Home seekers decry high rent, demand strong regulation
Calls for government intervention to regulate rent prices in the country’s major cities have been increasing, writes EDIDIONG IKPOTO
Lagos State, the commercial nerve of Africa’s most populous nation is said to be home to some 22 million people. Long before its christening and official recognition as a state in 1967, Lagos had already begun to witness rapid urbanisation which has snowballed into West Africa’s commercial hub.
For a geographical entity that is 3,577 square Kilometres, which is just 0.38 per cent of the land mass of Nigeria, simply indicates that Lagos, one of Africa’s marquee cities, does not have enough real estate to accommodate its 22 million residents and the droves from across the country and other neighbouring countries who continue to throng to it for greener pastures. This has given rise to a high demand for housing.
Consequently, just like in other megacities,York, Hong Kong, London, Mumbai, Tokyo, etc., living in Lagos is grappling with a housing shortage. And with demand outstripping housing supply, residents of Lagos have to pay through their noses to secure decent accommodation.
The fact that renting an apartment in Lagos would cost a king’s ransom is not particularly new knowledge. It is a topic, which is frequently up for discussion. However, what is frequently not being discussed is whether Nigeria’s commercial capital may be due for a policy to ensure that recouping construction costs and balancing the economics of demand and supply does not become a tool with which avaricious property developers hike prices beyond the realm of rationality.
In a report titled “Five reasons why Property Prices are Expensive in Lagos,” Nigerian proptech, Estateintel, noted that the number of housing units available in Lagos is not sufficient for the population. According to the Pison Housing Group’s 2019 report, the housing stock in Lagos is estimated to be 1.492 million units.
With a population of 18 million people (as of 2019), according to the United Nations and average household size of 4.9 according to a report by Renaissance Capital, Lagos had over 3.8 million households, indicating that there are up to 2.1 million households that are without formal housing. This presents a supply gap of over 55 per cent. As is typical in every market, excess demand drives up prices.
Historically, factors ranging from scarcity of land, increased demand, and high cost of building materials have typically been mooted as plausible reasons renting an apartment in Lagos may cost a home seeker an arm and a leg; but then, as pointed out in the Estateintel report, these price increases are not always rational.
This is perhaps why Lagos State, with a rental market, which is fast becoming a knife fight in a prison yard, may very well be due to a policy that places a cap on the state’s rental rates, especially in neighbourhoods, where property developers can afford to take a haircut on their rates without necessarily damaging their profit margins.
In many major cities around the world, rent control is being deployed as a tool to help curb immoderate pricing of property by estate developers and landlords.
According to Investopedia, rent control is a government programme that places a limit on the amount that a landlord can demand for leasing a home or renewing a lease. Rent control laws are usually enacted by municipalities, and the details vary widely. All are intended to keep living costs affordable for lower-income residents.
Rent control policies vary significantly from city to city and country to country. While some major cities have implemented rent control measures, others have chosen alternative approaches to address affordable housing challenges.
In New York City, United States, the city has rent stabilisation and rent control laws that limit rent increases for eligible apartments and provide protections for tenants.
Under this system, apartments operate under the Maximum Base Rent system. The Division of Housing and Community Renewal determines a maximum base rent and a maximum collectable rent for each individual apartment. Adjustments to the maximum base rent are made every two years to reflect changes in operating costs.
Tenants can challenge adjustments to their maximum base rent on the grounds that the building has violations or that the owner’s expenses do not warrant an increase.
Another US city with rent control is San Francisco has a rent control ordinance that restricts rent increases for certain residential units built before 1979.
In Berlin, Germany, the state has recently implemented a rent cap law that limits rent increases for a five-year period, aiming to stabilise rents in the city.
The Swedish capital city Stockholm similarly has a system of rent controls and regulated rents, which aim to ensure affordable and fair housing for residents.
In Lagos State, what has perhaps fuelled intense conversations regarding the need for a rent control policy is the fact that the average cost of renting an apartment in the state has increased by at least 100 per cent between 2018 and 2023, according to findings.
The data was culled from the price charts of popular proptech — Propertypro, which tracks rent prices year-to-year.
According to the charts, which provide insights into rent prices in different parts of the country, rent prices in many parts of Lagos have effectively doubled within the last four years.
Related News Different parts of Lagos examined included Magodo, Oworo, Bariga, Yaba, Surulere, Oshodi, Maryland, Lekki, Victoria Island, Ajah, Ikeja, FESTAC and Gbagada.
According to the data, in Magodo, the price of a one-bedroom apartment between 2016 and 2019 stood at N350,000 per year. In 2020, it recorded a 28 per cent increase to N450,000 per annum. It continued the upward trajectory up to N700,000 in 2023.
Similarly, the data showed that in the Lekki area of Lagos state, the price of a two-bedroom flat in 2015 was N1.5m. In 2016, it went up to N1.6m. Another price spark in 2017 took it up to N1.8m before hitting a new high of N3m in 2022.
A key observation of the data showed a significant spike in rent prices post-2020, reflective of the economic crunch experienced in the immediate aftermath of COVID-19 pandemic.
For example, in Maryland’s average price of a two-bedroom apartment hovered between N850,000 to N900,000 from 2016 to 2017, but witnessed a dramatic spike in 2021 which took it up to N1.5m.
The tremendous rent price increase comes as high inflation continues to pressurise the Nigerian economy, significantly eroding consumers’ disposable income.
A tenant in Oke Odo of the metropolis, Niyi Olaoye, decried the way landlords take advantage of homeseekers in Lagos.
“My landlord just woke up one morning recently and hike my rent for a three-bed flat from N325,000 to N450,000 per annum without concerning I was going to be able to pay it,” he told our correspondent.
He called on the state government to come to the aid of tenants by enforcing the Lagos Tenancy Law regulation that was enacted during Babatunde Fashola’s government.
Another tenant, who resides in Merian axis of the city, Motolani Oseni, stressed that there was a need for the state governments across the country, especially Lagos, to regulate the abnormal increase in house rent by the homeowners in the country.
“In my own case, my landlord hiked the rent by 150 per cent from N300,000 per annum to N450,000. Is that not outrageous? Where do they expect us to raise that? It has become a norm in Lagos State for landlords to raise rents at will. The state government must look into this abnormality to ameliorate the suffering of the people,” he averred.
In explaining the reason behind the significant spike in rent prices in the state in recent years, experts have cited reasons such as an increase in building cost as the primary reason why home-seekers would have to pay more.
Speaking with The PUNCH, a Lagos-based realtor and Founder of Michael’s Realty, Babatunde Michael believes that if nothing is done to stem the tide of indiscriminate rental price hikes, an affordability crisis may soon hit the housing market.
He noted that in Lagos, rental rates have been steadily increasing as a result of high cost of construction on one hand as well as the huge demand for housing. This hike, he said, is despite Section 37 of the Lagos state tenancy law 2011 which makes provision for a tenant to approach the court to contest rent increment.
He said, “Looking at the current realities in Nigeria, particularly the recent petrol subsidy removal and the direct effect that have further reduced purchasing power, something needs to be done as a significant affordability crisis looms.
“Therefore, implementing rent control policies could be a potential solution to consider. like making rent payments flexible, instead of paying annually, tenants can actually pay monthly, quarterly or bi-annually. Rent control in some zones of the state can help stabilise rental prices, protect tenants from steep increases, and provide more affordable housing options.”
On his part, the Chief Executive Officer of Estate Intel, Dolapo Omidire, said it would be erroneous to consider a rent control policy in Lagos without properly implementing the existing rent control framework.
Dolapo said, “I don’t believe we need rent control policies. There are existing policies that favour the tenant, but none are enforced properly. We need much better enforcement of the laws.”
Both experts, though proffering divergent views, made reference to the Lagos Tenancy Law 2011; but, the spirit and letter of the law, though geared towards protecting the tenant as well as the landlord, fails to address the foundational problem of price fixing.
Despite the law giving tenants the power to reject arbitrary rent hikes from landlords, it could be fruitless if the absence of rent control at the outset prevents the tenant from securing the apartment and seeking legal action.