Housing Policies (Part ii)

TOWARDS AN EFFECTIVE SOCIAL HOUSING POLICY (Part ii)

Social Housing There’s no private Developer who is not profit oriented. Thus, the calls from some quarters for the involvement of Private Developers in Social Housing, seems illogical and unreasonable. Even Non-Governmental Organizations, NGO’s, except set up by wealthy individuals (like Manny Pacquiao) still derive some elements of profitability in their operations.

Effective Social Housing Policies/Programs could be achieved through the creation of an efficient legal framework that would establish the National/States Social Housing Fund, and ensure annual budgetary allocations to the Fund; as well as the creation of a Social Housing Agency (National/States), for the implementation of Social Housing Programmes.

The Agency so created would be empowered to establish and regulate Co-operative Housing Blocks. Co-operative Housing Blocks are neighborhoods developed by the Agency consisting of not too many housing units, for effective Block management.

Yes, we have the National Housing Fund – NHF; the Nigeria Mortgage Refinance Company –NMRC. These Agencies have their places and play some roles in the Housing Finance Process, but we must accept the fact that their impacts are yet to be felt by those in real Housing Need. Co-op Housing, under the Social Housing Scheme will complement the roles of these Agencies and ensure those at the lower end of housing needs felt their impacts.

Co-ops Housing is a form of home-ownership not building types. It adopts conventional Co-operative Principles but leans back to the historical communal efforts towards home-ownership.

While acknowledging the near impossibility of neighborhood-labour support, it seeks to pull together collective financial resources of prospective home owners towards home-ownership.

The Agency draws funds from the Social Housing Fund to kick-start a neighbourhood with “Seed-Units”. The additional housing units to make up for the projected maximum units for a Co-operative Housing Block would come from contributions from members of the Co-operative Housing Block. The “Seed-Units” developed by the Agency are to be allocated at between 30% - 50% subsidy to beneficiaries.

It must be stated here that, even at the subsidized rate; virtually none of the prospective beneficiaries (with less than a $=/day income in Nigeria), would afford a one-time payment of the subsidized amount required of them.

Therefore, a variance of the conventional subsidy regime is being advocated. Involvement of financial institutions in the planning and implementation of Social Housing Programs is a step towards program actualization.

A prospective beneficiary would be required to make a down payment of not less than 30% of the subsidized amount. The payment would be made to a dedicated account with a participating bank. The participating bank would then provide the balance of 70% of the subsidized amount, for the development of the additional housing units. Beneficiaries would then effect installmental payments to the participating bank under pre-agreed terms and conditions. This arrangement is expected to remove all the hindrances and bottlenecks normally encountered by low-income families in sourcing for housing loans. (Here's where the NMRC's may come in). 

Although individual families are actual beneficiaries of the Construction Loans, it is the Co-op Housing Block that takes the Loans, and would repay the Loans; with the Agency acting as Surety and the Housing Units as Collateral (this would be examined in details in a later post).

Further of note is that the Co-op Subsidy beneficiaries are only occupiers not owners of the respective units occupied by them. That is saying, the units cannot be sold, rented or transferred by the beneficiaries.

This arrangement ensures that no elite benefits from a program not “suitable” for his/her occupation only ideal for high rental. It also protects the subsidy, as a public investment in the Housing process.

This arrangement is at variance with conventional Housing Subsidy Programmes. With conventional practice, houses are built and sold at subsidized prices and the beneficiaries pay by installments over a number of years.               

They become owners/landlords of the subsidized houses rather than occupants. Soon, the houses are  sold out or put up for rent giving them huge profits from what they made partial investment, thereby defeating the objective of the programme. 

Beyond and above that, the installmental payment approach, for the already subsidized units, does not pull in sufficient funds for more units to be constructed. Thus, it becomes impossible for the program to be sustained.

Housing subsidy is meant to enable those in housing needs to have access to decent shelters without paying for the full value of the shelters. It should be designed such that beneficiaries occupy houses relevant to their family growth and size and could transfer their interests to another category of houses, allowing others to take over their previous units.

With this arrangement, the inclusion of Banks in the planning process ensures availability of additional funds in every cycle of the program for the continuation and sustenance of the program.

More importantly, although the Social Housing Agency only needs to develop a proportion of the expected number of units in a Co-op Housing Block as Seed Units, all beneficiaries would enjoy the same rate of subsidy. For an example, if the Agency develops 50 units of houses as “Seed Units”, the number of beneficiaries would be more than 50 households, and would be determined by the allowed subsidy.

HOW THE CO-OP SUBSIDY WORKS

Over the years Housing Subsidies have been implemented as a “National Bonus” to the lucky beneficiaries. That had prompted unimaginable malpractices in the implementation processes, with the end-results that ‘dashed’ out the units to “undeserving” beneficiaries. Since there has been no legal framework to enforce occupation by actual beneficiaries rather than tenants or proxies, the houses are put up for rent; and those who would have been the actual beneficiaries, seen struggling to rent them. In most cases, the units are sold at market prices to the highest bidders despite the public investment-subsidy, and the fact that the sellers only invested paltry sums in the project.

Co-op Subsidy seeks to:

 (i)      Protects public investment in any subsidized Housing Project,

(ii)     Ensure that beneficiaries are actual occupiers of such houses;

(iii)    Ensure that a beneficiary is allotted a house comparable with his household size

(iv)    Ensure that the houses cannot be rented or sold

(v)    Ensure that beneficiaries are not “owners” in the real sense of ownership but “occupiers”.

They are entitled to occupy their allotted houses as long as they want. Once a beneficiary out-grows his present house, he transfers his investment to a house in another category, leaving his previous house to another beneficiary.

Social Housing should not be viewed as enabling house ownership but as a support for adequate shelter for those in housing need but unable to afford same.  

As stated earlier, Co-op Subsidy depends on the creation of two legal entities:

(i)              The Social Housing Fund, and

(ii)             The Social Housing Agency.

The Social Housing Fund would be managed and operated by the Social Housing Agency. The Social Housing Agency is not an appendix of any Ministry, but an autonomous Department under the Presidency or the Governor of a State. The structure and functions of the Social Housing Agency are well defined under the Law establishing it.

The Social Housing Agency draws funding from the Social Housing Fund to develop “Seed-units” for a Co-op Housing Block. Interested members of the public are invited to make inputs on the house types being proposed. They are also requested to express interest in the program. The Seed-Units so developed consist of house types as illustrated in Stages I – III of Household Growth (see Part i). 

The Agency determines the Development Cost of each unit of houses and adds for administrative charges and fees, without profit margins, to arrive at the projected Selling Prices of the different house types. It then determines appropriate subsidy ranging from 30% to 50%. Based on the number of units constructed and the allowed subsidy, the number of beneficiaries would be determined. Note that number of beneficiaries would be more than the number of “Seed Units” constructed, but all would benefit from the allowed subsidy.

Deposits are requested and received from prospective beneficiaries. Required deposits should be about 30% of the balance after the allowed subsidy. The bank receiving the deposits must be ready to provide 70% of the balance after subsidy as  Construction Loans to the Co-op Housing Block Members.

Total available funds, from Deposits and Bank Loans would be used to construct additional units required for the beneficiaries.

The loans are negotiated on behalf of the Co-op Housing Block by the Agency, which also stands as Surety for the loans. The seed units and the deposits by beneficiaries form equity contribution for the loans, while the constructed units are collateral for the loans.

Loans repayments are made by the Co-op Housing Blocks from monthly repayment plans drawn out for the beneficiaries.

SUMMARY

Housing or Shelter, the world over is understood as man’s second basic needs after food, yet given the least attention on priority list of Governments. The result is squatter settlements, slumps and unprecedented health issues.

With over 80% of families in Nigeria at less than a dollar/day income, rising cost of building materials and other costs associated with home-ownership, it is absolutely impossible for Nigerians to shelter themselves without some form of assistance.

A well designed and structured Housing Subsidy is advocated. Such subsidy, backed with an efficiently grafted legal apparatus, should integrate Co-operative Principles that ensure full participation of actual beneficiaries in the process.

Social Housing should be structured to meet the shelter needs of families who are unable to shelter themselves without some form of assistance. Social Housing should therefore be treated like roads and streets within cities that have no direct returns on investment, yet their states have direct economic impact on Cities, States or Countries; same as Security; Healthcare and Education. And, just as investments in those other areas are structured for their respective target needs, investment in Social Housing must be structured to meet the needs of those in shelter needs.   

There is no doubt that persons on Social Housing Program, by reason of their income earnings may not be able to provide required down payments for shelters for themselves and their families without some form of assistance. 

Social Housing Programs should therefore be designed to:  

(i)    Encourage Governments to make annual budgetary provisions for such assistance

(ii)   Ensure that such assistance is effectively directed to those in need;

(iii)  Ensure that such assistance is not viewed as “a carry-go National Cake”, but as an enabler   towards the alleviation of an identified social problem –  Housing.
Read Part i here

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