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Why Low Income Earners Miss Out on Mortgages and Home Ownership

A major requirement for getting a mortgage loan facility that will enable the borrower to own a home is having a good job with regular income. But it becomes very challenging when the earning is low.

At N18,000 per month minimum wage, public sector workers cannot afford mortgage loan. Even with the yet to be implemented new minimum wage of N30,000, this class of people will not still be able to afford mortgage loan.

Therefore, for many years to come, unless a drastic change occurs, homeownership through mortgage loan, will continue to elude workers who earn the national minimum wage.

This is because, based on the terms of mortgage structuring which requires not less than one third or 33.3 percent of this N30,000 per month, the borrower has to deduct approximately N10,000  for loan repayment,  and a monthly payment of this sum for 30 years as required by the mortgage law, will mean that the prospective home owner will contribute the sum of N3 million for the 30-year period.

However, apart from the fact that there is no decent accommodation for N3 million in a good location, there is no 30-year mortgage available for loan applicants.  Besides, at the current minimum wage, 33.3 percent of N18, 000 will be N5, 994 and a monthly payment of this sum over a 30-year period will amount to N2.15 million.

Taking it further, Adeniyi Akinlusi, CEO, Trustbond Mortgages, emphasises that many households cannot own homes through mortgage because, given their low per capita income, they won’t qualify for mortgages.

Mortgage deficit, he noted, stands at N49.05 trillion and out of a population of 180 million people, 30 percent representing the 44.4 million working class, the mortgage-able adults are only 19.9 million, representing 45 percent of the total population.

This is why mortgage experts insist that job creation is critical to ease homeownership They maintain that government and private sector developers could build all the affordable or social housing they want to, but people have to have jobs to be able to buy either cash or through mortgage.

Nigeria is one the world’s most expensive housing markets where the cost of renting a three-bedroom apartment ranges from N15 million to N20  million per annum in highbrow areas like Victoria Island and Ikoyi in Lagos; Asokoro, Maitama in Abuja; GRA phase 2 in Port Harcourt or Trans Amadi also in Port Harcourt, among other areas in Nigeria.

The country’s  latest effort at improving access to housing finance was the establishment of the Nigerian Mortgage Refinance Company (NMRC) which is aimed to provide liquidity in the mortgage system by raising money from the capital market and using same to refinance primary mortgage banks for on-lending to loan applicants. But, four years down the line, the company is still struggling.

A report on The Lagos Housing Market notes that a mortgage period of 30 years and a housing unit of N2.15 million are hardly available, and this amount excludes interest rate on the mortgage facility. Consequently, even the middle income earners struggle to have access to affordable housing.

The report notes further that Nigeria is faced with a multi-dimensional housing problems stemming from poor planning. It recalls that many initiatives have been launched in the past which did not translate to visible results.

“The country is fraught with abandoned low cost housing projects, inadequate funding, regulatory bottlenecks, lack of focus on residential housing development and unsupportive finance mechanisms,” the report says, pointing out that in most developed countries, affordable housing at different income levels is achieved through assistance from government through planning incentives, tax credit, land provision, infrastructural support and required building approval concessions.

The bane of mortgage access in Nigeria is high interest rate which hovers between 20 percent and 30 percent and this is one of the major reasons for the low homeownership level in the country whose housing deficit is in excess of 20 million units.

Roland Igbinoba, vice chairman, Roland Igbinoba Real Foundation for Housing and Urban Development (RIRFHUD), publishers of the report, laments that, though Lagos currently has the most vibrant property market in Nigeria, home ownership is still at less than 20 percent.

“With a daily intake of 3,000 immigrants, the housing supply has failed to keep up with rapid urbanization and population expansion, especially in the low income market. The housing demand estimate is roughly 4.4 million units while the estimated current supply of housing in the state is 1,417,588 units”, he reveals, adding that “this leaves a gap between housing demand and supply at roughly 3 million units; output is relatively low although there has been increased participation in housing projects from both the government and private sector,” he noted

The extent of housing shortage in Lagos is enormous and the deficit is both quantitative and qualitative, such that 72 percent of Lagos residents are tenants paying rent as high as 50 percent of their monthly income while most of the existing accommodations are provided by private landlords.

On the qualitative housing deficit side, most low income earners live in congested settlements usually characterized by buildings with structural defects, bad roads, poor drainages and pollution, posing health hazards for the inhabitants.

Kenya Invites Private Land Owners for Affordable Housing Program

Kenya will partner private landowners to implement a development blueprint on affordable housing, Charles Mwaura, Principal Secretary of the State Department for Housing and Urban Development, said on Friday.

Mwaura said that individuals, who own huge tracts of land have been invited to become partners in the implementation of the mass housing programme.

“We are interested in getting private landowners into the affordable housing programme provided they will comply with the stipulated guidelines,” Mwaura said.

Mwaura added that a legislative framework had been in place to facilitate private investments in low-cost shelter.

Kenya aims to develop 500,000 housing units annually as part of the Big Four Agenda outlined by President Uhuru Kenyatta to transform the country.

Government statistics indicated that Kenya has an annual housing deficit of 200,000 units thanks to bottlenecks linked to high cost of land, archaic regulations and volatility in the real estate sector.

Mwaura said that availability of land is key to bridging housing deficit in the rapidly growing urban centres.

“Private landowners will help us develop projects that would be added to the affordable housing programme pipeline. The government will facilitate strategic partners to deliver low-cost shelter to citizens,” Mwaura said.

The state will invest in supportive infrastructure such as access roads, clean water, sewerage and power to pave way for construction of affordable shelter in major cities and towns, he said

Private landowners will be lumped together with financiers and contractors, who have already been roped in to help implement the affordable housing programme, the official said.

“Currently, we are receiving applications from partners with technical and financial capabilities to develop housing units for the low-to middle-income groups,” Mwaura said.

The affordable housing programme is expected to promote social equity, stimulate economic growth and create an estimated 350,000 direct and indirect jobs by 2022, he said.

Skidlab Ventures rolls out 50,000 affordable housing units

Government must create an enabling environment to attract the private sector to the housing sector, that’s according to the Chairman of Financial, infrastructure and technological development firm, Skidlab Ventures Ghana Ltd.

Sean Ekow Brown said his outfit is ready to support government significantly reduce the cost of operations in the housing sector

Speaking to Joy Business after a signing agreement with Construction firm, AAK & Associates, Mr Ekow Brown said, “As long as government is providing an enabling environment there will be nothing to worry about. It will be difficult if the private sector does this alone.”

He believes the contract, which was awarded by the Housing Ministry will see the construction of 50,000 affordable housing units nationwide and it will be overseen by the Ministry of Works and Housing.

“It’s an arrangement between Skidlab and AAK & Associates. We’ve had series of interactions on best ways to partner us in the construction of affordable housing, We’ve got a contract from the ministry and we want the right partnership to hit the ground for 50,000 affordable housing units,” he stated.

Speaking at the signing in, CEO of Haswwani & Sons Inc, Abdul Hashwani, urged the Chinese company to prioiritze best standards to make this contract materialize.

Housing and mortgage finance have experienced several difficulties in Ghana. Limited mortgages have been attributed to inadequate capital allocated to long-term financing, persistent gaps in borrower credit appraisals, and difficult macroeconomic conditions resulting in high interest rates. Similarly, housing microfinance has also encountered challenges in its consolidation, perhaps worse than mortgagees.

As such, many housing is out of the reach of many households in Ghana since the least expensive house would still be unaffordable to over 95 percent of Ghana’s urban population considering monthly mortgage repayments relative to household income of urban residents estimated at $4 735 (GH¢20 930).

The majority of housing, about 90 percent of the total, is delivered by individuals and the most common method the building is incremental construction, where owners self-manage, relying on craftsmen and tradesmen to build progressively, dictated by the availability of funds.

This trend has implications on the quantity and quality of the dwellings. The result has been overcrowding, particularly in urban areas, evidenced in the Greater Accra Region.

Source: By  Charles Ayitey

Problems with the National Housing Fund and the Way Forward

On 2 April 2019, the Senate, during its plenary, announced that President Muhammadu Buhari declined assent to the National Housing Fund (Establishment) Bill 2018 (“The NHF Bill”).

The NHF Bill, which was recently passed by the National Assembly, sought to provide for additional sources of funding for financing housing development in Nigeria. However, the President rejected the Bill for legal and economic reasons.

The President equally declined assent to seven other bills which were passed recently by the National Assembly.

Buhari, according to the letters, cited several grounds, ranging from infractions on extant laws, duplication of responsibilities of existing agencies, to financial constraints for refusing assent to the bills.

The National Assembly had transmitted the NHF Bill to the president for signing into law after passing it in February 2019.

 

Character of the NHF Bill

The NHF Bill sought to replace the current National Housing Fund (NHF) Act and introduce a number of changes to the NHF Scheme. These changes include the imposition of a compulsory 2.5% deduction on the monthly income of Nigerian workers, a 2.5% levy payable by manufacturers and importers of cement and a compulsory investment of 10% of profits before tax on banks, Pension Fund Administrators (PFA) and Insurance companies.

Under the extant NHF law (NHF 1992), every Nigerian earning N3, 000 or more per annum is required to contribute 2.5% of their monthly basic salary to the NHF. The funds mobilised will be made available to contributors at affordable interest rates to build homes.

Just like the pension and personal income tax contributions, the NHF is compulsory for a public worker, a private worker or self-employed individuals earning pay from the range of minimum wage and above.

                          

Key elements of the proposed fund

  • Mandatory 2.5% contribution of monthly income by employees earning minimum wage and above in public and private sectors as well as self-employed individuals.
  • 5% on locally produced or imported cement.
  • Employers are to deduct and remit the contributions monthly
  • Penalty for non-compliance of up to N100 million for corporates and N10m for individuals while sanctions include cancellation of operating licence of banks, insurance companies and PFAs for violations.
  • Withdrawal by contributors who have attained the age of 60 years or 35 years of service to be an interest rate of 2% per annum. The Fund and any refund of contributions are exempted from payment of taxes.

 

Presidential Rejection

However, the President declined assent to the NHF Bill. According to the President, the various levies and obligations imposed by the NHF Bill would be disruptive and punitive to the Nigerian worker and to sectors such as cement manufacturing, banking, insurance and pension. The President also stated that the provisions of the Bill directing PFAs to invest in the NHF undermines the powers of the National Pension Commission and adversely affects the safeguards that protect the pension industry from unreasonable investment risks.

 

Public Sentiment against the NHF Bill

Checks have revealed that there is a teeming public sentiment against the bill, just in line with that of the president. Although the Fund is not new, many have faulted it on so many grounds.

One of the major reasons for public sentiment against the bill is because it is very much shrouded in secrecy, with little or no consultation whatsoever from the relevant stakeholders in the housing and finance sectors.

The revised bill is being presented for passage without the input of various stakeholders. The same factor that affected the NHF Act of 1992 which failed because many organisations including those of the government didn’t make contributions to the poll.

In a conversation with Housing News, Gbenga Orile, a housing finance and mortgage consultant revealed that there wasn’t any critical business analysis or due consultation on the part of the Federal Mortgage Bank of Nigeria – the authority charged with the sole responsibility and cumbersome bureaucratic bottleneck of administering and getting loan(s) from the fund – before presenting the proposal to the National Assembly.

‘’Everyone can agree that there is a huge housing deficit in Nigeria, and it is high time this age long problem is addressed. The National Housing Fund is a plausible idea because it symbolises a social contract – a situation where those with delegated authority can on behalf of the people fashion out a suitable plan that will bring good to the highest number of people. But it becomes problematic when the relevant stakeholders are not even consulted or a critical business analysis is done. A thorough look at the bill will easily reveal these obvious errors,’’ he said.

The Federal Mortgage Bank of Nigeria (FMBN), has also been accused of having a poor record keeping data base like the one existing in PENCON.

According to Mr. Orile, the amount of contribution(s) to the national pension fund is public knowledge because of the need for transparency and accountability. If the NHF bill should become law, then it must place value on transparency and accountability, he said.

As mentioned earlier, there is a public recognition of the fact that the cost might be too much for the beneficiaries.

Putting it in clearer perspective, the cost implication for income earners is that it will take 2.5% from their income every month which is the equivalent of 250% from the PAYE contribution. This means that a N30, 000 earner will pay 2.5% (N750) every month to a poll account on the provision of affordable housing for the population.

It will increase the price of cement as the revised bill introduced a 2.5% tax on a bag of cement.

It will also take 10% away from commercial or merchant bank profit before tax (PBT) in every accounting year.

The Lagos Chamber of Commerce and Industry (LCCI) also feel that the President did the right thing by declining assent to the Bill. According to Mr Muda Yusuf, the Director-General of LCCI, the bill would have caused more problems for citizens.

Yusuf said that the bill would have increased cost of building materials and widen the country’s infrastructural deficit, leading to increase in cost of doing business and inflict hardship on workers.

What government should do, according to him, was to evolve a mechanism that would reduce the cost of building materials to enable more Nigerians become empowered to construct buildings.

Another shortcoming of the revised bill was its inadequacies to touch on the shortcomings of the 1992 Act on the issue of land ownership and titles as well as the current Land Use Act. The NHF loan is merely for the construction of the building without the acquisition of the landed properties.

 

NHF Bill: The way forward          

While the National Housing Fund has obviously become a raging controversy, the national problem of housing deficit remain unsolved. A lot of industry stakeholders, including the President of Housing Development Advocacy Network, Bar. Festus Adebayo, believes that Nigeria cannot afford to throw away the baby with the bad water – which in essence means that the NHF remains a critical part of the housing crisis solution in Nigeria if the problematic issues around it can be resolved.

In doing so, he believes that relevant stakeholders including the Real Estate Developers Association of Nigeria, Mortgage banks, Mortgage finance experts, financial market analysts, tax consultants, lawyers and many more professionals that will ensure an inclusive consultation panel be formed in order to look into the contentious issues that prevented the President from assenting the bill.

This he believes will enable a popular representation of views, a review of the pros and cons, and a conclusion that will be based on facts and evidence.

Stakeholders have been admonished not to fold their arms, in order to ensure that the extant issues, including the foreclosure act and the land use act are also reviewed.

As earlier echoed, the opinion of many is that the NHF be open, accessible to all, transparent and accountable. According to Mr Orile, if this is done, it will even bolster the confidence of more fund investors, which will ultimately reduce the cost for the people.

The National Assembly has also been encouraged by stakeholders to act in a manner that is beneficial to national interest. According to Mr Adebayo, once the 9th National Assembly has been sworn in, stakeholders should quickly begin an engagement with them on how to review the issues that have been mentioned so far, as well as to see to the amendment of pending laws.

Furthermore, the government is advised to open up the industry by way of policy to encourage the participation of the private sector, by first creating access to affordable land for investors. Through the Homestead Act of 1862, the American government made available 300 million acres of public property to the private sector to ensure massive development. Nigeria can borrow a leaf from this to attract the interest of major investors in affordable mass housing.

The government, according to Tosin Ashafa, a real estate analyst, can also look into reducing or eliminating the payment of duty, over a certain period of time, on imported building materials that are targeted for use in mass housing projects within the country.

There is no doubt that the cost of borrowing funds from financial institutions is a macro-economic issue that affects several other industries. It has become necessary, for the sake of progress, that special interventions (e.g. tax breaks) be made to encourage banks to lend to investors in mass housing projects at lower interest rates, over longer periods.

It is time for the government to look at mass housing or the real estate sector as an economic imperative. Only recently, the real estate sector contributed 1.1 trillion dollars to the American economy, creating millions of jobs in construction, brokerage, and so on.

At a time when Nigerians are in desperate need of jobs, this industry has the potential to create opportunities for millions if the right policy framework is put in place. Nigerians deserve the dignity of owning a house of their own and having access to real estate jobs. This will happen only with the stakeholders’ review of the National Housing Fund Bill.

By Ojonugwa Felix Ugboja

Housing Crisis and the Need to Review National Housing Fund Bill

The National Housing Fund (Establishment Act) 2018 is a bill to repeal the NHF Act 1992 (now NHF Act Cap N45, LFN 2004).

The bill, sponsored by Senator Ahmed Lawan, has the primary aim of mobilizing additional funding for the financing of housing projects in Nigeria just as is the case with the NHF Act 1992.

 

The major highlights of the bill are as follows:

  1. A levy of 2.5% (ex-factory price) on each bag of locally produced and imported cement.
  2. Contribution of 2.5% of monthly income on all employees (Public and Private Sector) at an interest rate of 2% p.a.
  3. Contribution of 2.5% of self-employed earning the equivalent of minimum wage and above at an interest rate of 2% p.a.
  4. Investment of 10% of Profit before Tax (PBT) of every commercial bank, merchant bank, insurance company and PFA in the fund at the rate of 1% above interest rate payable on current accounts by banks.
  5. The FGN shall make “adequate financial contribution and grants” to the fund as it deem fit. No amount was specified.
  6. An employer (public and private) is expected to make the monthly deductions and remit to the fund through the Federal Mortgage Bank (FMBN).
  7. The Central Bank of Nigeria (CBN) shall collect the investment amounts from Commercial and Merchant banks at the end of each year, the National Insurance Commission (NAICOM) shall collect for insurance companies, the National Pension Commission (PENCOM) has the responsibility to collect for PFA’s; while the Federal Inland Revenue Service (FIRS) will collect from manufacturers and importers the 2.5% levy on cement.
  8. There are sanctions for individuals or body corporate who fails to collect and remit contribution & levies ranging from losing operating licenses to fines up to N100 million for corporates and N10 million for individuals.
  9. Any contributor who does not have any outstanding loans and has attained 60 years of age or 35 years of service is entitled to a refund of contribution at an interest rate of 2% p.a. with 3 months of application.

Who manages the fund?

The Federal Mortgage Bank of Nigeria

How?

Through lending to Primary Mortgage banks (PMBs)

Who can access the loan?

Individual Contributors and Developers

How do contributors access the fund and is it limited to contribution?

A contributor interested in obtaining the NHF loan applies through a registered and duly accredited Mortgage Loan Originator (PMB), who packages and forwards the application to the FMBN. The loan amount is determined by the applicant’s affordability and not the 2.5% of income contributed.

Is participation Compulsory?

Yes it is mandatory for everybody earning any amount from minimum wage and above. Whether you are a public worker, a private worker or self-employed; as long as you are earning any amount from minimum wage, you’re mandated to contribute.

What is the difference between the NHF Act 2004 and the NHF Bill 2018?

 What is the difference between the NHF Act 2004 and the NHF Bill 2018?
The  NHF scheme was set up by the NHF Act No.3 of 1992, to provide a pool of fund that will cater to the housing needs of the low and medium income earners, and it was mandatory for employees to contribute 2.5% of their monthly income to benefit from it.

 

NHF 1992

NHF 2018

Contribution
by Nigerian workers

An employee or self-employed earning an income of N3,000 and
above per annum in both the public and the private sectors shall contribute
2.5% of his basic monthly salary to the Fund at an interest rate of 4% on
contributions

An employee or self-employed earning minimum wage and above per
annum in both the public and the private sectors of the economy shall
contribute 2.5% of monthly income to the Fund. At an interest of 2% on
contributions

Contribution
by Body corporate

Every commercial or merchant bank shall invest in the Fund 10%
of its loans and advances at an interest rate of 1% above the interest rate
payable on current accounts by banks.

Every commercial or merchant bank shall invest in the Fund 10%
of PBT at an interest rate of 1% above the interest rate payable on current
accounts by banks.

Every registered insurance company shall invest a minimum of 20%
of its non-life funds and 40% of its life funds in real property development
of which not less than 50% shall be paid into the Fund at the rate of 4% p.a.

Every Insurance Company, shall invest in the Fund 10% of PBT at
an interest rate of 1% above the interest rate payable on current accounts by
banks.

No Investment from PFAs (Note: There was no PFA
then
)

Every PFA shall invest in the Fund, 10% of PBT at an interest
rate of 1% above the interest rate payable on current accounts by banks.

No Levy for any manufacturer or importer of cement

Every manufacturer or importer of cement shall remit 2.5% o
cement price.

Refund to
a contributor

Any contributor who does not have any outstanding loans and has
attained 60 years of age is entitled to a refund of contribution.

Any contributor who does not have any outstanding loans and has
attained 60 years of age or 35 years of service is entitled to a refund of
contribution at an interest rate of 2% p.a. with 3 months of application.

Penalty

Sanctions for individuals or body corporate who fails to collect
and remit contribution and levies ranging from fines up to N50,000 for
corporates and N5,000 for individuals.

Sanctions for individuals or body corporate who fails to collect
and remit contribution and levies ranging from losing operating licenses to
fines up to N100m for corporates and N10m for individuals.

Source: Yinka Ogunnubi Research / #NHF2018

 

If the NHF Act has been in existence since 1992 and the provisions of the law was mandatory how come it was not fully implemented?

 

The NHF scheme was set up by the NHF Act No.3 of 1992, to provide a pool of fund that will cater to the housing needs of the low and medium income earners, and it was mandatory for employees to contribute 2.5% of their monthly income to benefit from it.

However, there were several reasons why the scheme was never fully implemented, viz:

 

1. Stakeholders did not meet up to their obligations. As recent as 2013, the CBN had not even paid up its 30% equity stake in FMBN. Banks and insurance companies that were required to be investing in the scheme were also defaulting. Even the CBN and the insurance commission that was required by law to remit investments of these financial institutions couldn’t be bothered about implementing the law.

2. Many States didn’t start remitting until many years after the law came into effect. Even when they started remitting, they were defaulting. Some States have huge gaps as in number of years when they stopped and started remitting again. As at 2009, only twenty-four (24) States were contributing to the fund. It is difficult to enforce a law which even the drafters (government) were not obeying.

3. Many employees through their Labour unions opted out of the scheme due largely to complaints regarding alleged poor record keeping by the Federal Mortgage Bank of Nigeria (FMBN) and cumbersome bureaucratic bottlenecks.

4. The cost of construction and real estate development kept increasing beyond what the capacity of workers could afford. The maximum loan amount collectable on the NHF presently is N15 Million with equity contribution ranging from 10% – 30% depending on the amount applied for.

5. Challenges in enforcement of the law. For instance, the law hasn’t been able to figure out how to get the self-employed to contribute. The law expects them to voluntarily contribute. Never going to happen in a million years. Besides, it’s difficult to enforce a law that the enforcers themselves are breaking.

6. Finance. The pool of funds was insufficient to make any significant impact. Between 1992 – 2009 (a period of 17 years), the fund was only able to mobilize about N70 Billion of which it was able to loan out about N20 Billion mostly to developers.

7.The Land Use Act made the process of perfecting title to landed property burdensome, slow and costly. The NHF does not fund purchase of land. It only funds construction and renovation of buildings of which you MUST have title documents proving ownership to be qualified for the loan. This was a cul-de-sac scenario – a route or course leading nowhere.

8.Political considerations: The States were more inclined to implement their housing projects rather than contribute to the NHF because such projects had greater political gain to them than the NHF which is seen as a Federal Government institution and the means/arm through which the Federal government executes its own housing projects (political mandates/promises). Any accomplishment of the FMBN was therefore seen as a certain credit to the Federal Government rather than the State Government or Governor’s achievement.

“Without abrogating the land use act, housing can never become affordable in a million years in Nigeria. Freehold property rights is a pre requisite for accessing affordable 30yr mortgages which is necessary for cheap housing” – Kola Ibrahim‏ @alpontif

 

What has the NHF achieved since inception?

According to the Federal Mortgage Bank of Nigeria (FMBN) Managing Director, Ahmed Dangiwa, the NHF since inception (i.e. 27 years ago), has disbursed a total of N193.4 Billion in loans to about 23,000 beneficiaries and made refunds to about 230,000 retirees.

While a significant part of the fund has been accessed by developers resulting in thousands of housing units constructed, it must also be noted that the fund has been most active in recent years due to increased collaborations with Labour, States and the Organised Private Sector (OPS).

Challenges of the NHF 2018 Recently Passed by NASS

PriceWaterhouseCoopers (PwC) recently posted ten (10) reasons why the bill in its present form is a bad idea. Permit me to highlight seven (7) of them for specific reference.

  1. The contribution is regressive as it taxes the poor more than the rich. For instance, minimum wage earners will pay about 250% of their personal income tax (PAYE) to the NHF monthly.
  2.  Making all employers liable to deduct and remit the contributions monthly (without a threshold) will worsen the ease of doing business and Nigeria’s paying taxes ranking;
  3. Cost of borrowing will increase as banks are required to invest a minimum of 10% of their profits at 1% above current deposit rates;
  4. Increasing the tax burden without addressing other fundamental issues like land regulation, REITS framework etc is not consistent with the 2017 National Tax Policy;
  5. Imposition of the 2.5% levy on cement is a tax on property development which will make housing even less affordable;
  6. The requirement for PFAs to invest pension funds in the scheme means less returns for pension contributors which will erode value for pensioners; and
  7. The return of 2% per annum for contributors withdrawing after attaining 60 years of age or 35 years of service is far below inflation rate and grossly insufficient to compensate for time value of money.

Conclusion

This bill (as is) is clearly an attempt by the National Assembly to mobilize more funding for the NHF which in 27 years has not been able to mobilize much in terms of finance. That is clearly understood.

However, the challenges of housing, goes beyond just funding. First, there are systemic challenges around property rights for example that needs to be resolved. If this is not fixed, contributors cannot access loans and the funds will just be another big government effort to trap people’s money until they retire or worse die.

Secondly, I am of the opinion that perhaps the emphasis should be more about ensuring that banks and insurance companies comply with the law as it currently is rather than enacting another law that will most likely be defaulted. For instance, the Central Bank of Nigeria (CBN), and the NAICOM statistics indicated that between 2008 and 2017, total loans and advances by deposit money banks and non-life and life funds from insurance companies amounted to over N100 trillion.

At 10% investment of their loan advances and non-life and life insurance with the NHF, about N10 trillion should have been invested in the fund by the banks and insurance companies over the period. Can we strive to achieve this first before increasing the burden of contribution on workers?

It is telling that the fund has refunded more to retirees than it has actually granted loans to contributors.

Without an integrated solution, plan and strategy in place, (which must also include increased funding), we would simply be increasingly the burden on workers.

In trying to solve one problem (the lack of adequate funding), we should not in the process create additional problems for the Nigeria worker and corporate entities (the cobra effect).

This bill, in my opinion, should not be signed into law in its present form. The President should send it back to the NASS for further review and more stakeholders input to deliver on the practical objective

By Yinka Ogunnubi

Family Home Funds and the Plausible Goal of Affordable Housing in Nigeria

With nearly 200 million people, Nigeria has the largest population in Africa, and it is the 7th in world population ranking. In spite of this huge population, the country has struggled over decades to come up with a sustainable action plan that will reduce the incredible housing gap in the country.

Governments in many countries take the responsibility for the provision of housing through a mortgage financing system that simplifies home ownership for employed citizens, and a social security system for the unemployed. And this is why China with a population of 1.3 billion people has a housing surplus yet Nigeria with a population of about 200 million has a housing deficit.

According to multiple housing surveys conducted since 2011, there is over 20 million housing deficit in Nigeria. Generally, housing has been a major challenge in Nigeria for decades and there seems to be a preponderance of ineffective or motionless housing policies that has led to the inability of government to address the housing challenge.

In 1991 the government of Ibrahim Babangida promulgated the National Housing Policy, which was aimed at making housing affordable for Nigerians. As a result of the ineffectiveness of the policy in completely addressing the issues, a committee was set up in 2001 to provide a new housing policy. The report of the committee culminated in the New National Housing Policy of 2006. Yet, that policy despite the breadth of its input did not solve Nigeria’s housing challenges.

READ MORE: US MORTGAGE APPLICATIONS HIT TWO AND A HALF YEAR HIGH

In 2012 the then Minister of Housing, Dr. Ama Pepple presented a new draft policy on housing to the Federal Executive Council. The policy sought to initiate a new paradigm to the existing housing policy.

The new policy proposed the collaboration between federal government and the private sector in the provision of one million houses annually in order to address the housing deficit of the country. In other words, the new policy sought to promote Public-Private-Partnership in housing for all Nigerians.

family

Although, the new direction encouraged the participation of the private sector in the housing sector, not much was implemented before the expiration of the Jonathan’s administration.

A New Direction with Family Home Funds

It is against this backdrop that the current administration under the leadership President Muhammadu Buhari and the Minister of Works, Power and Housing, Babatunde Fashola introduced new policy measures to address the housing challenges in the country.

The Family Homes Fund Limited is one of such new initiatives. The Fund is a partnership between the Federal Ministry of Finance and the Nigerian Sovereign Investment Authority as founding shareholders.

The Fund is the largest affordable housing-focused fund in Sub-Sahara Africa, leveraging its significant capital (in excess of N1trn by 2023) to facilitate access to affordable housing for millions of Nigerians on low to medium income groups.

Through strategic partnerships with various players in the sector and some of the world’s main Development Finance Institutions, the Fund has an ambitious commitment to facilitate and supply 500,000 homes and 1.5million jobs for the low income earners by 2023.

Beneficiaries of the project will enjoy a deferred loan for up to 40% of the cost of their home. For the first 5 years of the loan, no payments need to be made. From the 6th year, monthly payments will be made to start repaying both interest and capital to assist the purchaser.

The amount paid starts low and increases each year in gradual steps (average 6.5% per annum) in order for the HTB loan to be fully repaid by the 20th year, the same year the mortgage is expected to be fully repaid. To qualify, households will have earnings between N600k to N1.2m per annum and the new home must cost less than N7.5m.

family

An exception is made in Abuja, Lagos, Port Harcourt and Kano where the cost of a new home can be as high as N9m. Households benefiting from Loan Assistance will not be owners of a suitable home and will include one income earner who is under 35 years of age and does not have to be one of the people applying for the scheme or the loan but must be available to help with repayments.

The fund has recently completed the construction of 400 homes with an average cost of N3.5million in Grand Luvu, Nasarawa State – part of over 4,000 homes under construction in five states namely Ogun, Nasarawa, Kano, Delta and Kaduna.

A further 30,000 homes have been negotiated with development partners and have commenced since November 2018.

READ MORE: SCIENCE TECH TO BOOST NIGERIAS GDP MINISTER

As the new company builds capacity through the ongoing recruitment campaign, it will achieve a program of 80,000 homes by December 2019.

family

 

FHF and Creation of New Jobs

Ongoing investments are already making a real difference with over 13,000 jobs created and about 360,000 to be created from current development pipeline. The Grand Luvu Project in Nasarawa State has created about 8000 jobs.

Many young people, especially those who were previously unemployed have been able to obtain training on the Funds Grand Luvu project, acquire valuable skills with guaranteed long-term employment and income to support their families. Same goes for the unskilled unemployed youths who depend on their family until they were employed as masons or carpenters on the project sites.

In Kaduna, the Millennium City project has directly engaged slightly over 200 persons which includes local artisans including carpenters and brick layers. The construction need for accountants, surveyors, engineers, etc. has created a lot of jobs since commencement.

According to officials of the fund “Our focus is to create homes that people, particularly those on low income can afford but beyond that, ensure that we provide opportunity for them to earn decent wages consistently through our investment in these projects.

“We have spent the last year building very strong foundations for a major take off and now we should start seeing the results in affordable homes and jobs for local people.”

 

Sustaining the Tempo

A noticeable pattern over the decades in such housing projects in Nigeria has been the counterproductive interference of politics, bureaucracy and corruption. Given the current level of performance by the Family Home Funds, and with credible projections for greater success, the wheels can only slow down if the government allows the intrusion of intervening variables that have always shortened the lifespan of housing development.

Government should ensure that its quality control officers are incorruptible and cooperative with the project leaders at Family Home Funds for the sake of harmony and the deliverance of testable results.

The current government has shown a commitment to fighting corruption, and it is the hope of many, especially Nigerians who will benefit from this project that corrupt civil servants and politicians do not have opportunities to exert themselves and their vested interest against the will of the people.

Obviously, Family Home Funds possess the technical and logistic abilities to deliver these projects, it is therefore very important for the government to ensure credible partnership.

 family

Family Home Fund’s Deserved Accolade

For Nigerians who had totally given up hope of ever owning a home of their own, especially because of cost, this is definitely a new era of hope. Times are changing and homes are being built, just as jobs are being created.

Many Nigerians on low income have always been unable to buy a home either because they do not have sufficient savings for a deposit or are unable to meet requirements for a mortgage. The Family Homes Funds intends to set up a Rental Housing Fund to give Nigerians on low income a first step on the housing ladder. When the Fund is launched, eligible beneficiaries will be able to lease a decent home for a monthly cost not exceeding 40% of their household income including an option to buy the home at any anytime.

It is the expectation of many that Family Home Funds do not fail Nigerians. If Nigeria must close its housing gap and catch up with other countries, then Family Home Funds has brought a timely intervention that must be sustained with utmost commitment.

By Ojonugwa Felix Ugboja

Hispanics Lead Recent Homeownership Surge in U.S

The National Association of Hispanic Real Estate Professionals released the 2018 State of Hispanic Homeownership Report on Tuesday at its Housing Policy & Hispanic Lending Conference.

The annual report found that from 2008 to 2018, the Hispanic population was responsible for 81% of U.S. labor force growth, accounted for 39.6% of U.S. household formations and represented 62.7% of the increase in U.S. net homeownership.

“The annual State of Hispanic Homeownership Report play an important role in noting important trends in the Latino megamarket and serves as a key informational resource for policymakers and industry stakeholders,” NAHREP said in a press release.

The 2018 State of Hispanic Homeownership Report is in its ninth year of publication, focusing on the impact of language and culture in home purchase transactions. In addition to statistics on these homeownership trends, the report also provides recommendations on marketing strategies to help companies effectively reach Hispanic consumers.

Download the full report here.

Source: By Alyssa Stringer

Archbisho

Archbishop Vows to Handle Housing Crisis

The Archbishop of Canterbury has launched a new commission to look at the housing crisis and the Church’s role in building stronger communities across the country.

Chaired by Charlie Arbuthnot, an expert in the financing of social housing, and the Bishop of Kensington, Graham Tomlin, who has been active in efforts to support residents following the Grenfell Tower disaster, the group will begin to ask questions about the use of Church land, affordable housing and government policy.

Launched at Lambeth Palace on Tuesday, the Commission is made up of experts in the area of housing and community including Sir Robert John Devereux a former permanent secretary for the Department for Work and Pensions and Marvin Rees the Mayor of Bristol.

Archbishop

Those gathered at the launch were promised a “thoughtful, imaginative and radical” look at issue as well being told the Commission is keen to listen to stories of those working on the ground.

SEE  ALSO: DELAYED INVOICE SETTLEMENTS THREATEN NIGERIA’S POWER PROJECTS

Explaining the importance of its work, Justin Welby, said: “Britain’s housing crisis is one of the major challenges facing this country – and it is hitting the poorest the hardest. While there is already significant work being done to find solutions, the Church has something unique to contribute.

“Up and down the country we are living out our faith in Jesus Christ by loving and serving those around us. Through food banks, night shelters and many other projects, the Church seeks to bind communities together with bonds of friendship, compassion and mutual support. This teaches us that any way forward must involve building communities, not just houses.

“The Archbishop of Canterbury’s Commission on Housing, Church and Community will consider what else we could and should be doing, as a Church and as a nation. In doing so, I hope it might help reclaim the very purpose of housing – as the basis for community, and a foundation for human flourishing.”

 

The Archbishop acknowledged the housing crisis isn’t a new issue. He also suggested it was a growing problem for clergy who retire and move out of church owned homes.

Speaking to Premier at the launch, Graham Tomlin explained why the Church wants to address what some would describe as a political issue.

He said: “The church is called to do justice and to bear witness of the kingdom of God and an important part of that is looking at the issues that particularly effect poorer people in our society.

“Housing is one of those issues. One of our clergy said to me the other day, that most of the postural issues he deals with have some sort of housing connection to it, the housing crisis affects poorer people more than others.

Archbishop

“One of the ways in which we bear witness to the kingdom of God, this vision of the way God wanted the world to be, is by helping people imagine what that might be. And what we’re trying to do is to try to see what that might look like, in the realm of housing in our society.”

The Commission is expected to gather evidence over the next 18 months before producing a report.

Charlie Arbuthnot spoke to Premier at the launch and explained what he was hoping to achieve.

He said: “I think probably top of my list would be that we’ve done something that’s enabled really healthy community across the nation.

“We’ve got dislocated communities and it would be great if we could deal with that.”

Marcus Jones

45 Schools Built By Borno for Orphaned IDPs

The Borno Government on Wednesday said it had constructed 45 mega schools to cater for the education of children orphaned by Boko Haram insurgency in the state.

The Commissioner of Education, Alhaji Inuwa Kubo, told newsmen in Maiduguri that the schools were established in the 27 local government areas of the state.

Statistics by the government indicate that over 53, 000 children were orphaned and 50,000 women widowed by the insurgency in the North/East state.

Kubo, who spoke on the sideline of the humanitarian stakeholders’ forum meeting, said the projects were part of a deliberate policy, to enhance access to quality education for orphans and out-of-school children.

READ ALSO: CITY SCHOOLS BELIEVE STABLE HOUSING IS KEY TO STUDENT LEARNING

He disclosed that the schools were designed with state-of-the-art facilities such as e-learning devices, air condition systems, power generators and other modern educational accessories.

orphaned

Kubo explained that meals, uniforms and instructional materials would be provided free to pupils in the schools, to create an enabling teaching and learning environment.

The commissioner revealed that the enrollment process of the children had commenced in the 27 LGAs, while the state government would embark on an awareness campaign to mobilise guardians to enrol their wards in school.

According to him, the state government has so far recruited 1,000 teachers to ensure the provision of quality services and sustainability.

READ ALSO: DELAYED INVOICE SETTLEMENTS THREATEN NIGERIA POWER PROJECTS

“Already, we commenced recruitment of 1,000 teachers and plans are underway to recruit additional teachers for the mega schools.

orphaned

While commending humanitarian and development organisations over their support to persons displaced by insurgency, the commissioner called on the organisations to provide scholarships for orphans and vulnerable children to enable them to pursue higher education.

READ ALSO: LAGOS ISLAND IS LONG OVERDUE FOR TOTAL REGENERATION

He also called on the organisations to provide livelihood support for poor families and sensitise them on the need to enrol their children in school.

The News Agency of Nigeria (NAN) reports that the humanitarian stakeholders’ forum meeting was organised by the National Emergency Management Agency (NEMA), to appraise interventions, identify gaps and enhance collaborative efforts for emergency response services in the state.

Source: Tribuneng

San Jose boosts affordable housing funding for poorest residents

Becoming what is believed to be the first city to take such a step, San Jose is set to devote 45 percent of its available affordable housing funding toward extremely low-income residents at the greatest risk of falling into homelessness.

The City Council voted unanimously to approve the idea, which could help hundreds, perhaps thousands, of families, on Tuesday. The income required to meet the threshold varies, but a family of three making about $35,000 a year, for instance, would qualify.

“As you all know, these are the most vulnerable members of our community,” said David Low, a spokesman for Destination: Home, a homeless advocacy organization that supported the proposal.

“Oftentimes, I think we forget the folks on the bottom rung of the ladder,” said Councilman Sergio Jimenez.

Nearly three-quarters of these residents spend more than half of their income on rent, Councilwomen Maya Esparza and Dev Davis said in a memo, arguing that adding more affordable housing will help prevent further homelessness.

“We have a housing supply problem and we’ve had it for a really long time in the Bay Area,” Davis said at the council meeting. “We know we have to do better and we can do better.”

In endorsing their colleagues’ memo, Councilman Sergio Jimenez and Councilwoman Sylvia Arenas pointed out that the city had come close to meeting its market-rate housing goal.

“We owe our most vulnerable residents a stronger commitment,” the pair wrote. “These same residents are critical to our economic prosperity by virtue of their employment in the service industry, construction and other fields essential to our growth. It is in our best interest to guarantee that they can afford to live in San Jose.”

But Mayor Sam Liccardo said the city needs to add all levels of housing, pointing out that market-rate developments can help fund affordable units.

“We just need a lot more at all levels of income,” Liccardo said. “We need both.”

After residents narrowly defeated a 2018 affordable housing bond measure, Liccardo said the city is considering another measure in 2020 and exploring partnerships with foundations, although he declined to provide specifics.

Councilman Raul Peralez, who represents the downtown area, said he supports affordable housing developments but called on other council members to champion them in their own districts. It is getting “harder and harder,” he said, to convince his constituents they are a good idea when the developments are largely concentrated in one part of the city.

Jimenez thanked Peralez for his effort and said he’d pushed back at residents in his own district who opposed such a project.

“Even though it’s challenging,” he said, “I believe it’s the right thing to do.”

The council also voted to spend some $10 million converting market-rate housing into affordable housing.

Even though it won’t add to the overall housing stock, the City Council voted to devote the money to buying and rehabbing market-rate units as affordable. Developers will be able to propose purchasing a property with some city financing if they agree to an affordability restriction.

The move will “open the doors to creative solutions” to the region’s housing crisis, said the city’s housing director, Jacky Morales-Ferrand.

The need is pressing. Now, more than 40,000 families qualify for extremely low-income housing. Yet, there are less than 3,000 units available.

And even for families making a little more money, the housing supply is short and the city is nowhere near meeting its goal to add 10,000 affordable homes by 2023. By the end of the first year, 2018, the city was only about 20 percent of the way to that target. At the current pace, the city will only get 58 percent of the way there within five years.

According to the Housing Department, it would take a massive injection of funds — more than $520 million — to reach the ultimate 10,000 goal.

“We need to continue to work toward finding additional revenue for affordable housing,” Morales-Ferrand said.

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