By S. Odia
We are trying to establish what true ‘affordable housing’ should look like in the Nigerian context. Local housing experts & practitioners have bandied around expressions like ‘mass’, ‘social’, ‘public’ & ‘affordable’ housing for some time. However, the concept of ‘affordable housing’ that is affordable to only 5 -10% of the population is self-delusionary. Technically speaking, ‘affordable housing’ in a given area should be affordable to at least 50% of the population in that same area.
In the absence of necessary data we have presumed a median household income of N192,000 per annum (N16,000 per month) for most urban cities such as Port Harcourt, Lagos & Abuja. This amount is four times the officially quoted, average national household income of N48,000, which covers both urban & rural areas. Since it is expected that a family should spend no more than 30% of their total income on housing, for urban Nigeria, any house that demands a rental or mortgage payment of N57,600 per annum (N4,800 per month) or less may be termed, “affordable housing”. This figure of N4,800 per month, or N57,600 per annum should form the basis on which all ‘truly affordable’ housing projections and planning should be done.
The question is, what type of house can one reasonably expect to get on a monthly rental or mortgage premium of N4,800? Most people who manage to build their own home in Nigeria do not take a loan, or are assisted with grants from close friends and relatives. However for those who do, there exist 3 main formal types of funding for housing purposes. These include,
1. Interest-free Funds – Donor funds channeled through international non-profit housing organizations such as Habitat for Humanity International (HFHI) and The Fuller Center for Housing (TFCH) both of whom administer mortgage loans to low-income beneficiaries at zero-interest and at no profit. However, as is the case with most donor funding, this is highly inadequate, unsustainable and only meets the need of a handful of lucky beneficiaries. Beneficiaries are usually required to deposit about 10% of the total cost of the house.
2. 6% Interest Funds – These are presently the lowest interest yielding rates on the market and are provided by the Federal Mortgage Bank of Nigeria (FMBN) through statutory deductions from workers’ salaries. Though much more available than donor funds, these too, are highly inadequate and are unsustainable. Beneficiaries are usually required to deposit 10% of the total cost of the house.
3. 18% Interest Funds – These loans at open market, commercial rates are more readily available through banks and primary mortgage institutions. They attract rates of between 13% and 22% per annum and beneficiaries are usually required to contribute about 30% of the total house cost.
For each of these options, repayment periods can range from 5 to 30 years, although usually, a 10-year period would be considered ideal by most lending institutions and beneficiaries. A side-by-side comparison using these various sources of funds bring to bear some vital ‘home’ truths with regards to the type of affordable house we should seriously be considering for Nigeria:
(1) Whereas with zero-interest funds, 50% of the urban population would be able to afford a N640,000(six hundred & forty thousand naira) home if paying over a 10-year period with a 10% deposit,
(2) with 6% interest funds, 50% of the urban population would be able to afford a N480,555 (four hundred and eighty thousand, five hundred and fifty five naira) home if paying over 10 years with a 10% deposit,
(3) with 18% interest funds, 50% of the urban population would be able to afford a N380,714(three hundred and eighty thousand, seven hundred and fourteen naira) home if paying over 10 years with a 30% (N114,214) cash deposit (that would take 24 months to save up at the same rate of N4,800 a month)!
Many would sharply disagree with these ‘home truths’ and might refer to them as being unrealistic. The degree to which we disagree should therefore be the degree to which we should be willing and able to subsidize ‘mass’, ‘social’, ‘affordable’ or ‘public’ housing. But whatever the case, we should stop bandying around fanciful sounding titles and begin to face some hard facts.
