Hot SourceState governments that have recently embarked on rent control measures may in the long run find it more injurious to the housing market than the anticipated short-term benefits.
The idea of policing the rental market through rent controls is against the spirit of a capital economy that Nigeria currently practices.
Controlling private investments, particularly in housing, may lead to a freeze in further developments, and in economics, the moment the supply side of the market becomes unattractive, particularly for inelastic products, it breeds higher prices. Even in a controlled environment, such controls may lead to black market rents being charged because of demand pull.
The only way to mitigate rental increases is to facilitate policies that will enhance the supply side of the market, making it attractive by stimulating the market forces. This way, competition will set in and thus drive prices down. In a society like FCT, access to housing factors like land is a big challenge.
Regarding effective demand, as long as the projected incomes potential home demanders don’t match or weigh over the cost of construction, the market will be unattractive.
So, I am not a proponent of rent freeze, but abhors additional unreasonable third party costs on rents. e.g. inspection fees, legal fees, and agreement fees. These can be regulated by the government. In the estate and surveying profession, it is illegal for anybody to charge above 10% because the regulatory body has already pegged it at 10%, anything above that is illegal.
But now the situation is so bad that some persons without direct property briefs advertise houses they don’t have, everyday collect inspection fees from innocent and desperate Nigerians thus defrauding them.
The government can, however, regulate what additional costs estate agents can charge over the permitted commissions, and this should not be beyond the approved 10%.
Relating to your question on affordable housing, the government should not misconstrue the term housing with houses. Housing is a process while houses are end products, housing process involves products mix, how do you make land easily available, how do you make finance affordable for Nigerians amongst other needs? So there should be policies that would ease access to land, finance, materials, etc., these will be a plus towards housing the poor.
A policy where civil servants would have access to their contributions to National Housing Funds (NHF) is essential. Similarly, a policy that would ensure longer moratorium on housing loans would assist, especially through revitalisation of primary mortgage institutions (PMIs) to be licenced and regulated by the Federal Mortgage Bank not Central Bank of Nigeria. Their core service is housing finance, not normal cash banking.
Regarding rent tribunals, they are alternative dispute resolution institutions meant to hasten adjudication on rental matters.
Therefore, the setting up of rent tribunals should be encouraged. This is one legal institution that would have supported declines in rental prices. If a landlord reviews his rent and the tenant is dissatisfied, he may approach such tribunals where a balance could be struck.
Similarly, once a landlord knows that he can recover his property within say two to three months through a tribunal, the real estate sector becomes attractive to investors, thus enhancing the supply side of the market. Today, most rental issues are determined in normal courts in Nigeria. In some cases, to recover a premises takes up to three years.
Adamu Kasimu is an Abuja based Estate Surveyor and Valuer
