By Gideon Okebu

Introduction

It is beyond disputation that shelter/housing is amongst man’s basic existential needs. Some Statutes like the ‘United Nations Declaration of Human Rights,1948’ and the ‘African Charter on Human and Peoples Rights 2004’ have recognised and elevated shelter beyond a need, to a basic human right that must be guaranteed by the Sovereign.

Affordable housing as a niche of housing can best be described as housing that is reasonably adequate in standard and location for lower or middle income households, and does not cost so much that a household is unlikely to be able to meet other basic needs on a sustainable basis.

Rent

Rent has been defined as “Consideration paid, usually periodically for the use or occupancy of property, especially real property.” Put differently, rent can be defined as a proceed/fruit derivable from property, which is received by a landlord in exchange for temporarily parting with possession of his property. Property acquirers who are desirous of return on investment from their properties often put up their properties for rent or lease, as opposed to an outright sale. Consequently, property holders part with ‘Possession’ of their property for a certain duration, in return for ‘Rent’.

Therefore, because shelter is a basic need of man that is common to all people, those who cannot afford the cost, price or conditions of acquiring property in the places where they are domiciled or resident, are constrained to obtain shelter for a certain duration of time by paying for possession rather than ownership of property.

It is prevalent to find low income earners and members of the lower middle class in rented properties in Nigeria, due to their meager or low earnings which are usually insufficient to acquire housing in urban settlements. Over 26 million households in Nigeria do not own their own homes.  Nigeria has a population of 223,804,632 people  and is the most populous country in Africa. Notwithstanding the foregoing, it is instructive to note that about 90% of Nigeria’s population falls into the bottom two classes of the social structure, the bottom two being: working class and underclass. 

Types of Rent

For a proper understanding of rent control as discussed in this article, it is important to know the various types of rent. There are five types of rent, namely: agreed rent, rack/economic rent, ground rent, best rent and standard rent.

a. Agreed Rent: As the name implies, agreed rent is the consideration agreed upon by the various parties to a property contract.

b. Rack/Economic Rent: This is rent that is commensurate with the full value or a close approximate of the full value of the land. It is usually paid for the use of the improvements (buildings or other constructions) on the land, thus it is often referred to as Economic rent. The rent payable is usually based on the value of the land and the improvements.

c. Ground Rent: This is the rent which is payable to government for use of land. It is payable on every landed property, developed or not. The amount payable usually depends on the location and size of the land.

d. Standard Rent: This is rent that is fixed by statute, regulations or court orders. This type of rent is usually fixed and derivable from rent control legislations. It usually applies uniformly to the same category of property. For example: “The rent of all 1bedroom apartments in Ikoyi shall be $50 per month.”

e. Best Rent: This is rent that represents the highest value obtained or obtainable in respect of a piece of property.

What is Rent Control?

Rent Control in a nutshell can be defined as the intervention of the state through positive legislation in property contracts and arrangements, by placing a cap on the maximum rent payable for the occupation, possession and use of the real property. These controls have historically been applied mainly to housing/ residential schemes and arrangements. Usually, these laws regulate and control rent by dividing cities and states into zones and prescribing the maximum amount of rent payable, and the duration for which rent can be demanded in advance. In Nigeria, the first Rent Control legislation is traceable to the colonial era.

History of Rent Control in Nigeria

During World War II, the British colonial masters enacted the English Emergency Powers (Defence) Act of 1939 in order to restrict the increase in rent on residential premises in Lagos, which was over-crowded and unhealthily congested, as a result of the economic effect of the war. The operation and provisions of this law were later extended to other regions in Nigeria when urban cities had limited housing to meet the growing demand for housing. In order to protect tenants against profiteering landlords who leveraged on the housing scarcity in urban cities and settlements in the country, a National Legislation, Increase of Rent (Restrictions) Act of 1946 was enacted.

After independence was secured in 1960, the Rent Control (Lagos) Amendment Act of 1965 was passed, and thereafter with the creation of states, several states enacted their own rental control laws such as the Rent Control Edict of Bendel State 1972.

Who Can Control Rent?

In Nigeria, by virtue of the Land Use Act 1978, now Land Use Act 2004, all lands within the territorial boundaries of a state are vested in the Governor of that state. However, the vestment is not that of beneficial ownership, but of Trust. Thus, the Governor grants Rights of Occupancy to the natural and juristic persons for a specific duration of time, which is usually 99 (Ninety-Nine) years. Furthermore, by Section 14 of the Land Use Act, 2004, a holder of a right of occupancy has exclusive rights to the land which is the subject of the grant, against all persons other than the Governor.

  The Powers of Governors over all lands within their territories are again buttressed by the Constitution of Nigeria, Section 44(2)(c) of the 1999 Constitution of the Federal Republic of Nigeria (As Amended) provides that the Rights of a Citizen over immoveable property cannot affect any general law relating to leases, tenancies or any other right arising out of contracts. Consequently, any law or order of general applicability enacted in respect of landed property by a state is binding on all land and property ‘owners’/holders. Flowing from the above, what is referred to as ownership of landed property in common parlance is actually a lease/occupancy of landed property. It therefore means that the land and all the improvements belong to state quicquid plantatur solo solo cedit.Sequel to the foregoing, the State/Governor has the power to control rent of properties within the territory of the state. The Governors of various states had indeed exercised these powers in the past by enacting rent control statutes in various states in Nigeria, as alluded to above.

Contemporary Legislation

Many of the existing conventional rent control statutes of the various states have been repealed, while in the few states in which they are still in force, the Rent Control laws have been completely abandoned and left in obscurity. In exemplifying the above, the Lagos State laws will be used as a case study, given that Lagos is projected to be the world’s most populous city by 2100, the most densely populated city in Nigeria and the origin of Rent Control in Nigeria equally emanates from Lagos.

For instance, the repealed Rent Control and Recovery of Residential Premises Law (Laws of Lagos State Nigeria,1997)provided robust rent control measures which impacted the maximum duration of tenancy for which rent could be demanded in advance and the maximum standard rent payable for each type of property according to its location. The law made it unlawful to accept rent in excess of the standard rent prescribed for the type of accommodation provided. 

The law also stipulated the duration of time after which rent review can be implemented, and further stipulated the percentage of increase per review.  From the repeal of the Rent Control and Recovery of Residential Premises Law (Laws of Lagos State 1997) till the enactment of the Lagos State Tenancy Law 2011, all the subsequent rent and tenancy laws enacted and repealed gradually whittled down the robust rent control mechanisms in the 1997 law. By 2011, when the Lagos State Tenancy Law 2011 came into force, the law only made provision for a miniature ambit of rent control, by merely limiting the duration within which rent can be demanded and paid in advance, to a one-year period. No standard rent was prescribed and the detailed rent review provisions were also gone.

However, in 2022 the Lagos State Government introduced a law called the Lagos State Tenancy Law 2022 which further reduced the maximum rent payable in advance by a sitting tenant to three months. While this new law is a positive step in the direction of making housing more affordable, it is still necessary for a price control of rent, by fixing a maximum standard rent for various types of accommodations in various areas of urban cities, and not leaving it altogether to the individual whims and caprices of various landlords.

State of the Nation

The annual inflation rate in Nigeria accelerated for a sixth month to 22.79% in June 2023,  which is the highest since September 2005. The Consumer Price Index, CPI, which measures the rate of change in prices of goods and services, soared by 2.1%.

This upward trajectory of the inflation rate is primarily due to the Federal Government’s policies on the removal of fuel subsidy and as a result of floating the Naira, when the federal Government loosened the restrictions on foreign exchange trading, which had a concomitant effect of plunging the value of the Naira. Consequently, the purchasing power of the populace was further weakened.

In light of the foregoing, it has become imperative for the various tiers of government to introduce policies that can counteract the hardship and difficulties faced by Nigerians, particularly low income earners, as a result of the aforementioned policy changes of the Federal Government. Housing is one of the most expensive priority needs of the local population. Rental values have soared astronomically and are constantly on the rise, given the current rate of inflation and the extent of deregulation in the housing sector. As at 2022, Nigeria had already recorded a 50% increase in rent across major cities in the country such as Lagos, Abuja and Port-Harcourt. Landlords are bent on obtaining ‘best rent’ from the tenants, and some shylock ones, which are quite considerable in number, amplify/over bloat the rental value of their properties and demand exorbitant rents.

Consequent on the above, the working class and low income class, which constitute a majority of the population, are forced into living in unsanitary shanties and temporary sheds. According to the Center for Affordable Housing Finance in Africa (CAHF), most of the urban population in Nigeria live in slums.

Despite forcing low income earners into deplorable living conditions, there is still no respite for them, as the government constantly demolishes these shelters and shanties, without making any provision for relocating the occupants to alternative accommodation. As of 4th August 2023, Lagos State Government demolished several houses in Oworo community in Kosofe Local Government Area of Lagos State, leaving 12,000 people displaced, with women and children being a greater number of the displaced . What then shall the poor masses do, seeing that they cannot breathe? John F. Kennedy once said that “If a free society cannot help the many who are poor, it cannot save the few who are rich”.

Recommendation

Noting that Lagos is poised to become the most populous city in the world by 2100, unlocking access to affordable rental housing in Lagos would be a global game changer, which could be modelled in other emerging urban cities around the world in addressing affordable rental housing. Consequently, in curbing and addressing the challenges of affordable rental housing viz-a-viz rising inflation rates, the growing population rate, and the depreciation of the local currency, rent control is a veritable and cost-effective tool and solution that can provide immediate respite for the populace and ease the looming dangers of not ameliorating the deep rooted poverty and hardship confronting the people. Sequel to the foregoing, in meeting with the constitutional objective of ensuring that ‘suitable and adequate shelter’ is provided for all citizens, the government(s) should balance the liberties of a free market and its attendant contractual freedom, against the dire effects and hardship of not providing low-cost and affordable housing for its people.

Using rent control as a tool for providing affordable housing and dousing the effects of the current inflation, merely requires a legislative and enforcement commitment from the government, as well as a few concessions, to balance the scales. In adumbrating the workability and effectiveness of the foregoing, the following simple steps can be taken;

a. Rent control legislations should be passed across the various urban cities in the Country, dividing each urban city into zones, the laws should prescribe a maximum limit on the rent payable for different kinds of properties in each zone, and stipulate the length of time for which rent can be demanded in advance.
b. These Legislations should also include rent review provisions, stipulating the length of time after which the standard rent provided in the legislation can be reviewed e.g. after 2 years or 3 years etc. The laws should also indicate the percentage of increment at every period of review. For instance: increase in the standard rent at every period of review should not exceed 20%.
c. The Government, as an incentive to landowners, should in turn waive arrears of unpaid land use charges and other tenement rates, which became due prior to the passing of the law. The Government should also reduce the percentage of future land use charges payable by properties to which the law is applicable.
d. Tax Holidays from ground rents should also be introduced at stipulated intervals, for residential properties to which the rent control law applies.
e. Fines and penalties should be included in the law for sitting tenants who occupy residential properties and either cannot pay or fail to pay rent in advance for the maximum length of time for which rent can be demanded.
f. The laws should also make provisions for every new tenant to include in his contractual documentation, an irrevocable standing order, copied to his bankers and linked to his bank verification number (BVN), authorizing a right of first payment to the landlord.
g. The law must also outlaw any demand or payment of rent in excess of the Standard rent prescribed for various types of accommodation.

Advantages

The foregoing measures, if implemented, can achieve the dual purpose of making rental housing more sustainably affordable, and can help bend the inflation curve, particularly in respect of the real estate market, which is already too expensive for a majority of the populace. The full fledged adoption of the aforementioned steps would also balance the inequality that hitherto existed in previous rent control statutes, where landlords were laden with regulated rent regimes, and the tenants had no corresponding obligations. Also, the inhabitations of a regulated rent regime on landlords would be balanced by the ground tax holidays, waivers and tax reductions from the government. These tax incentives would in turn encourage more investment in residential properties.

Conclusion

Housing can be very capital intensive for stakeholders (developers and off-takers alike), therefore balancing the scale is highly desirable for an effective regulatory regime. Low income earners who are at the bottom of the social structure, are usually the worst hit by inflation and unaffordable housing. Therefore, it is the duty of every responsible government to ensure that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of a few individuals or group , to the exclusion of the masses. It is also imperative for any government that wants to succeed and be established, to look into the plight of the poor, and allow them breath. As Franklin D. Roosevelt, the 32nd United States President put it; “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little”. It is therefore advisable for the government to use rent control as a means of of achieving affordable housing, wealth re-distribution and some measure of social balance. This will greatly lighten the burden of the masses, and put the government in right standing with the people, as a people-oriented government.