Construction Management and Economics

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Significant cost-push factors in owner-built

incremental housing construction in Tanzania

Samwel Alananga, Charles Lucian & Moses Mpogole Kusiluka

To cite this article: Samwel Alananga, Charles Lucian & Moses Mpogole Kusiluka (2015)
Significant cost-push factors in owner-built incremental housing construction in Tanzania,
Construction Management and Economics, 33:8, 671-688, DOI: 10.1080/01446193.2015.1090007

To link to this article: http://dx.doi.org/10.1080/01446193.2015.1090007

Published online: 13 Oct 2015.

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Construction Management and Economics, 2015
Vol. 33, No. 8, 671–688, http://dx.doi.org/10.1080/01446193.2015.1090007

Significant cost-push factors in owner-built incremental housing

construction in Tanzania
SAMWEL ALANANGA1* , CHARLES LUCIAN2 and MOSES MPOGOLE KUSILUKA3
1
Department of Land Management and Valuation, School of Real Estate, Ardhi University, Dar es Salaam, Tanzania
2
Department of Property and Facilities Management, School of Real Estate, Ardhi University, Dar es Salaam, Tanzania
3
Commissioner for Lands, Ministry of Land and Human Settlement Development, Dar es Salaam, Tanzania

Received 24 March 2015; accepted 30 August 2015

The owner-built incremental housing approach is highly prevalent in developing countries although its economic
rationale is questionable. This study uses descriptive statistics and regression analysis to examine the flexibility of
owner-built housing construction cost in response to different cost-push factors based on survey data on 43 main
and 20 outbuilding projects implemented in Dar es Salaam Tanzania between 1990 and 2013. It has been
observed that factor cost-flexibility of incremental construction is significantly enhanced through longer construc-
tion periods, the use of local cement and drainage system materials and larger built space. This flexibility is
explained by the owner-builders’ ability to internalize these cost-push factors over time which is reflected through
lower annual construction costs facing owner-builders even at times of shortage in services and material supply,
cost underestimation or high interest rate. These observations suggest that longer construction periods not only
offer the cost-spread advantage but also allow a more thorough search for appropriate plot location, cheaper
sources of materials, more affordable design and an appropriate match between changing life cycle housing needs
and household income. Therefore, the incremental owner-built approach has lower annual construction costs not
only because of the cost-spread effect of a longer construction period but also as a result of owner-builders’
cost-saving choices made in terms of utilization of certain local materials, purchasing plots in less challenging
environments, preferring single-storey over two-storey houses and avoiding complex house design.

Keywords: Construction cost, developing countries, duration, housing, Tanzania

Introduction targeted low-income households or government

Sub-Saharan Africa (SSA) faces unprecedented
challenges in relation to adequate and affordable hous-
ing (Beck, 2012; Mayanki et al., 2012; Drummond
et al., 2013). Among the critical challenges facing
SSA are uncertainties pertaining to land and housing
markets (Voordijk, 2012). This is a result of three basic
features: informality in construction or plot acquisition
or both (Kironde, 1995; Pugh, 2001; Arvanitis, 2013;
Nohn and Bhatt, 2014), greater diversity in the con-
struction materials used, and lastly, limited affordabil-
ity (Lim, 1987). Addressing informality often breeds
formal and informal housing archetypes in the property
market. The formal housing types can be categorized
into two, i.e. private housing and public housing all
being developer-built. Public housing has traditionally
employees (Gattoni, 2009; Beattie et al., 2010;
ShoreBank International, 2011; Wakely, 2014),
whereas private developer-built housing targets high-
income households (Malpezzi and Sa-Aadu, 1996;
Greene and Edwardo, 2008). The informal housing
development takes place on either developed or unde-
veloped land and the construction process is incremen-
tal depending on an individual’s financial capability,
needs and time (Mukhijaa and Scott-Railton, 2013;
Awanyo et al., 2014; Hamid and Mohamed-Elhassan,
2014). The informal, incremental housing approach is
however, applicable in both developed and developing
countries although in many developing countries it is
controversial as it fuels informal settlements (Pugh,
2001; Mukhijaa and Scott-Railton, 2013) and does
not operate to capture economies of scale (Lizarralde

*Author for correspondence. E-mail: alananga@aru.ac.tz

© 2015 Taylor & Francis

672
and Root, 2008). Similarly there are still controversies
with regard to its ability to solve the housing problems
of urban dwellers (Awanyo et al., 2014).
Unlike in developed countries where housing is an
investment (New Zealand Productivity Commission,
2012; Nakamura, 2014), to many in SSA countries,
housing is viewed as a means to meet the social and
shelter needs of households (Turner, 1967; Mehta
and Bridwell, 2005; Siddiqui, 2005; Schmidt, 2006;
Boamah, 2010; Harper et al., 2011; Scott, 2012). Con-
ventional housing approaches in SSA entail observance
to stringent development conditions intending to con-
trol housing quality as well as meeting loan repayment
obligations (Lim, 1987). This makes low-income
households unlikely targets of conventional methods
of housing supply (Hoek-Smit, 1998; UN-Habitat,
2008). Beginning in the 1970s, countries in SSA
recognized many of the housing approaches which were
conceived as illegal during the colonial and early post-
independence era, as among the options for providing
‘affordable’ housing (Turner, 1967; Majale et al.,
2012; Wakely, 2014). Many policies recognized that
owner-built incremental housing is affordable not only
because of cheaper local materials used but also
because owner-builders can supply own labour in the
form of initiatives, skills, and time owing to the lower
opportunity cost of labour (Turner, 1967). Incremental
housing can be defined as a housing approach which
allows construction works to be undertaken in such a
way that habitable stages of a house are constructed
first and the rest of the house is completed while the
owner resides in the finished portion of the same house.
Although affordability could be the main reason for the
adoption of incremental housing in SSA, the approach
is also preferred because it is associated with larger
space compared to ‘instant’ housing approaches
(Turner, 1967; Tipple, 1999). These observations sug-
gest that preference for incremental housing may not
necessarily be associated with affordability, but rather
there are multiple factors, the understanding of which
could provide some insight into its prospects as a
sustainable housing approach.
Incremental housing as an approach to housing
traces its origin in Turner (1967) where housing
development is conceived as emanating from private
initiatives. Instead of wasting the expended energy
and resources through clearance and demolition of
informal housing, Turner (1967) argued that it is more
economical to devise means through which such initia-
tives can be integrated into the wider housing pro-
grammes. Three forms of incremental housing have
been identified in SSA: (1) informal housing; (2)
sites-and-services; and (3) core housing (Hamid and
Mohamed-Elhassan, 2014). Informal housing can be
initiated either illegally or through purchase of land
Alananga et al.
owned under customs and traditions in the urban fringe
(Selod and Tobin, 2013; Yu et al., 2014). In either case
the resulting housing can be formalized through recog-
nized housing transformations or squatter upgrading
(Lizarralde and Root, 2008) or some other forms of
incremental housing. Housing transformation involves
extension, alteration and removal of housing parts in
an attempt to increase usable space or improve housing
quality (Nguluma, 2003; Harper et al., 2011;
Majale et al., 2012; Awanyo et al., 2014; Mukhija,
2014; Nakamura, 2014). Squatter upgrading involves
improvement of neighbourhood services such as roads
and drainage systems, and may involve the provision
of water and electricity. The site-and-service incremen-
tal housing approach targets the provision of developed
plots to households who are supposed to incrementally
build their own houses using their own resources
(Gattoni, 2009; Beattie et al., 2010). The last incre-
mental housing approach, i.e. core housing, is often
provided in formally held land where the government
or donor agencies provide a core-house or ‘starter’
which must be habitable (Beattie et al., 2010; Hamid
and Mohamed-Elhassan, 2014).
Owner-built incremental housing in
Tanzania
The government of Tanzania has since the early 1960s
been providing formal housing units for sale or under
rent-purchase arrangements or renting through its agen-
cies including the National Housing Corporation
(NHC) (Lupala, 2002; Nguluma, 2003). As in many
other SSA countries, formal housing has also been
provided through private developers who, however,
make up a marginal share of the total housing stock
because their prime consumers are the middle- and
high-income households (Malpezzi and Sa-Aadu,
1996; ShoreBank International, 2011). An alternative
to developer-built housing is the owner-built incremen-
tal housing as explained in the previous section. The ori-
gin of urban incremental housing in Tanzania can be
traced as far back as colonialism. The colonialists
neglected Africans’ housing by applying discriminative
policies which allowed segregation of White, Asian
and African settlements in major towns of the time
(Kironde, 1995). Thus low-income Africans interested
in urban life found themselves in settlements which
were closer to the towns but were regarded as illegal.
These practices continued even in early post-indepen-
dence where in addition, the governments were unfa-
vourable to informal housing and applied demolition
policies (Lim, 1987; Malpezzi and Sa-Aadu, 1996).
The recognition and legality of the owner-built
incremental housing as a method of housing development
Cost-push factors
in Tanzania can partly be attributed to the legal stance and
inefficiency in the enforcement of planning laws and reg-
ulations and to a certain extent the political support which
is often reflected in the changing policy framework. As a
result of this regulatory laxity, the incremental housing
approach has also attracted middle- and higher-income
households leading to less dense settlements (Lupala,
2002; Limbumba, 2010). A number of initiatives provide
evidence of formal recognition of owner-built housing in
Tanzania. For example between 1973 and 1976,
Tanzania through the assistance of the World Bank con-
ducted site-and-service schemes in different parts of the
country (Mbyopo, 1993). A more recent, but of relatively
lower quality site-and-service scheme is the 20 000 plots
project implemented in Dar es Salaam beginning in
2002 (Siddiqui, 2005; Mwiga, 2011; Majale et al.,
2012). Many of these housing approaches designed to
provide serviced plots often fail because the serviced plots
end up in the hands of the few rich (Malpezzi and Sa-
Aadu, 1996; Siddiqui, 2005; Beattie et al., 2010). Further,
in response to the High Court decision in Mwalimu Omari
and Ahmed Baguo v Omari Bilal, Civil Appeal 19 of 1996,
which declared informal housing in cities throughout
Tanzania as ‘squatters’, the government incorporated
provisions to protect these settlements in the 1999 Land
Act. Therefore, it is evident that the socio-political as well
as the legal environment favours incremental housing but
the economic justification for such an approach is not well
investigated.
Significant cost factors of owner-built
incremental housing
The owner-built incremental construction cost can
directly be measured as the overall expenditure on the
construction activities from the start of the housing
project to the habitation stage. Whilst habitation time
provides a cost-measurement limit in incremental con-
struction, such time can substantially vary within the
same spatial unit depending on the socio-economic
status and need of the owner-builder. Based on this,
construction cost is defined in this paper as ‘the annual
expenditures on all construction activities including
maintenance of an incomplete house in which one
lives’. The owner-builders can adopt several strategies
to reduce or manage these costs before and after habi-
tation. During construction, owner-builders rely on
their meagre incomes and loans from friends and rela-
tives thus lowering financing cost (Magigi and Majani,
2006; UN-Habitat, 2008; Majale et al., 2012; Bisiaux,
2014). Similarly, Awanyo et al. (2014) argue that
labour intensive techniques in incremental housing
construction can significantly reduce costs. Since the
majority of owner-builders do occupy or let out their
673
home as soon as it is roofed (Mukhija, 2014) or trans-
form their houses to allow business activities to take
place at home (Kachenje, 2005; Schmidt, 2006), it is
not surprising to see some of them remaining incom-
plete for as long as 10–20 years (Greene and Edwardo,
2008; ShoreBank International, 2011; Awanyo et al.,
2014). Although these strategies are associated with
lower construction costs, the mechanisms through
which they operate are not clear.
One possible cost reduction mechanism for differ-
ent cost factors identified in owner-built incremental
housing is owner-builders’ flexibility in response to a
changing cost environment. The nature of construction
activities in incremental housing can allow the owner-
builder to enjoy certain cost controls. For example
since work contracts are informal, they can easily be
postponed/internalized at times of higher prices to a
future date without significant costs to the parties
involved. Although the same flexibility can be applied
to material cost, once materials have been procured,
they must be used otherwise significant cost in terms
of waste and theft will be incurred. The owner-builders
tend to be completely inflexible in terms of certain con-
struction costs. For example the owner-builders may
decide to use a loan thereby tying themselves to the
annual repayment obligations. Therefore, the effect of
a cost factor on incremental construction costs is deter-
mined by the ability of the owner to respond to these
cost factors.
Figure 1 provides a framework of analysis where it is
portrayed that each factor affecting cost is associated
with at least one of the four cost components, i.e.
labour, material, land and finance. The effect of each
factor on construction cost is referred to as ‘factor flex-
ibility’ indicated by the three levels, i.e. flexible, partially
flexible and not flexible. This flexibility is determined by
the ability of the owner-builder to internalize/control a
particular cost factor. Owner-builders’ construction
cost is flexible and thereby lower in response to changes
in labour related costs because of the use of cheap
skilled and unskilled labour (Jayawardane and
Gunawardena, 1998; Centre for the Study of Living
Standards, 2001; Dell’Isola, 2003; Kadir et al., 2005;
Magigi and Majani, 2006; Warsame, 2006; Ejohwomu,
2007; Majale et al., 2012; Enterprise Community
Partners et al., 2013), heavy competition among infor-
mal construction ‘firms’ (technicians) (Elhag and
Boussabaine, 1999; Dell’Isola, 2003; Warsame, 2006;
American Institute of Architects, 2007; Enshassi et al.,
2007; Africon, 2008; New Zealand Productivity Com-
mission, 2012) and higher ability of the owner-builders
to stall projects as a hedge against inflation (Malpezzi
and Sa-Aadu, 1996; West and Worthington, 2006;
Enshassi et al., 2007; Giddings, 2007; Azhar, 2008;
UNESCO, 2009; Ozcelebi, 2011; Oladipo and Oni,
674 Alananga et al.

Cost Push Factors

Significance

Use of unskilled labour ; Source of materials (imported/local Small Size;

Large pool of semi -skilled labour;
Factor Flexibility Informal contracts;
Outer-plot location;
(βi,byi,bpi) Longer construction duration; and
Single-storey
cement, gravel, plumbing, electrical); Many rooms;
Use of luxurious materials/quality Year under construction
(roofing/floor tiles, gypsum, Grazed Change of design;
aluminium window); Challenging locations;
Prices and Housing finance loan; and
Quantity supplied in the market Higher interest cost

Flexible Partially Flexible Not Flexible

Factor Internal Indeterminate External

Control Control Control Control

Construction
Costs Labour Cost Material Cost Land Cost Finance Cost

Figure 1 A framework for analysing cost-push factors in owner-built incremental housing: the significance of any cost-push
factor is determined by factor flexibility bi ; byi ; and bpi as defined in the methodology section, which in turn depends on the
degree at which owner-builders have control over different cost components

2012; Bisiaux, 2014). Figure 1 suggests that the effect of
materials is indeterminate, however, since in owner-
built incremental housing owner-builders are likely to
use cheaper, locally available materials and fittings,
and tend to internalize unexpected changes in material
cost leading to lower costs (Moavenzadeh and Rossow,
1975; Ofori, 1994; Malpezzi and Sa-Aadu, 1996;
Dell’Isola, 2003; Bakefi, 2006; Giddings, 2007;
ShoreBank International, 2011; Majale et al., 2012;
Taylor, 2012; Awanyo et al., 2014).
The main incremental housing cost-push factor is
size of the built unit where as one increases the built
space, construction cost must increase because of mate-
rial and labour requirements (Turner, 1967; Mumtaz,
1995; Tipple, 1999; Arvanitis, 2013; Enterprise
Community Partners et al., 2013). Therefore in terms
of Figure 1, increasing the built space size or number of
rooms is cost-inflexible hence owner-builders must face
higher costs by having bigger houses. Such inflexibility
is also applicable to factors such as inner city plot location
(Majale et al., 2012; Drummond et al., 2013), complex
house design (Roodman et al., 1995; Akadiri, 2012;
Arvanitis, 2013; Enterprise Community Partners et al.,
2013; Mukhijaa and Scott-Railton, 2013), subsoil and
topographic constraints (Maevis, 1980), complex con-
struction methods (Ngowi, 1997), shorter duration of
construction (Baloi and Price, 2003; Warsame, 2006;
Greene and Edwardo, 2008; UNESCO, 2009; Harper
et al., 2011; ShoreBank International, 2011; Awanyo
et al., 2014), formality of plot (Dell’Isola, 2003; Vincent
and McKoy, 2008; ShoreBank International, 2011) and
market interest rates (Hoek-Smit, 1998; Nohn and
Bhatt, 2014).
Research methodology
Sample and data
Dar es Salaam is the biggest city in Tanzania, and by
the year 2012 had a population of 4 364 541 people
in 1 095 057 households (National Bureau of Statistics
Tanzania, 2013). According to the 2012 household
budget survey 37% were estimated to be house owners
(National Bureau of Statistics Tanzania, 2014). This
means that house owners in the city could be around
405 171. The data used in this study are based on a
survey administered through questionnaires to 43 prop-
erty owners in the city of Dar es Salaam between Jan-
uary and March 2013. A total of 200 questionnaires
were distributed with an expected response rate of
50%. The questionnaire had four main parts, the first
part intended to collect data on location, timing of
the projects and respondents’ attributes, the second
part dealt with structural characteristics of the built
house, including built space (sqm), lot size (sqm),
number of rooms and average costs (Tanzania
shillings), the third part dealt with a description of
the different cost components (the results of which
are not presented in this paper) and the last section
dealt with perceived constraints in construction and
cost-push factors which form part of the current paper.
The response rate was 21.5%. The low response rate
Cost-push factors
can be attributed to reluctance to respond especially
among informal employees who were ultimately
excluded in further analysis. All respondents had super-
vised the construction of their own houses in the period
between 1990 and 2013. The questionnaire allowed the
respondents to separate the construction of a main
house and the outbuilding leading to a total of 63 pro-
jects which were weighted by the number of years
under construction resulting in a total of 369 data
entries (project years). Therefore, the resulting dataset
is a result of a breakdown of construction cost over the
period in which a project was ongoing. For example if
the project was implemented for three years, then
annual expenditure for each year was recorded based
on the responses but the other variables and dummies
remain the same throughout the three years.
Variables and analysis
As noted above, the data are based on a survey and
comprise both numeric entries and dummies. Appro-
priate approaches in analysing such data are descriptive
and/or inferential statistics (Bhattacherjee, 2012). Since
the researchers wanted to understand the simultaneous
effect of predefined variables including controls, it was
necessary to use multiple regression techniques which
allowed the simultaneous isolation of the effects of each
variable. Therefore, the analysis relies on both descrip-
tive statistics and multiple regression analysis which is
inferential statistics. Descriptive statistics provides a
quick and an easy-to-interpret approach for the data
based on measures such as the averages, maximum
(max), minimum (min) values and standard deviation
(std dev.). For a deeper understanding of the relation-
ships between annual construction cost (per square
meter, sqm) and cost factors, multiple regression anal-
yses were carried out. Ordinary least squares (OLS) is
first used to estimate the following regression model:
X
4 X
2 X
12
LnACCiy ¼ b0i þ bi xi þ bpi di þ
i¼1 j¼1 k¼1
where LnACCiy is the natural log of annual construc-
tion cost per sqm that owner-builder i spent in year y
to construct his house, β0i is a intercept, βi is the
coefficient for independent variables, xis, bpi is the
coefficient for the property characteristics and stated
cost-push factor dummies and byi is the coefficient for
year dummies.
Based on the available data annual construction
cost is hypothesized to be significantly flexible (positive
partial correlation) in response to duration in years
from plot purchase to home ownership (DHOiy) and
675
from the start of construction to completion (DHCiy);
more flexible for single-storey houses than two-storey
houses (HTN) and for outer construction sites than
inner city (PLO). Theoretically flexible factors of infor-
mal contracts and labourers’ skill levels shown in
Figure 1 were not observed/mentioned by respondents
hence were excluded in analysis. Cost inflexibility
(negative partial correlation) is hypothesized for the fol-
lowing cost-push factors: number of bedrooms
(NBRiy), size of built space (SBSiy), years during which
a project is ongoing (YUCiy), change of design
(HCFCFD), challenging locations in terms of drainage
(HCFCDS), use of loan (HFL) and perceived higher
interest rate (HCFHIR). Material related cost factors
are hypothesized to be indeterminate and can fall on
either side depending on supply condition, i.e. source,
quality and preferences. These factors were derived
from specific questions that asked about the materials
used for foundations, walls, roofing and finishing.
The resulting lists were then compared against each
other by creating dummies for the use of local Portland
cement (LCU), local white cement (LWCU), roofing
tiles (RRT), gypsum (CMG), concrete/gravel (FMC),
floor tiles (FMFT), glazed aluminium (WMA), local
drainage system materials (LDSMU) and local electri-
cal materials (LEIMU). All other cost-push factors
included in the analysis as controls were based on
respondents’ identified cost-push factors.
A description of all these variables is presented in
Table 1. The 47 or 49 data entries in Table 1 are for
nine two-storey housing projects and the remaining
312, 314 or 320 data entries are for the remaining 54
one-storey projects. Generally, it is rare to find a more
than one-storey incremental house in Dar es Salaam.
The nine projects that were encountered in this study
reflect the type of respondents who dominated our sur-
vey, i.e. government employees, hence the data though
small are representative of the population cluster for
which conclusions are drawn, subject to the explana-
tion given in the limitation section.
Given the nature of the data, the assumption of
byi yi þ eiy
independence is violated (Bajat et al., 2011). For a pro-
ject implemented in more than a year the effect of each
(1)
year may be correlated across projects. To capture this
interdependence in years a linear mixed effect (LME)
model was implemented for comparison purposes.
The LME model can be written as
LnACCi ¼ Xi b þ Zi bi þ ei (2)
where LnACCi = Y is a vector of natural log of annual-
ized construction cost per sqm for each owner-builder i;
β is the unknown vector of fixed effect variables, bi is the
unknown vector of random effect; i is the unknown vec-
tor of random errors, Xi and Zi are the known design
matrices relating the observations LnACCi to β and μ
Table 1 Descriptive statistics by house types
676

Two-storey house Single-storey house

Std Std
Variable Description N Lowest Highest Average dev. N Lowest Highest Average dev.
LnACC Natural log of annual construction cost (sqm)a 47 11.11 13.02 11.84 0.47 314 8.30 13.84 10.67 1.26
LnSBS Natural log of size of built space (sqm) 49 4.09 5.75 5.30 0.45 320 2.20 6.40 5.02 0.61
NBR Number of bedroomsb 49 3.00 5.00 4.00 0.58 312 1.00 6.00 3.21 0.77
YUC Year under construction 49 2002 2013 2010 2.68 320 1990 2013 2007 5.00
DHO Duration to housing ownership from plot purchase (years) 49 1.00 10.00 6.69 2.25 320 1.00 20.00 6.78 5.54
DHC Duration of housing construction since start of construction to 49 1.00 5.00 3.37 1.29 320 1.00 21.00 10.41 5.94
completion (years)
PLO Dummy for plot location being in the outer periphery of the city 49 0.00 1.00 0.55 0.50 320 0.00 1.00 0.48 0.50
PTM Dummy for property type being main house 49 0.00 1.00 0.96 0.20 320 0.00 1.00 0.84 0.37
YUC 1998 Dummy for year under construction being 1990–98 49 0.00 0.00 0.00 0.00 320 0.00 1.00 0.08 0.26
YUC 2000 Dummy for year under construction being 1999–2000 49 0.00 0.00 0.00 0.00 320 0.00 1.00 0.06 0.24
YUC 2002 Dummy for year under construction being 2001–02 49 0.00 1.00 0.02 0.14 320 0.00 1.00 0.08 0.27
YUC 2004 Dummy for year under construction being 2003–04 49 0.00 1.00 0.04 0.20 320 0.00 1.00 0.08 0.27
YUC 2006 Dummy for year under construction being 2005–06 49 0.00 1.00 0.06 0.24 320 0.00 1.00 0.11 0.31
YUC 2007 Dummy for year under construction being 2007 49 0.00 1.00 0.04 0.20 320 0.00 1.00 0.08 0.27
YUC 2008 Dummy for year under construction being 2008 49 0.00 1.00 0.14 0.35 320 0.00 1.00 0.08 0.27
YUC 2009 Dummy for year under construction being 2009 49 0.00 1.00 0.14 0.35 320 0.00 1.00 0.08 0.28
YUC 2010 Dummy for year under construction being 2010 49 0.00 1.00 0.12 0.33 320 0.00 1.00 0.09 0.29
YUC 2011 Dummy for year under construction being 2011 49 0.00 1.00 0.14 0.35 320 0.00 1.00 0.09 0.28
YUC 2012 Dummy for year under construction being 2012 49 0.00 1.00 0.16 0.37 320 0.00 1.00 0.09 0.29
YUC 2013 Dummy for year under construction being 2013 49 0.00 1.00 0.12 0.33 320 0.00 1.00 0.08 0.28
HFL Dummy if housing construction financed through loan 49 0.00 1.00 0.41 0.50 320 0.00 1.00 0.66 0.47
LCU Dummy if local ordinary Portland cement used 49 0.00 1.00 0.78 0.42 320 0.00 1.00 0.94 0.23
LWCU Dummy if local white cement used 49 0.00 1.00 0.33 0.47 320 0.00 1.00 0.57 0.50
RRT Dummy if roof material is roofing tiles used 49 0.00 1.00 0.45 0.50 320 0.00 1.00 0.08 0.26
CMG Dummy for if ceiling material gypsum used 49 1.00 1.00 1.00 0.00 320 0.00 1.00 0.63 0.48
FMC Dummy for foundation material used if concrete 49 0.00 1.00 0.33 0.47 320 0.00 1.00 0.57 0.50
FMFT Dummy for finishing material if floor tiles used 49 0.00 1.00 0.41 0.50 320 0.00 1.00 0.12 0.33
WMA Dummy for window material used if aluminium used 49 0.00 1.00 0.45 0.50 320 0.00 1.00 0.20 0.40
LDSMU Dummy for if local drainage system material used 49 0.00 1.00 0.71 0.46 320 0.00 1.00 0.65 0.48
LEIMU Dummy for if local electrical material used 49 0.00 1.00 0.80 0.41 320 0.00 1.00 0.52 0.50
HCFIC Dummy for if builder stated that cost increased because of the 49 0.00 1.00 0.12 0.33 320 0.00 1.00 0.20 0.40
incremental nature of constructionc
HCFFPC Dummy for if builder stated that cost increased because of 49 0.00 1.00 0.84 0.37 320 0.00 1.00 0.71 0.46
changes in material pricesd
HCFSSS Dummy for if builder stated that cost increased because of 49 0.00 1.00 0.33 0.47 320 0.00 1.00 0.16 0.36
shortage in service supplye

(Continued)
Alananga et al.
Table 1 (Continued)

Two-storey house Single-storey house

Std Std
Variable Description N Lowest Highest Average dev. N Lowest Highest Average dev.
HCFDCU Dummy for if builder stated that cost increased because of 49 0.00 1.00 0.12 0.33 320 0.00 1.00 0.07 0.25
Cost-push factors

deliberately cost underestimatedf

HCFCFD Dummy for if builder stated that cost increased because of 49 0.00 0.00 0.00 0.00 320 0.00 1.00 0.03 0.17
changes in the designg
HCFCDS Dummy for if builder stated that cost increased because of the 49 0.00 1.00 0.16 0.37 320 0.00 1.00 0.00 0.06
need to control nearby drainageh
HCFLMS Dummy for if builder stated that cost increased because of 49 0.00 1.00 0.16 0.37 320 0.00 1.00 0.08 0.28
shortage in material supplyi
HCFHIR Dummy for if builder stated that cost increased because of 49 0.00 0.00 0.00 0.00 320 0.00 1.00 0.02 0.12
higher interest ratej
a
Two data entries on two-storey and six data entries on single-storey have missing responses on construction costs.
b
Eight data entries on single-storey have missing responses on number of bedrooms.
c
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
d
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
e
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
f
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
g
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
h
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
i
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
j
The data are based on a response to a question that asked about the factors that were responsible for higher cost during the construction process. The factors are only perceived and not
observed by the researcher.
677
678
respectively. Equation 2 is an LME model with fixed
effect terms, the intercepts as well as random error
terms. The model assumes first e  Nny ð0; <i Þ, where
ℜi is an ny * ny covariance matrix that characterizes
the variance and correlation due to within-year sources
which is constant throughout observations,
i.e.<y ¼ r2 Iny . The second is that by ∼ Nk(0, D) where
D is a k * k covariance matrix that characterizes varia-
tion due to among-years sources which is also assumed
to be constant. The dimension of D corresponds to the
number of among-years random effect, in this case
12 years after combining 1990–98 as a one-year
dummy and between 1998 and 2006 a combination
of two years is used to make one-year dummies. This
was adopted because of the limited amount of data
for each independent year. Based on the above assump-
tions, the parameters in Equation (3) were estimated
using restricted maximum likelihood estimator
(REML) which was implemented in R platform using
the lme4 function (Bates et al., 2012). REML is pre-
ferred in this study because the approach can handle
missing or unbalanced data designs which are typical
features of the dataset at hand. The interpretation of
all coefficients is in terms of percentage which is
obtained through the formula exp (βi) – 1.
Limitations to the study
Two basic limitations are evident in this paper. First,
there is lack of a comprehensive theoretical framework
to analyse the production function of owner-built incre-
mental housing. The economic theory of production
does not fit properly in this context because of the
asymmetries prevalent in SSA. Second, data collection
limitations bias the conclusion as being relevant only
for owner-builders employed in the formal sector. This
study embeds a simple framework of analysis which was
designed specifically for the data available. With a
more comprehensive dataset, a more comprehensive
framework may be required.
Results of analysis
Descriptive statistics
The summary of data is presented in Table 1 where
construction cost is on average higher in two-storey
houses though the highest cost is a single-storey
building. Similar observations are relevant for the size
variables. Two-storey houses seem on average to be
larger than single-storey but the biggest house is a
single-storey. Further it can be observed that it takes
longer to construct and own a single-storey than a
Alananga et al.
two-storey house. To own a two-storey or one-storey
house requires on average about seven years in which
the average construction period for two-storey houses
is only three years while for one-storey houses is
10 years. The simple relationships between annual con-
struction cost per sqm and size of the house measured
in terms of number of bedrooms and built space in sqm
are presented in Figures 2 and 3. It can be observed
that in either Figure annual construction cost is a
declining function of house size suggesting economies
of scale for larger projects.
Regression results
Assessment of the overall model fit
The analysis results for the overall model fit are pre-
sented in Table 2. The LME model pseudo R-squared
is 0.85 while the OLS R-squared is 0.90. In either case
the model fits well to the data suggesting that the
explanatory variables captured a greater proportion of
the variation in annual construction cost. The ANOVA
test for the LME has a p-value less than 0 suggesting
that a significant improvement was realized by incorpo-
rating the years as grouping variables in the model. The
variance captured by such incorporation is 18% of the
overall variance with a reliability measure of 98%.
The effect of time
The results for the effect of time are presented in
Table 3 and Figure 4. A closer look at Table 3 reveals
that the OLS dummies for years are all not statistically
significant suggesting minor annual variation in
construction cost.
The effect of duration of construction, location and property
type
The results presented in Table 4 show that an additional
year towards house completion from plot purchase
(DHO) is associated with a 4% decline in annual con-
struction cost while an additional year of housing con-
struction from construction start (DHC) reduces
annual construction cost by 8%. The results presented
in Table 4 also suggest that outer city incrementally
built houses (PLO) have 15 and 18% higher cost com-
pared to those built in other locations in the LME and
OLS models respectively. Similarly the construction of
a main house (PTM) is associated with 137 and 144%
higher construction cost compared to outbuildings
while a single-storey owner-built incremental house
(HTN) has 32 and 34% lower cost than two-storey
houses in LME and OLS models respectively.
Cost-push factors 679

YUCG : {2000} YUCG : {2002} YUCG : {2004}

9 10 11121314

9 10 11 12 13
9 10 11 12
2.0 2.5 3.0 3.5 4.0 4.5 5.0 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Natural log of Annual Construction Cost

YUCG : {2012} YUCG : {2013} YUCG : {1998}

9 10 11 1213

9 10 11 12 13

9 10 11 12
2 3 4 5 6 2.0 2.5 3.0 3.5 4.0 4.5 5.0 3.0 3.5 4.0 4.5 5.0
YUCG : {2009} YUCG : {2010} YUCG : {2011}
9 10 11 12 13

9 10 1112 13
9 1011 1213
2.0 2.5 3.0 3.5 4.0 4.5 5.0 1 2 3 4 5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
YUCG : {2006} YUCG : {2007} YUCG : {2008}

9 10 11 12 13
9 10 1112 13
9 1011 1213

1 2 3 4 5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1 2 3 4 5

Number of Bedrooms
1998 2008
2000 2009
2002 2010
2004 2011
2006 2012
2007 2013

Figure 2 Scatter plot with regression line for house size in terms of number of bedrooms and LnACC

The effect of size, material used and mode of financing housing (HCFIC) have around 25% higher cost com-
The results presented in Table 4 further suggest that pared to non-incremental projects. Projects which
incremental construction cost tends to be 24% higher involved changes in the design (HCFCFD) are associ-
for each additional bedroom (NBR) and 59% lower ated with 120 and 133% higher cost in the LME and
for each additional sqm of built space (LnSBS). The OLS models respectively. Projects where the owner
use of gypsum (CGM) has 30 and 33% higher cost had to control natural drainage during construction
and the use of aluminium window (WMA) has 88 (HCFCDS) have 93 and 84% higher cost in the
and 94% higher cost in the LME and OLS models LME and OLS models respectively. Housing projects
respectively. The use of local ordinary Portland cement facing serious shortage in the supply of services
(LCU) is associated with a 35 and 33% decline in con- (HCFSSS) have around 21% lower costs compared
struction cost in the LME and OLS models respectively to projects that did not face such shortage. Projects
while the use of locally made water supply equipment where initial costs were underestimated deliberately
(LDSMU) reduces costs by 24 and 26% in the LME by the technician/s (HCFDCU) are also associated
and OLS models respectively and the use of aggregates with 40 and 38% lower cost in the LME and OLS mod-
in the foundation (FMC) has 38% lower cost els respectively and projects which faced serious short-
compared to its non-use. Using a loan to finance age in materials (HCFLMS) have 43 and 45% lower
owner-built incremental housing (HFL) is associated cost in the LME and OLS models respectively.
with 62 and 57% higher cost compared to the use of Owner-built incremental projects attached to monthly
own savings in the LME and OLS models respectively. interest obligations were also implemented at 71 and
72% lower cost than those not attached in the LME
and OLS models respectively.
The effect of stated cost-push factors
The results on the effect of stated cost-push factors on Discussion of the findings
annual construction cost are presented in Table 5.
Housing projects that were perceived to have been The above partial correlations measures were inter-
affected by the incremental nature of owner-built preted in terms of factor-flexibility as provided in Fig-
680 Alananga et al.

YUCG : {2000} YUCG : {2002} YUCG : {2004}

9 10 12 14
9 10 12 14
9 10 11 12
Natural Log of Annual Construction Cost
3.5 4.0 4.5 5.0 5.5 6.0 3.5 4.0 4.5 5.0 5.5 6.0 3.5 4.0 4.5 5.0 5.5 6.0
YUCG : {2012} YUCG : {2013} YUCG : {1998}

9 10111213
9 10111213

8 9 10 1112
3.5 4.0 4.5 5.0 5.5 6.0 6.5 4.5 5.0 5.5 6.0 4.5 5.0 5.5 6.0
YUCG : {2009} YUCG : {2010} YUCG : {2011}
9 10111213

9 10111213

9 10111213
4.0 4.5 5.0 5.5 3 4 5 6 3.5 4.0 4.5 5.0 5.5 6.0 6.5
YUCG : {2006} YUCG : {2007} YUCG : {2008}

9 10 111213
9 10 12

9 10 12

3 4 5 3 4 5 6 3 4 5 6
Natural log of Size of Built-Space
1998 2008
2000 2009
2002 2010
2004 2011
2006 2012
2007 2013

Figure 3 Scatter plot with regression line for house size in terms of built space and LnACC

ure 1. The negative correlations suggest lower annual construction cost. These observations support the view
construction cost as more of a factor is employed. that significant gains can be realized by removing
When such correlations are also significant in both barriers to large-scale housing projects (larger space)
models, they are interpreted as flexible cost-push fac- (Enterprise Community Partners et al., 2013). Similarly,
tors signifying the associated flexibility that owner- an additional year in terms of duration of construction
builders have in adjusting the amount/level used of that and duration to ownership are also cost-flexible with
factor. When such correlation is positive, the associated around 4 and 8% lower annual construction costs
cost-push effect is higher the more that factor is used in respectively. Given the nature of owner-built incremen-
construction. Positive and significant partial correlation tal housing, this was an expected finding since owner-
for any factor in both models is interpreted as a builders would take longer to finish their houses in order
non-flexible cost-push factor signifying the difficulties to identify new financing opportunities as well as accu-
owner-builders have in adjusting the amount/level uti- mulate existing sources of funds (Magigi and Majani,
lized. All the other correlations are interpreted as par- 2006; Majale et al., 2012). The most time consuming
tially flexible and indeterminate. The discussion that task in incremental construction is matching labour
follows relies on this categorization of factor flexibility costs with technical qualifications given the owner-
to link construction cost and owner-builders control builders’ flexibility in labour choices (Jayawardane and
over the different cost components. Gunawardena, 1998; Magigi and Majani, 2006;
Ejohwomu, 2007; Majale et al., 2012).
A change in prices of construction materials is
Flexible cost-push factors another flexible cost-push factor in owner-built housing
construction across SSA countries (Majale et al., 2012).
The results presented in this study suggest that the size of
It has been established in this study that about 33–35%
the built space is cost-flexible whereby each additional
incremental construction cost reduction can be realized
sqm built is associated with 59% lower per sqm annual
Table 2 Overall model fit

Linear mixed model fit by REML [’merModLmerTest’]"

Cost-push factors

Scaled residuals:
Min 1Q Median 3Q Max
-4.9099 -0.4247 -0.0409 0.4048 4.6748
P-seudo R Squared 0.845
Interclass Correlation (ICC1) 0.182
Reliability (ICC2) 0.976
Anova test of significance
Df Akaike Information Bayesian logLik deviance Chisq Chi Df Pr (>Chisq)
Criteria (AIC) Information
Criterion
(BIC)
Null Model 3 1173.3 1184.96 -583.65 1167.3
Full Model 31 541.0 660.86 -239.50 479.0 688.29 28 < 2.2e-16
Random effects:
Groups Name Variance Std.Dev. Corr

YUCG (Intercept) 0.225746 0.47513

LnSBS 0.008866 0.09416 -1.00
Residual 0.180621 0.42500
Number of obs: 353
groups: 12
Linear model ["OLS"]

Residuals: Min 1Q Median 3Q Max

-2.20415 -0.17661 -0.00669 0.17256 1.90181
Multiple R-squared: 0.8956
Adjusted R-squared: 0.8833
F-statistic: 73
degrees of freedom37 and 315 DF
p-value: < 2.2e-16
Residual standard error: 0.4299
Residual degrees of freedom 315
Formula: LnACC ~ LnSBS + NBR + YUC + DHO + DHC + PLO + PTM + HTN + HFL + LCU + LWCU + RRT + CMG + FMC + FNFT + WMA + LDSMU + LEIMU +
HCFIC + HCFFPC + HCFSSS + HCFDCU + HCFCFD + HCFCDS + HCFLMS + HCFHIR + (LnSBS | YUCG).
681
682 Alananga et al.

Table 3 The LME random and OLS year dummy effects be the fact that most such materials are likely to be pro-
on annualized construction cost cured through informal channels where stolen and
reject materials are available at lower prices. The use
Year group (Intercept) LnSBS YUC (Intercept) of aggregates as foundation materials has been observed
1998 0.368 −0.073 to be cost-flexible with about 38% compared to the use
2000 −0.063 0.013 2000 −0.044 of other materials. This however, is unexpected,
0.817 because aggregates, though locally available, are con-
2002 −0.372 0.074 2002 −0.209 sidered expensive and many owner-builders would
0.388 use bricks. Given the varieties of aggregates available
2004 −0.218 0.043 2004 −0.313 in the local market and the general preference in
0.296 owner-built housing, this observation may require
2006 0.302 −0.060 2006 −0.475
further evidence.
0.194
In terms of cost-push factors which were introduced
2007 0.509 −0.101 2007 −0.496
0.233 as controls, it has been observed that shortage in service
2008 −0.302 0.060 2008 −0.683 supply during construction increases cost-flexibility
0.128 leading to about 21% lower annual construction costs.
2009 0.001 0.000 2009 −0.787 This observation could be attributed to low-income
0.104 owner-builders who cannot afford plots in serviced
2010 −0.050 0.010 2010 −0.755 areas and spend more to service plots acquired in the
0.145 periphery than to increment the house itself (Greene
2011 −0.062 0.012 2011 −0.879 and Edwardo, 2008; Samaranayake, 2012). Since
0.111 many owner-builders do not consider infrastructure as
2012 −0.049 0.010 2012 −0.962
part of construction cost, such services and costs
0.101
incurred in the provision of infrastructure such as
2013 −0.064 0.013 2013 −0.948
0.127 obtaining additional land for road construction or path-
ways may have been excluded in cost estimation during
survey administration. The resulting income-effect
0.6 forces owner-builders to construct low-cost houses.
LME annual intercept
OLS annual intercept
Similarly, deliberate cost underestimation has also been
Natural log of annual construction cost

0.4
observed to enhance cost-flexibility where the associ-
0.2 ated annual construction cost reduction ranges
between 38 and 40%. Underestimation in incremental
0
2000 2002 2004 2006 2007 2008 2009 2010 2011 2012 2013
housing is probably a device for technicians to get jobs
-0.2 in the first place. However once the construction has
Years
started additional items are slowly added on by pre-
-0.4
suming that either there was a mistake in the initial esti-
-0.6 mation or something has changed that requires
additional expenditure. Since these practices are com-
-0.8
mon among low-skilled technicians, their projects are
-1 likely to be smaller leading to the observed lower con-
struction costs.
-1.2 Shortage in material supply is also cost-flexible with
around 43–45% lower cost, contrary to theoretical
Figure 4 The effect of time on annualized construction cost expectations where material shortage was expected to
in the LME and OLS models increase annual construction costs (Malpezzi and
Sa-Aadu, 1996; ShoreBank International, 2011; Majale
through the use of locally manufactured Portland et al., 2012). This can be linked to owner-builders’
cement and 24–26% for using locally made water sup- ability to stall projects to avoid higher costs until such
ply equipment when compared to importing these. time as materials are oversupplied and can be obtained
These observations are consistent with the existing lit- at a relatively lower price. Alternatively if materials
erature where local materials tend to be cheaper whose prices escalate are manufactured or imported,
because they are produced using locally available owner-builders might reduce their consumption and
resources (Turner, 1967; Malpezzi and Sa-Aadu, complement them with more of the locally available
1996; ShoreBank International, 2011; Majale et al., materials which are cheaper (Malpezzi and Sa-Aadu,
2012). Another reason for the noted flexibility could 1996; Beattie et al., 2010; ShoreBank International,
Cost-push factors 683

Table 4 Regression results for material used, loan finance and quantitative variables

LME coefficients OLS coefficients

Variables
abbr. Variable description Estimate Significance Estimate Significance
LnSBS Natural log of size of built space −0.897473 −0.899301
2.22e-16 *** < 2e-16 ***
NBR Number of bedrooms 0.218553 0.217653
2.08e-06 *** 2.90e-06 ***
YUC Year for which construction is ongoing −0.007287 0.054680
0.246227 0.123320
DHO Duration to housing ownership −0.041002 −0.039454
5.97e-07 *** 2.15e-06 ***
DHC Duration to housing completion −0.081416 −0.083921
< 2e-16 *** < 2e-16 ***
PLO Dummy, 1 = outer plot location, 0 otherwise 0.161739 0.140267
0.040811 * 0.079703 .
PTM Dummy, 1 = property type main building, 0 0.863909 0.895148
otherwise 7.59e-14 *** 2.13e-14 ***
HTN Dummy, 1 = house type singe-storey, 0 −0.390629 −0.414592
otherwise 0.005340 ** 0.003636 **
HFL Dummy, 1 = housing finance through loan 0.481701 0.453406
5.52e-11 *** 1.35e-09 ***
LCU Dummy, 1 = local Portland cement used, 0 −0.433254 −0.403782
otherwise 0.002068 ** 0.004911 **
LWCU Dummy, 1 = local white cement used, 0 −0.023521 0.003490
otherwise 0.807001 0.971443
RRT Dummy, 1 = roofing tiles used, 0 otherwise 0.011425 0.025524
0.929671 0.845007
CMG Dummy, 1 = gypsum used as ceiling 0.260860 0.283887
material, 0 otherwise 0.000241 *** 3.33e-08 ***
FMC Dummy, 1 = gravel used as foundation −0.479518 −0.472341
material, 0 otherwise 1.55e-08 *** 3.33e-08 ***
FNFT Dummy, 1 = floor tiles used as finishing 0.243226 0.203031
materials, 0 otherwise 0.054660 . 0.126253
WMA Dummy, 1 = aluminium window used, 0 0.630960 0.664421
otherwise 1.39e-07 *** 5.80e-08 ***
LDSMU Dummy, 1 = local drainage equipment used, −0.270848 −0.296779
0 otherwise 0.016830 * 0.010159 *
LEIMU Dummy, 1 = local electricity equipment −0.050778 −0.040076
used, 0 otherwise −0.434 0.735621
Note: Significant values: 0 = ***; 0.001= **; 0.01 = *; and 0.05 = . .

2011; Majale et al., 2012). The result will be lower
quality and cost and in this case the shortage leads to
lower cost. Lastly, a higher interest rate has been also
observed to be cost-flexible with about 125–126%
lower annual construction cost suggesting that those
paying interest tend to construct at lower per unit costs
per annum compared to those who use other sources of
finance. Although a higher interest rate increases con-
struction cost (Boamah, 2010; Drummond et al.,
2013), owner-builders tend to avoid such costs by not
using loans at all (Turner, 1967). The observation on
interest rate contradicts similar observations presented
in Table 4 on HFL. It seems the use of loans
increases annual construction cost not as a result of
the higher interest rate but because those who use loans
tend to construct spacious houses in the outskirts thus
incurring more costs. However, since interest rate as
used in this study is only perceived or stated, the results
presented reflect the perceived effect of higher interest
rate on annual construction cost. Therefore, interest
rate as a perceived cost-push factor is in fact associated
with lower-cost projects probably because the pain of
the same level of interest rate is likely to be more felt
among low-cost builders than higher-cost builders.
Non-flexible cost-push factors
The number of bedrooms for owner-built incremental
housing has been observed to be cost-inflexible
whereby an additional bedroom is associated with
684 Alananga et al.

Table 5 Regression results for stated cost-push factors

LME coefficients OLS coefficients

Variable
abbr. Variable description Estimate Significance Estimate Significance
HCFIC Dummy, 1 if construction cost is higher because of the 0.223065 0.226300
incremental nature of the project, 0 otherwise 0.011453 * 0.011775 *
HCFFPC Dummy, 1 if construction cost higher because of 0.122713 0.099235
frequent material price changes, 0 otherwise 0.174101 0.281972
HCFSSS Dummy, 1 if construction cost higher because of −0.234870 −0.229969
shortage in service supply, 0 otherwise 0.049422 * 0.056352 .
HCFDCU Dummy, 1 if construction cost higher because of −0.504484 −0.484464
deliberate cost underestimation, 0 otherwise 4.57e-05 *** 0.000109 ***
HCFCFD Dummy, 1 if construction cost higher because of 0.790804 0.847300
changes in fashion/design, 0 otherwise 6.28e-05 *** 2.75e-05 ***
HCFCDS Dummy, 1 if construction cost higher because of the 0.655159 0.608700
need to control drainage systems, 0 otherwise 0.004587 ** 0.009403 **
HCFLMS Dummy, 1 if construction cost higher because of low −0.569195 −0.598368
material supply, 0 otherwise 0.000923 *** 0.000672 ***
HCFHIR Dummy, 1 if construction cost higher because of higher −1.265578 −1.249772
interest rate, 0 otherwise 3.68e-07 *** 7.62e-07 ***
Note: Significant values: 0 = ***; 0.001= **; 0.01 = *; and 0.05 = . .

24% higher annual construction cost. The annual per
sqm construction cost increases as more rooms are built
holding all else constant. The most plausible explana-
tion for this observation is that owner-built housing
addresses the housing problem through more but smal-
ler sized rooms leading to higher housing density. In
terms of location, this study suggests that outer city
construction sites tend to be inflexible with around
15–18% higher annual construction costs than inner
city sites thus refuting previous studies’ findings which
were based on lower land cost in the periphery. The
higher annual construction costs of projects in the
periphery could be associated with the need to service
those plots by the house builders, something which
may increase construction cost substantially (Mumtaz,
1995; Greene and Edwardo, 2008; Majale et al., 2012).
Similarly many such peripheral plots are found in
highly challenging sites including incompatible subsoil
attributes and topographically challenging areas which
can significantly increase soil treatment/replacement
and levelling costs (Maevis, 1980).
This study further suggests that the use of loan
finance is inflexible since projects implemented on loan
finance have 57–62% higher annual construction costs
than those implemented otherwise. This partly suggests
that builders intending to develop costly projects tend
to seek financial loans from banks. Incremental housing
is traditionally based on own funds and/or small loans
from friends and relatives (Mumtaz, 1995; Hoek-Smit,
1998; Magigi and Majani, 2006; Nohn and Bhatt,
2014). It is, however, increasingly recognized that
owner-builders are getting access to micro-finance
which includes micro-finance facilities offered by com-
mercial banks. It should be noted further that commer-
cial banks offer loans at a higher interest rate than
informal sources, which increases the annual cost of
housing construction (Turner, 1967; Boamah, 2010;
Majale et al., 2012; Drummond et al., 2013). As noted
above, the interest rate seems irrelevant for higher-cost
projects; owner-builders using loans face higher con-
struction cost probably because of their preferences in
terms of number of rooms and location.
The use of gypsum ceiling and glazed aluminium
windows has been observed to be cost-inflexible with
30–33% and 88–94% higher cost when compared to
other materials respectively. These materials, however,
can only be applied closer to or during the finishing
stage. Therefore owner-builders applying such materi-
als either have higher income or are nearing completion
leading to higher cost. This observation is consistent
with the existing literature where certain finishing
materials tend to be associated with higher costs
(Taylor, 2012). Of relevance to note in the Tanzanian
context is that the extensive use of expensive foreign
imported construction materials symbolizes success
and position in the community, which are often associ-
ated with home ownership (Mehta and Bridwell,
2005).
The incremental nature of construction though
intended to reduce cost tends to be cost-inflexible with
an associated 25% higher cost providing some evidence
to refute claims that incremental housing is cheaper
than other housing provision approaches. This is com-
patible with the findings of Samaranayake (2012) and
Arvanitis (2013) but against those of Mukhija (2014),
Gattoni (2009), Beattie et al. (2010) and Turner
Cost-push factors
(1967). These observations can be linked to the fact
that owner-built housing in Tanzania tends to be of rel-
atively higher quality (Lupala, 2002; Limbumba,
2010). This further supports the view that lower costs
in incremental construction are often achieved by
lowering the quality of housing (Abdel-Kader and
Ettouney, 2010; Beattie et al., 2010; Harper et al.,
2011; Albuquerque, 2012). Alternatively the observa-
tion could be associated with the possibility that
owner-builders who perceive their construction strategy
as incremental are implementing higher-cost projects
within shorter periods than those perceiving otherwise.
The orders with which public utilities are provided
in informal settlements vary because infrastructure
facilities such as drainage are available in some while
lacking in others (Turner, 1967). Therefore, among
the critical challenges facing owner-builders is plot
location which often requires critical investment in
terms of infrastructure services (Ballesteros and Egana,
2012; Samaranayake, 2012). In this study, the need to
address natural drainage is cost-inflexible with an
associated 84–94% higher construction cost. This is
consistent with expectations as the rich (higher-cost
projects) are more likely to spend more on construction
cost than low-income households (low-cost projects)
(Arvanitis, 2013). In addition to that, change in
design/fashion which is associated with many
owner-built incremental housing projects (Enterprise
Community Partners et al., 2013), is also cost-inflexible
with around 120–133% higher costs. This occurs
when the newly introduced designs tend to be more
complex than originally envisaged (Harper et al.,
2011; Mukhijaa and Scott-Railton, 2013).
Partially flexible and indeterminate cost-push
factors
The factors which were investigated but turned out to
be either statistically insignificant or had different sig-
nificance scores across the two models implemented
include year under construction, frequent material
price changes and the use of the following materials:
locally produced white cement, roofing tiles, floor tiles
and locally manufactured electrical equipment. Fur-
ther, annual variation in construction cost has been
observed to be an insignificant determinant of project
cost, thus the expectation on the effect of inflation/
changes in price lacks evidence.
Conclusion
This study has found that the owner-builder incremen-
tal path to housing is characterized by flexible, inflexi-
ble and partially flexible cost-push factors. The
685
flexible cost-push factors were found to be duration
of construction, plot location, property type, built-up
area, material price fluctuations, certain locally avail-
able construction materials, shortage in service supply
and materials and higher interest rate. Projects
performed over extended periods that spanned more
than one year were highly correlated with decline in
annual construction cost by paving the way to avoid-
ance of higher cost elements or to use of cheapest alter-
natives. Likewise, geographical location that differs in
the prevailing cost of labour, availability of materials,
energy costs and tastes was also treated as a separate
cost driver that indeed flexibly contributed to the
reduction in construction cost components. The size
of the project as well built-up area, locally available
materials and shortages in services, material supply
and interest rates that proved to be flexible in the
downward direction suggest the ease with which
owner-builders can internalize the associated costs as
an efficient way to lower construction cost.
Non-flexible cost-push factors were found to be
number of rooms, location on the outskirts of the city,
use of loan finance, use of imported exotic finishing
materials, changes in design/fashion and natural drai-
nage. The owner-built housing addresses the housing
problem through more but smaller sized rooms result-
ing in small room sizes with high densities which are
cost-inflexible. Another factor found to be inflexible is
location on the outskirts of the city which is associated
with the need to service those plots as well as challenges
in dealing with construction on very poor subsoil con-
ditions by the house builders, something which may
increase construction cost substantially. Furthermore,
informal finance that continues to dominate the fund-
ing of incremental housing was found inflexible because
incremental housing is traditionally based on own
funds and/or small loans from friends and family which
attract very little or no interest. Likewise, the uses of
imported materials for finishes such as gypsum board
ceiling and glazed aluminium windows have been
observed to be cost-inflexible especially where the
owner-builder has a change of mind to cope with a
trend of newly introduced designs or materials that
are more complex and expensive than the original ones.
The factors that turned out to have statistically insignif-
icant impact or gave different statistical significance
scores across the two models implemented include
duration of construction, frequent material price fluctu-
ations, annual variation in construction cost and the
use of locally produced construction materials such as
white cement, roofing tiles, floor tiles and locally
manufactured electrical equipment. Further research
on these factors is recommended, by either increment-
ing the sample to include informal employees and/or
incorporating more economic and demographic vari-
686
ables of owner-builders into the model specification
and the data collection instruments in order to verify
the magnitude and direction of effects for these
variables.
Acknowledgements
This research project would not have been possible
without the concerted financial support of Swedish
International Development Cooperation Agency
(SIDA) research project which allowed Ardhi Univer-
sity (ARU) to support this project. Special gratitude
to ARU for commendable work on the overall manage-
ment of the project and for providing us with a good
environment and facilities to complete this project.
Disclosure statement
No potential conflict of interest was reported by the authors.
ORCID
Samwel Alananga http://orcid.org/0000-0002-3995-6486
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