Half of the world's population lives in cities, urban areas, and other urban spaces. Population growth will be widespread and rapid, irreversibly, in both developing and developed countries. According to the World Bank, recent urbanization has occurred in almost all developing countries, with approximately 70 million new residents added to urban populations each year. In Africa, particularly in sub-Saharan Africa where the urban population is expected to double by 2030, the situation is a major concern.

Decent housing contributes significantly to quality of life and improves economic performance, in that it constitutes a potential indicator for the human development perception index.

As the population increases, the urbanization process continues, and governments are therefore increasingly concerned with providing a better living environment for populations, especially the most disadvantaged, by giving them access to housing with the necessary basic services.

The political logic for economic growth in Africa must keep pace with population growth. Therefore, considerable efforts are needed to ensure access to decent housing.

Our reflection aims to provide an overview of how the public-private partnership (PPP) model can contribute to promoting housing and supporting human development efforts.

It cannot be stressed enough: growing government deficits and the rate at which their debt is increasing are putting greater strain on available public resources. To bridge the gap between housing financing needs and the capital governments can mobilize, it is essential to tap into other sources of funding, particularly from private investors.

To achieve this, it is necessary to leverage PPPs to mobilize private sector investment, expertise and efficiency for the design, structuring and implementation of housing projects accessible to all segments of the population.

It is essential to define a strategy for implementing public-private partnerships (PPPs) in the social housing sector in our countries, thereby supporting governments in ensuring access to decent housing for the most vulnerable populations. This approach will allow us to reconsider the key strategic issues surrounding the contribution of PPPs in the social sectors.

Public-private partnerships (PPPs) thus affect all sectors of economic life. The housing sector is therefore a suitable candidate, as it involves the private sector, based on a structured financing model, constructing housing accessible to the population on behalf of governments, with remuneration based on performance.

The financing needs of urban development projects are too great to be covered solely by traditional public funds.

Public-private partnerships (PPPs) allow public entities to deliver goods and services on behalf of the population. In this respect, they constitute a powerful tool for rapidly facilitating access to decent housing.

Today, governments are increasingly turning to public-private partnerships (PPPs) as a potential financing option for large-scale investments in affordable housing. As a financing model entirely based on synergy between the public and private sectors, PPPs can ensure that the various stakeholders involved in the contracts (public, private, lenders, and equity investors) benefit in the long term from the opportunities offered in the housing sector.

As a general rule, a PPP allows a private operator or group of operators to take charge of the design, construction, maintenance and/or operation of a public facility or service under a well-designed, balanced contract backed by a defined risk-sharing and financial model.

In many developed countries, including Canada, the Netherlands and the United Kingdom, partnerships have greatly contributed to reducing costs and increasing the operational efficiency of urban development projects, ranging from the provision of affordable housing to related services.

With such experiences, African authorities are able to drive the creation of better housing units at reasonable costs.

The strategy will make it possible to identify investment opportunities in the field of housing, to define an approach allowing the inclusion of stakeholders for the construction of an ecosystem that is true to the spirit and practice of PPPs.

This illustrates in many ways that PPPs, if handled with sufficiently expert "hands", constitute a powerful instrument that can help develop infrastructure and housing services, even in the most disadvantaged localities around urban centers.

Specifically for Senegal

In Senegal, several structures are put in place by the State, such as SN HLM and SICAP SA, to facilitate access to decent housing with the privilege of a substantial land mobilization capacity.

The National Transformation Agenda "Senegal 2050" places social housing as a strategic pillar, aiming to address the structural housing deficit through the production of decent and affordable housing. The objectives are ambitious: to produce 500,000 social housing units in ten years to fill the current gap and reach 2 million units by 2050, including 1.2 million at affordable prices.

The Government is therefore opting for the definition of a genuine national housing strategy focused on land security, the implementation of appropriate legislation, sustainable financing as well as social and territorial equity in terms of access to housing.

To better understand the possibilities of public-private synergy within the framework of PPPs, it will be necessary to carry out a combined assessment between the different actors, to take stock of the situation before defining a vast program in the sector.

This assessment will help to identify the steps, with a view to a global strategy and a specific intervention for each geographical area of the country or regional economic space such as territorial hubs.

The program agreement tool, a new mechanism introduced by the 2021 law on public-private partnerships, will simplify and accelerate the implementation of multiple PPP contracts sharing common characteristics across several locations in Senegal within a single program. The issue of legal uncertainty is thus resolved with the completion of the PPP governance framework.

Housing, yes, but sustainable and resilient.

One of the merits of PPP is the consideration of green technological developments throughout the life cycle of projects or programs with better involvement of the national private sector.

This point aligns with the numerous initiatives that are pushing us to rethink our construction and housing methods in a way that respects planetary boundaries. We must accelerate action in the face of one of the most urgent challenges of our time: making the built environment a driver of environmental sustainability through holistic approaches that harmoniously integrate resilience and socio-economic factors.

The building and construction market must be impacted to accelerate action against the adverse effects of climate change. By rethinking building regulations to prioritize overall carbon footprint, resilience, and value, rather than the lowest initial cost, public and private buyers can stimulate the market through demand for low-carbon materials, energy-efficient designs, and modern, innovative construction practices. Need creates the market.

The aim will be to assess how ambitious sustainability criteria can send clear signals to other actors in the context of PPPs, strengthen ambition and accelerate the transition to low carbon and resilient buildings across the sector.

The PPP and Infrastructure Assessment and Rating System (PIERS) promoted by the United Nations Commission for Europe can help to better structure projects for PPPs that are resilient to the Sustainable Development Goals in the building sector in general and housing in particular.

The PIERS tool constitutes an evaluation system applicable to PPP Projects around 05 sustainability criteria, mainly: - Access and equity – Economic efficiency and budgetary viability – Environmental sustainability and resilience – Reproducibility – Stakeholder participation.

Thus, the specific requirements and scope of projects in the building sector in general, and housing in particular, will be precisely adjusted to reflect climate considerations and can be used to develop appropriate performance indicators for addressing climate risks and resilience. These elements will become inputs for structuring projects and programs.

This project, supported by the momentum generated within the framework of sustainable/green public procurement by Dr. Moustapha Djitté, Director General of ARCOP, will definitively and irreversibly reconcile building construction and sustainability. This project, based on an ambitious yet realistic plan, will ultimately shift the trajectory of state investments towards construction projects fully aligned with the Sustainable Development Goals (SDGs).

Which mounting model?

For the public entity, the advantages of the PPP solution lie in the acceleration and good control of the deadlines and costs of implementation in the long-term appropriation and ownership cycle, and the guarantees provided on the actual existence of maintenance.

The logic behind these contracts, in the field of housing, is, for the public entity, to move from an essentially asset-based approach to a logic of service provision guaranteed by a commitment from the operator on performance for the benefit of the populations receiving the housing.

The operator will, for its part, be able to maximize the revenues of projects or programs through related services such as security, the provision of commercial services, the maintenance of the ecosystemic balance of the localities concerned, etc.

In this sector, we observe that the degree of private sector involvement can vary considerably from one project to another. While it is often quite significant in terms of meeting construction deadlines, it tends to be weaker regarding operation and maintenance performance.

Housing projects are often part of a strategy to rationalize the land assets of public authorities (selling off unsuitable or overpriced sites, consolidating services, etc.). Thus, PPP contracts offer private operators the opportunity to develop, in addition to the public service mission that may be carried out by the public authority, an alternative development strategy for the land or buildings included in the contract. This development will generate revenue that will be deducted from the rent paid by the public authority in the form of ancillary revenue, thereby resulting in budgetary savings for the public authority. The payment terms for beneficiaries will be left to the discretion of the public authority.

What sustainable financing model?

Governments therefore need access to appropriate financial capital, technical learning and technological innovation, long-term asset efficiency and proactive climate risk management throughout the asset lifecycle; this ambition is well within the reach of the private sector.

Therefore, mobilizing private investment is crucial to bridging the housing finance gap, given increasing financial needs and pressures on public budgets. The financial costs associated with resilience should not be seen as a threat, but rather as an advantage contributing to resilience financing.

The size, complexity, and lack of understanding of resilience financing models mean that concrete examples remain limited. However, there are at least two main frameworks for financing resilience in the context of PPPs:

- Integrate climate resilience into existing and successfully financed PPP models, taking into account climate risks identified in infrastructure and services;

- Use PPPs to finance successful adaptation, mitigation and resilience initiatives, leveraging private sector knowledge and resources to build sustainable housing.

And since resilience is a systemic attribute, it is essential to consider both the project and its ecosystem, and to adopt a life-cycle financing approach based on assumptions that are credible for all stakeholders. This allows for the consideration of even the most pessimistic climate scenarios and their impacts beyond the return on investment. This monitoring role falls to the public authority.

At least two approaches can help achieve this:

Blended finance and risk mitigation instruments can be used: PPPs allow for this. Blended finance mechanisms combine public and private funds. Public funds, mobilized as subsidies or equity investments, aim to reduce the probability of risks occurring and attract and reassure private investment in resilient housing projects. Insurance and guarantees are climate risk mitigation instruments that can improve the credibility of projects. Parametric insurance, for example, can guarantee rapid payments based on climate triggers predefined by the contracting parties.

It is also possible to promote incentive instruments based on performance and risk sharing. PPP contracts, in general, should include performance-related incentives, especially those based on achieving predefined SDG resilience outcomes. Risk-sharing mechanisms, such as resilience bonds and contingency funds, distribute climate risks between public and private actors, thereby strengthening the stability and contractual balance of the project.

Al Hassane Diop,

PPP Expert

ARCOP

Senegal