By AGELE ALUFOHAI

Houses are the largest “items” many people will ever spend on in their lifetime; the sheer size of the funds spent on them and the proportion of the financial system connected to housing construction and real estate make housing a dominant part of the economy.

Getting the policies to stimulate the demand and supply of housing right is one of the most portent ways to develop an economy. The sector provides employment for a host of professionals and perhaps even more importantly lower-skilled artisans; architects, mortgage providers, painters, carpenters, transporters, tillers, interior decorators etc.

Affordable Housing: A conceptual trap

The “basic needs” nature of housing and the enormous costs involved in procuring them has necessitated public interventions in their provision. In the absence of a mortgage system, personal savings, achieved through significant deprivation and/or engagement in corruption are often required to build or acquire a house.

In Nigeria, the principal means of acquiring a property is to buy land and build over an average of 10 years. This is grossly inefficient as funds invested in the land and buildings are usually totally unproductive until the house is completed.

Broadly, we can contrast “provider” and “enabler” models of intervention. In the former model, a Government directly builds houses or supplies inputs for the procurement of housing while in the former, the Government concentrates on creating incentives to boost the demand and supply of houses by private actors in a context largely governed by free-market, profit-oriented relationships.

Singapore: A state-provided housing market

The strategy employed by Singapore is of more relevance to Nigeria because of the similar levels of development in the post-colonial period. Today, about 85 percent of Singaporeans live in houses developed by a state-owned housing corporation. This feat was achieved with three main institutions:

The Housing Development Board (HDB). A state agency founded in 1960, the HDB had the mandate to develop houses for Singaporeans. It first concentrated on developing low-cost houses, mostly high-rise multi-apartment buildings which were built after slums were demolished.

A British Housing Committee Report had commented in 1947 that Singapore had “one of the world’s worst slums – ‘a disgrace to a civilized community”. The high-rise buildings were rented out to Singaporeans who used to live in the slums. The flats were very modest buildings with toilets only on the ground floors. It wasn’t until the 1980s that the HDB embarked on modernizing them, fitting amenities such as lifts.

Exclusion of the majority

The Federal Housing Authority/State Housing Corporations lacked a well-defined focus of the class of Nigerians they were trying to assist. It was never clear if their mandate was to improve the accommodation of the poorest Nigerians, assist the masses acquire houses or generally increase the stock of houses.

Whatever they thought their mandate was, it had no impact on the poorest Nigerians or on how a majority of Nigerians built or acquired houses. To emphasize, government programmes didn’t feature in the calculations of the vast majority of citizens as they made plans about securing accommodation.

The Federal Housing Authority/State Housing Corporations built “low-cost” houses which were not only too expensive for the overwhelming majority of Nigerians considering the levels of income required to purchase them. They also use the State’s power to acquire lands under the Land Use Act to plan and “allocate” land at prices that are grossly under their market value; these lands in the so-called “government-scheme” estates often ended up been acquired by the rich and powerful, including top bureaucrats. Low-cost houses are often similarly acquired and rented out to low-income people.

Social Iniquity

Had considerations of social equity featured in the minds and discussions of Nigeria’s policymakers, housing policy is likely to have had well-defined goals. This is why the Singapore model started out with slum eradication and providing low-cost houses for rent.

Government through its planning and regulatory powers and also through investment in infrastructure, directly and indirectly vastly multiplies the value of lands. When lands in housing schemes or new towns or neighborhoods, like Lekki in Lagos or Maitama in Abuja, are “allocated” rather than sold to developers through competitive auctions, monumental value is being surrendered.

Furthermore, taxes on property built on such land never reflect the enormous value that has been lost and that is if taxes are levied or paid at all. Funds which could be used to develop houses for the poor who often are evicted from the lands are hence lost. It is sad that we are building on these poor policies rather than eradicating them.

For instance, under a bizarre PPP scheme, hectares of lands are allocated in Abuja to developers for nominal sums far below the market value, the construction of houses to be financed by the “Estate Development Window” of the Federal Mortgage Bank of Nigeria to build low-cost houses.

Lack of incentives for investors

Nigeria created a National Housing Fund (NHF) into which workers were to pay 2.5 percent of the salaries in 1991. Insurance firms were required to invest 10 percent of their non-life and 20 percent of their life funds in the NHF and banks 10 percent of the funds they loan out.

Potentially, the NHF could have effectively mobilized significant funds for providing long-term mortgages. But there is too wide a difference between the rate at which NHF-based mortgages were made i.e. 6 percent and real interest rates, hence banks and insurance have not complied with the requirement to invest in the NHF.

N72 trillion market

Housing is very big business. The demand for it everywhere is so huge. Satisfying Nigeria’s estimated deficit of 18 million housing units will cost N72 trillion if the cost of each unit is set at N4 million. Historical experience and reality dictate that we approach Nigeria’s housing challenges primarily as a N72 trillion economic opportunity rather than a case for charity.