Minister for works,power and housing
Ladies and Gentlemen:
Whenever you see the cover page of City People Magazine, I think it is fair to conjure an image that is most likely formed in your mind is summed up in one word – Tabloid.
The word evokes other images for which tabloids are world famous – Beautiful People, fashionable people, the Rich and the famous, glitz and glamour – City people is all of these.
Tabloid also evokes images of scandal, nudity in some cases, sometimes outrightly false or baseless reports. To my knowledge, City People is not that.
But two images that tabloids rarely or never evoke automatically is Governance and Ideas.
City People is both of these images, and this perhaps explains why it has outpaced and outlasted some of its competitors who are either gasping for air or have given up the chase.
In Governance, City People has sought to inspire public servants through its annual recognition and awards ceremony.
In the area of ideas, City People dares to be different. It follows the view that ideas rule the world and convenes this summit to challenge thinking and hopefully inspire action towards tackling a problem that offers many opportunities.
Bravo to Mr. Seye kehinde, the self-effacing man behind City People who dares to be different by convoking the 1st City People Real Estate, and Housing Lecture, and I am delighted to accept your invitation to speak at the inaugural lecture, by which you ask me to share “My thoughts on how to move the Housing Sector Forward.”
Before I share my thoughts, I think it might be helpful to share my experience.
If you have lived in other people’s houses because you could not pay your own rent you will appreciate the discomfort of homelessness and the indignity.
In 1982, I was privileged to work as a vacation jobber in LSDPC in Ilupeju, where my colleagues and I were assigned the privileged responsibility of sorting out the allocation of flats then under construction by the Jakande administration.
So I have some early experience of public mass housing and some of its challenges as a teenager.
I have been a tenant myself and know the pressures and anxiety that come with payment of rent in advance 2-3 years from a salary that you are yet to earn monthly in arrears.
It reinforces the need for a credit system in our real estate sector, where payments for rent are matched not only to the quantum but also the timing of income.
So people who get paid weekly, monthly or yearly, should pay their rent weekly, monthly or yearly.
It will relieve a lot of pressure on ordinary working people, it will allow increased occupancy of many flats that are now empty across our country because people cannot pay multiple year advance rent from weekly or monthly incomes received in arrears.
The need for credit reinforces my belief in the resort to the time tested use of mortgages as the best method for increasing access to housing for the vast majority of Nigerians; if we can build the houses, and I will shortly come to the point of what my thoughts are about the way to build.
But it is still pertinent to share with you my experiences as an advocate, where I have had cause to either act for the landlord to re-possess premises from defaulting tenants ; or when I have acted for tenants to prevent unlawful or forced evictions.
My experiences in those cases still lies with me.
They are the frustrations of landlords who depend on their houses for income and who are saddled with defaulting tenants on one hand; and the trauma of families with children who are unsure when they will be thrown on the streets on the other hand.
In my own quest to own my own house, I have personal experience.
Land that I bought that was resold illegally to a third party, or savings made from frugal earnings in the hope of securing a mortgage from mortgage institutions who later denied me on the ground that I did not have a collateral for my loan, or indeed Government housing for which I paid the advertised fees as deposit only for the scheme to be cancelled and refund not made.
There is of course my experience as Governor, where I bore the responsibility of the expectations of citizens looking for affordable housing.
While the question of “affordability” as a concept seems to elude definition as I will attempt to show, against the odds, against unsubsidized cement, unsubsidized labour and other building inputs, my team succeeded in putting 200 flats on the market every month at a mortgage of 9.5% for 10 years for some first time owners.
It is with this experience that I approach my job as your Minister for Housing and it is the background against which I proffer my thoughts.
In all our post-independence history, 2 (TWO) housing initiatives have first mind mention. The one is the Lateef Jakande initiative which was localized to Lagos and the other is the Shehu Shagari initiative which was national.
One common thread they share is that they have not been replicated or continued – so sustainability is a problem.
Another commonality was that they occurred at a time when our national currency was very strong. The Naira traded at almost parity with the Dollar which is our currency of reserve.
Today the story is much different.
Another feature I am told is that the Shagari Housing, did not incorporate enough diversity to reflect different weather and cultural differences in the country; and therefore, there were places where acceptability was low.
Whatever the situation we must salute the courage and the service of these pioneers.
I agree that it is difficult, if not impossible, for Government to provide all Housing solutions, all diverse types of demands, such as those who want detached buildings, those who want duplexes, those who want flats and indeed those who cannot even afford to own, but can only afford to rent.
The truth, which we must accept, is that 100% home ownership is an ideal, but the reality is that, best practices in places like the UK and Singapore are stories of a mixture of ownership and rental.
Success is defined and measured by the increasing number of tenants who become owners and not by the attainment of 100% home ownership because owners today may become tenants tomorrow if they fall on hard economic times, just as tenants today may become owners in a season of prosperity.
With this in mind my thoughts are directed on how to gradually and consistently increase the number of tenants who become owners, with a focus on first-time owners.
Our first thoughts and actions are to avoid the limitations of the past initiatives and deliver a sustainable program of National Housing, that has wide acceptability.
The Roadmap to this in our view is to evolve nationally acceptable designs that respond to and accommodate our diversity.
I am happy to announce that we have concluded this, starting from about 21(TWENTY-ONE) different designs, working down to 12 (TWELVE), and concluding on 6 (SIX).
The summary of those designs are as follows:
- 1,2 and 3 Bedroom bungalows, with court yards, that respond to the climate situation and cultural leanings of the North, to be built in states in the North East, North West and North Central parts of Nigeria.
- Blocks of 16 and 24 flats of 1,2 and 3 bedrooms and Bungalows of 1 and 2 bedrooms to be built in the South-South, South-East and South-West of Nigeria and the FCT.
These are broad classifications without details of special adaptations to be made in some states, based on our research and the experience of our diverse team of architects in the Ministry who come from all parts of Nigeria.
These designs do not contemplate those who want duplexes or bigger houses.
They contemplate those who we think are in the majority and who are the most vulnerable.
The first-time home owners, who do not earn large incomes, in the civil service, junior workers in private companies, young families where husband and wife can pool their incomes together to qualify, artisans, drivers, market men and women, whose income bracket falls within grade levels 9 – 15 in the public service.
Having proferred a pathway to acceptability and end-user identity, the next step to sustainability is mass production.
It is true that our deficit is large, but I will not go into the exact number because first the population since 2006 census has been disputed and successfully challenged by Lagos State in the census tribunal.
Secondly, the amount of the deficit has no certainty and has varied according to the reckoner.
My attitude is that no matter the size of the deficit it can be addressed if there is a sustainable plan that is rigorously implemented, while awaiting the conduct of a more credible census.
Our plan for sustainable supply is to standardize these designs (or modifications of them that may become necessary) and industrialize production, by standardizing fittings such as doors, windows, roofing sheets, tiles and other components in order to use these standards to stimulate local mass production of fittings and finishing to meet the demands of mass housing.
In this way, we will be achieving one major objective of the President’s economic plan of diversifying our economy.
For example, the smallest of houses will have at least a main door, a kitchen door, a room door and a bathroom door making a total of 4 (FOUR) doors.
In order to build 250,000 units of that type of house, this market will need to produce 1,000,000 (ONE MILLION) doors. This does not include pipes, taps and sockets for electrical appliances.
I leave you to imagine what this can do for our economy if we produce all these items locally.
I have news for small and medium scale businesses who are in this line of business.
We have resolved not to use imported:
- Doors
- Windows
- Tiles
- Ceilings
- Plumbing accessories
- Cables
- Paint and
- Iron – mongery on our housing schemes.
Our surveys indicate that electrical fittings such as sockets and door locks are still largely imported and we will use our demand capacity to stimulate local manufacturing or assembly, in order to keep the jobs in these areas at home.
The next step toward industrial production is to reduce the time it takes to build a block. Our recent experience shows that a block of 12 flats usually takes 12- 18 months at the quickest and we are looking at designing moulds that reduce this time to 6 (SIX) months or less.
This would of course mean that we cannot change designs at will.
We already have one or two serious offers in this direction and we will engage them as we go on.
Once this is done, the next step should be ascertaining who will develop.
It is easy for the uninformed to wonder why this is important; after all, anybody can build a house.
Sadly, that is not the reality and even the developers with proven capacity accept this, and I will explain.
As recently as Tuesday the 16th August 2016, I held a meeting with allottees who are yet to take possession of their land under a site and service scheme conceived around 1987 when the land of over 200 hectares was acquired. Since then nothing has been done. And there are many cases like this which put a lie to the complaint that there is no land to build .
We have resolved to complete the design for the roads, drainages and other services and hopefully get budget approval for 2017 to start developing.
A survey of our PPP initiatives with developers over the last 10 years which was supposed to deliver about 20,000 housing units has delivered less than 2,000.
The truth is that apart from financing difficulties, there are some people who have resorted to property development out of a survival necessity rather than out of any capacity or knowledge about the industry.
I recently received a letter from a developer who contracted to build 1,000 units about 4 years ago and has completed only 88. He is asking to be bought out.
We receive dozens of letters almost daily by people offering to build 10,000 housing units, (which seems to be the magical number some of these emergency developers favour), without being able to show to us, where they have built 100 Housing units.
We also have offers from road construction companies who want to build houses. The skill sets and logistics are entirely different even though they both involve construction.
At the recent Shelter Afrique Annual General meeting and the National Housing Summit which we hosted in Abuja, the recommendation from the Real Estate Developers Association of Nigeria, which we have accepted is that we must accredit, certify and rank developers who will be allowed to participate in our scheme.
There is the view that Government should get out of housing and leave it only to the private sector.
This was one of the issues debated at the summit. What the proponent failed to show us, was the proven capacity of the private sector on its own to meet the demand for housing and reduce the deficit.
The successful methods in countries I have referred to, show that Government often leads the process first by policy and later by regulation and finally by empowerment and enablement.
Our programme will not be different.
The policy framework of standardization of designs, use of local materials, and registration of developers has already started.
These are governmental initiatives.
The next intervention is funding.
For now, we have a budget of N35 Billion in 2016, which is not a lot by any measure. However, when compared with N1.8 Billion budgeted by the last administration is a 1900%. Increase.
Our first challenge is to show that we can utilize this budget given the late timing and all the preparatory challenges we have to surmount, and I am optimistic that we can.
We must be mindful that all the things I have talked about; design change, standards, local supply of materials etc, are conceptual. Our reality will hit us when we get to the field. This is when we will know whether the concept will work.
As in all initiatives, the laboratory is different from real life. The former is controlled and the latter is dynamic.
So our objective is to use this budget to prove the efficacy of our concept in the short term.
In the medium term, we will raise more capital outside direct Government Treasury, working with the Ministry of Finance, through Bonds, REITS and other forms of real estate finance.
Funding sources such as pension funds, private equity funds, and the National Housing fund managed by the Federal Mortgage Bank to finance development and also acquisition will be our focus.
It might interest you to know that for the first time since 2011, the Federal Mortgage Bank of Nigeria has declared a half year surplus of of N423,653,187.
This is against the backdrop of half year losses of N8.6 Bn; N6.4 Bn; N1.7 Bn, N2.1Bn and N8.6 Bn in 2011, 2012, 2013, 2014 and 2015.
Clearly the process of change is underway.
In the long term, I see the role of the Ministry as purely regulatory, controlling designs, quality of finish, construction methods and materials, guaranteeing offtake of any house that private sector can deliver, and strengthening the Federal Mortgage Bank to provide finance to developers and end users.
The Federal Mortgage Bank has recently requested an amendment to the payment process of the equity contribution of prospective home owners to be capitalized over a period instead of being paid at once and we have approved this request.
While much of what I have discussed focuses on home ownership, there are a sizable number of people who cannot afford to own homes, but who can afford to rent.
We have received some very useful suggestions about rent to own schemes, and the need to revive the culture of public access hostels once made popular by YMCA and YWCA and I think that this is one area where private sector can play a huge role.
The big elephant in the room of course is affordability.
This is a matter we must deal with honestly and frontally.
The first question is what is an affordable house and who can afford to own one.
My answer is that the price of a house is a function not only if its cost of construction, the land, the facilities it offers, but also its location.
Globally, home ownership or rental is always tied to income.
Therefore, we must understand that those who do not have work cannot legitimately expect to own a home.
This is because, apart from ownership, there are incidents of ownership; and they are huge responsibilities such as – payment of rates, mortgage repayment, charges like property tax, maintenance costs.
What society owes such a Jobless person is to provide opportunity first for employment, and thereafter he can get on the property ladder.
As one of our contributors at the Housing Summit pointed out to us, we must sharpen our focus on who the beneficiary is: between the off-taker and the end-user; and there is a world of difference between both.
Often times, “the off-taker” can buy but he does not need it. He wants to rent it to the “end user” who cannot afford to buy.
What we therefore propose to do is to target end users of the income category I have mentioned, design a mortgage tenure that allows them pay to own over a period.
If we remember that these end users already pay some rent anyway, such as 2 to 3 years rent in advance, a mortgage enables them to convert what they would have paid to a landlord into the equity contribution towards owning their own home, instead of perpetual payment that gives them no ownership rights.
As for the definition of what is affordable, let me say that all of us must come to a consensus of reasonableness about affordability.
At the recent Shelter Afrique meeting and the National Housing Summit when I threw the challenge to the operators to define affordability, these are some of the definitions that we received:-
“Affordable Housing”, from the off taker-driven perspective, is the Home Ownership Capacity of an Average Nigerian Citizen: to Build, Buy, or Rent, a Cost-effective House; based on spending a Total amount, inclusive of all related costs, of not more than 1/3 (One-third) of the individual’s take home Pay, calculated on an installment Monthly or Annual basis, up to the Average Working Age limit of 60 years”
-Dr. Joshua Egbagbe,
“Affordable housing is housing that a person or group can pay for with or without government assistance and according to the present and future socio-economic circumstances of the person or group in question”.
-Prof. Layi Egunjobi
“Affordable Housing is the provision of accessible and subsidized housing solutions on a SUSTAINABLE basis through END-USER driven initiatives”.
-Brig. Gen. PMO Reis
“Affordable housing is a house with some incentives, flexibility that allows a citizen own a house without stress”.
-Kabiru Sani Abdulallahi
“Affordable housing is housing that is accessible, appropriate, and secure, for the needs of the low and moderate income households, and is priced so that these households are also able to meet their other basic living costs like health, education, feeding etc. This is usually estimated at about 30% (or 1/3) of Gross household income”
-Centre for Affordable Housing and UN-Habitat
“Affordable housing, it depends”
-Simon Gusah “
I remember this last definition. Its simplicity was profound. It said very little and said a lot. The hall I re-call erupted in applause.
Clearly what he left unsaid, was said in those two words. They cover the issues of cost, location, quality, etc and the income of the end user.
Ladies and Gentlemen, these are my thoughts about real estate and Housing, and some of the actions my Ministry and our team have taken in furtherance of these thoughts.
They do not cover, for example, the role of agents in the real estate sector, the costs they charge, the cost of perfecting title such as stamp duty and registration, or indeed the cost of maintaining buildings when completed and has no plan maintenance from design.
This presentation also omits the question of energy efficiency in our houses and estates, in respect of which we have developed guidelines for incorporation into our building codes.
These areas are much more extensive and require very detailed discussions that are not suited for this occasion or the time frame of our circumstance today.
What I will say by conclusion is that 24 (Twenty Four) states have given us the land requested to start.
Our staff are working tirelessly to inspect these sites, survey them, prepare layout design as some are working on preparing tenders towards awards of contract.
We hope to start construction sometime in the 4th Quarter.
But the success of our plan will not be defined in the first few years by how many houses we build.
It will be defined by whether we can repeat the process every year, correct mistakes, increase annual output , and ultimately leave behind a programme that will have no political colour.
By this I mean a programme that will endure like the UK scheme which started in 1918 and will be 100 years in implementation in 2018, of course with modifications that have ensured continuity.
Babatunde Raji Fashola, SAN
Honourable Minister of Power, Works and Housing
Friday 19th August 20
