Home ownership still eludes low-income earners at proposed minimum wage

For many years to come, unless a drastic change occurs, homeownership through mortgage loan, even at the proposed N56,000 per month minimum wage, would continue to elude workers who earn the national minimum wage, BusinessDay checks have revealed.

This is because, with the proposed minimum income wage of N56,000 per month for an employee and based on the terms of mortgage structuring which requires not less than one third or 33.3 percent of this income, which is N18,648  for loan repayment,  and a monthly payment of this sum for 30 years as required by the mortgage law, will mean that the prospective home owner will contribute the sum of N5.6 million for the required 30 year period.

However, apart from the fact that there is no decent accommodation for N5.6 million in a good location, there is no 30-year mortgage available for loan applicants.  Besides, at the current minimum wage , 33.3 percent of N18, 000 will be N5,994 and a monthly payment of this sum over a 30-year period will amount to N2.15 million.

Nigeria is one the world’s most expensive housing markets where the cost of renting a three-bedroom apartment ranges from N15 million to N20  million per annum in highbrow areas like Victoria Island and Ikoyi in Lagos; Asokoro, Maitaima in Abuja; GRA phase 2 in Port Harcourt or Trans Amadi also in Port Harcourt, among other areas in Nigeria.

The country’s  latest effort at improving access to housing finance was the establishment of the Nigerian Mortgage Refinance Company (NMRC) which is aimed to provide liquidity in the mortgage system by raising from the capital market and using same to refinance primary mortgage banks for on-lending to loan applicants. Two years after, the company is still struggling.

“A mortgage period of 30 years and a housing unit of N2.15 million are hardly available, and this amount excludes interest rate on the mortgage facility. Consequently, even the middle income earners struggle to have access to affordable housing”, says a recent report.

The report which focuses on The State of the Lagos Housing Market, notes that Nigeria is faced with a multi-dimensional housing problems stemming from poor planning and recalls that many initiatives have been launched in the past which did not translate to visible results.

“The country is rife with abandoned low cost housing projects, inadequate funding, regulatory bottlenecks, lack of focus on residential housing development and unsupportive finance mechanisms”, the report says.

The report also pointed out that in most developed countries, affordable housing at different income levels is achieved through assistance from government, planning incentives, tax credit, land provision, infrastructural support and required building approval concessions.

The bane of mortgage access in Nigeria is high interest rate which hovers between 20 percent and 30 percent and this is one of the major reasons for the low homeownership level in the country whose housing deficit is in excess of 17 million units.

Roland Igbinoba, Vice Chairman, Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD), publishers of the report, laments that, though Lagos currently has the most vibrant property market in Nigeria, home ownership is still at less than 20 percent.

“With a daily intake of 3,000 immigrants, the housing supply has failed to keep up with rapid urbanisation and population expansion, especially in the low income market. The housing demand estimate is roughly 4.4 million units, while the estimated current supply of housing in the state is 1,417,588 units,” he reveals, adding that “this leaves a gap between housing demand and supply at roughly 3 million units; output is relatively low, although there has been increased participation in housing projects from both the government and private sector”.

According to him, the extent of the housing shortage in Lagos is enormous and the deficit is both quantitative and qualitative, pointing out that 72 percent of Lagos residents are tenants paying rent as high as 50 percent of their monthly incomes while most of the existing accommodations are provided by private landlords.

“On the qualitative side, most low income earners live in congested settlements usually characterized by buildings with structural defects, bad roads, poor drainages and pollution posing health hazards for the inhabitants,” he notes.

CHUKA UROKO