Fire in a rundown area of Jeddah. (photo courtesy of Affordable Housing Institute)
This column appeared in Arab News on January 19, 2014:
The news last week that the city of Jeddah is going to be the pioneer among Saudi cities in tearing down slums and build affordable housing in its place, was a refreshing development for a pressing need.
Expensive housing, especially for younger Saudis just starting out in life, has long been a common complaint. A real estate bubble in most major Saudi cities has made land prices takeoff, making it almost impossible for young couples to buy a piece of land on which to build a house, which has traditionally been the way most Saudis entered the real estate owning market. This has forced most Saudis to rent apartments or houses since 70 percent of Saudis do not own their own home.
Renting property, as most of you are aware, is not a good financial proposition especially in the long-term. It’s money thrown down the drain that never returns to you, and in the end you don’t have anything to show for it. With some apartments and houses selling for millions of riyals, ownership has become a distant dream for most Saudis; even those who earn relatively well.
Jeddah Mayoralty is leading the way in attempting urban renewal and the supply of new low and middle income housing through its Slum Areas Development Department of the Jeddah Development and Urban Regeneration Company. This department has a plan to tear down many slum areas in Jeddah and rebuild them with affordable housing and buildings for businesses such as offices and shops. Makkah and Riyadh are closely watching Jeddah’s footsteps and are ready to start similar projects.
There is plenty of money to do this, especially after Custodian of the Two Holy Mosques King Abdullah in 2011 earmarked $70 billion for the construction of 500,000 apartments for low-income Saudis, as well as $37 billion into a fund for lower income Saudis to access interest-free loans to help pay wedding costs and furniture.
The slum areas of Jeddah have become an eyesore and often give cover to criminals that deal in drugs and robbery. I remember visiting a Filipino friend once who had fallen on hard times and moved to a slum area in Ruwais. The houses were all unfinished, the roads were not paved, and trash was thrown everywhere. I was shocked at seeing such squalor only a few kilometers from where I lived in Baghdadiyah. My friend left the area soon after, but so many poor expatriates and Saudis continue to live in these areas, and they deserve housing that is dignified, clean and safe.
The government should also put some sort of rent control system in place. Landlords often raise their rents astronomically without giving their tenants any notice or say in the matter. Years ago my uncle, who also happened to be my landlord, suddenly hiked my rent from SR15, 000 a year to SR24, 000 a year. When I complained to him that the increase was abusive, he said he was only following the market trend that indeed had seen rents rising. After some haggling I was able to get a more reasonable rent increase out of my relative, but I’m sure that most renters do not have such luck from their landlords.
Little did I know that the rent I had been paying was a bargain compared to other major Gulf cities such as Abu Dhabi and Dubai. When I moved to Abu Dhabi in 2007 there was an acute housing shortage, which meant that landlords could charge whatever they wanted and get away with it. I found a small one-bedroom apartment in a new building near my work, but the rent was horrifying at more than 6,000 dirhams a month. Luckily, I had a good housing allowance that covered my rent.
With the construction of affordable housing by the government in Jeddah, rents across the city will automatically fall as the offer of more housing units will push prices down. This is a good thing for hardworking Saudis and expatriates who need affordable, clean and safe housing. No one should be forced to live in the slum areas. The renewal of slum areas will attract more investments and hopefully provide more job opportunities.
Update (Jan. 21, 2014): I forgot to mention in the original article that persons living in slum areas slated for redevelpoment will be given temporary housing while the rebuilding is ongoing, and will then be offered housing in the new developments.