Posers on housing deficit

Nigeria’s housing deficit has been estimated at approximately 17-18 million housing units. I was recently joking to a friend that given how long I have heard that figure vis-à-vis the very limited number of units added to the housing stock on a yearly basis, I’m surprised the size of the deficit has not since been revised upwards!

The issue of housing Nigerians remains intractable-a large and growing current deficit; absence of mortgages to help the middle class build or buy their own homes; high interest rates that make mortgages prohibitive, even if available; absence of a secondary mortgage market to provide liquidity to mortgage providers; limited capacity of building developers in terms of construction technology, industrial-scale housing delivery, finance and project management; high cost of building materials, including cement and building accessories; absence of viable, large-scale and standardized local production of accessories including doors, windows, sanitary systems, kitchen ware etc.; the vexed issue of the Land Use Act and its mode of implementation and administration which makes land transactions expensive and time-consuming and land title uncertain; the judicial system which elongates commercial dispute resolution and makes realization of security illusory; and large scale poverty which means a huge proportion of Nigerians cannot afford decent housing and perpetuates slums and unplanned, inhabitable and unsafe communities, amongst others. Add the fact that even if you were able to afford to build, buy or rent a fair and functional accommodation, public infrastructure-power, roads, drainages, water supply and urban planning and environmental limitations all combine to undermine your enjoyment of your home and reduce your standard of living.

We all live these realities and at the policy level, I have been concerned about them for decades, hence my acceptance of an invitation to moderate an advocacy roundtable on “The Nigerian Real Estate Sector: A Reform Agenda” organized by the Nigerian-British Chamber of Commerce (NBCC) on March 7, 2016 at which Federal Minister of Power, Works and Housing, Babatunde Fashola SAN was Keynote Speaker, represented by Biodun Oki, his Special Adviser on Housing and Urban Development. My views on Fashola are probably well-known-he is a very visionary, analytical and effective administrator and manager, and I believe that if anyone can/will solve some of the intractable issues I mentioned in the housing sector (as well as those in power and works!) it is Fashola. Of course the administration in which he serves will have to create an environment conducive to investment, economic growth and employment in order to facilitate success in the three herculean assignments which his current portfolio combines into one. It was substantially because of my faith in Fashola’s abilities and the opportunity to interrogate his ideas on addressing the multitude of problems in the housing sector that I looked forward to the session.

The minister however had a slightly different agenda-instead of allowing me and other panelists and participants at the roundtable to question him, as we would inevitably have done, he turned the table on us and used the opportunity of his keynote address to present his own questions! The questions were loaded and their combined implication is to remind us that behind the mountain of problems in the housing sector, as in perhaps many others, are unresolved policy debates and unsettled policy!!! Fashola’s style is to get to the “root” of the matter in the style he describes as a “root and branch” examination reflecting his original training as a lawyer! In the answers to some of the questions Fashola raises, lie the philosophical basis and seeds of a future comprehensive housing policy, which, if we build consensus around through rigorous analysis, debate, agreement and advocacy, may see us addressing the vexed housing deficit over the next decades.

His questions included, “Can (or should) government provide homes for every Nigerian?” “Who should own houses?” The rich, the middle class, or the poor? He also probed, “What kind of house can we adopt as the Nigerian house?” Leading from the last question, he also wondered whether we could, on the basis of a conceptual definition of “the Nigerian house”, adopt (and produce!) standardized housing accessories for Nigerian houses? How many could we produce over a period of time-monthly, yearly etc.? How do we finance the sector? He also raised the problematic issue of house owners and land owners wanting to collect rents two or three years in advance! Even though this is a system that we have all accepted as normal, it is really an incongruous system! How are tenants who collect salaries on a monthly basis expected to pay their rents a year, two or three in advance? This practice encourages corruption and other social ills – a friend told me that the practice encourages many single girls to go on a “rent-seeking offensive” every time such advance rent is due! Your guess is as good as mine regarding the means and strategies by which they would have to raise such funding!

I took up the minister on this issue in a (as usual) stimulating policy debate later that evening and while recognizing the flip side of the problems-difficult tenants who may default on their rents leaving landlords who have laboured to build houses high and dry, he advocated a tripartite system involving the tenant, tenant’s employer and their bankers issuing guarantees and/or standing orders in favour of the landlord thus guaranteeing the monthly payment of rent and assuring the landlord of a steady and consistent stream of income. He argued as he did at the roundtable, that this would solve the problem of the large number of unoccupied houses in many urban centres due to demand for multiple year’s rent-in-advance. I have decided to personally test the Minister’s suggested model in respect of a vacant flat I own as a public experiment and I would report in due course on the results.

Another problem the minister identified is the large transaction costs involved in property transactions due to the demand for ten percent legal fees and agency fees as well as high valuation rates, all of which combine to keep completed buildings empty.

As Fashola insightfully pointed out, the most important element of a housing policy is consistency, and not episodic or ad-hoc interventions in the housing sector through unsustained and/or unsustainable schemes. Even if we address these issues, we probably won’t invent solutions that will make every Nigerian own his or her home anytime soon (Singapore a nation of only 5 million people has reached only 80 percent of its population in spite of consistent housing delivery since the 1960s and the United Kingdom since 1918 has covered only about 65 percent, Fashola pointed out) but we will at least have started a process that guarantees that going forward, the deficit gets lower, not higher!

Opeyemi Agbaje