The President, Association of Housing Corporations of Nigeria (AHCN), Dr Victor Onukwugha, in this exclusive interview, explains why many landlords demand rent for two years upfront and don’t waste time evicting defaulting tenants. Dr Onukwugha, who is also the Executive Chairman of Bauhaus International Limited, a real estate firm with presence in Nigeria and the USA, while offering solutions to the housing crisis in Nigeria, proposes the construction of agric-village integrated scheme; a low income housing model for rural dwellers. Excerpt:
You are passionate about rental housing. Why do you think it is the solution to the housing problem in Nigeria?
First of all, people think that home ownership starts from the first day you graduate from the university. All over the world, there’s always a transition and somebody who is just starting life may not be able to buy a house, no matter how cheap it is. So it starts from rentals. That is one.
Secondly, some youths, based on lifestyle, would want to live in apartment housing, whether rental or owned. Home ownership is something that is very vital to the welfare of every citizen and in countries where there is mortgage facility, developed mortgage system, home ownership becomes easier to buy large single homes and all those other larger homes. But in our country, where there’s no mortgage, even most senior civil servants may not be able to afford single homes, duplexes and all those other things in this form.
So they can start with rental housing and then buy apartment housing. When we are talking about apartment housing, there are two options; those for rental and those for purchase. If we develop it very well, we can go a step further, which is rent-to-own.
This version is the advanced version of rental housing, whereby part of your rent becomes part payment for eventual ownership based on the financial packaging. So that is how it works.
So, what policy needs to be implemented or under which environment will this housing model thrive?
Firstly, rental apartments take a long period for a developer to recoup his money. If you take a bank loan to build a block of six flats, and you’re going to rent them out, it will take you not less than 15 years to repay the loan. Therefore, there must be a special type of concession loan that will be long-tenured to accommodate that model of housing so that any developer who wants to embark on rental accommodation could source funds from banks or financial institutions that have a minimum tenure of 15 years. If that happens, it will also help to promote a kind of payment regime for those who are tenants, such that any developer who has developed that kind of apartment housing based on loan that is long-tenured could charge rentals on a monthly basis instead of saying one month in advance or six months in advance or two years in advance as the case may be right now.
Talking about rent payment, you seem concerned that tenants don’t really have rights in Nigeria because of the informal setup in the rental housing sector?
That is why we are talking about this in the first instance, because when we talk about tenants’ rights, your right begins where my own stops.
If a developer has borrowed money, and the bank says he must pay back in two years, or five years maximum, as the case may be right now, he’s under pressure to collect his rent. So, first of all, you must collect it in bulk, that is why most of them ask for one year, two years in advance. Some even three years. That is one, and if they default, they are prepared to go to any length to evict you because there is no remedy for them once they default. And that’s why you have shylock landlords. They are shylock because of circumstances.
Then, another is that there is no mortgage here for even the tenant to go and seek a loan for rent. So we want to ask government to create an enabling environment for developers to access funds on the following plans.
One is with single digit interest rates and with long tenure. With that, the developer will be able to pay back fast and even crash the rents because if he/she is taking loans at double digits interest rates, there’s no way it will be low. So that is why I said the right of this person stops from where the other one starts, and vice versa.
Now, the next is even getting the land. Land is also very expensive to get even when you get an allocation from the government. So government should be able to look into the Land Use Act and also know how to ameliorate the problem for developers.
The third one is to create a mortgage, because there’s no mortgage institution in Nigeria. Let’s face the facts. Even Federal Mortgage Banks, as much as they have done in recent times, are just scratching the surface. These are some of the policy frameworks that we are fighting and we are going to take it at three levels; to the governors at the Nigeria Governors’ Forum. We also want to go to the National Assembly to see some of the legislations that mitigate against this, and then of course, to the executive council.
What are some of these legislations that you want to approach the National Assembly for?
One is, like I said, the Land Use Act should be revised. Then the issue of titling is a very crucial one. And then, of course, the legislation that affects the Central Bank of Nigeria (CBN), mortgages and banks in terms of lending to the real estate sector.
You have this ambitious rental housing scheme of constructing 700,000 per state, under the Eradicating Homelessness Scheme (ERAHOMS). Is that not punching above your weight considering the problems in the sector that you have just highlighted?
No! In fact, it is not feasible as of now, to have 700,000 housing units, even though it is possible, if all these things are addressed. But with all these problems, it’s not possible. Once we have the enabling environment, that’d be a good room for the public/private partnership to try, so it will be attractive to the private sector to partner with government.
So in essence you’re saying the ERAHOMS initiative is a long term target that is not feasible now?
I’m saying that it can be now, if these things are done.
They have not been done, so are you saying for now, it is a long term target?
Everything is long term, even when we know it is short term. What I’m saying is that we want to see it as a long term initiative. Obviously it’s not a thing of this year, or in the next three months or four months.
Rural-urban migration has exacerbated the housing crisis in the country and you have proposed the agric-village integrated scheme as a solution. How is that going to work, considering that many such initiatives, most times don’t get to take off?
This initiative is not just only for housing provision, but it has a linkage effect on the entire economy. That is why we are trying to integrate housing towards productivity. Because if you go and build the best homes in the villages and you don’t have means of production in the villages, people will still migrate. What they are searching for is means of livelihood. I tell you that those who squat in slums go to their villages; you would see that they have better homes. So why did they leave their homes in the village? It is because of greener pastures. So that’s the truth. But if you situate means of production and means of livelihood within the rural areas and you provide them with houses, they would stay.
And what does this scheme entail? It has four plans. One is housing; low income housing. Next is agriculture with agro-based industry and in the same place we have the silos or the storage facilities. The idea is a village should have these four components, such that in this section, people are living, and those who live there must agree to be involved in any of these other three productive arms.
