Tenancy law, taxation and house rent in Lagos

Due largely to its cosmopolitan nature and surging population estimated at 21 million, Lagos, Nigeria’s commercial nerve centre and cultural melting pot, is the most viable real estate destination though with the most expensive rental market in the country.

The city is adjudged Africa’s second most expensive property market after Luanda in Angola and its rental market is one in which residents in highbrow areas pay as high as N10 million and N15 million per annum for a three-bedroom apartment while same size apartment in the low to medium income areas goes for between N250,000 and N2.5 million.

A report published by Pison Housing Company in 2009 estimated that over 60 percent of the Lagos population lived in rented accommodation, spending about 50 percent of their monthly income on house rent. Just five years after, this figure has gone up significantly as it is currently estimated that 80 percent of the city’s population now lives in rented accommodation, and the city’s share of the 50 percent of Nigerians who are either homeless or live in inadequate shelter is about 20 percent.

Apart from the large population which exerts too much pressure on existing inadequate housing stock, leading to housing demand-supply imbalance, other factors such as the state’s tenancy law and multiple taxation are also major contributors to high house rent in Lagos.

Recognising that Lagos is home to over 21 million people, with housing posing a major challenge to the huge population, the state government in August 2011 enacted the Tenancy Law which prescribes one year rent for a new tenant and six months for a sitting tenant.

Consistent with the aphorism that “events mock at human foresight”, the single-year rent payment law has, ironically, discouraged investment in houses for rent and has pushed rent to a new level where landlords, in many locations in the city, now collect two years’ rent for one year.

Housing supply from the state government for low income earners, either for sale or rent, has almost been stagnant since after former Governor Lateef Jakande’s low-cost housing phenomenon over 30 years ago. The private-sector efforts at closing this gap is not only inadequate but also inaccessible and unaffordable and the developers hinge the reason for their expensive rents on multiple taxation by the government which makes them pay for land, planning and approval, environment, council, and “Omoonile”.

In Lagos, access to land through government allocation is a battleground for money-bags because an average indigene tells you that land is their own oil well, hence its high cost. Planning approval takes forever even when government says it will take one to two months and comes at great cost.

Like other Lagos residents, we are highly appalled by the high rent paid for even ramshackle buildings in Lagos simply because both the public and private sector operators have abandoned low income earners to their fate by building only mansions for the rich. Nobody is building for the poor who need mass housing. We are not unaware of the state government’s efforts at providing housing for the residents through its mortgage scheme—the Lagos Home Owners Mortgage Scheme (LagosHOMS)—but the question is, how affordable are both the housing and the mortgage scheme?

We share the view out there that the enforcement of the one-year rent law has not been effective because government has no alternative provision for those who cannot afford open housing market prices offered by private developers/landlords and because government-owned housing schemes are not cheaper, it has become a case of the pot and the kettle.

For us, it is trite argument when government says its houses cannot be cheaper because it goes to the same building materials market with private developers. Land and infrastructure constitute over 75 percent of construction cost and government has all it takes to provide these two components free. Lagos residents choose to rent because they cannot afford the cost of land in the city centre and on the outskirts where there is land, there is virtually no infrastructure especially roads to enable development.

We, therefore, urge the state government to stem the tide in house rent by doing the needful—provide infrastructure to encourage mass housing development in the hinterland; make its mortgage scheme more affordable or, at best, revisit the Jakande model which, in spite of its imperfections, is still a reference point 30 years after. Lagosians need just decent housing, not castles or mansions.