About 1.3 million households could further fall into worse living conditions in Lagos, Africa’s largest city, by 2025, says the McKinsey Global Institute.
According to the global think-tank, the increasing un-affordability of housing is a growing challenge in Lagos and most other emerging economy mega-cities. In some 240 cities with populations of more than two million, majority of households will not be able to afford standard housing units at market rates.
In Lagos, which is considered an extreme case, more than 90 percent of households are unable to afford standard housing units rates, thereby forcing them into informal and substandard housing.
Nigeria has the third largest number of households living in substandard housing, estimated at 11 million households.
Lagos is, however, addressing the housing problem of its residents with the Lagos Home Ownership Scheme (LagosHOMS) launched in March this year, aimed to provide housing finance at single-digit interest rate and long repayment tenor of 20 years.
Though there is still the affordability factor with the scheme which requires applicants to provide 30 percent equity in order to own a house through it, the scheme has made remarkable impact and progress, having produced over 300 homeowners through its monthly draws for successful applicants.
The state government is optimistic that in the next couple of years, the scheme would have reduced the state’s housing deficit estimated at two million units, adding that given its over 4,000 housing stock and many more units expected from construction sites in 25 locations in the state, this deficit would be reduced considerably.
Nigeria’s under-developed mortgage finance system, which is due to a number of factors such as monetary policy and macroeconomic conditions, especially higher inflation risk, is considered a major issue which limits access to housing finance in the country.
In Nigeria, the interest rate on mortgage hovers around 20 percent, which is about five times that of France, the US and Germany, says the report. This comes amidst a ‘myth’ that affordable housing is too risky to finance.
The Nigeria Mortgage Refinance Company (NMRC) was set up to provide much lower rates for housing projects. “The step we have taken is to create the enabling environment for primary mortgage banks and institutions to conveniently offer 20 -year mortgages to the market, since the ability of banks to deliver mortgage services is limited by the fact that 80 per cent of all banks’ deposits are for 30 days,” said President Goodluck Jonathan during the launch of the NMRC.
“The NMRC, in ensuring greater access to finance for longer tenors, will be key to accelerating the growth of the market for all income levels,” he added.
The dividends of the institution have, however, yet come into full force.
In narrowing the affordability gap, unlocking land supply was highlighted as the most critical step for governments to take. Nigeria’s Land Use Act has been named by industry watchers as being a major hindrance to the ample supply of land in urban centres.
Expectations are high in the housing sector that more land will be freed up as the Federal Government undertakes auditing and inventory of its land and landed property.
This move is expected to facilitate the bridging of the nation’s housing deficit which the United Nations estimate puts at 17 million units.
A large portion of government’s landed property in various parts of the country is either locked-in or underutilised, government officials say. The present effort is therefore intended to optimise the use of such property.
“The objective of this audit is to update our database on the status of all federal lands and landed property in the country, in order to free underutilised land for housing development and optimise the use of all Federal Government landed property,” said Akon Eyakenyi, minister of lands, housing and urban development, in Abuja.
Other steps include expanding access to lending and reducing financing costs which will help buyers and developers of affordable housing, using an industrial approach to deliver housing quickly, and on a large scale at the desired cost.