‘People will patronise quacks if professionals don’t adhere to best practices’

Basirat Oyalowo is the Lagos housing domain lead, 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, remedy to Lagos 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 back to physical spaces.

They have taken advantage of e-commerce and remote work technologies. The supply of residential real estate in major Nigeria cities has typically tilted towards the high/middle class rather than the lower income earners, who are in actual need. Unfortunately, a lot of 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 also 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 recognise the peculiarity of this sector. They need to optimise 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 a challenge for professionals in the sector. How do we address such loopholes in the Industry?
Quacks continue to be patronised because consumers/clients trust their services or do not mind taking the risk to patronise 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.

If we reflect on this, we will see that it is a question of how professionals are handling their services, how they relate with the society and what is communicated to the society. If professionals themselves adhere to international best practices, they become distinct from those who are quacks. If they are accessible to all income classes and provide top-notch services and engage with society as ethically as they should be, then they are able to build trust.

Otherwise people will continue to patronise these quacks and they become more entrenched in the society. Add to this, the impact of apps that break down complex processes into easy to understand ‘Do It Yourself’ processes that are breaking down professional services: from property valuation to architectural designs and material costing, there are so many apps that are being developed that people can easily adopt, without engaging professional services. So, professionals themselves have to be vocal and active in addressing these.

The mortgage industry has been ineffective in Nigeria and experts say high mortgage rates have impeded accessibility to homeownership. What is the way forward?
The issue is not only about high mortgage rates; it is that mortgages have never worked for the majority of Nigerians. Mortgages are an exact housing finance method that is consistently based on conditions that are not available in Nigeria.

Mortgage fundamentals require that prospective homeowners be employed in sectors where they earn continuous, predictable income for a number of years. In other words, those in formal employment are favoured.

In addition, their credit history must be available to predict and pre-empt defaults, and they must also have some savings as down payment. If a mortgage loan is provided, they must be able to pay back comfortably with sufficient income to afford feeding, healthcare, transportation, education and others. So, you see it is an exact system of financing.

If we now factor in the sales prices of houses on which mortgages are based, you will find that construction costs have gone up exponentially just as Nigeria’s macroeconomic conditions become insufferable with high interest rates, high cost of importation of close to 65 per cent of building materials as at 2022, inflation rates and so on.

Of course, without the government providing an enabling environment, real estate developers will need to earn an income from their investment, so, sales prices will be high. Typical Nigerian households cannot even afford a down payment for a three-bedroom apartment not to talk of monthly repayments. Research findings show that the cheapest newly built houses in Nigeria is nearly four times what a Nigerian teacher might 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 on-going. 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 focussed 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 per cent to the GDP, most records indicate 0.2per cent to 0.5per cent. 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 housing problems have to do with lack of enough decent housing to meet the demands of the rental markets, lack of sufficient new housing construction that is affordable to low- income earners and lack of attention to climate impacts in existing communities. Added to these is the lack of attention to existing housing stocks in the various neighbourhoods 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 makes 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 institutionalise the role of co-operative societies in the Lagos housing sector, supporting them towards providing affordable and sustainable rental and owner-occupied housing for their members. We know that over two thousand co-operative 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 co-operative societies, particularly those that already purchased land, losing these lands to Omo-onile encroachment because they have not built on them for years? We are advocating for specific institutionalised approaches to address this issue.

Our second focus is on existing communities, where we propose actions for improving living conditions in existing communities. The first is to scale up their resilience to climate change, and the second is to initiate sustainable services for residents. In the first place, we are looking at participatory processes for ensuring communities are safe from flooding. As you know, flooding is a critical problem throughout the city.

We are exploring community-led interventions that have already been identified in the 2020 Lagos Resilience Strategy as a means of entrenching preparedness and safety from flood hazards. Each community has their peculiar challenges, and our goal is to support the articulation of these challenges and their proposals for solutions, and then connect them to state and non-state actors for implementation.

We are also promoting the uptake of sustainable alternatives such as treated rainwater harvesting for domestic uses, solar electricity for housing, local entrepreneurial and street lighting, drainage clearing to improve living conditions in low-income communities. We know the ACRC project will not address every single problem in Lagos, but we must count on the Lagos State government and its agencies to provide the linkages and institutional processes that will bring these projects to reality.

One of the findings of the study on housing in Lagos focused on ensuring housing rights of citizens. What options do governments explore instead of demolition of slum areas?
The first option really, is to be proactive by preventing the emergence of slums. This is a serious task that is beyond conventional town planning processes.

It calls for technological advancement in monitoring the city growth and new settlements, involvement of communities and local governments, civil society and welfare organisations in prevention and control.

At the heart of this is to ensure that existing built up areas do not become slums. Look at the condition of public estates that are supposedly planned, such as the Jakande and Gowon Estates, even Festac Town. Over the years, the lack of provision or repair and upgrade of basic facilities: roads, drainages, green areas, physical fabric of houses, in-house plumbing and external drainages have created slums out of these areas.

So, if we take an approach of providing service to existing communities, we can prevent their expansion into slums. With this, the rationale for mass demolition based on poor living conditions, potential health hazards can be downscaled. Other excuses for mass demolition are hinged on security concerns, but security breaches occur in all types of communities, and all over Lagos, criminals operate within high profile communities as well. So, how many houses/communities will be demolished for harbouring gangs?

Even then, demolition will not eradicate gangs; it will just transport them to other areas. So, the social security mechanism for Lagos must work towards nipping these conditions in the bud, school drop-out rates at the junior and senior secondary school levels must be monitored and addressed in real time, youth unemployment, political thuggery are all very present in the city and these need to be tackled, rather than demolishing communities where they proliferate.

Of course, we cannot also overlook the fact that where demolitions are to take place, for example in disaster prone areas, (not for displacement and real estate development) it is the duty of government to ensure that appreciable alternatives, resettlements and abundant notice must be served, and also bear in mind that the lack of proactiveness of government agencies has also aided the proliferation of these areas. So, the Lagos State government must also take some of the social and economic costs arising from such actions.