Brazilian model for housing the poor

Though lack of dependable data on the state of the housing market in Nigerian makes it a bit difficult to say categorically or locate the segment of the market where the country’s 17 million housing deficit really lies, a critical analysis readily shows a strong leaning of the deficit towards the lower segment of the market. Such an analysis presents a bottom-heavy pyramid thinning out at its topmost end.

The situation in the market is the way it is because housing developers are congregating at the top of the pyramid where, even with relatively more supply and lower demand, buying power is assured. What this means is that virtually nobody is building for the poor who populate the bottom end of the pyramid.

This, essentially, accounts for the housing deficit which is not only in housing, but also in infrastructure, requiring over N30 trillion investment to close. This deficit is monumental and, according to Alufohai Angele, the immediate past president of Nigerian Institute of Quantity Surveyors (NIQS), Nigeria  has such a huge housing and infrastructure deficit not  because it is poor, but  rather because it has failed to develop the policies and institutions appropriate for boosting investment and the supply of housing and infrastructure.

Infrastructure deficit has been identified as the major cause of the high cost of housing delivery which is why developers avoid low cost housing for low-income earners and it is against this backdrop that investment analysts recommend what they call Brazilian model for housing the poor.

They explain that, like in Nigeria, until recently, mortgages barely existed in Brazil because interest rates were too high and evicting defaulters was almost impossible. The poor built on their own without title, often in precarious spots on riverbanks or steep hills.

A 2010 census found 11.4 million Brazilians living in slums. Millions more squeeze in with relatives or live in formal but substandard housing which is a common feature of most Nigerian cities, especially Lagos, Nigeria’s bustling commercial capital.

About a decade ago, Nigeria was classed along with Brazil as frontier economies, but today the story is different. Whereas Brazil has moved on to become an emerging economy, Nigeria is still struggling at the spot where Brazil left off.

Realising the importance of housing as a growth factor in any economy, Brazil has come up with a scheme to promote working-class home ownership and, according to The Economist magazine, “this scheme is off to a good start”

The story of Adriana Palugan, as told by the magazine, is same as that of Johnson Onyebuchi who has  lived in a rented apartment in Ajegunle, a sprawling slum in Lagos, for over 18 years. Unlike, Palugan however, there is no government scheme anywhere  for Onyebuchi  that guarantees home ownership for him.

Palugan, a mother of two, rented a home in Balneário Camboriú, a seaside town in southern Brazil. Now she is buying her own house from Colina do Cedro, a new development on a hill overlooking the town. She extols her new home’s wonders in its  bright and spacious rooms with a pool, gym and multi-games court, 24-hour security, and altitude. Her old place was flooded in 2008, and she lost much of what she owned just as it happens to Onyebuchi during seasonal flooding in his down-town home in Lagos.

If not for Minha Casa Minha Vida (MCMV—My House My Life), a federal government programme started in 2009 to fund housing for Brazil’s poor and middle classes,  Palugan, who works for a car dealership, would have struggled through life to buy such a home.

The price was keen: 100,000 reais ($51,000). Caixa Econômica Federal, a state-owned bank, gave her a subsidised mortgage; the repayments were less than her rent used to be. Caixa has also granted the developers, Abramar, cheap financing for the project’s second phase, two apartment blocks. The funding comes from a workers’ compensation scheme and the federal budget. Buyers cannot already own homes or make over 5,000 reais a month. The lowest earners get the biggest subsidies.

MCMV is shifting homebuilders’ interest away from the rich minority to the middle market. This is the kind of thing that Nigerian government can also do to close housing demand-supply gap in the country. Big private developers like the UACN Property Development Company (UPDC) should be encouraged, through government schemes such as Brazil’s, to shift interest from building for the rich to building for the poor.

It needs to be pointed out however, that for this model to make a headway here, infrastructure deficit has to be addressed. This is because, even in Brazil, the government still needs to work out how to get more homes built for the truly poor. Of the 2.3 million that past MCMV’s approval stage, only 45 percent are for families earning less than 1,600 reais a month. The target was 60 percent. Increasing that share would mean persuading states and cities to chip in with land, roads and other services, instead of demanding these from developers as is the case in Nigeria where developers provide all the facilities. 

Chuka Uroko