Basirat Oyalowo is the Lagos housing domain lead, the Africa Cities Research Consortium (ACRC) and Coordinator, University of Lagos Centre for Housing and Sustainable Development. She spoke with CHINEDUM UWAEGBULAM on the impacts of high mortgage rates on homeownership, the remedy to Lagos’s housing shortfall and proactive measures to prevent slum areas emergence.

Vacancy rates for residential and commercial property have continued to soar. What are the major reasons and measures to be adopted by property owners to woo tenants?
This is not surprising; we have experienced so many shocks to the economy in the last 10-15 years that have dampened the real estate market for both residential and commercial properties. There were also the COVID-19 impacts, which raised the consciousness of people that they can work remotely, particularly smaller start-ups, some of which never returned to physical spaces.

They have taken advantage of e-commerce and remote work technologies. The supply of residential real estate in major Nigerian cities has typically tilted towards the high/middle class rather than the lower-income earners, who are in actual need. Unfortunately, many government-developed estates also get allocated to people who already have one or two homes, so they remain vacant. Some of these developments are built in remote areas to employment zones, so they also remain vacant. So, it is not surprising that vacancy rates are high, particularly in these spaces.

From a broader perspective, the real value of incomes has become lower and lower as the economy not only plummets because we are a consumerist society, but also because we continue to experience constant economic shocks without adequate cushioning for people. Property investors need to recognize the peculiarity of this sector. They need to optimize their offers and create flexible payment schedules, offer additional value-added services and improve facility maintenance. Investors should read the local market carefully before going into new builds.

Issues relating to non-adherence, International best practices, and quackery remain challenging for professionals in the sector. How do we address such loopholes in the Industry?
Quacks continue to be patronized because consumers/clients trust their services or do not mind taking the risk to patronize them. Consumers/clients may not be able to differentiate between the services of a quack and that of a professional. To compound it, professionals are not always available to all income classes, so consumers will tend towards available substitutes: medicine peddlers instead of doctors, unregistered agents instead of professional real estate surveyors and valuers, draftsmen instead of architects and so on.

Upon reflection, it becomes evident that the challenge at hand revolves around how professionals conduct themselves, their interactions with society, and the messages they convey. Professionals who adhere to international best practices stand apart from those who are less reputable. When they make their services accessible to people across all income levels, offer exceptional quality, and maintain ethical engagement with society, they can build trust.

Conversely, if professionals do not meet these criteria, people may continue to seek services from less qualified individuals, further solidifying their presence in society. Additionally, the emergence of user-friendly apps that simplify complex processes into “Do It Yourself” solutions is impacting various professional services, including property valuation, architectural designs, and cost estimation. Hence, professionals must actively address these challenges.

The mortgage industry in Nigeria has been ineffective, and experts point to high mortgage rates as a hindrance to homeownership. What is the way forward? The issue extends beyond high mortgage rates; mortgages have historically not been viable for the majority of Nigerians. Mortgage systems rely on specific conditions that are often unavailable in Nigeria.

Mortgages traditionally require prospective homeowners to have stable, predictable income from formal employment, along with a credit history that can assess and prevent defaults. They are also expected to have some savings for a down payment and the ability to comfortably repay the mortgage while affording basic necessities like food, healthcare, transportation, and education. This creates a rigid financing system.

When you consider the soaring construction costs, exacerbated by Nigeria’s challenging macroeconomic conditions, characterized by high-interest rates, substantial import costs for building materials (around 65% as of 2022), and inflation, the situation becomes even more daunting.

Furthermore, without a conducive government environment, real estate developers must generate income from their investments, leading to higher property prices. Most typical Nigerian households struggle to afford even the down payment for a three-bedroom apartment, let alone the monthly mortgage repayments. Research indicates that the cheapest newly built houses in Nigeria are nearly four times what an average Nigerian teacher can afford.

All of these preclude the functioning of institutions that support the mortgage industry such as the regulatory, foreclosure mechanisms and secondary markets. So, we cannot just hang the failure of mortgages around high-interest rates, which is a single component that is required.

But let us now consider that even though an appreciable number of Nigerians are in the informal sector and would not be able to access mortgages, housing construction is still ongoing. I mean, people are still incrementally building homes for themselves. With the mortgage sector not serving them, where do they get funds from?
Serious housing finance mechanisms for Nigeria should support these other alternatives to mortgage financing that people have evolved, strengthen them to make it easier and expand, not regulate them to drain them or constrain them. Then, permit the mortgage market to work for those it is traditionally meant for.

In other words, one size will not fit all for housing finance in Nigeria. We must pay attention to alternatives that are more focused on our realities rather than forcing processes from other climes, based on other countries’ peculiarities on our people. How much has the mortgage industry contributed to Nigeria’s Gross Domestic Product (GDP) in recent times? I don’t think it has ever contributed up to 5 percent to the GDP, most records indicate 0.2 percent to 0.5 percent. That’s enough evidence that it is just not the ultimate solution to housing finance in the country.

Lagos has a huge housing problem. About three million homes are needed to address the shortfall. What are the complex problems identified in the African Cities Research Consortium ACRC study and how do we ensure housing for all in the city?
Lagos’s housing problems have to do with a lack of enough decent housing to meet the demands of the rental markets, a lack of sufficient new housing construction that is affordable to low-income earners and a lack of attention to climate impacts in existing communities. Added to these is the lack of attention to existing housing stocks in the various neighborhoods of the city.

The complexity is evident in the continuous entry of migrants into the city and the pressure they place on existing infrastructure and services that make what is available in various parts of the city insufficient.

The ACRC study addresses two problems in two proposals that are quite distinct in their focus. The first one is that we are advocating for reforms that will institutionalize the role of cooperative societies in the Lagos housing sector, supporting them in providing affordable and sustainable rental and owner-occupied housing for their members. We know that over two thousand cooperative societies are registered in Lagos as of 2020. A number of them already own land.

We know the Lagos State government from time to time, makes pronouncements about the desirability of co-operative societies having a stake in housing provision in Lagos. Several researchers point this out as well. So, why have these cooperative societies, particularly those that already purchased land, lost these lands to Omo-onile encroachment because they have not built on them for years? We are advocating for specific institutionalized approaches to address this issue.

Our secondary focus centers on existing communities, where we propose actions to enhance living conditions. Our primary objectives are to bolster these communities’ resilience to climate change and to initiate sustainable services for residents. To begin with, we are prioritizing participatory approaches to ensure these communities are safeguarded from flooding, a pervasive issue in the city.

We are exploring community-led initiatives that were already identified in the 2020 Lagos Resilience Strategy as a means of strengthening preparedness and flood hazard mitigation. Recognizing that each community faces unique challenges, our aim is to facilitate the articulation of these challenges, propose solutions, and establish connections with both government and non-governmental entities for implementation.

We are also advocating for the adoption of sustainable alternatives, including treated rainwater harvesting for domestic use, solar electricity for housing, local entrepreneurship, and street lighting, as well as drainage maintenance to improve living conditions in low-income communities. We acknowledge that the ACRC project alone cannot address all of Lagos’s issues, but we rely on the Lagos State government and its agencies to establish the linkages and institutional processes necessary to bring these projects to fruition.

Regarding housing rights, instead of resorting to the demolition of slum areas, governments have several options to consider. First and foremost, they can adopt a proactive approach to prevent the emergence of slums. This requires advanced monitoring of urban growth and new settlements, involving communities, local governments, civil society organizations, and welfare groups in prevention and control efforts.

Central to this approach is ensuring that existing built-up areas do not deteriorate into slums. Consider the condition of public estates that were initially planned, such as Jakande and Gowon Estates, and even Festac Town. Over time, the absence of infrastructure provision, repair, and upgrades—including roads, drainage systems, green spaces, housing maintenance, plumbing, and external drainage—has transformed these areas into slums.

Therefore, by providing services to existing communities, the expansion of slums can be prevented, reducing the need for mass demolitions based on poor living conditions and potential health hazards. Other reasons for mass demolitions, such as security concerns, should be addressed comprehensively since criminal activities occur in various communities across Lagos, regardless of their profile. Simply demolishing houses or communities will not eradicate criminal activities; it may merely displace them elsewhere.

In cases where demolitions are necessary, particularly in disaster-prone areas (not for displacement or real estate development), the government must ensure that affected residents receive adequate alternatives, resettlement plans, and sufficient advance notice. Additionally, government agencies should take responsibility for their lack of proactivity, which has contributed to the proliferation of such areas. Therefore, the Lagos State government must bear some of the social and economic costs resulting from these actions.