Housing the poor using Brazilian model

A critical analysis of Nigeria’s 16 million housing units deficit shows a strong leaning towards the lower segment of the property market. It is a bottom-heavy pyramid that thins out at its topmost end.

Analysts estimate that the country requires over N30 trillion investment to close its infrastructure gap. According to Alufohai Angele, the immediate past president of Nigerian Institute of Quantity Surveyors (NIQS), Nigeria has such a huge housing and infrastructure deficit not because it is poor, but rather because it has failed to develop the policies and institutions appropriate for boosting investment and the supply of housing and infrastructure.

Like in Nigeria, until recently, mortgages barely existed in Brazil because interest rates were too high and evicting defaulters was almost impossible. The poor built on their own without title, often in precarious spots on riverbanks or steep hills. A 2010 census found 11.4 million Brazilians living in slums. Millions more squeeze in with relatives or live in formal but substandard housing which is a common feature of most Nigerian cities, especially Lagos, Nigeria’s bustling economic capital.

Only a decade ago, Nigeria was classed along with Brazil as frontier economies, but today the story is different. Whereas Brazil has moved on to become an emerging economy, Nigeria is still struggling at the spot where Brazil left off.

Realising the importance of housing as a growth factor in any economy, Brazil has come up with a scheme to promote working-class home ownership and, according to The Economist magazine, “this scheme is off to a good start.”

The story of Adriana Palugan, as told by the magazine, is same as that of Johnson Onyebuchi who has lived in a rented apartment in Ajegunle, a sprawling slum in Lagos, for over 18 years. Unlike, Palugan, however, there is no government scheme anywhere for Onyebuchi that guarantees home ownership for him.

Palugan, a mother of two, rented a home in Balneário Camboriú, a seaside town in Southern Brazil. Now, she is buying her own house from Colina do Cedro, a new development on a hill overlooking the town.

She extols her new home’s wonders in its bright and spacious rooms with a pool, gym and multi-games court, 24-hour security, and altitude. Her old place was flooded in 2008, and she lost much of what she owned just as it happened to Onyebuchi following the 2012 flood.

Without Minha Casa Minha Vida (MCMV – My House My Life), a Federal Government programme started in 2009 to fund housing for Brazil’s poor and middle classes, Palugan, who works for a car dealership, would have struggled to buy such a home.

The price was keen: 100,000 reais ($51,000). Caixa Econômica Federal, a state-owned bank, gave her a subsidised mortgage; the repayments are less than her rent used to be. Caixa has also granted the developers, Abramar, cheap financing for the project’s second phase, two apartment blocks. The funding comes from a workers’ compensation scheme and the federal budget. Buyers cannot already own homes or make over 5,000 reais a month. The lowest earners get the biggest subsidies.

MCMV is shifting homebuilders’ interest away from the rich minority to the middle market. This is the kind of thing that Nigerian government can also do to close housing demand-supply gap in the country.

Big private developers like the UACN Property Development Company (UPDC) should be encouraged through government schemes such as Brazil’s, to shift interest from building for the rich to building for the poor.