Thursday, 25 August 2011 00:00 Anonymous

The Lagos State Tenancy Law which came into effect recently, is expected to bring relief to tenants in the state who have, over the years, suffered from the high handedness of landlords.

The new law makes it illegal for any landlord to receive more than a year rent from a new tenant otherwise he will pay a fine of N100, 000 or be sentenced to three years imprisonment. The law also states that it shall be unlawful for a landlord or his agent to demand or receive from a sitting tenant, rent in excess of three months in respect of any premises; that it shall be unlawful for a sitting tenant to offer or pay rent in excess of three months in respect of any premises; that any person who receives or pays rent in excess of what is prescribed in this section shall be guilty of an offence and shall be liable to a fine of N100,000 or three months imprisonment or any other non-custodial disposition.

The law also says it will be unlawful for a tenant to offer to pay more than a year rent even though it gives room for the two parties to sign a tenancy agreement.

Good as this law is, the outlook of the Lagos property industry stands as an impediment to the successful implementation of the law.

Lagos, with a population of 15 million people, is under immense pressure, having failed to keep up with its citizens’ housing needs in over 30 years! The result is that asking sale and rent values are often higher than comparable residential areas in major cities in Europe and America, whereas the property, infrastructure and services are not of comparable quality. Property experts have stated that high brow residential areas in Lagos such as Ikoyi are overpriced by as much as 30 percent.

Metropolitan Lagos covers 37 percent of Lagos land mass and hosts about 80 percent of the population, resulting in an average population density of 20,000 persons per square kilometer. By comparison, London has an average population density of 4,900 persons within the same area. The Lagos State Development and Property Corporation (LSDPC) established to drive the provision of housing, has in the past 15 years delivered 20,000 housing units across the State.

In the same period, the state required 224,006 housing units per annum. In effect, the State agency contributed 0.6 percent of the actual requirement. By comparison, Accra, Ghana’s capital city with an annual housing gap of 98,007 units and with several similar constraints as Lagos, though to differing scales, achieved an annual average of 35,008 housing units in the same period, meeting 36 percent of the requirement.

Currently, Lagos requires a total of 2.17 million housing units to close the existing gap. Home ownership finance remains inaccessible and unaffordable to 80 percent of Nigerians. There are only a couple of mortgage products available and double digit interest rates (up to 20 percent) and short tenors (less than 10 years) continue to inhibit growth.

In Nigeria, housing policies are a set of well documented but unimplemented ideas. The traditional policy inconsistency trait of governments in Nigeria plays out too on the issue of housing delivery. In spite of recent policies targeted at encouraging private participation, very little success has been recorded in the area of implementation/housing delivery. LSDPC, one of the most vibrant state-owned housing agencies in Nigeria, focuses on the development and sale of homes and does not play in the rental market. Invariably, investors buy these properties and put the properties back into the rental market at exorbitant market‖ rental rates.

A Lagos State Government research has revealed that 90 percent of the housing stock in the state is held by less than 10 percent of the population. In 2010, it was reported that 80 percent (as against 19 percent in South Africa and 22 percent in Ghana) of the population live in rented accommodation and spend more than 40 percent of their income on rent - above the 20 –30 percent bench-mark recommended by the UN. In spite of this, LSDPC does not see itself as an organ which can act as a catalyst in the provision of build-to-let accommodation.

It is therefore clear here that it is the sellers market – demand for housing is greater than supply. So what is playing out is the operation of market forces, which translates to higher prices.

It will be difficult to implement the Lagos tenancy law given the facts stated here. The solution therefore is to build more houses. This is the only way to bring down rents paid by tenants.