• Wednesday, June 19, 2024
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The need for price control on rent and cost of land in urban centres in Nigeria

The need for price control on rent and cost of land in urban centres in Nigeria

“These rent hikes reflect not merely inflation but are symptoms of a deeper issue: the soaring cost of land.”

Nigeria’s urban centres are grappling with a housing crisis that is spiralling out of control. Cities like Abuja and Lagos, the nation’s capital and economic hub, respectively, are at the epicentre of this turmoil. The unrelenting surge in rent prices, driven predominantly by the escalating cost of land, calls for urgent intervention through effective price control mechanisms.

In Abuja, neighbourhoods such as Lugbe, Kubwa, and Jabi, known for middle-class families, serve as glaring examples of the arbitrary rent increases plaguing the city. In these areas, the annual rent for a three-bedroom apartment has skyrocketed, ranging from N2 million to N6 million within just four years. Lagos tells a similar story, with three-bedroom apartments’ rents in high-demand areas like Lekki and Ikeja jumping from N2.5 million to over N6 million annually in the same period, while that of a one-bedroom apartment within the same areas has gone from N1 million to N3 million annually. These rent hikes reflect not merely inflation but are symptoms of a deeper issue: the soaring cost of land.

The price of land is a primary driver of the increased cost of rent. For instance, the cost of land in Ikate, Osapa-London, and Chevron Lekki has surged by an astonishing 300 percent to 450 percent between 2021 and 2024. Such exponential increases have a cascading effect on housing costs, as developers inevitably pass the burden of higher land acquisition costs onto renters and buyers. This scenario raises a critical question: What factors are driving the soaring cost of land in urban centres like Lagos and Abuja?

Rapid urbanisation and population growth in cities like Lagos and Abuja have created a high demand for land. With an annual urban population growth rate of 4.3 percent, cities such as Lagos, Abuja, Kano, Ibadan, and Port Harcourt are struggling with migration-induced challenges, including unsustainable housing, waste management, unemployment, and overburdened road networks. Lagos, in particular, has seen its population swell from about four million in 1982 to approximately 20 million people in 2024. The limited availability of land in prime locations means that prices are driven up by basic supply-and-demand economics. However, it is the activities of speculators who purchase large parcels of land and hold them until they can sell at significantly higher prices that further reduce the amount of land available for development and artificially inflate prices.

Other factors leading to the surge in prices of lands in urban areas are bureaucratic red tape, corruption in land allocation and title perfection processes, and the lack of transparent land registries, which create an environment where acquiring land is complex and costly. These challenges increase the overall cost of land as sellers’ factors in the cost of navigating these hurdles. In Abuja, for example, there are cases where land allottees sell their allocations for 10 times the cost for which the allocation was received. Many, rather than develop the allocations, simply hold on to them for speculative reasons, reducing the available lands for ready developers to purchase and build.

It is understandable that general economic instability and high inflation rates in Nigeria also contribute to the increase in land prices. Currently, the annual inflation rate in Nigeria has accelerated to 33.7 percent by May 2024. The Consumer Price Index (CPI), which measures the rate of change in prices of goods and services, has additionally soared by 2.1 percent, driven by high food costs and the depreciation of the naira. As the naira depreciates, landowners and sellers adjust their prices to maintain value, further exacerbating the cost for potential buyers. However, the increase in the price of rent and land far outpaces the inflation in the economy.

The consequences of unchecked rent and land price increases are severe and far-reaching. They contribute to the rising cost of living, making it increasingly difficult for average Nigerians to afford decent housing. As of the first quarter of 2024, Nigeria has already recorded a 50 percent increase in rent across major cities such as Lagos, Abuja, and Port Harcourt. Landlords often seek to maximise their rental income by inflating property values and demanding exorbitant rents. High land and rent costs stifle economic growth as businesses face higher operational expenses and employees struggle with housing affordability.

A survey by Numbeo found that Lagos has the most expensive real estate in Africa, with a property price-to-income ratio of 19.2. This significant disparity between property prices and residents’ income levels highlights the challenge of homeownership for many in urban regions. When property prices are nearly twenty times the average annual income, the dream of owning a home becomes an unattainable fantasy for the majority. Consequently, the working class and low-income class, which constitute the majority of the population, are forced to live in unsanitary shanties and temporary sheds. According to the Centre for Affordable Housing Finance in Africa (CAHF), most of the urban population in Nigeria lives in slums.

Given that urban cities in Nigeria, including Lagos, are poised to become some of the most populous cities in the world by 2100, the implementation of price control measures would be a global game-changer. Establishing a framework to monitor and control land prices in urban centres can help mitigate speculative activities and ensure that prices reflect true market value.

Also, streamlining the land allocation process and combating corruption will reduce costs and make land more accessible to genuine buyers and developers. More collaborations between the government and private sector will lead to the development of housing projects that are both affordable and profitable, balancing public interest with business viability. Investing in affordable housing projects and providing incentives for developers to build low-cost housing can alleviate the pressure on rent prices.

The need for price control on rent and land costs in Nigeria’s urban centres is urgent and cannot be overstated. Without proactive measures, the dream of affordable housing will remain elusive for many Nigerians. Stakeholders must come together to create a sustainable framework that ensures fair and reasonable housing costs for all, ensuring that the nation’s urban growth benefits everyone, not just the privileged few.