Obi’s housing plan raises hope for low-income earners
With the intention to create financing incentives to unlock private capital for housing and create mechanisms to improve infrastructure financing, Peter Obi, the presidential candidate of the Labour Party, has raised the hope of low-income earners to own homes.
Obi, in his newly unveiled 62-page manifesto, tagged ‘Our Pact with Nigerians: Creating a new Nigeria’, says if elected, his government “will create financing incentives to unlock private capital for provision of affordable social housing for Nigerian workers and people in proximity to their businesses and workplaces.”
Though the manifesto is silent on the nature of the financing incentives Obi’s government is promising, it is expected that there may be tax holiday, low (single digit) interest rate or special funding arrangement for affordable housing developers, which will translate into affordable housing for low-income earners.
“Yes, besides land, what has been a major hurdle to delivering affordable or low-cost housing in Nigeria is the cost of funds. We have always advocated incentives that will enable private developers to deliver housing at a cheap rate. One of such incentives is low interest rates,” Kunle Adebayo, a property market analyst, told BusinessDay.
“Developers are not Father Christmas; they cannot borrow money from banks at the spread of 20-25 percent interest rate and use the same to develop affordable or social housing. Such housing is done by the government, but if Obi’s government is going to allow the private sector to do that, it will be fine; after all, the government has no business in business,” Adebayo added.
Apart from finance, infrastructure is another major constraint to delivering affordable housing. According to Chii Akporji, former director at Nigerian Mortgage Refinance Company, infrastructure constitutes about 30 percent of construction cost.
“Here’s a country where house-suppliers are their own government, providing all the critical infrastructure including water, electricity, and even roads and drainages, by themselves. This explains why houses cannot be affordable because these costs are transferred to end-users,” Akporji said.
Nigeria has a huge infrastructure deficit, which, according to Emmanuel Odemayowa, CEO of Cavali Group, requires about $30 trillion investment and about 30 years to close.
This, he noted in an interview in Lagos, impacts negatively on housing supply as it adds to costs and discourages investment in affordable housing in the hinterland where land is relatively cheaper.
“People would rather pay more to live in the city centre than buy houses cheaply in the hinterland where there is no water, electricity, good roads and efficient public transport system,” he said.
This explains why Obi’s promise to tackle infrastructure constraints by involving the private sector and addressing the bottlenecks that impede investment in the sector comes as light in a tunnel, he said.
“We will integrate existing master-plans for infrastructure – gas, road, railway, urban mass transit, telecommunications (broadband), water, sewage, and electricity to create national multi-utility transport tunnels for co-location of subsurface infrastructure development with the objective of achieving cost efficiency and a one-stop solution to right-of-way issues for accelerated infrastructure development,” Obi says.
Continuing, he says: “We will address current bottlenecks in extant national policies and frameworks with the view to unlock resources for investment in critical physical and social infrastructure; we will harmonize agencies involved in the infrastructure space to address coordination failures that impede effectiveness and efficiency.”
But Obi promises to explore innovative solutions to address the shortcomings in the current public-private partnership initiatives, saying his government would go beyond blended finance, which is recognised by the World Bank, to create mechanisms to scale infrastructure financing.
“We will incentivise not only corporate tax credit application to infrastructure, but also philanthropy, and community-based infrastructure bonds.”
The presidential candidates of other political parties, including Bola Tinubu of the ruling All Progressives Congress and Atiku Abubakar of the main opposition, Peoples Democratic Party, have also made promises to Nigerians on housing, if elected.
Tinubu promises to merge federal housing agencies into a competent body to ensure greater cohesion and efficiency for addressing housing deficit, saying these agencies are too small and fragmented.
He also promises to lower costs, remove delays associated with housing development, promote more efficient use of land and efficient land allocation, which, he hopes, will bolster the housing industry and lower costs for investors and subscribers.
Atiku, on his part, promises easy access to land and to provide easily transferable property rights by revamping land registries and creating a uniform platform for a nationally acceptable system.
He also promises land reforms to reduce transaction time for property transfers, improve access to credit and increase transparency in land transactions and promote the use of local materials for affordable housing.