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Imagining a N500 billion housing fund

A big part of Nigeria’s infrastructure gap is the huge housing deficit. At the last count, it was estimated that the country has a 17 million housing deficit. However, this figure has been around since 2012 and so many players in the housing sector believe it is no longer an accurate reflection of the housing gap. Considering that housing provision has been deficient over the years, there is a strong prospect that the housing gap would have grown wider since 2012 than narrower.

But if we assume that the 17 million housing units’ figure is still accurate, even if the country were to build a million houses every year, it will still take 17 years to close the existing gap. With the country’s population growing at an estimated 3.5 percent per annum, to effectively close the housing gap, the country should actually be providing about 1.5 million housing units on an annual basis over a 17-year period.

If the gap were to be closed in the tenure of a single administration, assuming an 8-year tenure, we should be looking at approximately two to three million housing units per annum to do that.Practically, it is impossible for any government to seek to provide up to a million housing units on an annual basis. The cost would be too much and the logistics too huge. If we assume that the government would be providing very low cost housing at an average rate of N5 million per unit (say a two-bedroom apartment in a condominium), we would be looking at a cost of N5 trillion per annum, more than have of this year’s budget. The government is certainly not in a position to fund such huge budget for public sector housing.

However, government is a continuum. So no one government needs to close the housing gap in an 8-year tenure. What is really needed is a long term strategy that is fully funded on an annual basis aimed at closing the housing gap over a determined number of years. Besides, a well-funded and implemented public housing scheme could have a profound impact on economic development. We have all seen the impact Festac and 1004 estates, two mass public sector housing schemes that has stood the test of time, had made in Nigeria. Sadly, they have not been replicated over the years.

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So imagine that the federal government sets up a N500 billion public sector housing fund that is fully funded in the first year and use it to bridge the country’s ever widening housing gap. There is no doubt that a N500 billion housing fund is likely to have more socio-economic impact than the N500 billion social investment scheme that the government is currently implementing.

If we assume that the government can provide a two-bedroom flat on a mass housing basis at an average of N5 million per flat in a condominium style type of housing scheme, the government could easily be building a 100,000 housing units per annum over the next few years. This means that in four years, the government could build 400,000 housing units, a drop in the country’s housing deficit pool, but a significant step forward, when you consider that the government is currently unable to even provide up to a 1000 housing units on an annual basis.

If we assume that you will need to engage a minimum of 10 direct labourers to build one flat, building 400,000 flats per annum, assuming economies of scale, could create at least two million direct labourer jobs. The multiplier effect on other industries, like cement manufacturing, carpenters, wire manufacturers, electricians and many more that will have to be engaged or their products bought to complete this massive public sector housing scheme will be massive.

Then, there is also the taxation impact of providing housing for 400,000 households, who because they are living in government housing, can be identified and taxed. So those not already in the tax net can easily be brought into the tax net.

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The other major advantage of such a housing scheme is that it can be used for urban renewal, creating new urban centres and also for societal integration. So imagine a replica of 1004 estate in Ikorodu area of Lagos that also comes with a shopping mall located within the premises, an entertainment hub, including cinemas and an office complex. It also comes with all the basic amenities like water and road infrastructure.

The estate is built as a place where you can live, work and play. Allocation of flats is done on a quota system basis, that is, a combination of all the major tribes in the country and a healthy sprinkling of minority tribes to encourage ethnic integration.

The question is how do those who get allocated these houses pay for them. The answer is in the country’s fast growing pension funds. As at May 2018, data from the Pension Commission (Pencom) shows total retired savings funds under management is now N8.14 trillion. Total contributors in the fund stand at slightly over eight million.

Average contribution per person is slightly above N1.0 million while 74 percent of contributors are below 50 years. This means that there is room for a good chunk of these contributors to use part of their pension contribution as mortgage payments for a house. This will resonate well with most people as the biggest challenge facing many people looking to retirement is having a house of their own. It is just a matter of allocating a part each person’s monthly pension contribution as part payment for a mortgage for a house which he or she can move in as soon as a certain portion is paid.

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Also contributions currently being made under the National Housing Fund (NHF) can be consolidated under the pension fund contribution. Basically, Pencom should take over the NHF contributions and administer it as a mortgage fund under the pension contributions.

The Federal Mortgage Bank can be remodelled into a regulator and possibly a buyer of last resort in the mortgage sector for those who may default in paying up on their mortgages. As a regulator, the federal mortgage bank will ensure that all houses being built under the public sector housing scheme meet with laid down standards and regulations. It could also undertake the provision of the public infrastructure needed to support the new housing units that will come up.

Public housing could be a catalyst for economic development. Sadly, despite our rising housing infrastructure gap, the government has failed to think through a workable and sustainable solution. With the high pace growth in the country’s population, the slow growth rate in housing provision and fast growth in rural to urban migration, the country faces a slum crisis and the associated insecurity that comes with it unless significant efforts are made to close the housing deficit.

Anthony Osae-Brown


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