Abuja, the Federal Capital Territory (FCT) of Nigeria, has experienced a rapid population growth of approximately 8percent annually. This increase in people has created a significant demand for housing. In fact, Abuja, with its 1.7 million housing units, accounts for 10percent of Nigeria’s overall housing shortage.
A concerning trend is the presence of many unoccupied houses and estates in the city centre, estimated to be around 600 properties. This number is much higher compared to other areas in Abuja. While these vacant housing units could help alleviate the housing deficit, their rents remain prohibitively high.
Unfortunately, these homes are out of the reach of a large portion of Abuja’s residents, particularly those with low to moderate incomes, due to the exorbitant rental costs associated with them.
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Additionally, Abuja has experienced a substantial influx of people from both within and outside the region, as individuals seek better economic opportunities. This has added to the housing challenges in the city.
Will rent control or price ceiling solve the problem?
The Nigerian Senate has taken a step in addressing the burdensome rent payment system in the Federal Capital Territory (FCT) by approving a bill to that effect. The legislation, titled the ‘Advanced Rent (Residential Apartments, Office Spaces, etc.) Regulation Bill 2022,’ was sponsored by Senator Smart Adeyemi, who represented Kogi West in the Ninth Senate.
When the bill passed first reading in the upper legislative chamber, Senator Adeyemi spoke with journalists, highlighting the challenges faced by many residents of Abuja when it comes to dealing with substantial rent payments.
The proposed bill aims to compel landlords in the FCT to adopt a more tenant-friendly monthly rent payment structure.
“Some landlords always insist their tenants pay for one year or two years’ rent. That is wrong.
“By this bill, Nigerians especially Abuja residents, will now pay rent on a monthly basis after the expiration of the initial three months. The law we are proposing stipulates a maximum advance rent payment of three months.
“After the expiration of the three months rent, the tenants are expected to pay monthly. There are many tenants whose salaries are competing with their rents because they live in cities like Abuja.
“Many landlords did not secure loans to build their houses. They are products of free money they acquire from the system. Yet, they make life difficult for poor Nigerians who do not have such privilege of making ill-gotten money from the system and put up structures.
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“The buildings are constructed in such a manner that an average Nigerian would not be able to afford it. Many people are indulging in corrupt practices to get their rents paid while the ladies take to prostitution,” he said.
There are calls from various stakeholders to implement government regulations aimed at reducing the high cost of renting in Abuja. The proposal suggests that the government could establish maximum rent limits that property owners are not allowed to surpass.
However, it’s important to note that price ceilings, although well-intentioned, can potentially result in inefficiencies within the housing market. Experts argue that such restrictions can discourage new investments from profit-seeking individuals, ultimately leading to long-term shortages.
In essence, price ceilings can act as a deterrent for investors, creating market distortions due to the artificial reduction in housing supply. This imbalance, coupled with increasing demand, exacerbates the housing market’s disequilibrium and worsens the existing shortage.
Unlocking the potential of Property Tax for government revenue enhancement
Property tax stands as a cornerstone of government revenue, playing a vital role in sustaining economic growth and stability. In Nigeria, this tax revolves around levies on real property and is primarily enforced through the Land Use Act and related legislation.
As a reliable income source, property tax provides essential funding for government activities and development initiatives, particularly during times of currency fluctuations, volatile oil markets, and global economic uncertainties. Property owners contribute through annual taxes, offering a steady stream of revenue.
Recent data and studies support the effectiveness of property tax as a revenue source, with developed nations worldwide relying heavily on it to finance public services. However, in many developing countries like Nigeria, the full potential of property tax as a dependable income generator remains untapped.
Efficient property tax collection and management significantly boost the Internally Generated Revenue (IGR) of states and local government councils in Nigeria. This empowers them to meet economic obligations to both the government and citizens, establishing tax authorities as vital contributors to the state’s economy.
Nonetheless, property tax administration faces challenges, with tax evasion being a significant concern. Tax evasion hinders the generation of essential revenue and acts as an impediment to economic growth and development.
To enhance property tax administration, modernization of collection methods is crucial, aligning them with global best practices and establishing internal measures to prevent corruption within tax authorities. Advocacy programs are essential to educate property owners and managers about the economic consequences of non-compliance and the legal ramifications of failing to pay property taxes.
In a global economic landscape marked by challenges, taxation, especially property tax, plays a pivotal role in the development of states and nations. Therefore, collaboration among stakeholders is imperative to ensure efficient property tax administration and collection at all government levels, emphasizing property tax payments as a collective effort to build and safeguard shared wealth.
Exploring the potential of property taxation for government revenue enhancement
Amidst declining government revenues at various levels, experts in the real estate sector are urging authorities to harness the untapped potential of property taxation to bolster their income streams.
In a report titled ‘Property Taxation as a Revenue Source for Nigerian Governments – Key Considerations,’ Chudi Ubosi, the Principal Partner of Ubosi Eleh and Co., an estate surveying and valuation firm, emphasized that property taxation remains an underutilized revenue source.
He highlighted various types of property taxes in Nigeria, including capital gains tax, withholding tax, stamp duty, consent fees, registration fees, development charges/levies, land use tax, regularisation of title charges, value-added tax, and estate duties.
Ubosi pointed out that governments at various levels haven’t fully embraced property taxation, attributing this to an overreliance on federal government funding as a major hurdle.
Challenges he identified in fully realizing property taxation included inadequate property data, incorrect valuation, under/over-assessment, limited public awareness, factors influencing property value increase, disincentives to property development, and high tax rates that are often perceived as punitive.
He explained that high taxes and rates, driven by the constant need for funds, have become problematic and are often passed on to end users directly or indirectly.
Ubosi also mentioned poor work ethics and collection practices, a lack of visible impact of taxes paid, the absence of consideration for owners’ ability to pay, and inefficient administrative processes as setbacks.
While discussing the advantages of property taxation for government revenue enhancement, Ubosi highlighted the stability of real estate and the certainty of ownership, making it easy to administer, collect, and calculate. He emphasized that both property owners and authorities can readily determine tax liability.
He discussed the benefits of an ad valorem tax system, where higher property values lead to higher taxes. A well-structured tax administration system can also provide valuable information about the total properties in a locality, aiding in planning and infrastructure provision.
Ubosi stressed that for governments to boost revenue, they must leverage property taxes, a resource that has been underutilized. Success, he noted, hinges on effective implementation and administration, calling for the engagement of professionals in property enumeration and valuation.
He further urged the government to launch aggressive public awareness campaigns and ongoing public education initiatives about property taxation. Transparency, accountability, penalties for non-payment, and addressing tax evasion were all emphasized as critical aspects of a successful property tax strategy.
Legislative intervention on unoccupied mansions in Abuja
Senator Smart Adeyemi, who served as the Chairman of the Senate Committee on the Federal Capital Territory, had revealed that the National Assembly was in the process of drafting a bill to tackle the increasing prevalence of unoccupied high-end mansions in the affluent neighborhoods of Abuja.
In line with this objective, Adeyemi
had pledged to introduce legislation that would impose property taxes on all unutilized properties, particularly those with exceptionally high values.
This announcement was made during an interactive session between committee members and the secretariat team, under the leadership of the Clerk to the panel. Adeyemi expressed his deep concern regarding the surplus of vacant properties in the city.
He underscored that enacting such legislation offers a rational approach to address this issue and potentially ease the housing challenges faced by the residents of the nation’s capital.
In his words: “As a committee, we would compliment all the executive arm of government has been doing and see how we can help accelerate the socio-economic development of the city.
“We would see how we can improve the security of the city.
“We want this city to be a place where everyone will be proud of as the capital of the country and even that of West Africa, because we have the Economic Community of West Africa States (ECOWAS) secretariat here.
“One of such, ways is to solve the issue of accommodation and housing deficit in the state.
“We have found that in this city, many houses are not inhabited. There are a lot of mansions with no one living in them and no one is asking questions.
“If those houses were built with loans from banks, then the banks should be asking for interest.
“Having abandoned houses all over the place, even poses more risks to the residents because they serve as abodes for kidnappers, hooligans and criminals.
“If you have built houses and they are unoccupied, we would find out the reasons and tell the government to lock them up, so that criminals will not take charge.
“We would propel legislation that will cause them to start paying taxes, so that we would use the money to develop the city.
“We are not asking people not to build, but if you build and it is not something within the range of what an average person can afford, you would start paying taxes.”
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FG unveils ambitious plan to construct 30m homes in 10 years to address housing deficit
In a significant development over the weekend, the Federal Government of Nigeria revealed its ambitious plan to construct over 30 million new homes within the next decade, aiming to address the nation’s pressing housing deficit.
Madu Hamman, managing director and chief executive of the Federal Mortgage Bank of Nigeria (FMBN), made this announcement during the World Habitat Day anniversary in Abuja. He emphasized the bank’s intent to take a more proactive role in incorporating the informal sector into the National Housing Fund (NHF) scheme to facilitate this massive housing initiative.
Hamman stressed that this move would open up opportunities for over 85 percent of the Nigerian population currently underserved or overlooked in housing development.
He further explained that the bank is nearing completion on a project to deliver approximately 1,000 housing units, and it intends to leverage this experience to scale up to at least 5,000-unit projects. This strategic approach aligns with President Tinubu’s administration’s objective of constructing 30 million new homes over the coming decade.
Prior to this announcement, the Minister of Housing and Urban Development, Architect Ahmed Musa Dangiwa, expressed concern regarding the escalating rate of rural-urban migration, now accounting for more than 50 percent of Nigeria’s population. He warned that by 2030, this figure is expected to increase to 60 percent.
Dangiwa underscored the importance of comprehensive urban planning and management, along with the need to build resilience and foster innovation to absorb the anticipated urbanization challenges.
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