This dilemma is common in Iraq these days. The country urgently needs more housing for its rising population, yet a growing number of Iraqis with relatively stable incomes cannot afford much of what is being built. Despite a construction boom in recent years, the nationwide housing deficit remains substantial, and new real estate alone cannot resolve the problem. Rather, the more important question is whether authorities in Baghdad and Erbil can produce enough affordable housing for those who need it.

 

Bismayah’s unfinished promise

The United Nations Human Settlements Programme (UN-Habitat) estimates that Iraq faces a cumulative housing deficit of 2.5M to 3.5M units. A wave of new initiatives promises to close that gap. Egypt’s Talaat Moustafa Group won a 2026 license for a 43,000-unit smart city near Baghdad while Dubai’s DAMAC has launched luxury towers of its own. Iraq’s Ministry of Construction and Housing is also planning several satellite cities around the capital.

In parallel, the government of Iraqi Prime Minister Ali Al-Zaidi has introduced its flagship “One Million Residential Plots.” The platform is intended to boost construction across the country and is set to launch in Sept. 2026.

Those efforts have made little dent in the housing shortfall so far. Iraq’s own department of statistics reports that private construction permits, a rough proxy for building activity, have actually fallen in recent years—from 37,442 in 2022 to 25,934 in 2025. These numbers are far short of the roughly 250,000 units a year the government says are needed just to keep pace with new demand.

The case of the Bismayah New City development, located 10 km (6.2 miles) southeast of Baghdad, illustrates these challenges. Launched in 2012 as a key component of Iraq’s 2010 National Housing Program, the sprawling 18.3 km² (7.1 sq mi) project was designed to provide around 100,000 housing units for 600,000 people under a subsidized homeownership scheme.

A 100 m² unit in Bismayah costs a fixed 83.16M IQD (63,000 USD)—a fraction of the equivalent in Baghdad’s broader private market. Comparable apartments in the capital range from 900,000–9.24M IQD (680-7,000 USD) per m² (10.76 sq ft) depending on the neighborhood. That gap helps explain both the pressure on Bismayah’s waiting list and why so much of the capital’s private housing stock remains out of reach for ordinary buyers.

However, the South Korean firm tapped for the project, Hanwha Engineering & Construction, halted construction in 2020 after Baghdad fell behind on payments. The company only completed around 30,000 homes before work resumed in late 2024 under a revised contract that covers an additional 70,000 units. By Dec. 2024, Iraq’s National Investment Commission said around 21,480 of the completed units had been handed over and were already occupied by residents.

Last year, the investment commission tightened conditions for reopening applications, and claimed that around 70,000 people had registered to be allocated unbuilt units at the flagship housing complex via the government’s ‘Ur’ platform.

Bismayah’s fortunes reflect how building housing and ensuring access are different problems. Initially, the project’s terms for prospective buyers required a 25% down payment, but this was later reduced to 10%, with the balance to be repaid over 15 years. The 2024 contract for the project’s remaining units extended that repayment window to up to 25 years. That repeated loosening of terms suggests the state has had to keep adapting financing conditions because unit costs and household purchasing power do not naturally align.

Similar housing struggles have played out in Iraqi Kurdistan, although in a different kind of market. Over the past decade, the semi-autonomous region’s capital has seen a remarkable expansion of apartment developments, gated communities and large residential compounds. Yet, despite this uneven boom, affordability has deteriorated for many middle-income households.

One study covering 2024 housing prices in Erbil found that a 100 m² (1,076 sq ft) low-income reference apartment cost approximately 91.08M IQD (69,000 USD). That represented a price-to-income ratio of 23.1 years for those who earned the median household income in Iraqi Kurdistan in 2023, approximately 328,680 IQD (250 USD) a month. For buyers already active in the market and with higher incomes, the ratio was 4.4 years.

Unaffordability in Iraqi Kurdistan, as in other parts of Iraq, has been exacerbated by limited access to mortgages, high property prices as well as dependence on savings and informal financing. Erbil’s urban landscape can therefore have thousands of apartments for sale while those earning the median income cannot realistically buy one. Even higher earners face a multi-year climb to ownership.

Iraq’s wider housing problem should not be understood exclusively through the language of poverty. A teacher, engineer, doctor or civil servant can have a stable income and still be unable to accumulate the capital to buy a home. This does not mean that Iraq’s traditionally high rates of homeownership have suddenly collapsed.

Rather, it points to a generational divide. Older Iraqis may already own their homes, while those entering the market now increasingly face having to rent a property, borrowing heavily or relying on family wealth. Formal mortgage financing in Iraq remains weak, particularly in Iraqi Kurdistan. This leaves prospective buyers dependent on savings, family assistance, remittances and developer installment plans, meaning that income does not necessarily translate into asset ownership.

A middle-class crisis

Homeownership in Iraq has long meant wealth and security beyond mere shelter. If younger generations are priced out of the property market, housing risks reproducing existing wealth disparities across generations. This is a trend visible in the Kurdistan region, where the number of home and apartment renters increased by 16.6% between 2018 and 2024, from 228,679 to 266,600.

Housing in Iraq is not only viewed as shelter, but a key economic asset. Where investment opportunities remain slim and financial markets underdeveloped, land and real estate can function as stores of wealth, generating investor demand alongside genuine housing need. However, while an investor can wait for a property to appreciate, a family needs somewhere to live. The dramatic dinar devaluation in 2020 appears to have reinforced this dynamic and ushed wealthier dollar-holding Iraqis toward property as a hedge to protect their purchasing power.

Corruption compounds Iraq’s affordability problem, with real estate reportedly becoming a favored vehicle for money laundering. Wealthy individuals and politically connected groups have been accused of funnelling illicit funds into real estate, partly to avoid growing scrutiny of international money transfers. Experts blame this for driving up prices unrelated to genuine housing needs. Against this backdrop, one housing-sector official alleged to Amwaj.media that businessmen have at times acquired and resold subsidized units at a profit, with officials often turning a blind eye.

But the private sector and rampant corruption cannot hold all the blame for Iraq’s housing woes. The authorities have repeatedly intervened by building and subsidizing public housing units directly. Still, Iraqi Kurdistan’s experience shows this too can fail to deliver affordability. Between 2011 and 2013, government-subsidized housing units in the Kurdistan region were estimated to cost between 60–80% more than comparable private-market alternatives, while household incomes rose only marginally.

Researchers have attributed the gap less to graft than to fragmented procurement, where units pass through multiple approval stages and absorb costly revisions once awarded. Access is also largely tied to state employment rather than open-market choice. The real subsidy lies in 25-year, below-market financing rather than a lower price, which makes beneficiaries’ own monthly payments more accessible—but in practice, no cheaper than the private market.

The debate on housing in Iraq focuses mainly on how many units get built, and less on who ultimately captures their value once construction ends. A government that subsidizes property without controlling eligibility, resale and affordability risks underwriting private wealth rather than affordable housing. The country’s real estate market needs conditions for investors to profit from housing that Iraqis can afford; with public land could go to developers only in exchange for binding affordability requirements.

Housing projects like Bismayah show that federal Iraq can build at an extraordinary scale, while Erbil shows how a construction boom can coexist with severe affordability constraints. Together, both point to a national housing system that remains dangerously out of alignment. A generation of aspirational Iraqis who can work but cannot convert their income into assets will remain caught in a crisis of social mobility, not just a housing shortage.