security picture of the city is still unstable, and it is considered the most insecure area
in Somalia. However, the security conditions in the city differ from
one neighborhood to another. The periphery, semi-periphery and highly
protected zones offer different security,
which affects the land value and the rate of house rents. Consequently,
for many people, including civil servants, government officials, some
diasporas, foreigners, and business people, residing in the peripheral
districts is not an option at all. They often remain in the relatively
secure districts in the center of the city, where rental prices are
staggeringly high. Furthermore, foreign embassies and governmental and
international organizations concentrate on the safe and protected
government-populated zones of the city.

According
to a land broker, Wadajir, Hodan, and Waberi are among the most
expensive districts to live and rent a house in Mogadishu. Most of the
government offices are located in these districts and other core
districts such as Warta-Nabadda (previously War-Dhigley), Hamar Weyne,
and Abdi-Aziz. In addition, when people get jobs from governmental and
non-governmental organizations, they often relocate to these central
districts for security reasons. As a result, landlords exploit this
vulnerability and high demand by increasing rent prices as more people
turn to them daily.

Increased Demand: The
high demand for rental houses is believed to be another major factor
that causes the soaring rents in Mogadishu. The city is the most populous in
the country, with an estimated more than 2 million people. The number
of people, mostly youth, moving from other regions in Somalia and
looking for tertiary education and employment opportunities in the
capital city has increased significantly over the past decade.

Furthermore,
the situation has been aggravated by a wealthy diaspora who began
purchasing residential and business plots and renting houses in the most
secure neighborhoods with a high price after relatively security has
improved and the government regained full control of the city in late
2011. Subsequently, the high demand due to the increasing population of
the city combined with the investors’ intention to make quick returns
from their investments culminates in prohibitive rental prices.

On
the other hand, a participant at the SPA forum argued that most of the
diaspora are not cost-conscious and have a good income compared to the
locals. Accordingly, they mostly accept the higher prices that the
landlords demand. That price becomes standardized and is increased
continuously without considering the low-income and poor local people
who can hardly afford these rates.

Rapid Urbanization: Following Mogadishu’s relative peace and the establishment of the first non-transitional government in 2012, development initiatives and reconstruction efforts began. Three years later, in 2015, Mogadishu was ranked the second fastest-growing city in the world by the US-based
consultancy Demographia (after Batam, Indonesia). Real estate is one of
the booming sectors in Mogadishu, where banks and businesspeople are
heavily investing. Daru Salaam gated community in Yaqshid district is a
prime example. The initial phase of the construction cost was estimated
at US$20 million, consisting of 500 houses and 50 dwellings upon completion.

However,
rental costs and house prices have hardly witnessed a slowdown despite
the growing investments in the real estate sector. Conversely, the rent
prices are continuously going up as new flats and apartments are built,
and landlords are setting the bar higher as they introduce new projects.

Contributing Factors

Apart
from the core causes of the increasing rent prices in Mogadishu, land
commodification and real estate financing are contributing to the costs
of rent in Mogadishu.

Land Commodification: Commercial
and residential lands are highly commodified in Mogadishu. This has led
to an unprecedented rise in land and rental prices that don’t reflect a
corresponding improvement in the economic situation of the country and
people. Various contributors are believed to be behind this
commercialization including land speculation, diaspora investment in land and construction, and other commercial interests.

Moreover, 
different actors involved in land-related decision-making, economic
transactions, and conflict adjudication add more costs to land and its
construction since all these governmental and non-governmental actors
receive money in the process in different ways, such as fees, bribes, and taxes. These costs are passed on to tenants, also contributing to spiraling rental prices. 

Real Estate Financing: With the Central Bank of Somalia gradually
starting its functions and regulations for banking, the financial
sector is increasingly adopting a more formal style of operation. The
banking sector is in an early stage, with only a few commercial banks
registered so far by the Central Bank of Somalia. Real estate financing
is one of the main financial products that these banks currently offer.

Nonetheless, a local engineer who works in the real estate sector and was interviewed for this commentary argued that the Muraabaxa (cost-plus financing) finance solution partially causes the rising
rents in Mogadishu. He argued that landlords, who obtain bank financing
to build their houses, push tenants hard by charging them very expensive
house rents, with some also demanding tenants to pay several months’
rent in advance. By doing this, he asserted, landlords might repay the
bank’s money faster and make a quick profit at the same time.

Consequences of the High House Rent Prices

The
consequences of the high rent prices in Mogadishu are often felt by the
displaced communities and the urban poor. Gentrification forced
evictions and insecurity in some neighborhoods are – in part –
consequences of high house rent prices in Mogadishu.

Gentrification: Due to the unaffordable and ever-increasing rent prices in Mogadishu, some urban poor and
internally displaced people (IDPs) move to peripheral areas voluntarily
to get cheaper house rents or places to squat. As will be explained
further in the following paragraphs, most of these areas are more
dangerous than the core districts from which people are being pushed
out.

Because of the poor development and scarcity of job opportunities in the periphery, they are forced to come into the city center on daily basis to make a living and return at sunset. Additionally, the Mogadishu-Afgoi Road, which is
the main road that peripheral residents use, is known to be unsafe, with
landmines and explosions occurring frequently. The most recent occurred
in October last year when a landmine struck a civilian public transportation minibus traveling on the road, killing eight passengers.

Forced Evictions: Over the last decade, there has been an increase in the number of mass evictions in Mogadishu,
mostly of IDPs, due to rising land and property values and an
increasing number of developers and potential real estate and commercial
sites. In 2017 alone, an estimated 148,000 people were evicted.
Many of those people were pushed out to peripheral districts, including
Daynile and Kaxda. When evicted, they did not only lose their homes and
shelter but also their food stock and livelihood assets.

In addition, in some cases, IDPs are used as an instrument to manipulate urban land values and real estate prices and then evicted
afterward to new settlements, where the same scenario repeats itself.
IDPs also play a role in clearing previously unused land for their camps and connecting them to local infrastructure. This adds value to these
plots at which point landowners may return to evict residents for
further commercial development of these areas. It should be noted that
rising rental prices are one of the factors driving up land values in the Benadir region. Consequently, landlords evict IDPs and urban poor people so that their lands are developed or rented.

Security Concerns: The misery and suffering of the evicted and gentrified urban poor and IDPs do not stop there. As they reconcile to life in their new settlements in the outlying districts, they face new challenges. The peripheral areas are known to be unsafe, and
the government provides limited security services there. Extortion,
illegal roadblocks, robbery, and organized crime occur in these
periphery areas.

Furthermore, the notorious Ciyaal Weero gangs have
a profound presence in these areas and commit violent crimes including
murder, robbery, and assault. On the other hand, a resident in a
peripheral area, who could not move to the city center due to the
extreme rent prices, pointed out that he leaves early in the evening
from downtown for security reasons and goes home. He further added that
it is difficult for him to attend late-evening events or enroll in
classes in the city center for the same reasons.

Ways Forward

Firstly,
the government needs to improve the overall security of Mogadishu. The
situation has forced many people to congregate in a few areas of the
city while the rest are uninhabited or have fewer residents. Most of the
civil servants and international organizations workers reside in the
central areas of the city due to the fragile security situation in the
city. Consequently, house rents and the cost of living in the core
districts of Mogadishu are spiraling upward. Improving the security of
the entire city would ease the over-concentration in some parts of the
city and could contribute to a decline in the high rent prices in
Mogadishu.

Secondly,
the government should introduce new laws and policies to control and
regulate the real estate sector and prevent rent manipulation. The
policies should, for example, set a limit where rent prices cannot be
exceeded with due regard to the economic situation of the country; how
much a landlord can charge for a security deposit on new leases; and how
much a landlord can increase rent; and introduce mechanisms that enable
both tenants and landlords to have fairer contractual agreements.  In
the current lease “agreements”, landlords mercilessly dictate the terms
of the “agreements”, which leaves no room for maneuvering for the
tenants. Moreover, local courts find it difficult to hear such cases
since the few current laws that exist regarding this matter (and that
the courts rely on for deliberations and jurisdiction if a particular
party breaks the lease “agreement”) are outdated. The issue urgently
needs updated legislation and policymaking. On the other hand,
apartments are growing rapidly in Mogadishu due to the heavy investments
in the real estate sector. However, this newly emerging sector has no
laws in place that explain ownership rights or other related laws.
Nonetheless, the Benadir Regional Administration (BRA) has recently
appointed the “Apartments Director,” but the role of the new department
remains ambiguous.

Thirdly,
health, education, and other social services should be decentralized,
and their effectiveness needs to be improved. Furthermore, jobs and
employment opportunities should be distributed, and investors should not
only consider Mogadishu for their investments. Many people who relocate
from other regions to Mogadishu are simply looking for tertiary
education and social services that are unavailable or insufficient in
their home regions, while others are looking for employment
opportunities because Mogadishu receives significantly more investment
than other cities in the country. The government should also encourage
the Somali diaspora and other foreign investors to invest in other
regions to create jobs and employment opportunities there.

Fourthly,
there should be policies in place to prevent forced eviction and
support people affected by gentrification to resettle. Although
Mogadishu is rapidly developing, rapid urbanization is hurting the
city’s urban poor and IDPs. It is estimated that more than 40% of IDPs in Somalia live
in Mogadishu. The government should not leave these vulnerable
communities at the mercy of the wealthy and business people, who have
been massively investing in real estate in recent years.