Strategies for mass housing minimum wagers in nigeria2
Paper presented at Mini-Housing Summit organized by Nigerian Institution of EstateSurveyors and Valuers, Lagos State Branch, on Tuesday October 25, 2011. By Sola Enitan ANIVS, RSV., CRO/Managing Cromwell Center for Housing and Urban Development Ltd GTE Principal Partner, Sola Enitan and Co, Lagos.
Introduction Housing Facts: The World Bank, in its 2010 report, estimated Nigeria’s housing deficit to be about 17 million units . According to the 2006 census, Nigeria has a population of over 140 million people. At an average of 4 dwellers per household according to United Nations Organisation’s (UNO’s) figure, about 35 million housing units will be required to house about 140 million people. Current indicators show that Nigerian population lives in about 18 million housing units home to about 72 million people. Housing has two parameters: quantity and quality. The above analyses only discuss the quantity of housing in Nigeria. The quality of this housing will be discussed in another discuss.
HOUSING FACTS CONTD. Presently in Nigeria, the World Bank estimates that Nigeria requires the production of about 720,000 housing units annually for the next 20 years in order to solve the housing needs of the country. Not less than 30% of this, about 220,000 housing units is needed to stem the tide of homelessness in Lagos State alone, annually, We are equally aware that about 58% of all commercial activities in Nigeria happen in Lagos, so the housing requirement annually in Lagos could well surpass 300,000. Moreover, the household Survey 2010 of the Lagos State Government reveals that 91% of Nigerians live below the poverty line of $1.25- $2.0 i.e 18.2million Lagosians earning between N72,000 PA- N216,000 PA. they consist of the poor and the minimum wagers. Housing goes beyond simple shelter to include utilities and community services such as water supply, energy, access road, sewage and refuse disposal facilities. It is a complex factor determining the general well being of the society. Hence it is not surprising to notice that housing has received attention from responsible organisations like NIESV.
housing facts! Housing stats!. The World Bank estimates the cost of bridging Nigeria’s 17 million housing deficit as N59.5 trillion against a Gross Domestic Product (GDP) in 2010 of $374.3 billion (NBS, 2011). Others infrastructure deficit include, roads, water, hospitals, schools, markets, airports, recreation and so on. WHO IS A MINIMUM WAGER; A minimum wager in Nigeria: Is somebody earning minimum wage of N18,000 per month. This is N216,000 per annum. Employers and governments therefore, must come to terms with workable designs that will empower minimum wagers to home ownership over a period of 30 years.
Demand Indicators: Lagos state Lagos currently provides socio-economic expression for 20 million people in various social classes, according to the Lagos Household survey 2010, 18.2 million Lagosians earn about N6,000.00 per month while the rest about 1.2million are somewhat above the waters of poverty with a larger percentage earning minimum wage . For any reasonable housing plan therefore, that must attend to the needs of the masses , about 50 percent of every housing project must attend to the needs of the poor while the rest can be provided on commercial basis with a variety of financial packages to make accessibility less cumbersome. Of the 50% housing provision for minimum wagers by government 65% MUST be made available on rent to own basis while the rest 35% will be allotted to direct owning minimum wagers. Design types must conform to the indicated demands which is largely studio apartment, 1 and 2-bedroom flats .
DEMAND INDICATORS CONTD. The World Bank at a recent interactive session with national officers and real estate stakeholding members of the Real Estate Developers Association of Nigeria lends support for any programme of housing activity that focuses on the mid level of the housing pyramid providing housing at prices not exceeding $20-25,000.00 USD. This is the challenge that stares us in the face concerning the problem of mass housing deficit in Lagos State and by extension in Nigeria. Concerted efforts must be made therefore to ensure that the development funding available for this initiative can be adequately tapped in the interest of the Lagos public and Nigerians at large.
What is Housing? “Housing is a bundle of joy” (Agbola, 2003). Every human being aspires to have his or her own house. “Housing is a house, a structure or an enclosure used for habitation by people, which generally has walls, openings and a roof to shelter its enclosed space from inclement weather, that is, precipitation, wind and heat (hotness or coldness). Housing is the combination of residential, commercial and industrial buildings, agricultural land, transportation, health, education, recreation, parks, services centres (water and electricity), waste management centres, cemeteries, markets, religious centres etc in a ratio that will sustain the development of an area” (Oyedele, 2011).
What is Housing? Contd. Housing is an abode where people reside. It is an enclosure for resting, strategising, storage and safety against intruders. Housing is a status- booster. It improves the status of owners as “landlords and landladies”. It is a form of investment and store of value. It is a basic need after food. Housing is a land use as well as a structure. It is not completed without the environment which surrounds it. It is not only the enclosure that shields the occupiers, it includes the auxiliary services like lightning, water, security, fire-prevention, sewerage, waste management, greenery, etc. Mass Housing refers to housing provided by public authorities and private corporations on a large scale at highly subsidised rental and sales rates for the benefit of society while affordable housing is income determined housing that tracks one-third to one-quarter of monthly take home of the middle class and the poor.
Challenges of Mass-HousingMinimum Wagers in Nigeria According to Windapo (2000) and Okupe (2000), the gap between income and shelter cost in Nigeria is very wide making housing unaffordable for the minimum wagers. The income given to the lower cadre of workers in Nigeria is not a living wage. Considering the fact also that the percentage of Nigerians in meaningful employment is 21% (35million), it means that an average worker has about four (4) dependants. This makes it very difficult for an average minimum wager to save for his or her own house.
Challenges of Mass-HousingMinimum Wagers in NigeriaContd. According to Nubi (2006), “Prior to the colonial period, many methods of housing finance were adopted in different parts of the country. Amongst these are Esusu and Ajo, Age grade association, Village development scheme, and Town unions of people living outside their place of birth. Traditional loans sources: revolving loan association, traditional moneylenders, Social club contributions, Aaro or Owe where members contribute in kind by providing labour on members’ site until the cycle is completed. All of these methods were successful in the provision of finance for housing and its delivery in the traditional setting. But with the complexity in economic activities, these methods faded away and are “to be replaced” by modern methods”. The modern method of construction sees housing as economic good and has monetized all processes thereby leaving housing at exorbitant level.
Challenges of Mass-HousingMinimum Wagers in NigeriaContd. The cost of housing provision is enormous. The World Bank puts it at N3.5 million for a 3bedroom apartment, when it says that N59.5 trillion will be enough to produce 17 million housing units. This rate is definitely devoid of cost of land and/or has considered the lowest building materials. Housing is an asset which is a store of value. The legal title to it must be efficient. Unfortunately, the Land Use Act of 1978 has not helped matters. The governors are the custodians of state lands and can give title to it at their own discretion. The cost of procuring title to land and of getting approval to build is exorbitant.
Challenges of Mass-HousingMinimum Wagers in NigeriaContd. Right from 1957 when local production of cement commenced at the premier cement factory, Nigercem, Nkalagu, local production has never been able to meet demand for construction even in the mid- 80s when demand for cement was declining. Local production remained at less than 50 per cent of total installed capacity, which was largely concentrated in just two plants. Of the annual demand estimated at 18-million tons, local production could only supply between 6 and 6.5 million tons of cement yearly.
Challenges of Mass-HousingMinimum Wagers in NigeriaContd. This informed the Backward Integration Policy of Government in 2001 wherein importers were encouraged to open local plants aimed at bridging the deficit of 11.5 million tons in the supply of cement, and temporarily reduce price which was considered high at that time – N800 per bag. However as of today, in spite of various good intentions of the Federal Government, the annual demand of 25 million MT leaves a yawning deficit of 12 million MT, price of cement has continued to increase (N2,400 in February, 2011 and N2,000 in October). There is no need saying the fact that the cement industry in many ways contribute to economic growth.
Challenges contd. HIGH COST OF COMPLIANCE AND DOCUMENTATION: This is another major sore thumb, in that what the investors find painful gives pleasure to government. A meeting point need to be found to make physical planning for mass housing possible in Lagos State. HIGH COST OF BUILDING MATERIAL: Government must find it convenient to assist developers in cutting cost by supporting bulk buying and importation where necessary for mass housing programs. HIGH INTEREST RATES: The CBN owes a duty to the Nigerian public to ensure that interest rates for mass housing falls below the monthly rent receivable on real estate investment. The era of negative equity should end in the interest of reducing the housing deficit in Nigeria and in Lagos in particular.
CHALLENGES CONTD FINANCE: Finance is a key bane of housing in Lagos state, with an impoverished population and a government saddled with all facets of problems of a mega city, finance is a major consideration for all government and the public. Government’s commitment needs to match the desires of the public while it will be foolhardy for government to build houses that its teeming masses cannot afford. ACCESS TO LAND: Government has tried in so many ways in making land available to its citizens but a lot still needs to be done in this regard. No doubt land in Lagos occupies a principal role in the internal revenue drive of the state. It has been said that land in Lagos is its Oil, however, a lot of the lands currently lies in the hands of land bankers and speculators who have positioned themselves to exploit the state in so many ways. Government, in order to advance its mass housing drive, must make land available to the development of mass housing all over the state. Transparency in allocation must become the norm.
THE FINAL HURDLE…. SUBSIDY POACHING AND DIVERSION: Regulations, monitoring and enforcement are required to ensure that subsidies granted to mass housing developers does not find its way back into the commercial market through subsidy poaching and benefit diversion that continues to increase the basket of corrupt practices while reducing the delivery of mass housing. Culprits should be prosecuted to show the path to best housing practices. The World Bank and other multilaterals are of the opinion that subsidy poaching continues to be an albatross on healthy fiscal administration in Nigeria. Current financing subsidy for mass housing ,which is in the region of 13%, is under threat of being removed totally. INADEQUATE GOVT INTERVENTIONS: Recently the Federal government intervened into the mass housing funding basket by injecting 200 Billion Naira into the Federal Mortgage Bank, this is grossly inadequate for a country that needs an intervention of about $5 billion USD over the next 3 years for any meaningful progress to be made in the mass housing deliverables.
Strategy for Mass-HousingMinimum Wagers To mass-house the minimum wagers in our society, housing must be seen as both economic and social goods. Infrastructure, without which life cannot be complete. It must be categorised in the same class as roads which are the prerogative of the people but provided by government. Mass Housing must not only be subsidised, it must be directly provided by agencies of the government for the low income earners in association with responsible organisations like NIESV and REDAN due to the zero- low profit margin. Government cannot and should not be allowed to divulge itself of these responsibility at these time. Sustainable Residential Housing Development must become the norm in areas within 20 minutes driving distance of our city centres. This will help in making affordable housing available.
Design must reflect cost! Majority of housing designs have yet to conform with the reflected needs of the market. With available demand indicators, Nigerians need studio apartments and 1-bedroom flats. The highest design applicable to the needs of minimum wagers is 2-bedroom flats. The Nigerian Institute of Architects and The Nigerian Institute of Quantity Surveyors need to further grapple with this peculiar issue in conjunction with the NIESV, the custodian of the housing realm. Design scale is proposed as follows, for all public developments and other mass housing initiatives; 45% studio apartments, 35% 1-bedroom apartments, and 20% 2- bedroom apartments.
Subsidy! Subsidy!! Subsidy !!! Land Subsidy; The Federal and Lagos State governments needs to make land available, either at no cost to the project, free from source or the cost back-loaded with repayment over the tenure of title. This may look a somewhat impossible task but it is the cost that must be paid for public housing in Nigeria, particularly in Lagos State. Stamp Duty Subsidy; The area in which mass housing is built must be supported with stamp duty free regulations in order to aid investment and incentivize public housing development. Ease of exit and entry should be guaranteed. Developers’ Tax Holiday; Government should look seriously at financial incentives in the mode of tax holidays for developers who invest in mass housing over a period of years without taking out their profit from the sector. Bulk Material Procurement; economies of scale can be greatly achieved on an industry level with governments involvement, leveraging on import duty freedom and waivers would go a long way in making mass housing possible in Nigeria and Lagos State. A joint collaboration with the Federal Ministry of Finance will achieve this to a large extent and help reduce the supply deficit on cement.
Ppp: partnering on policy andprocesses Expedited Building Approval; all applications for housing programs in excess of 4 units should receive same week treatment and fast tracked to ensure speedy project takeoff and cost saving. Estates providing housing for more than 20 householders should be treated on a fast track such that project approval is done within 30 days. All unnecessary proofs of ownership that hamper efficiency should be discarded. Pre-approved Proto-Plans; the housing ministry in conjunction with the Ministry of Physical Planning and the NIA should look at the possibility of selling pre-approved proto- plans that enables quick take-off of mass housing initiatives. All estate planning could be subsidized through the pre-approval of prototype plans which can be procured from the ministries.
Backbone support Sovereign Guarantees; the Federal Government and the State governments must urgently explore ways by which it could provide sovereign guarantees for mass housing projects taking off across the country which will depend on any of its subsidies and attend itself to satisfying the needy public at government rental rates. The provision of guarantees by deploying off-taker mandates in favor of a certain percentage of all mass housing projects in , e.g, Lagos State will aid speedy provision of housing to the teeming masses. Government need not commit cash in this instance but will provide leverage for developer associations across the states of the federation. Zero Interest loans; this is another area where government’s impact could be largely felt. Especially where developers get stuck with completed units and need speedy exit due to commercial loan burdens, government would come in by loan pay-off and project assumption at zero-interest with a guarantee that the project will devote a larger percentage of its units to housing government tenants. The peculiarities of this will need to be closely explained .
INT. RATE GRADUATION, NEEDSURVEY AND HEAD TITLING... INTEREST RATE GRADUATION: In the developed countries, house-owners are categorised into first-on the ladder and buy-to-letters. The interest rate of first-timers who are just climbing the property ladder is different from the interest rate of second-timer who is buying the second home for investment. CONSISTENT NEED SURVEYS: Housing provision should be directly related to housing need. A spinster or bachelor who needs a studio apartment or at most, one bedroom flat should be provided exactly what he or she needs. This can only be possible with regular “Housing Needs Survey”. Such a survey is long overdue and a pre requisite to accessing development funding and aid available through multilateral agencies. HEAD TITLING: Housing cooperatives among low-income owners should be encouraged. Collective pursuance of head-title of a cooperative estate will make things cheaper and easier. TRUST BUILDING: We need to advance our social causes through trust building and rapport.
SUPPORT ACCROSS BOARD... STAFF HOUSING INITIATIVES: Workers villages should be encouraged and there should be enforcement of all laws mandating organisations with more than 20 workers to provide workers village or quarters in an area not far from the office. GOVT ADOPTION OF LOW COST LOCAL MATERIALS: Alternative building materials like timber and clay roofing members or galvanised sheets that will make housing cheaper should be considered. Government needs to deploy the use of cheaper building materials in the construction of public housing on a large scale. Innovations developed by NBRRI and other technology oriented initiatives should receive patronage for development. NIESV NATIONAL HOUSING INTERVENTION PLAN: We must not continue whistle blowing alone, we must also progressively engage practical solutions by instituting a N7 BILLION HOUSING INTERVENTION PLAN over a 5 year period. The financing can be contributed by members at 200,000 naira per annum in order to enable us tap multilateral development funding of about $1 billion USD into the mass housing sector. NIESV HOUSING FACULTY will manage the fund.
What can be done now!!! Designs to cost objectives Cost Subsidy Price Subsidies Off-taker Mandates Public Guarantees Tax Holidays Adoption of low cost local materials Subsidy policing Interest rate graduation and zero interest where bailouts are required. Removal of negative equity syndrome Stamp duty and Import duty Waivers Expedited approval processes Head Titling Need Surveys Easy access to land and land subsidies Cooperation with Staff Associations, Unions , professional bodies etc NIESV MASS HOUSING INTERVENTION PLAN Sustainable Housing Development and Affordable housing principlesAll of these and more are required to deliver affordable homes for minimum wagers.
Minimum wage housing plan Annual gross pay: N216,000 Monthly equivalent: N18,000 Affordable house plan: N1,944,000 Monthly repayment: N5,401 Annual repayment: N64,800 Payment in years: 30 YEARS Number of payment per year: 1 Interest applied: 9% Type of property affordable: 2 Bedroom apt. For informal groups, initial deposit of N240,000 will be pd in 3 installments over one yr. Monthly repayment will commence after a 3 month gap to last 28 years. Age applicable: 27 yrs or 2 yrs post graduation w/exp to 40 yrs age max. Other age brackets will have to pay over shorter term plans.
References Agbola, T. (2003). Lecture notes on Principles of Housing, Department of Urban and Regional Planning, Faculty of the Social Science, University of Ibadan, Nigeria. 2002/2003 Session. NBS (2011). Information on Demand. Available at http://www.nigerianstat.gov.ng/. Accessed on October 23, 2011. Nigerian News (2011). World Bank sees N60trn investment potential in housing market. Nigeria News Services, Sunday 23, October, 2011. Available at http://www.nigeriannewsservice.com/nns-news-archive/news-blocks/world- bank-sees-n60trn-investment-potential-in-housing-market. Accessed on Sunday, October 23, 2011. Oyedele, O. (2011). Real Estate Investment Trust (REIT) as Impetus for Adequate Housing Delivery in Nigeria. Available at http://www.scitopics.com/Real_Estate_Investment_Trust_REIT_as_Impetus_f or_Adequate_Housing_Delivery_in_Nigeria.html. Accessed on October 22, 2011. Cromwell Center for Research strategic unit on housing finance. October 2011 Cromwell Real Estate Academy mass housing strategic papers. October 2011