The proposed policy on monthly payment of rent in Lagos State has been criticised by professionals. OKWY IROEGBU-CHIKEZIE reports that operators dismissed the proposal as impracticable. They frown at the tedious process involved in land acquisition, titling and funding as de-motivators.
Mixed reactions by experts in the built environment sector and landlords have trailed the suggestion by the Minister of Works and Housing, Mr Babatunde Fashola, that state governments should enact laws on monthly rent payment.
While many condemned the idea, others said Nigeria cannot operate in isolation, adding that it is the global practice. Some of the stakeholders, however, want the government to lead by example by building affordable houses for people to live and pay monthly rent.
Fashola, had at the 10th Meeting of the National Council on Lands, Housing and Urban Development, advised state governments to enact laws to make mandatory monthly rent payments to make housing more available to the masses. He said it was difficult to remove inequality in any society, but commitment of the government could reduce the ratio.
“We may not be able to make all people homeowners, but we can reduce the number of those who lack shelter. I am sure that our country will be a much better place when three years’ rent in advance, two years’ rent in advance or one year rent in advance for middle class and working family residential homes becomes monthly rent, payable at the end of the month.
“While we may not get there immediately, this is an area of immense exclusion that we can remedy by legislative action at state level. This is a matter in which the Federal Government has no legislative competence. It is a matter for the states, and I urge you not to turn your backs,” the minister said.
According to him, economic indicators have shown that payment for a year or more in arrears affected affordability, thereby increasing shelter gap. Hence the need for legislation. He urged state legislators to see this as an important area of representation of their people to make life easier.
Lagos State Governor Sanwo-Olu, at the same event, said the rental model in which people pay yearly in advance had become inadequate to address contemporary realities in the housing sector, especially in cities where demand for properties is high and expensive.The governor advocated monthly rental system, which, he said, would be affordable to low- and middle-income earners who are pressured by yearly rent obligation. The governor said Lagos was already working out monthly rent modalities to accommodate residents not keen on state’s home ownership scheme.
“In building homes, we do not only enhance the family ecosystem by providing a decent setting for raising future leaders, we also strengthen the economy through provision of economic engagements for professionals, artisans, suppliers, home decorators. In delivering decent shelters, we must care for both low-income and high-earners because housing is such a basic human need for everyone.”
According to the governor, his state operates a very robust Rent-to-Own programme of five per cent down payment and six per cent simple interest rate payable over 10 years. Furthermore, he said his administration is working on another rental system, where residents will pay monthly. In his words, this is to accommodate those who are not keen on home-ownership and address realities. “In doing this, we believe that no one would be excluded from our intervention in this critical sector,’’ he said.
An estate surveyor and valuer, Gbenga Ismail, said the structure of a rental market is determined by the state of the market. Though it can be legislated by the government, the market will eventually align to the necessities of demand and supply, he added.
He said: “Effectively, while it is very convenient for monthly payments to be insisted upon, the market fundamentals cannot be ignored. If demand outstrips supply, then there will be the tendency for prospective tenants to outbid through number of years payment. This is what actually distorts the market place, you must, however, realise that in the lower cadre of the market, monthly payment exists.”
Landlords actually collect rent monthly; yearly rental payments exist in more urban and sophisticated markets, he added. He reiterated that it was the market depression that led to one year payment and in some rare cases six-month payment in advance. The minister rightly blamed agents for institutionalisation of yearly and above payments.
An analyst, who spoke in anonymity, said in addition to the suggestions made by the minister and Lagos State Government, there is a way to get it done quickly, if the government is committed. The first port of call will be for them to start from their estates. He said: “If it works well in Lagos- owned estates, other interests with buildings in Lagos and the rest of the country may key in having seen the viability of the programme. Let it not turn out to be like the case of the former Lagos State Governor, Akinwunmi Ambode, who sought to provide an alternative to Lagos State Waste Management Authority (LAWMA), but failed woefully because it was never tried out in stages.’’
A real estate consultant, Peter Nwankwo, lamented that the government of Lagos State is only interested in the revenue projection to be generated by the registration and renewal of the companies involved in the sector. He asked what the Lagos State government had done about the incessant building collapse and how effectively it had implemented the law relating to planning approval and building collapse?
He said: “What has the government done about traffic offences? Is it not only the private cars that are always apprehended for unjustifiable reasons just because the owners will readily pay unjustifiable charges? Has the government done anything on the commercial motor cycle riders and their unbridled right to one way? Certainly, no reasonable revenue will be generated by arresting them. He dismissed the sincerity of the government to see the policy through.
Chief Executive Officer, Eximia Realty Co. Limited, Hakeem Oguniran, stated that the government could not legislate and fix rent by fiat, saying it did not work in the past and would not now. He explained that most investors and developers were operating in an economy where the macro fundamentals do not support housing and real estate development.
“The odds are simply too many. We all saw what happened in 2016 with commercial and retail properties. With some degree of oversupply, the following happened: Rents came crashing down; property owners lured potential tenants with freebies, including rent free periods and fit out allowances; monthly and quarterly tenancies suddenly became “realistic” to property owners. No legislative intervention was needed to correct the market.The adjustment happened quietly and contractually. If we want rents to become more affordable, we should do the needful.”
Principal Partner, Ubosi Eleh and Co, Chudi Ubosi, said the lack of institution and delays in getting judgment in court would make the proposed policy difficult to operate.
“Paying rent monthly is a good thing. After all, no one earns a salary a year or two in advance. But the key thing is that we don’t have the institutions to back it. Even when tenants pay you annually, it’s tough getting their rents subsequently. When they default, your option is the law courts. No matter how good a case, you have the minimum time frame to get the first judgment, which is three to five years. Now you think you can collect monthly.’’
Also, the Managing Director, Ace Hi-Teck Construction Company Limited, Okupe Adewunmi, cautioned the government on the implications of compelling operators on monthly rent payment.
According to him, it would discourage investment in real estate. Besides, he said the landlord who borrowed money from the bank to build the house might find it difficult to repay through monthly payment of rent.
“When tenants pay monthly, we have further reduction in housing provision because the landlord has no incentive or part capital to start a new one.That is even if he has not borrowed to build the house,” he said.
Immediate Past President, Real Estate Developers’ Association of Nigeria (REDAN), Rev. Ugochukwu Chime, raised posers on the interest of the government to legislate monthly rent payment but failed to control input costs of housing development.
“Why not build more houses and allow the laws of supply and demand to apply? Are you controlling the cost of other commodities in the market? Why not reduce the transaction cost and fees charged on the value chain of housing development? Why not remove or reduce the cost of planning approval and title perfection and transfer costs? Why not reduce or remove the multiple taxation and the very brutal and scary means of enforcing them?
“Why not assist in domesticating the foreclosure law, to give comfort to landlords and investors in the real estate sector? Why not start by asking the public sector organisations like Federal Housing authority (FHA) and the various State Housing Housing/Property Development Corporations to lead the way?”
According to Chime, why did the ministries, departments and agencies (MDAs) involved in the housing sector since 1992 migrate from affordable/social housing projects for which they were created, and become agents of home ownership/investment for the bourgeoisie?
He wondered why the government was not creating and enhancing the operating environment for the private sector investors to see the housing sector as a destination of choice. He lamented that the policy is only setting the stage for more extortion, racketeering and corruption in the sector.
