…N29trn needed to bridge deficit – Shettima
…It’ll cost N59.5trn, says World Bank
…Wrong approach responsible for huge deficit – Adefolarin
As arguments continue on Nigeria’s housing deficit, the federal government has not relented in its bid to meet the country’s housing need; BENJAMIN UMUTEME and TOPE SUNDAY write.
Over the years, it has become an uphill task to determine the country’s housing deficit. While some say it is 20 million, others insist it is 21 million. However, analysts have argued that considering the country’s huge population, stakeholders may just be downplaying the seriousness of the housing challenges.
Several governments have come and gone yet there has not been any concrete follow-up on the various policies meant to bring relief to citizens.
In advanced economies, the housing sector is seen as an important sector for stimulating economic growth. However, access to affordable housing has largely remained an unfulfilled dream to the vast majority, most especially, the middle and the lower classes of the society.
The Federal Mortgage Bank of Nigeria (FMBN), which is supposed to be a government vehicle for the provision of mortgages to low-income earners through the National Housing Trust Fund (NHTF), has failed to achieve its objectives partly due to operational and financial capability restraints and corruption on the other hand.
The few low-income earners who own their houses usually obtain land and build incrementally with their funds, while the high-income house-owners buy with money or mortgage finance, usually pay back over a maximum period of 10 years.
A major shortcoming has been with ownership rights under the Land Use Act 1978, which confers ownership of all lands on the governors of each state and is a substantial restriction to housing and housing investment in Nigeria.
N21trn needed
Though, the government is not unmindful of its inability to provide affordable housing for Nigeria, it is, however, clear that to do that it would need trillions of naira, which the country cannot afford at the moment.
Speaking recently in Sokoto at the groundbreaking of the construction of a 500-unit housing estate, Vice President Kashim Shettima said the country would require N21 trillion to effectively bridge the housing gap.
According to the vice president, despite efforts by national and sub-national governments the country’s housing deficit remained huge.
“Nigeria has a deficit of 28 million houses and we will need N21 trillion to meet our housing needs. This step taken by the Governor is highly commendable and worthy of emulation by other State governments,” he said.
ERGP approach
As a way of addressing the huge housing burden, the federal government initiated the Economic Recovery and Growth Plan (ERGP) 2017-2020 aimed at addressing the housing deficit in the country.
There was a proposal to set-up a Family Homes Fund (FHF) that would be designed to stimulate the construction sector, while improving access to social housing.
The main objectives are to overcome critical constraints in the construction and real estate sectors and increase the availability of financing for the construction industry.
Part of the strategy of the ERGP is to construct 2,700 housing units in the short-term to create 105,000 direct jobs a year and gradually increase to 10,000 housing units per annum by 2020; the construction of 20,000 pilot social housing units; and the repositioning of the Federal Mortgage Bank of Nigeria by recapitalising it from N2.5 billion to N500 billion to meet the country’s housing needs.
Bridging the gap
A World Bank study in 2019 projected that the cost of bridging the housing gap which it put then at 20 million was N59.5 trillion, indicating the vast and untapped investment potential of Nigeria’s real estate sector.
The global lender noted that unlocking the residential housing market through the development of housing finance can provide a wide range of income opportunities through the construction sector and related industries.
“As a result of current urbanization trends, Nigeria’s housing demand is expanding rapidly. It is estimated that up to 700,000 housing units in different market segments are needed annually to keep up with demand. However, current production is below 100,000, resulting in accumulated deficit,” it said.
According to a 2019 General Household Survey, the World Bank noted that purchasing power and spread of poverty is correlated with the occupancy status of different households.
The report indicated that a majority of Nigerian households own their dwelling and that rental housing is prominent in urban areas.
According to the report, more than two thirds (66 per cent) of households in Nigeria own the house they live in, while about 33 per cent have a different occupancy status; about 14.4 per cent live in rent-free houses, and 17 per cent live in rented premises. About one per cent live in a property provided by the household head’s employer.
Owning a house is more common in rural areas (81 per cent) than in urban areas (44 per cent), whereas renting houses and rooms is more common in urban areas (35 per cent) than in rural areas (4 per cent). Living in a rent-free house is rather common in both urban and rural areas, at 17 and 13 per cent, respectively. On a gender basis, 54.3 per cent of female-headed households own their property, 29 per cent live for free in a property with the owner’s authorisation, and only 15 per cent rent a property. By contrast, 68 per cent of male-headed households own their property and 17 per cent rent their dwelling.
Analysts say that Vice President Shettima’s N21 trillion was an underestimation of the amount needed as increasing population, growing urbanisation, poverty and displacement due to insecurity and recently flooding seem to indicate that much more is needed.
Profit maximisation
A political economist and development researcher, Adefolarin Olamilekan, said the quest for maximization of profit is part of the reason for the housing deficit.
He said private housing developers should focus more on building affordable, accessible and less cost intensive houses.
“Another is the luxury to build expensive housing as opposed to mass housing. The private developer jettisoned mass housing for luxury estate above the reach of ordinary Nigerians.
“Couple with the high cost of foreign building materials like fittings and design models. Many of the developers lose out to potential buyers who are the majority middle class people.
“Let not forget the business environment of our climate that mistreats government policy that has not been favourable, which reverses the gains of mass housing potential to grow the economy. This in trust impacts the economy negatively as housing, construction and real estate are supposed to contribute more to GDP,” the development researcher said.
Accurate, reliable data
Speaking with Blueprint Weekend, Chief Executive Officer of Sigvent Property Trust Limited, Mr. Benjamin Onigbinde, said for the government to address the huge housing deficit, it must have accurate and reliable data.
Analysts have for so long bandied 21 million as Nigeria’s housing deficit but with the rate of population increase many have equally questioned the figure.
He said that a solution needed to be found for this ‘critical economic sector’.
According to Onigbinde, it has led to the government’s failure in the delivery of various housing policies.
He said, “I believe that the time is now to take the issue of housing development very seriously as it affects other economic delivery like job opportunities, security, and productivity.
“The new Minister of Housing needs to work together with the ministry of Economic Planning and Digital Economy to work out reliable data which will form the basis for sustainable planning and implementation of housing development.
“Definitely, I believe so. We have spent so much time in the past on implementation of housing development policies based on speculative data. There is no other way, if we are really sincere about solving the housing deficit, than going to the basics, how many people are homeless?
“What’s the nature of the homelessness? Can we define our housing culture along income, religion, ethnicity and age? What’s the role of new technologies on housing culture? We need answers to these questions as fundamentals to solve our housing deficit.
“All the stakeholder ministries need to establish a team working together on solving this problem. If not, we keep having the same results as we have always had,” he added.
Wrong approach
Adefolarin further said a proper understanding of the housing sector by the government contributed to the huge deficit the country was experiencing.
According to Adefolarin, rather than lack of access to funding, the challenge has been due to a wrong approach on the part of the government.
The issue around housing is not about lack of funding, rather it is a poor economic decision on the part of authority. He said it happened because the housing project focused on the top to down approach instead of the bottom top approach that successive administrations failed to appreciate.
“For us, the authorities need to consider the role of Nigerians in any housing projects because past projects lack input from the citizens.
“We are not talking of gathering estate developers and their likes. We expect a citizen’s prototype housing policy that is driven from the bottom to the top.
“Another is for the government to deal with the corrupt activities within the government housing project, where housing loans and mortgage policy are carried out with serious monitoring and evaluation.
“In addition, the various housing projects are too cost-intensive that ordinary people cannot afford because it is modelled in luxury with too much emphasis on elite taste.
“Lastly housing projects should be between federal and sub-national government collaboration and partnership, this would go a long way to ensure mass housing is achieved rather than luxury and posh housing spreading across major cities of the country,” he said.
Harnessing the capital market
Fielding questions from Blueprint Weekend , Professor of the Capital Market at the Nasarawa State University, Uche Uwaleke, said the capital market can play a vital role as the federal government seeks to address the perennial housing challenge.
Uwaleke, who is the President of the Association of Capital Market Academics of Nigeria (ACMAN), noted that through the capital market, the government would be able to access the needed long-term funding required for that sector.
A look at the lending pattern of banks revealed that they are more disposed to short term loans. This, analysts say, is a challenge for operators to access loans from them.
“Today, some estimate that the country’s huge housing gap is about 21 million. The deficit is he no doubt. How can the capital market be used to breach that?
“Remember the capital market is for medium to long term funds, now the capital market can provide a veritable platform for funding housing in Nigeria.
“One of such platforms is through a real estate investment fund. It is also a fund of collective investment scheme; savings can be mobilized in such a way that such funds can be channeled to this trust. Unfortunately for us in Nigeria, this is one area they still have not really developed. Real estate investment trust in several countries, many of them in that economy have helped to bridge that deficit gap.
“One way by which the capital market can help to do this is develop that space-real estate investment trust. These days, we have tax regulations that tend to promote real estate investment trust. Therefore, the government should continue to support it such that it can actually fulfill its potential.”
