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Operators eye rental model as affordable housing remains elusive

Housing stakeholders highlighted challenges bedevilling the sector and how they could be tackled at the 42nd Annual General Meeting of Shelter Afrique. DamilolaAina in this piece examines the fallout of the meeting

At the recent 42nd Annual General Meeting of Shelter Afrique, a pan-African finance institution, housing stakeholders focused on how to bridge the huge housing gap in Africa. Affordable housing and the role rental housing plays in reducing housing deficits took a substantial part of the deliberations at the AGM.

To many Nigerians, the term affordable housing has become a cliché used to describe the government’s mere housing promise that never sees the light of day.  Successive governments had promised to make housing accessible to low- and middle-income earners through mass affordable housing, but it had been empty promises that never saw the light of the day. The country is battling 28 million housing deficit.

The situation has been worsened by the accelerating inflation, which hit 22.41 per cent in May. The high inflation rate and dollar scarcity in the country have caused building materials, which are mostly imported, to skyrocket.

Consequently, shelter is one of the basic necessities of man has been out of the reach of millions of Nigerians.  Despite the country’s high inflate rate, the minimum wage still stands at N30,000, making it almost impossible for low-income earners to afford mortgages with benchmark interest pegged at 18.5 per cent.

Over 40 per cent of Nigeria’s population lives in urban areas, which include Lagos, Ibadan and Jos. Factors responsible for this urban population growth, include a high fertility rate of about 2.8 per cent  and inflation, resulting in rural-urban migration. The resultant effects of this trend are the emergence of new growth centres and the increase in the size of existing ones. The urban population has been growing rapidly at an annual rate of 4.2 per cent.

While homeless persons run helter-skelter to source funds to get shelter under their heads, private investors are only willing to partner with high-income earners, building luxury homes, duplexes and apartments. They pay little attention to the low-income earners who are in dire need of shelter. This has resulted in a lot of slums springing up in the country’s urban centres.

Experts say high-interest rates, low penetration of long-term financing options and a nascent mortgage system have made it challenging for low-income households to access affordable housing finance. As a result, many Nigerians are forced to live in informal settlements, which lack basic services and are often prone to natural disasters and health hazards.

To help address this challenge, Shelter Afrique, a pan-African bank Housing Finance institution, which offers housing finance, practical advice and assistance to developers, has resolved to step in and promote the development of both residential and commercial housing in Africa.

The company has predominantly been offering debt financing in the form of project loans to developers and lines of credit to other financial intermediaries that provide mortgages to the end users. In spite of the huge it has made in the development of the continent’s housing sector, low-cost homes for Africans have been elusive due to a lack of data.

In need of data

According to the former Minister of Works and Housing, Babatunde Fashola, an assumption is deceptive.  He claims that assumption is making a general submission on a matter without facts or statistics and this is the first devil to be conquered on the route to housing provision.

Speaking during the ministerial roundtable during Shelter Afrique’s AGM, the former Lagos State governor stressed that Africa had little or no information on its housing deficits or the housing needs of its population and called for more investments in data harvesting.

The former minister, however, noted that the reliability of data sources must be unimpeachable as it can be dangerously interpreted if in the hands of the unskilled.

He said, “There is a need to address a very important subject and that is the subject of data. The first point to make is to acknowledge the critical role that data plays in development and planning because that can then allow you to make decisions based on precision.

“I would like to say that the use of data must come with a specific caveat that determines its reliability. It must be collected or gathered from verifiable sources and its integrity unimpeachable. Data can be dangerous if it is in the hands of the unskilled. It is like putting the world in peril when you have unreliable, dangerous data of unknown origin.

Fashola further promised that with the prospects of a housing census scheduled to hold later this year, Nigeria would be able to identify key housing challenges and align housing policies and programmes with the results.

“Nigeria will be undertaking a housing and population census this year and with the results, we hope to gather data about our people’s housing needs and use this to implement programmes and policies for the next decades,” he assured.

Rental housing model

Meanwhile, the former Chief Economic Adviser to former President Muhammedu Buhari, Dr Doyin Salami, proposed the usage of different housing models to deliver affordable housing in a way which allows utility (rent) to be provided to low-income households as well as luxurious homes for high-income households.

Salami, speaking on the theme “The role of multi-sectoral stakeholders in the industry”, stated that all segments of society must have homes, and the government must act as a regulator, catalyst and partner with the private sector.

He said it was unnecessary to focus on housing development in urban areas and neglect rural areas.

He explained, “What housing model should be used? How do we want to provide housing, is it to enable us to move from homelessness or to own a home? In Africa, housing cost is 55 times the size of the average income, which already rules out large space for our people. Therefore, the challenge is how to provide housing as a utility as opposed to owning assets. The government has spent a lot of time and resources building houses for sale. A solution is to play across all segments from premium to affordable because it can make a profit at a premium level and devote that profit to the provision of housing at the affordable housing levels. Failure to do that in the context of inadequate resources will exclude some sections of society. At the base, it should not be about ownership but about rent.”

The associate professor at Lagos Business School also noted that urban infrastructure provision should be both top-down and bottom-up approaches.

 “Another solution is land reforms or access to land. Too many countries have what is called dead capital where people have land but have no title because the cost of titling is very expensive. The built environment needs to be clear about planning and adherence to plans. Some laws must be changed to ensure foreclosure.

“Every time we talk about the role of finance, not everybody is going to get a mortgage and we should not be aiming that everybody should get it, but there should be an industry that is viable and vibrant. The role of government will diminish simply because of constraints to resources and in that context, it has to begin to think through what models will bring private capital to the table in the absence of this, it is unlikely we make progress,” Salami asserted.

Expert calls for partnership

On her part, the former Minister of Finance, Budget and National Planning, Zainab Ahmed, stressed the need for more public-private partnerships, noting that many countries were spending much less than planned due to the constrained fiscal situation, due to monetary and fiscal policy issues.

She said, “Considering Nigeria’s peculiar need, the government cannot do it alone and there must be partnerships with the private sector. The need for precise data must be looked into and ensure capital raised is channelled to the right sector.

“We are not just getting the data for the sake of doing so but to meet an important development objective. A key constraint is that they don’t have enough funds but we need to identify ways to partner with external stakeholders and bring them into the housing sector.”

She added that key deliverables must include the availability of affordable finance for housing across Africa, unlocking capital, inclusionary housing, looking at reverse urban-rural migration and easy-to-process title deeds throughout Africa.

Cheaper loans

The Chief Executive Officer of Shelter Afrique, Thierno-Habib Hann, in his presentation, said the business model should focus on clients and efficient turnaround for credit operations and develop more housing products with a focus to strengthen local currencies.

 “We will be raising currency bonds in Nigeria and other countries to get access to credit in local currencies, given the crisis in the FX market nowadays. It is important for us to finance the sector with local currency and not to be exposed to fluctuations in the market.

“We need to harness the private sector and we are trying to do more with public entities, but we need to raise more funding, cheaper, concessional funding.

The Executive Director of Mixta Africa, Sade Hughes, said Africa can achieve affordable housing through the use of low-cost building materials and adopting cost-effective building designs.

She also noted that with the use of technology to reduce construction costs and increase efficiency with the support of green finance construction costs “and in turn product prices are kept at a relatively affordable price without compromising the quality and standards and communities developed”.

“Rent-to-own schemes for potential homeowners must be implemented through a creative financing option,” she explained.

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