Can informal housing be a solution?
It is absolutely mandatory for us to ensure that we place the beneficiaries of our social and affordable housing agenda at the center of our planning rather than the houses themselves, for there is a real tendency for the ‘upward creep’, that sees houses in this lower segment becoming nicer, more expensive and therefore less affordable. As we have often said, at the end of the day it is not the houses that matter most in this business of providing affordable housing but the human lives that are affected by the process.
Governance, as presently practiced in Nigeria is often anti-poor. Unfortunately, the common people are seldom catered for by our governments and elected officials. It is also a system where double standards exist, for instance in the administration of justice, where a “big man” (or “big woman” as the case may be) will get away with a ‘pat on the hand’ for misappropriating billions of naira, while, for a minor misdemeanor a common man will usually have to face the full weight of the law. (That is unless of course, the big man is unfortunate enough to escape to Dubai or the UK where, it appears, our own war against corruption is being fought with more seriousness and determination!)
Our laws are equally tilted against the poor. And this includes our land laws, which by their very constitution favour the rich and those with access to functionaries-of-state. All this, put together has resulted in the general “informalization” of the majority of housing presently being produced in the country. Unable to gain access to titled land at affordable prices on which to build their modest homes, and unable to obtain housing loans, the vast majority of people living on the fringes of our urban centres have simply proceeded to help themselves where their governments have been unwilling to help them.
With a plethora of conflicting issues each struggling for attention, how best can we move the nation’s housing agenda forward, providing housing for the most needy? We now have a new national housing policy ready while Nigerians have been waiting eagerly for their government to begin to deliver the dividends of our fledgling democracy.
May I suggest two approaches, that may assist us in effectively implementing a strategy to address the cries of some of our people in most dire need of housing :
1. A short term, ‘rapid response’ or ‘kia-kia’ strategy that can begin to deliver say, a hundred thousand houses nationwide within months, innovatively working around the various obstacles to affordable housing provision; and
2. A more comprehensive medium-term strategy, aimed at correcting structural defects and removing major obstacles altogether, such as the limitations of the Land Use Act. The medium-term strategy would aim at implementing a good percentage of the recommendations arising from the policy review before the end of this administration, and would also position the nation for rapid growth in the housing sector.
It is heartwarming to note the Ministry of Finance and Central Bank of Nigeria’s determination to play its own part in reforming the financial sector to favour housing development on an unprecedented scale. However, in aiming for some quick victories that can begin to deliver in the short to medium term, the following populist suggestions initially proffered by Reiner Nordberg of UN-Habitat may be considered:
1.Need to Recognize and Accept Informal Housing
We need to keep reminding ourselves that Nigeria is not a rich country. And yet, despite the fact that the informal housing sector produces the vast majority of all new housing units in and out of our cities, it is rarely appreciated nor supported in any way by government. The United Nations is at the forefront of calls urging the need for governments to realize that informal housing can, indeed become a solution because it requires little or no public investment. Informal settlements regardless of their quality, provide affordable housing for the vast majority of the population who have no access to titled land, or to formalized mortgage loans.
2.Provide “Non-Mortgage Housing Loans” or Home Improvement Loans
Because informal housing is devoid of the official Certificate of Occupancy recognized by government as title, it has so far received little, if any support from the formalized financial sector. And yet, the bulk of our population MUST be housed, and they must be housed NOW. Most people do not have the luxury of waiting for a foot-dragging government to amend their laws – if not their ways! What then can we do to help finance housing for the informal sector?
If the mass provision of affordable housing must take-off immediately, as long as the land use act remains in force, we must in the short term de-emphasize land as a security requirement and replace it with the client’s ability to repay a “Non-Mortgage Housing Loan” not tied directly to the property. This will be based wholly on his current income level and his ability to PREPAY the required deposit for his home loan. To a large extent, these are the same principles on which booming housing microfinance (HMF) economies in many countries are based, ably supported by theirgovernments.
3.Developing a Savings Culture
This is very important. A national housing programme that is not somehow tied to a major offensive to encourage a savings culture can only be sustained for a short term. The two must go together. We must immediately begin to mobilize savings from within the informal sector. Developing a savings culture amongst the populace is a pre-requisite to developing a healthy housing finance sector. Indeed, people who cannot successfully ‘pre-pay’ to build a deposit are often poor candidates for home ‘re-payment’ after they have received a loan. Apart from developing a pool of loanable funds, the savings culture can help prepare and train people for what may become almost a life-time of repayment. In addition, it often helps to weed away potential defaulters. Indeed, studies have shown that the less the equity a borrower is able to save prior to receiving a loan, the more his likelihood of defaulting. Hence, the savings or ‘pre-payment’ culture is to be encouraged in order to build a robust and healthy housing loans system. This can either be carried out on an individual basis, or through housing co-operatives.
3.Areas to specifically look out for might include:
1. Leverage On Finance/Counterpart Funding.
Incentives to save should be provided by extending credit on that basis.
2. Encourage Incremental Housing For Shorter Term Funding.
Smaller, shorter-term loans should be advanced rather than larger, longer-term loans thus creating impact by making limited resources available to more people. This is particularly true in a clime where funds are scare and their cost is extremely high. Furthermore, a large housing loan broken up into smaller loans attracts much less interest in the long run.
3. Encourage Savings Groups/Coops.
The Federal Mortgage Bank of Nigeria (FMBN)’s new initiative to provide a lending window to co-operatives is to be applauded. The formation of housing co-operatives and savings groups should be vigorously encouraged.
Ultimately, the race to provide Nigerians with more and better housing is a race in which we all have a part to play. However, it lies on our governments to play the leadership role in galvanizing a waiting and willing electorate to follow.
•Odia (email@example.com) is a National Director of The Fuller Center for Housing