Nigeria faces a dire housing situation. The Central Bank of Nigeria (CBN) estimates a housing deficit at 20 million units, but the World Bank pegs it at 28 million.
Homeownership rate was put at 25 percent as of 2022.
Industry experts say the situation derives from the country’s faulty, unfriendly and obsolete land and housing policies, in contradistinction to what obtains in other countries of the world, especially Singapore, where homeownership rate is as high as 90 percent.
Singapore’s land and housing policies have lessons for Nigeria on how to shore up its homeownership rate. Unlike Nigeria, the land policy in Singapore is freehold while housing is funded by the state and made available for the citizens to buy through government moderated mortgage.
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Land policy is essentially aimed at ensuring land accessibility to citizens of a society as well as protection of their interests. But the contemporary land policy in Nigeria, known as Land Use Act (LUA), vests ownership of land on state governors who, rather than holding it in trust for the citizens, use land for political reasons.
“Anywhere in the world, land is central to social and economic development. It is one resource that has generated and attracted widest attention from both individuals and governments,” Funso Adebayo, a builder and real estate consultant, explained to BusinessDay.
According to him, Nigeria needs to review its land policy in order to free it for economic activities, including real estate, agriculture, industrialisation and other activities that take place on land, pointing out that, in major cities of the country, especially Lagos, land is very scarce and so attracts prices that are not affordable to many residents.
Speaking on how Singapore achieved a home ownership rate of 90 percent, Sock-Yong Phang, a renowned economist, noted that the government of the country wanted widespread home ownership so that its citizens would feel like they had a stake in the country.
Phang noted further that because Singapore has a tiny land mass, like Lagos in Nigeria, the dominant house type in the country is high density flats and the majority of these houses are built by the country’s Housing Development Board (HDB), an equivalent of Nigeria’s Federal Housing Authority.
“The government finances the HDB’s deficits and provides loans to the HDB so it can extend mortgage loans to homebuyers with an interest rate of 2.6 percent. About 94 percent of the HDB’s housing has been sold to households on a 99-year leasehold basis,” Phang said.
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This is at variance with what obtains in Nigeria where the Federal Housing Authority builds for commercial purposes in apparent competition with private estate developers. Again, the interest rate on mortgage in Nigeria is no different from that on commercial loans which come in double digit.
According to Phang, the prices of HDB properties are generally four to five times the household income of buyers, noting that a first-time homebuyer household can enjoy, on average, a $300,000 discount from market prices when they buy a new flat from the HDB.
“Since the year 2000, increases in HDB resale prices and private house prices have not exceeded increases in median household incomes, thanks to deliberate efforts by the government,” he said.
Another major factor that helped to grow homeownership rate in Singapore is the country’s compulsory savings system, similar to Australia’s compulsory superannuation, but it’s used differently.
Phang explained that a small proportion of anyone’s compulsory savings is put aside for their retirement and health-related measures, and a much larger proportion is used for a housing down-payment and mortgage repayments.
“Compulsory savings can’t be used for rental payments, so home ownership is the default choice for most households. The majority of households living in HDB housing end up servicing their mortgage payments entirely from their compulsory savings, with no cash outlay,” he noted.
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Adebayo, earlier quoted, likened this system to Nigeria’s National Housing Fund (NHF) which has good intentions, but poor implementation as its promoters are still struggling to get many workers to subscribe and contribute to the fund.
“Worse still, contributors are bogged down with too many requirements for them to access their contribution when it is due and this, I believe, is a major reason, after so many years, the fund’s subscriber-base is still low,” he said.
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