“Repositioning Housing Sector As A Tool For Economic Recovery And Development In

Nigeria”

PROFESSOR T.G NUBIDepartment of Estate ManagementUniversity of Lagos, Akoka, Lagos.

KEYNOTE ADDRESS FOR A 2-DAY NATIONAL WORKSHOP ORGANISED BY THE ASSOCIATION OF HOUSING CORPORATIONS OF NIGERIA, 19 – 21

MAY, 2015, UNDER THE AUSPICES OF ONDO STATE DEVELOPMENT AND PROPERTY CORPORATION

1. Introduction: The importance of housing …Housing and The Economy

Housing is an important contributor to economic growth Construction of new homes (private residential investments) Consumption spending on housing services (13% of USA’s GDP) Consumption spending on housing upgrades Housing finance and related services (mortgage finance, insurance finance, e.t.c) Housing and construction: a source of mass employment across professional , skilled

and semi-skilled workforce: India each new housing unit =2 direct and 8 indirect jobs. South Africa each housing unit =5 direct jobs and 3 indirect jobs

Housing wealth is synonymous with private wealth Increase in home-ownership increases investment in homes and the need for housing

related facilities and services Increase in home-ownership increases demand for public infrastructure like roads,

schools, healthcare, hence greater investment and employment generating opportunities

Increase in taxes (land use charge, ground rent, tenement rates

2. What does mass housing look like in developing countries like Nigeria?

3. What are the factors responsible for this state of Affairs in Developing Countries, Nigeria inclusive?

Low Ratio of Mortgages as % of GDP across Africa.

Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

Problems across the housing development value chain

Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

Cost Of Registering Property Across Africa

Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

4. The Nigerian SituationThe Housing Need The problem of housing has become an every day discussion in all quarters of the public

and private services of the developing countries of Africa. It has become increasingly glaring that most of the urban population live in dehumanising housing environment while those that haveaccess to average housing do so at abnormal cost.

Rent in major cities of Nigeria is about 60% of an average workers disposable income. This is far higher than the 20-30% recommended by United Nations.

With an estimated population of 170 million as quoted, Nigeria needs to produce 720,000 housing units per annum based on an estimate of 10 dwelling units a year per 1,000 of population. This is a very big challenge to the building industry.

Despite Federal Government access to factors of housing production, the country could at best expect 4.2% of the annual requirement from her. Substantial contribution is expected from other public and private sectors.

Nigeria’s housing deficit is estimated at over 17 million units It is estimated to be growing at 780,000 units annually It is estimated that N56-60 million is needed to curb the deficit

Millions in the informal sectorOver 200,000 military personnelOver 200,000 teachersOver 250,000 police personnel and civil defence personnelOver 500,000 public servants at state and federal levelsOver 500,000 students

The National Housing Policy of 1991, the Federal Government set a target to deliver 8 million houses by the year 2000 and to deliver at least 700,000 houses per annum

Government White Paper of 2002 recommended “the implementation of a program of constructing 40,000 housing units per annum nation-wide with at least 1,000 units in each state”

The imperative is how to deliver AFFORDABLE HOUSING on a sustainable and UNPRECEDENTED SCALE.

The Mass Housing Need Indicators

Housing in Nigeria

estimated to be 2.3 per 1000

inhabitants

Absence of

significant social housing initiative

sAbsence of new town

development initiatives for several decades

More than seven

cities with populations above 1

million

Absence of real estate backed capital market

instruments

5.5% rate of urban

population growth,

twice the national

population growth rate of 2.9%.

Estimated

housing deficit of

16 -20 million houses

Over 70% of the

population lacks decent quality/

urban life

N12-20 trillion required to

finance housing deficit

Mass Housing in Nigeria…Challenges

Low Capacity of Real Estate Developers

Low financial capacity to carry out mass development : no real estate developer has capacity to produce more than 1000 houses per annum

Weak Corporate Capacity: Most are registered as sole proprietorship and partnerships

Experiencing deep macro-economic induced challenges

Enduring significant challenges across the real estate development value chain

Inability to Tap into Latent

Suppliers 36 State Housing

Corporations Over 700 Local

Governments Thousands of Co-

operative Societies Pension Fund Wealth

Income Low income as major

obstacle 70% of Nigerians earn

below $1 per day Less than 10% are gainfully

employed. About 70% of Government

workers between Grade level 1-7 with earning less than N50,000 per month

Price of a simple 2 bedroom flat with minimum finishing is about N2.5.

Depth of Financial Markets

High interest rates reflecting risk and source of funds

Absence of long term mortgage finance

Housing delivery models not replicable – projects carried out in silos

Foreclosure laws Lack of institutional depth Affordability gap between

cost of houses and income of end users

Housing Delivery Technique Acute shortage of housing

stock Inadequate scale of

delivery Over 80% of houses built

by individuals Absence of quality

assurance framework Fragmented industry Artisanal construction Absence of community

management to preserve asset value

Land Assembly Absence of clear property

and security rights

Mandatory Governor’s consent for all land transactions

Inefficient land management system

High cost of land transactions

Qualitative

17 million housing deficit

Quantitative

5. A model for effective housing delivery in the next dispensation of our governance using housing sector as tool of economic recovery and development.

A Policy Proposal….. A multiple approach to housing provision in Nigeria Mass housing supply could be on regeneration rather than

new build Recognizes the various stakeholders needed to deliver this

mandate Recognizes that housing delivery at this scale must be

tailored towards the effective demand of the Country’s various income classes and economic groups

Current activities of housing delivery agencies in the Country need to be integrated into a holistic delivery framework.

“Regeneration Programmes, home completion loan services shall be the fulcrum of government’s policy for releasing uncompleted housing Stock to the market, while the private sector would be enabled to provide accessible housing solutions to the general populace.”

Slum improvement programs

Home Completion loans

New Builds

Strategies Key workers Defense sector Public sector

employees Private sector

workers Informal sector Special

groups: students, widows&rural dwellers

Internally displaced people

Target Groups Cooperative

housing development scheme

State Housing Corporations

Local Government Housing

Social Housing Programme

PPPs

Delivery Models

National Housing Fund

Cooperative Home Loans

Prime Property development

Microfinance Industry

Government Revolving Fund

Concessionary Funding

Private Sector

Funding

The Federal Government’s Role Affordable Gap finance. Land acquisition at low cost Government intermediation, equity participation, for risk

mitigation Credit support by making credit cheaper and / or more easily

available. Tax concessions Lower transaction cost Quality warranty for houses Cheaper and faster title documents Mortgage related legislation

Housing Corporation’s Role Re-orientation : Living up to the ideals on which they were created

over 50 years ago Restructuring: Internal restructuring to address modern challenges Advocacy: Ensuring government listens and acts on their needs Modern Methods of Construction: Ijora-Badia Case-study Partnerships for Infrastructure Development Land Accounting: How much land was acquired, How much is left? Changes in internal planning policies and standards: Mass housing

construction at higher density., rather than promoting low density standards

Partnerships in construction, maintenance etc. Transparent allocation policy

FUNDING MODEL

End Users e.g.

Cooperatives

FMBN, PMI & AHFC

Development Agent

Housing Stock

Securitisation

• Capital markets• Revenue from sale of Federal

Government landed property• Redevelopment of Federal

Government prime property revenue

• N25 billion Government seed fund investment

Housing Development Fund

Wh

ole

sale

R

ep

aym

en

ts

Loan Repayment

Mortgage Loan

Construction Finance

Construction Finance

Flow of FundsFlow of Houses

Legend

Funding Instrument

Affordability Gap Finance

ANNEX H TOFHA/EC/HMDATED AUGUST 2007

H-1