KSA Housing Program
Ministry of Housing kingdom of saudi arabia

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Providing fair access to adequate housing to every citizen has been made one of the highest priorities in Saudi Arabia as the gap of affordable housing in the Kingdom had been increasing rapidly at a rate of ~100,000 units yearly. This gap is driven by an increased demand for affordable housing, as one third of the population is in age of marriage (20-34years) with limited income. In addition to this core segment, vulnerable segments of the Saudi society, including but not limited to handicapped citizens, divorced women, widowed women, unmarried women above the age 40 were also exposed to the housing problem. In order to address this issue, the Custodian of the Holy Mosques has dedicated USD ~70 billion to fund a housing program aiming at delivering 500,000 housing units to relax the housing problem in the Kingdom. This initiative came to solve the funding element of the issue. However, it raised four challenges for the Saudi Ministry of Housing: 1) The mandate did not specify who among the citizens should be eligible for this initiative neither who should be prioritized among eligible citizens. As the Ministry was delivering the first batch of housing units, these questions became highly relevant to ensure highest impact by targeting those who are most in need first, instead of the “first come first serve” approach which had been adopted by other programs. 2) The delivery of infrastructure projects is not the core capability of the public sector. The experience of the Ministry in managing contractors directly had not proven effective, in particular that the contractors “had no skin in the game”. This resulted in slow delivery of units and at times questionable quality, despite the contractual penalties and stringent requirements set by the Ministry. Moreover, it was difficult for the Ministry to define a set of unit designs that matches the various needs and tastes of the citizens. 3) While the Ministry was provided access to a dedicated land bank for this initiative, the state-owned land available is not sufficient to cover demand. Hence, there is need to leverage privately owned land, which is extremely expensive, given it had been increasingly used as an investment object, rather than a development platform in particular in urban areas, which encouraged speculation and drove prices significantly. Hence, private owners had no incentives to sell off their land, which further exacerbated the land availability issue. 4) While the ring-fenced USD ~70 billion would fund the supply of ~500,000 units, this funding mechanism is neither sustainable nor scalable, in particular given the expected slow recovery of these funds from beneficiaries. Alternative funding mechanisms have proven to be too slow with a long backlog of applicants (e.g. the public Real Estate Development Fund) or too restrictive (e.g. private banks). In this context, the Ministry will not able to fulfill its mission in a consistent manner across generations.

B. Strategic Approach

 2. What was the solution?
To address the challenges, the Ministry of Housing devised a set of four strategic initiatives aiming at focusing the housing program and providing linkage across the housing value chain between beneficiary management, land, delivery and financing. 1) The Ministry developed an eligibility and prioritization approach in order to define and determine target segments for its housing program and ensure highest impact. The Ministry conducted socio-economic and supply gap analyses to define target and priority segments and derive eligibility criteria (e.g. marital status, income, etc.), and prioritization criteria (e.g. family size, social / medical hardship) accordingly. The designed approach promotes equity and social inclusion through: ■ Gender-equality: the person financing the household can apply regardless of gender; divorced women can apply if they prove custody of children. ■ Prioritization of vulnerable groups (e.g. widowed and divorced women, unmarried women above 40, orphans, households with handicapped members get a priority bonus) and financially disfavored groups (lower income households get a higher priority bonus) ■ Exclusion of beneficiaries of other housing programs offered by public sector entities (e.g. loan from Real Estate Development Fund), private sector entities (e.g. employer housing programs) and not-for-profit organizations (e.g. charities and foundations) The eligibility and prioritization mechanisms represented the cornerstones of housing policy drafted by the Ministry and approved by the Government. 2) In order to solve the delivery issue, the Ministry engaged in public private partnerships aiming to leverage the private sector delivery capabilities while committing it through a proper risk reallocation. The adopted approach was designed in close consultation with private developers to increase feasibility, and consists of a set of key elements: ■ The Ministry developed a detailed operating model, where roles and responsibilities of each party (incl. Ministry, developers, end users, and other stakeholders) are well defined. This model was translated into a contractual framework, whereby each party is legally bound to its responsibilities. ■ While leveraging private developers for delivery, the Ministry kept an oversight role through well-defined performance indicators, incl. minimum technical standards (e.g. minimum housing unit size) and a pre-agreed execution timeline. These minimum criteria are enforced through contractual tools such as performance and advance payment bonds. ■ To reduce the delivery risk, the Ministry chose a pilot site, which it subdivided into plots to test the approach with multiple developers, hence reducing the risk of a single point of failure. ■ Given its limited design capabilities, the Ministry allocated this function and the associated risk to developers, hence creating competition between them to innovate on designs and master-plans and market to beneficiaries. This enabled creating vibrant mixed income communities that had unique identities. 3) To unlock the supply of private land, the Ministry pursued a dual approach consisting of incentives to unlock land supply, and penalties for not doing so. Private owners are provided a range of incentives to develop their land including but not limited to access to well-funded buyers, speedy issuance of permits, provision of infrastructure connectivity, on-time provision of social infrastructure, etc. Simultaneously, the Ministry explored the introduction of a land-fee on non-built land that is not being developed nor built within usual timelines. The objective in the short-term is to bring private land owners to develop and build their land, or selling it off to unlock the supply situation. Also, the fee will indirectly limit speculation effects. 4) Finally, the Ministry is exploring the possibility to establish a guaranteed mortgage fund, where the funds provided to the Ministry will serve as a leverage to unlock private sector funding, rather than a direct source of funding. This approach aims at ensuring sustainability and scalability of funding.

 3. How did the initiative solve the problem and improve people’s lives?
1) Eligibility and prioritization: ■ Given poor data quality, the Ministry introduced flags, which it checks in an automated way to identify fraudulent applicants. E.g., low-income citizens with registered expensive cars are flagged and initially rejected, with the right to appeal. This allowed the Ministry to efficiently filter out fraudulent applications, and focus on real exceptions through the appeal process. ■ To ensure efficient roll out, the Ministry leveraged IT and technology-based solutions including online applications (instead of paper-based), electronic communication with citizens, automated eligibility and priority checks, which reduced processing time and increased responsiveness. 2) PPP for housing delivery: The Ministry introduced a citizen-led developer selection in order to incorporate citizen’s feedback in the program and channel private resources effectively. Developers compete through their design for the interest of beneficiaries. Those, who are not successful in marketing their products, based on citizens’ choices, are disqualified from the program. 3) Unlocking land supply: The introduction of a land-fee by the Ministry is a unique instance of penalizing monopoly of resources in KSA, aiming to improve access and establish equity among citizens. The collected fees are reinvested in form of incentives to promote private land development and increase affordable housing supply.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
The implementation of three out of four strategic initiatives discussed so far is ongoing and important milestones are being achieved: 1) The implementation of IT application platform including eligibility and prioritization mechanisms was done through the following steps: ■ By July.2013: Translation of the eligibility and prioritization mechanism into a draft policy and submission to higher authority for approval ■ By Sep.2013: Establishment of data collection mechanism in collaboration with all governmental and non-governmental parties representing data sources ■ By April.2014: Implementation of the online application platform, integrating different data sources, and launch of the online application platform to the public ■ By Oct.2014: Run of the first eligibility check on the received applications and announcement of eligibility outcome, and priority rank for eligible applicants ■ By Oct.2014: Receiving and addressing appeal requests and adjusting eligibility status accordingly in the online platform 2) The implementation and launch of PPP program for development on Ministry owned land was achieved through the following steps: ■ By Nov.2013: Establishment of an internal PPP unit to drive implementation of the program ■ By Jan.2014: Development of minimum technical standards ■ By Feb.2014: Translation of the defined operating model into a contractual framework ■ By Mar.2014: Development of an evaluation framework for potential partners taking into account organizational and financial capabilities as well as previous experience and track record ■ By April.2014: Drafting a Request for Proposals describing the scope of partnership and all project details ■ By Jun.2014: Launch and management of RFP process and shortlist a set of developers ■ By Sep.2014: Assessment and approval of developer designs and their marketing material based on consistency and compliance with minimum standards ■ By Dec.2014: Launch and management of marketing, where developers market designed products to beneficiaries released by the Ministry based on priority ranks to create sufficient demand at each point in time for developers to achieve their objective ■ By Jan.2015: Identification of successful developers and management of non-successful ones –successful developers are provided with initial funding, based on number of sold units, and granted permission to start building. Non-successful developers will be disqualified and replaced. ■ By Feb.2015: Monitoring of construction through a technical consultant supporting the Ministry on technical validation of progress made by developers, identifying potential quality gaps or delays and managing developers accordingly ■ By April.2015: Start delivery of housing units to beneficiaries and start of loan payback 3) The implementation of the policy to unlock land supply is being planned and involved the following steps: ■ By Aug.2014: Drafting the policy and submission to higher authority for approval ■ Large scale public announcement of the approved policy ■ Signing a memorandum of understanding with relevant stakeholders, e.g. other ministries to facilitate implementation ■ Definition of roll out approach ■ Design of organizational requirements for implementation ■ Detailed approach design (e.g. use of GIS data to identify white land areas) and partnership with technical providers ■ Concept design of an IT system and partnership with IT providers ■ Creation of a land registry and definition of land use and properties for the registered parcels based on municipality and urban planning data ■ Determining ownership for registered land parcels ■ Determining the value of registered parcels, defining land zones and determining the fee levels applicable by land zone ■ Announcement of the proposed system to public and collection of public feedback ■ Definition and implementation of deferral, exception and appeal process ■ Definition and implementation of collection and enforcement mechanisms ■ Launch of the system and monitoring in order to perform changes where required (e.g. refining zoning, adjusting fee levels)

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
Several stakeholders were involved in design and implementation. Other Ministries and public entities: ■ Ministry of Justice for land ownership data ■ Ministry of Finance for refining the approach to the land-fee policy, in particular the fee collection ■ Ministry of Water and Electricity for data used in the eligibility and prioritization platform, as well as for the implementation of the land-fee policy ■ Ministry of Municipalities and Rural Affairs for provision of data for the implementation of the land-fee policy ■ Ministry of Interior for provision of civil status data and validation of applicant data for eligibility and prioritization ■ The Real Estate Development fund for the loan payback mechanism for the PPP program ■ The General Organization for Social Insurance (GOSI), the Public Pension Agency (PPA), the Saudi Arabian Monetary Agency (SAMA) for salary income data ■ The Ministry of Higher Education for students scholarships data to exempt from residential stipulation as an eligibility criterion ■ The Ministry of Social Affairs for special needs group data ■ The Ministry of Commerce & Industry for business records ■ The Ministry of Civil Service: for public sector employee data ■ The Saudi Post for post data ■ The National Water Company for water meters data ■ The Saudi Telecom Company for telephone lines data Private sector: ■ Real Estate developers: validation of the approach for the PPP program ■ IT system providers and integration experts: implementation of the application, eligibility and prioritization platform as well as implementation of the land registry and related mechanisms for the land-fee ■ Strategy consultants: analysis of international experience and design of approach and strategies for the eligibility and prioritization approach, the PPP operating model, as well as the policy design and implementation approaches ■ Technical consultants: on the implementation of the PPP program
 6. How was the strategy implemented and what resources were mobilized?
Being made a priority for the Kingdom, the housing program is funded by the Government and seeded with USD ~70 billion which have been ring-fenced for the program. Given the PPP construct, however, the private developers find themselves also involved in funding of housing units and bearing the risk of non-recovering their funds if they do not manage to sell-off the totality of the units that they build to beneficiaries. The program with its various initiatives is driven by the department of planning and strategic studies of the Ministry, e.g. through the recently formed PPP unit for the PPP program, and leveraging multiple internal and external resources on demand and as required. Internal resources include other Ministry departments (e.g. legal department, procurement department, technical department). External resources leveraged so far include technical consulting teams, IT consulting and system integration teams, strategy consulting teams as well as legal teams. For the implementation of the land-fee policy further specialized teams and resources will be required such as Geographic Information System (GIS) providers.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
The program is still under implementation, yet it has delivered a set of successes so far: 1) Eligibility and prioritization platform: ■ ~960,000 households have submitted applications to the housing program within two months from the launch of the online application platform Eskan ■ The eligibility mechanism has found over ~620,000 applicants across the Kingdom to be eligible and informed applicants accordingly ■ 49,165 applicants appealed against their non-eligibility and the appeal process found 40,983 out of these to be eligible. ■ 33,935 women (25,600 widows and 8,335 divorced) applied for the housing program as household heads, and were granted eligibility ■ 4000 housing units have been delivered and distributed to eligible applicants in Jazan based on the allocated priorities. 2) Public private partnerships for delivery of housing: ■ Launch of a national RfP to develop the pilot site involving ~1,200 residential apartments (housing ~7000 Saudi citizens) on a Ministry-owned site in Riyadh ■ 6 developers have been shortlisted and qualified and publicly announced to participate in the PPP process 3) Unlocking land supply: ■ Suggested land-fee policy drafted, submitted and in last rounds of discussion by higher authorities potentially leading to approval

 8. What were the most successful outputs and why was the initiative effective?
The Ministry established a project governance structure consisting of a steering committee headed by H.E. the Minster of Housing and different initiative teams leading the implementation of the strategic initiatives discussed here. The reporting takes place on a weekly basis, where the initiative teams report to the steering committee on achieved progress, but also on potential issues to seek resolution. Progress is not only assessed against predefined implementation milestones (e.g. planned RfP launch date for the PPP program), but also evaluated against quantifiable KPIs (e.g. number of appeal requests processed for the eligibility and prioritization platform). Given the long-term perspective of the PPP program, the Ministry established a dedicated unit as part of its organization, the PPP unit. This unit has been mandated to manage the program delivery and oversee the works of the private partners reporting directly into the head of planning and strategic studies, who in turn reports directly to H.E. the Minister of Housing.

 9. What were the main obstacles encountered and how were they overcome?
Several obstacles were encountered and needed to be addressed during design and implementation of the strategic initiatives: 1) Eligibility and prioritization platform: Data quality issues and availability of digitized data were the main issues in the implementation, given high reliance on data to build an automated approach. To solve this issue, the Ministry used available proxies to cross check data (e.g. use of asset data to cross check income data) and adopted a conservative eligibility approach combined with an appeal process. In addition, digitization of paper-based data (e.g. ownership deeds) has been launched. 2) Public Private Partnerships: High reluctance was expected initially from the private sector given the PPP construct implied a higher allocation of risk to the private sector. In order to manage this issue, the Ministry organized workshops, inviting private developers to openly discuss the approach in order to collect their feedback early on in the process. 3) Policy for unlocking land supply: Once issued, the land fee policy is expected to apply to all qualifying land parcels across the Kingdom. However, the implementation of such a policy will be complex and difficult to manage in all cities simultaneously, which could put at risk its success. Therefore, the Ministry decided to define a gradual roll out strategy starting with a pilot in a high-impact location (e.g. Riyadh), where the supply gap is particularly important. This pilot enables the Ministry to test the approach effectiveness and take corrective measures for the roll out. Another challenge faced in the policy implementation is the limited transaction data for land parcels, which makes their valuation difficult. Therefore, the Ministry is planning on applying the Computer Assisted Mass Appraisal methodology which relies on available transaction data and builds characteristics-based analogies between land parcels to determine the value of parcels in scope.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
The housing program orchestrated by the Saudi Ministry of Housing is perhaps one of the largest programs of its kind in the world that is simultaneously addressing the demand and supply side of housing. As of November 2014, the Ministry’s housing portal has ~1 million registered citizens. This is a significant milestone in impact in stimulating the end user demand. Previously, the waiting period for applicants to get their land and loan from the government was ~18 years through the government sponsored real estate development fund. However, under the housing eligibility program, these ~1 million registered citizens will have the opportunity to choose between finished units, land and loan or pure loan products and realize their housing aspirations within a much shorter time period. Most importantly, these ~1 million eligible citizens have been prioritized based on the eligibility criteria for the first time – this will ensure equitable allocation of housing units to citizens who are most in need. On the supply side, the ministry’s PPP program has already been activated on the first pilot project on a site measuring 5 million square meters next to the Riyadh airport. This development can house ~5600 units housing ~30,000 citizens. The tender process has already been rolled out and 6 developers have been selected based on a rigorous developer qualification program to initiate development within this site. A pilot targeting 1200 out of the 5600 units has already been awarded and launched. The PPP operating model showcased through this effort is unprecedented within MENA and sets the stage for scale-up to ~60,000 units across 9 ministry of housing sites over the coming 1-2 years. This effectively sets the stage to house ~350,000 Saudi citizens. The model for the first time has helped allocate the right risks across the housing value chain to the rightful owner. Further, it has given certainty to all stakeholders through innovative mechanisms such as use of escrow accounts and technical consultants to link milestone based payments to actual development progress. Finally, the land policy that is under legislation is unprecedented in terms of its impact in the Kingdom. Even the announcement of the policy and a public debate has helped moderate land prices and support a moderate correction of ~10-15% and increased transactions that have enabled private citizens to be able to access desirable land parcels that are well connected to social infrastructure and transportation networks. This is supporting unlocking land supply where it is most needed – where, employment, housing and infrastructure can converge. Thus, the ministry’s program has helped bring back land at the center of the housing policy and is helping create sustainable mixed income communities.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The ministry’s housing program is both sustainable and transferable. The sustainability of the program can be described along a few dimensions. In terms of financial sustainability, the program engages the private sector to develop and sell units to the eligible citizens. Thus, private capital and the implicit expectations on their productivity and innovation increases the financial sustainability of the program. Further, the consideration of ideas such as mortgage guarantee program increases financial inclusion while introducing a massive multiplier effect. This ensures that subsidy based vouchers given out by the government are minimized which is critical for the long term financial sustainability and health. In terms of social and economic sustainability, by virtue of creating mixed income developments, the housing program is enabling creation of thriving communities which residents look to embrace for the long term. This has helped prevent ghettoization of such housing developments. Further, the way the ministry has developed the minimum standards and design guidelines for the housing communities has put a minimum burden on the private sector to ensure environmental sustainability. In terms of transferability, the ministry’s PPP program has been designed with several features which address the fundamentals of how the private sector would view housing programs. For instance, the use of escrow accounts and technical consultants solve an underlying issue – they provide certainty of cash-flows to the private sector and encourage their participation while minimizing their risks. There are several such ideas and design principles from the program which can be transferred both within Saudi and across many markets.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
The first lesson involved grounding housing policy in socio-economic and spatial data that can drive policy making. The land policy in particular required a strong fact base to push for unprecedented reform in land holding that could have become a deeply political issue. However, by building the land holding data, ownership patterns, price movements and modeling of penalties on land prices, the ministry was able to ground the discussions on an analytical basis for the economic and social rationale to implement land reforms. This helped build the required alliance within the decision makers and the ministry was able to table legislation that is under active consideration. Further, the IT platform that the ministry built helped collect detailed socio-economic parameters of the beneficiaries and this helped link the demand side with the supply side in terms of the types of products that need to be unlocked. For private developers, access to this data was instrumental in their willingness to bear a portion of the risks along the housing value chain. The second key lesson is around solving for housing across a mixture of incomes as against purely focused on low income segments. The ministry realized that it is important to focus on both the existing stock and new flow of housing units in order to create a balanced supply. Further, the policies should help facilitate availability of housing for a variety of incomes – not just the poorest income segments and a variety of tenure types including affordable rental options. This way, a ladder of housing aspirations can be met by the ministry and can help create thriving mixed income communities. The third lesson has to do with the approach to development of the housing communities. In a market where supply is fragmented, industry capacity building is key. By engaging multiple developers on the same site, the ministry used its scale to open up access for smaller developers to the housing program. Further, it encouraged competition and innovation by the participating developers. By also enabling access to foreign developers, the capabilities of the local developers were increased. This suggests that with the right planning, housing ministries can institute an industrial approach to housing developments and aspire to unlock housing at unprecedented scale.

Contact Information

Institution Name:   Ministry of Housing kingdom of saudi arabia
Institution Type:   Government Agency  
Contact Person:   Mohammed alzumaie
Title:   Engineer  
Telephone/ Fax:   +966112894044
Institution's / Project's Website:  
E-mail:   maz@housing.gov.sa  
Address:   Saudi Arabia - Riyadh
Postal Code:  
City:   Riyadh
State/Province:   Central

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