Government & Rent Control in Nigeria: A Reality Check

Government & Rent Control in Nigeria: A Reality Check

Housing is not just a basic necessity; it’s as vital as banking and agriculture. A fundamental pillar for ensuring economic stability.  In a nation like Nigeria, where millions are in need of affordable homes, the housing market plays a crucial role in the overall economic framework.

The lack of access to affordable housing however, creates a ripple effect throughout the economy and society.  Perpetuating a cycle of poverty and inequality.

The Pain of Rent

The pain of lack of affordable housing (decent housing that individuals can afford within their income) is a multifaceted issue that deeply affects individuals, families, and communities. The overwhelming demand, especially in the cities, for ‘affordable’ accommodation constantly drives rents higher, forcing families into inadequate housing and creating a vicious cycle that’s hard to escape.

From higher rents, poorer living conditions, to emotional/psychological pains to individuals and families, and diminished opportunities for millions of Nigerians. 

It is no wonder many of us look to the government for help. For hope.

“If only the government can pass a law that will determine how much rent should be”

“But the government should be able to help us put landlords in check”...paraphrasing.

Yet, the idea of government controlling rent in Nigeria stirs a mix of optimism and skepticism. While it’s tempting to look at rent control as a quick fix to the housing crisis, the reality is far more complex. Nigeria, at this point, might not be fully equipped for such a leap.

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How did we get here? Who'at fault? Why is rent so expensive?

Who's at fault? 

It's a complex web and many stakeholders bear their share of the blame. The main culprits are the combination of market forces, economic realities, and policy gaps that have driven rent prices to their current levels, making housing increasingly unaffordable for many Nigerians. All these are further enabled/supported by the prevalent economic instability.

Sorry, No! The problem is not the landlord.

Rent (almost all over the world) is expensive due to a combination of factors. But for Nigeria, the obvious reasons are as follows:

1. High Demand and Low Supply:
   There’s a significant imbalance between the number of people seeking housing and the availability of affordable homes. As urbanization increases, especially in major cities like Lagos and Abuja, more people are moving into these areas, driving up demand while the supply of affordable housing remains limited. 
   On one divide is the pressure to find housing in proximity to work. This has caused many to put up with excessively inflated rent prices, that consequently deepens the divide. On the other side is the succumb to ‘available’ alternatives that are very far away from work. For whichever side, most options are either overpriced or in sharp contrast to desired quality of life.

2. Cost of Construction:
   Building materials and construction costs are high, partly due to inflation, importation costs, and inadequate infrastructure. These costs are often passed on to tenants through higher rent. When you combine this with the cost of Land, it becomes clear why it is almost impossible to make housing affordable without being intentional about it.
   
   
3. Economic Factors:
   As in 2 above, the cost of construction directly reflects economic factors. Housing is unfortunately adversely affected by economic instability, including fluctuating exchange rates, impacts the cost of goods and services, including housing. Inflation erodes purchasing power, making rent a larger portion of a household's income.
   
   
4. Speculative Investment:
   Real estate is a lucrative investment. Since it involves taking lots of risks to navigate the unfavorable economic realities, it’s no wonder investors and developers set high rental prices to maximize their returns. This often results in outpricing the average Nigerian. This is why it is not entirely the landlords’ greed or insensitivity.
   
   
5. Urbanization and Infrastructure Challenges:
   The rapid pace of urbanization has not been matched by adequate infrastructure development. Areas with better infrastructure naturally attract higher rents, pricing out many residents, this is the major catalyst for no 1 above.
   
   
6. Greed:
   It goes without saying that beyond economic/market factors, greed plays a crucial role. From ‘house agents’ charging unnecessary ‘agency’ fees, to landlords dubiously inflicting scrupulous ‘security/damages’ charges on renters, renters have been forced to pay more. This is arguably the most pertinent reason why many citizens have called on the government to put control measures into renting activities.
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7. ‍Lack of Government Intervention:
   This is the focus of this post. There's insufficient government regulation in the housing market. Without effective policies to control rent prices or increase affordable housing, landlords, developers, and even agents have more power to set prices as they see fit. 

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So, Why is The Nigerian Government Not Helping?

Rent control sounds appealing, especially in a market where demand drowns supply (that is, excluding the over-priced housing at cut-throat costs). However, Nigeria is not yet ready for government-imposed rent control.

To understand why rent control might not be the immediate solution, we need to delve (yes, use of 'delve' isnt exclusive to the 'robots') into what effective government involvement in housing truly entails. This typically goes beyond just passing laws to cap rent increases; to creating a coordinated approach that addresses the deeper issues within the housing market.

For rent control to work effectively, the government must hold a significant share of the housing market, have enough skin in the game to earn a say. This doesn’t just mean owning properties, but having the capacity to influence market dynamics substantially. 

Currently, the government’s share is minimal, which limits its ability to dictate terms or stabilize prices. And without a robust presence/stake in the market, any attempt at rent control would be equal to putting the cart before the horse.

'Pot wey go cook soup, must first collect fire"

Putting the Horse Before The Cart for Government Involvement.

To realistically control rent, the government needs to play a much larger role in the housing sector. Here are three critical areas that must be addressed:

1. Provision of Housing: The government must provide a significant share of housing to influence market dynamics. This could mean developing large-scale housing projects that offer alternatives to private rentals, thus giving tenants more choices and landlords less power to hike rents.
   
   
2. Incentives for Independent Homeownership: Encouraging competition among private developers is crucial. The government could offer incentives such as favorable mortgage terms and flexible payment plans aimed at creating affordable housing.
   On the other hand, the government can review planning laws; approvable limits and land/title laws to encourage independent private homeownership for average citizens. This would encourage more people to adopt the co-ownership model.

With increased supply (more housing), the force of demand and supply would naturally drive down prices, making housing more accessible.

3. Revenue Generation: For the government to be a responsible player in the housing market, it must generate revenue from this sector. This goes beyond the usual taxes and land use charges; it involves creating a sustainable revenue stream that allows the government to continually invest in housing and infrastructure. With increased revenue, the government could expand its market share, gradually gaining the influence needed to control rents effectively.

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Recommendations for Improvement: A Collaborative Approach

While Nigeria may not yet be ready for full government control of rent, there are actionable steps that can be taken to improve the housing market. Given the current state of the housing market, instead of pushing for immediate rent control, the focus should be on creating a more sustainable housing environment. 

Here’s how:

1. Financial Incentives for Developers: By offering financial incentives, the government can encourage more real estate developers to enter the market, thereby increasing housing supply and driving down costs.
   
   
2. Regulating Rent Frequency and Price Benchmarks: While full rent control might be premature, the government can still regulate rent duration or frequency from yearly to monthly and also set price benchmarks to prevent excessive rent hikes. This approach would provide some relief to tenants without the complexities of full-scale rent control.
   
   
3. Tenant-Landlord Collaboration: Tenants and landlords need to collaborate in advocating for better government support in housing. Only by working together, can we push for policies that make housing more affordable and stable, benefiting both parties in the long run.

As always, "If you want to go far, ...go together."

Moving Forward: Rethinking Sustainability.

Moving forward, it’s crucial to rethink the role of government in rent control and the broader challenge of providing sustainable, affordable housing in Nigeria. The idea of controlling rent is enticing, but it’s not a silver bullet, at least not in the interim, from how I see it. 

Rather than simply imposing rent caps, which may not address the root causes of high rent, the government needs to become a more active player in the housing market. Effective rent control requires a deep and coordinated involvement in the housing market—something Nigeria is still building towards. 

In the meantime, focusing on long-term solutions that align with sustainability and economic inclusivity; increasing housing supply, offering incentives, and reviewing planning laws to encourage independent homeownership, may offer a more sustainable path forward.

Thank you.

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