the impact of abandoned government housing … · 2017-07-10 · non-payment of interim certificate...

International Journal of Advanced Engineering Research and Technology (IJAERT)

Volume 5 Issue 6, June 2017, ISSN No.: 2348 – 8190

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THE IMPACT OF ABANDONED GOVERNMENT HOUSING PROJECTS

IN GHANA (SPECIFICALLY AFFORDABLE HOUSING PROJECTS)

KODWO AMOA-ABBAN, BSc. MSc.

Department of Building Technology, Accra Technical University

ABSTRACT

The presence of many abandoned construction projects scattered all over Accra presents an ugly image on the outset of

architectural performance in the city. Observing this from one point of view, one would attribute the failure to poverty,

but looking at it from a different perspective, one would see that, the luxurious and expensive architectural provision on

the abandoned buildings have a significant role to play in the frustrations of the project. It is common in Ghana especially

in the Accra metropolis to see projects which have taken off quite well only to be abandoned at the later stages. The main

objective of the research is to identify the causes of project abandonment with the aim of identifying the effects of these

abandoned projects and their possible cost implications.

Keywords: Affordable, Architectural, Cost, Housing, Project.

1.0 Introduction

There is no doubt that construction is a key activity within any economy; it influences, and is influenced by a nation’s

gross domestic product (GDP) (Cox et al, 1998, cited in Madi, 2003) [1]

. According to Navon, (2005) [2]

, the construction

industry is one of the largest industries and contributes about 10% to the gross national product (GNP) in industrialized

countries. In Ghana the construction industry, like that of many developing countries, plays an important role in the

national economy, through its contribution to gross national product and employment. Most capital cities in developing

countries are faced with the problem of providing housing to a vast majority of the populace. Huge financial budgets are

made to facilitate the accomplishment of these objectives. Governments at various stages usually seek external aid and

loans to undertake such projects. However, as a result of a number of constraints peculiar to those countries, many of such

projects usually end up being uncompleted, abandoned or unsustainable. Accra is a typical example of a capital city in a

developing nation with quite a number of such projects. Reasons for abandoning such projects have been found to be

many; some are the lack of funding, inappropriateness of the contract conditions, unilateral enactment of government

laws, inflationary trends, and contractors’ management technique. Others include inadequate source of funding, price

variation and corruption (Reiss, 1999) [3]

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1.1 The Construction Process

According to (Harris and McCaffer, 2001) [4]

, the processes involved in construction can be summarized in the following

eight stages namely:

Inception

Preliminary

Scheme Design

Detailed Design Architects drawing,

Production Information Structural drawing

The tender documents

Contracts and Procurement

Commissioning, Final Operation and Maintenance

Figure 1: The Construction Process

1.2 Affordable Housing in Ghana

In Ghana, the shortage of housing continues to be one of the most critical socio-economic challenges facing the country

(Ghana National Development Plan, 2008) [5]

. The situation reflects estimates of 1.2 million house-units would be needed

to bridge the gap by the end of the decade (Home finance Company, 2001) [6]

. Ghana government committed substantial

resources to address the nation’s housing shortage with GH¢30 million (¢300 billion) for the construction of 3,500

affordable homes at Borteyman and 1,500 flats Kpone all in the Greater Accra Region. A conducive business environment

was created for the Ghanaian private sector to provide an average of 40,000 homes a year.

1.3 Parties Involved in the Building Project

The preconstruction phase also serves as the time to establish which team members are needed, their roles and

responsibilities. Among the team are:

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Architect

The Design Team Quantity Surveyor

Structural Engineer

Mechanical & Electrical Engineer

Clerk of works

Contractor

The Production Team Subcontractor

Suppliers

Figure 2: Parties Involved in the Building Project

1.4 Tendering Procedure

Tendering is the process of making an offer, bid, proposal or expressing interest in response to an invitation or request for

tender. Organisations will seek other businesses to respond to a particular need, such as the supply of goods and services

and will select an offer or tender that meets their needs and provides the best value for money. The tendering process is

generally utilised by government departments, offices and agencies, Private sector companies and businesses, overseas

markets and businesses. Some of the common tendering procedures used in the country are Open Competitive Tendering,

Selective Tendering and Negotiated/Restricted Tendering.

1.5 Abandoned Projects

“Abandoned Projects” are defined as projects that meet the following criteria: the project is not completed within or later

than the delivery date stated in contract agreement and no significant activity is noticed at the construction site for six (6)

continuous months (Ministry of Water Resource, Works and Housing) [7]

.

1.6 Causes of Project Abandonment [8]

1. Delay in payment of interim certificate.

2. Non-payment of interim certificate

3. Unsettled Claims

1.7 Problems Relating To Abandoned Project [9]

1.7.1 Socio-Economic impact

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Declining Property Values

Community and Neighborhood Aesthetics

Wasted resources and tax loss

Increase poverty levels

Decline in property values

Unemployment

1.7.2 Environmental impact [10]

Impact on Public Health and Safety

Landscape modification

Erosion

1.7.3 Social Effect [11]

Promotion of Illegal Activity

Hideout for criminals

The Encouragement of further Abandonment

2.0 The Study

The research made use of investigative and descriptive study design with particular reference to the causes and effect of

abandoned housing projects in Ghana. The study involved representative samples from the Client (Ministry of water

Resources, Works and Housing), Consultants, Contractors of the affordable housing projects and the general public. The

sample size of 74 was arrived at using the Kish formula with a gross total response of 73 representing an overall response

rate of 99%.

3.0 Findings

3.1 The Causes of Abandoned Affordable Housing Projects

Table 1: Relative importance index (RII) and rank of the causes of the abandoned housing project according Clients,

Contractors, Consultants and the General Public.

Causes Of Project Abandonment Clients Contractors Consultants General Public

RII Rank RII Rank RII Rank RII Rank

Delay in Payment of Interim Certificate 0.800 1 0.820 2 0.840 1 0.800 1

Non-Payment of Interim Certificate 0.725 2 0.868 1 0.840 2 0.800 2

Unsettled Claims 0.575 4 0.724 4 0.560 3 0.600 3




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Table 2: A Summary of the relative importance index (RII) and rank of the causes of the abandoned housing project

according to all the respondents.

Causes of Project Abandonment All Respondents

RII Rank

Delay in Payment of Interim Certificate 0.815 1

Non-Payment of Interim Certificate 0.808 2

Unsettled Claims 0.615 3

Figure 3

Delay in payment of interim certificate was first with a RII of 0.815. Clients, consultants, contractors and the general

public agreed that the delay in payment of interim certificate was the main cause of the project’s abandonment. The Non-

payment of interim certificate took the second position with an RII of 0.808. This justified the assertion by some

contractors during the interview that, they were no longer credit worthy to their suppliers because, their accumulated debts

portfolio was as a result of non-payment of interim certificate by the client. Most contractors had gone out of business due

to delay in payment. Unsettled claims were next with a RII of 0.615. It was identified that claims in building contracts

could sometimes double the contract sum thereby making it very difficult to be settled by clients. Therefore, if a

contractor does not receive payment for such claims due him, he abandons the project till his case is addressed. This has

led to most building projects abandoned in the country today.




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3.2 Impact of Abandoned Housing Projects

Table 3: Relative importance index (RII) and rank of the impacts of abandoned affordable housing projects according to

Clients, Contractors, Consultants and the General Public.

Socio-Economic

Clients Contractors Consultants General Public


Unemployment 0.925 1 0.868 2 0.840 4 0.920 2

Wasted Resources 0.875 3 0.788 5 0.880 3 0.800 4

Loss of Tax Revenue 0.825 5 0.848 4 0.900 2 0.800 4

Decline Property Values 0.550 8 0.588 8 0.540 9 0.680 5

Increase Poverty Level 0.825 5 0.556 110 0.660 6 0.880 3

Effects on Community & Neighborhood Aesthetics 0.825 5 0.788 5 0.780 5 0.800 4

Environmental Impact

Impact on Health of the People 0.850 4 0.868 2 0.900 2 0.880 3

Impact on the Safety of the People 0.875 3 0.772 6 0.920 1 0.920 2

Landscape Modification

Changes in the Landscape 0.550 8 0.532 11 0.360 11 0.480 7

Erosion

Gullies formed in Yards 0.625 6 0.600 7 0.580 8 0.800 4

Social Impact

Promotion of Illegal Activities 0.925 1 0.884 1 0.880 3 0.960 1

Hideout for Criminals 0.900 2 0.864 3 0.900 2 0.920 2

Encouragement of further Abandonment 0.575 7 0.572 9 0.400 10 0.600 6




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Table 4: A summary of relative importance index (RII) and rank of the impacts of the abandoned affordable housing

project from all the respondents.

Impact

Classification of

Impact

All Respondents

RII Rank

Promotion of Illegal Activities Social 0.912 1

Hideout for Criminals Social 0.896 2

Unemployment Socio-economic 0.888 3

Impact on Health of the People Environmental 0.875 4

Impact on the Safety of the People Environmental 0.872 5

Loss of Tax Revenue Socio-economic 0.843 6

Wasted Resources Socio-economic 0.836 7

Effects on Community & Neighborhood Aesthetics Socio-economic 0.798 8

Increase Poverty Level Socio-economic 0.730 9

Gullies formed in Yards Environmental 0.651 10

Decline Property Values Socio-economic 0.590 11

Encouragement of further Abandonment Social 0.537 12

Changes in the Landscape Environmental 0.481 13




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Figure 4

The promotion of illegal activities with a RII of 0.912 was the highest impact on abandonment of the affordable housing

project in Ghana. During the time of construction, workers from distant homes occupied places on the site as temporary

squatters. After the construction had stalled and the site abandoned by the contractor, these workers, with no means of

transport back to their homes allow other squatters to join them thereby engaging in drugs, thievery, prostitution and

human trafficking. Abandoned housing projects’ serving as hideouts for criminals was next with a RII of 0.896. These

criminals engage in diverse activities in these abandoned houses. Due to the dark nature of these hideouts especially at

night, these criminals rob residents living within and outside the vicinity and later come back to hide and rest after their

criminal operations. These areas are sometimes marked as “no-go” areas by some security agencies. Unemployment was

next with a RII of 0.888. Where vibrant on-going housing projects suddenly grind to a halt, the employees of these

housing projects will join the unemployment group. This eventually affects the livelihood of all the dependants of these

unemployed workers. Impact on health and safety of the people was next. Health and safety of the people is a key to the

total development of the individual as well the community as a whole. Most abandoned project sites serve as refuse

dumping sites, places of convenience for people living around and breeding grounds for parasites and rodents. Buildings

under construction before being abandoned may have some scaffolds left standing or hanging for months or even years

and these may cause severe injury to the passers-by and other inhabitants around if left unattended to. Furthermore, some

abandoned structures may house certain industrial and/or domestic chemicals (paints, solvents, cleaning materials, fuel

and lubricants) that have not been properly disposed off. Finally, they may serve as fire safety hazards where faulty wiring

and debris encourage rapid ignition. Abandoned housing projects have dire consequences on revenue generation and tax




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loss to the nation. This is important because more tax revenue will be lost from the sale or rental of these affordable

houses and will impair on further project development for the nation. Abandoned housing projects may also lead to further

abandonment due to the deteriorating economic and social conditions within blighted neighborhoods. Abandoned

buildings make no positive aesthetic contribution to a neighborhood. At worst, abandoned buildings are aesthetically

unpleasant. Their grounds become unkempt and overgrown, while the buildings themselves become dilapidated through

lack of maintenance. In any event, they bring no aesthetic pleasure to the residents of neighborhoods in which they are

located. Economic losses, both private and public, are not confined to abandoned structures themselves but rather affects

other properties within a neighborhood by lowering property values thus, a decline in the value of rents and property

selling prices.

3.3 Cost Implication of Abandoned Housing Projects

Table 5: Relative importance index (RII) and rank of the cost implications of abandoned affordable housing projects

according to Clients, Contractors, Consultants and the General Public.

Social-Economic

To The Client

Clients Contractors Consultants General Public


Capital lock-up 0.950 1 0.884 4 0.880 2 0.960 1

Loss of interest on capital if saved in the bank 0.900 3 0.852 7 0.840 4 0.800 5

Money will be needed in future to complete the project 0.925 2 0.916 3 0.860 3 0.880 3

Loss of revenue 0.850 5 0.932 2 0.880 2 0.840 4

To The Contractor

Loss of revenue 0.825 6 0.960 1 0.600 9 0.560 8

Unable to pay creditors 0.675 7 0.840 8 0.760 6 0.720 6

Accumulated interest on loans 0.925 2 0.788 9 0.800 5 0.800 5

Unable to pay workers 0.875 4 0.860 6 0.800 5 0.880 3

Collaterals will be used to defray loans 0.550 8 0.836 6 0.680 7 0.640 7

To The Consultant

Loss of revenue 0.875 4 0.868 5 0.660 8 0.440 9

Unable to pay workers 0.825 6 0.868 5 0.920 1 0.920 2




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Table 6: Depicts the relative importance index (RII) and rank of the cost implications of abandoned affordable housing

projects according to all Respondents

Cost Implications

Sector

All Respondents

RII Rank

Capital lock-up Client 0.919 1

Money will be needed in future to complete the project Client 0.895 2

Unable to pay workers Consultant 0.883 3

Loss of revenue Client 0.876 4

Unable to pay workers Contractor 0.854 5

Loss of interest on capital if saved in the bank Client 0.848 6

Accumulated interest on loans Contractor 0.828 7

Unable to pay creditors Contractor 0.749 8

Loss of revenue Contractor 0.736 9

Loss of revenue Consultant 0.711 10

Collaterals will be used to defray loans Contractor 0.677 11

Figure 5




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Capital lock-up to the client was the most important effect with a RII of 0.919. Ghana, a developing country prioritises its

developmental projects and seeks funds to execute them. If the secured funds do not accomplished its aim for end user but

rather the project ends up abandoned, the whole nation suffers because that capital could have been used for some other

developmental project that could support one community or the other. What could follow naturally will be that, more

money will be needed at a later date to complete the project. The process of repackaging the contract, assessing the

uncompleted works, revising the old or preparing a new tender document, inflation and its effect on labour, plant and

material prices for completion of the project will ultimately increase the original project cost. When contractors abandon

project sites, the services of consultants on the project become defunct and clients do not pay consultants for non-

performance. Ultimately, the consultants find it difficult to pay his staff and are made redundant till a decision is taken by

the client to recall the consultant to work. Other cost implications of abandoning housing project sites to the contractor

include his inability to pay his workers and creditors, accumulated interest on all loans taken from the bank to finance the

project and the use of valuables as collaterals to defray these loans.

4.0 Conclusion

The construction industry presents the most effective and elaborate attempt employed by the client to provide the much

needed infrastructure base of the country. The impact of abandoned housing projects and their cost implications are

summarized below:

4.1 Cash Flow Problems

The main causes of abandoned housing project in Ghana are the delay in payment and non-payments of interim

certificates by clients to the contractors. These affect the cash flow of contractors which ultimately affects their

performance to the contract and eventually abandon the site.

4.2 Social Effects

Socially, abandoned projects helps promote illegal activities such as drug peddling, prostitution, robbery, hideout for

criminals and human trafficking.

4.3 Economic Effects

Project abandonment causes financial loss to the state, increase in poverty levels of the employees and their dependants,

unemployment due to redundancy, revenue to the state is lost and taxes to be accrued from rent and sale of these houses

cannot be realized which affects the nation in its developmental program. Abandonment affects other properties within a

neighborhood by lowering property values.

4.4 Environmental Impact

Project abandonment imparts negatively on the health of the people because of poor sanitation within these areas. The

safety of the people around is affected because there is inadequate house-keeping in and around these structures. These

abandoned structures could have store rooms that keep hazardous or flammable lubricants and chemicals. Finally, the




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presence of debris around naked/faulty wires would encourage rapid ignition in these abandoned structures. Abandoned

buildings make no positive aesthetic contribution to a neighborhood.

4.5 Capital Lock-Up

Funds to complete the project was not forth coming because capital which could have been used for other developmental

projects have been locked up in these abandoned buildings. More money will be needed at a later date to complete the

project. Time and inflation would affect the cost of plant, material and labour needed to successfully complete the

projects. These were found to be additional cost implications to the client. Consultants on the project became affected and

are unable to pay their staff. Contractors on the other hand had to use their valuables as collaterals to defray loans taken

from banks to finance these projects.

5.0 Recommendation

In view of the challenges identified, it can be argued that there is the need to put in place appropriate measures to avoid

project abandonment and enhance the effective execution of housing project in Ghana. In this regard, structures and

strategies for improving project execution in Ghana are suggested:

1) Housing Development Fund

Government should set up a housing development fund and levy every Ghanaian worker about 5% of his/her basic salary,

which will be paid into the fund for a period of about 10 to 15years, after which the contributor qualifies for an affordable

house. This will provide enough and regular funds for the provision of the housing needs of the nation.

2) Prompt payment of Certificates

The government should negotiate with some financial institutions like the Ghana Commercial Bank, to honor payment to

contractors for certified work done, after which the government will later pay this financial institution so that there would

be continuity of work to completion.

3) Completion of Abandoned Projects

Government should endeavour to secure funds from development partners to complete these abandoned projects as their

continuous exposure to the ravages of the weather will eventually require more excessive funds to complete them.

4) Line of Credit

Contractors should make use of the credit facility from their bankers who granted them line of credit to pre-finance the

projects to completion and pass on the interest that will accrue on this facility to the client.

5) Security

Since the projects have not been contractually handed over to the client, the contractors are to provide security to the

semi-completed buildings to deter squatters from taking over them.




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5.1 Photo Gallery Of Abandoned Affordable Housing Projects From Borteyman And Kpone Greater Accra

Region




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REFERENCES

[1]. MADI, I. M. (2003) Essential factors affecting accuracy of cost estimation of building contractors. Islamic University

– Gaza, Palestine.

[2]. Navon, R. (2005) Automated Project Performance Control (APPC) of Construction Projects, Automation in

Construction, Vol. 14, No. 4, 467-476

[3]. Reiss, G. (1999), Project Management Demystified - today’s tools and technique: 2nd

ed. Spon Press, London and

New York

[4]. Harris F. & McCaffer R. with Edum-Fotwe F. (2006).Modern Construction Management, Sixth Edition. Blackwell

Publishing Ltd. Garsington Road, Oxford UK.

[5]. Ghana National Development Plan (2008).National Commission for Development and Planning, Accra, Ghana.

[6]. Home finance company, (2001).

[7]. Ministry of Water Resource, Works and Housing (2002).

[8]. Griffith Alan; (1992), Small Building Works Management: Macmillan Press Ltd.

[9]. Setterfield, M. (1997) Abandoned Buildings: Models for Legislative & Enforcement Reform

[10]. Greenberg, M.R., Popper, F.J., Schnieder D. and West B.M. (1993) "Community Organizing to Prevent TOADS in

the United States" Community Development Journal 28: pp. 55-65.

[11]. Spelman, W. (1993) "Abandoned Buildings: Magnets for Crime" Journal of Criminal Justice 21: pp. 481-495.


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the impact of abandoned government housing … · 2017-07-10 · non-payment of interim certificate...

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