- Lagos, Nigeria’s commercial capital, is home to 21 million people. It currently has a housing deficit of about 3 million.
- Due to its limited geographic size, large population, and status as Nigeria’s central business district, housing in Lagos is in high demand. This makes rent incredibly high.
- A monthly (or quarterly) rent model could be the way forward, but are landlords willing to embrace this?
Welcome to the city of Lagos, Nigeria’s commercial capital and home to 21 million people, according to the Lagos State Government estimates. The World Population Review expects it to double by 2050 despite Lagos being only 1,171 km² big.
Due to its limited geographic size, large population, and status as Nigeria’s central business district, housing in Lagos is in high demand.
Alongside Asia, Sub-Saharan Africa is expected to be the second biggest driver of the world’s building activities in the years leading up to 2025 and global construction output will double to $15 trillion in that time, according to PwC’s Emerging Trends in Real Estate: The Global Outlook 2018 report.
The report also states that Nigeria will be one of the biggest contributors to this growth as it will need almost 20 million new homes between 2012 and 2025. One huge factor in this growth will be Lagos’ booming population and housing deficit, which the state commissioner for housing puts at about 3 million.
However, despite the need to make up for its deficit, Lagos’ major housing problem lies elsewhere -- the cost of rent. By the last population census data (2006), 53.9% of Lagos’ population was below the age of 25. By now, the majority of this demographic are in their most productive years, looking to settle down by owning or renting their own apartments. For them, rent is either too expensive or hard to maintain, mainly because earning power is much weaker.
Ibukun Akinnawo, a resident of Lagos, says, “Rent in Lagos is definitely ridiculously priced.” She argues that apartments are often not worth the prices they go for. “For example, I currently live in a serviced apartment, which really isn’t serviced at all,” she says. “The landlord just takes the service charge and does God knows what with it. Whenever any of the facilities spoil in the apartment, my housemates and I have to pay for it out of pocket because the facility manager is nowhere to be found.”
“Most people cannot afford to pay upfront costs to rent a place for one or two years,” Tola Adesanmi, the co-founder of Spleet, a real estate startup that offers flexible rent and housing options in Lagos, argues.
Olaoluwa Oyedele, a business analyst, however, believes that rent in Lagos is adequately priced. “Real estate markets work based on the principles of demand and supply, except in cases of manipulative power men,” he says. “Many times when we talk about rent in Lagos, places like the Island, Yaba, Gbagada come to mind, but don't forget Idimu, Ikotun, Egbeda (where rent is much cheaper) are also parts of Lagos.”
However, places where rent is relatively cheap in Lagos are far away from the central business districts where most companies have their offices. Meaning people residing in those areas have to battle daily with Lagos’ notorious traffic, which will ultimately affect their productivity. Living closer to work is a luxury very few can afford.
The high demand for accommodation means landlords are less incentivised to embrace any rent model that prevents them from getting their money in bulk up-front. What this also means is that people are inclined to take what they get. Oftentimes, houses in Lagos are constructed with little regard for environmental and safety laws -- poor drainage systems, poor ventilation, and buildings so closely built to roads that there is no space for sidewalks or parking. Even gutters are not well-channelled so that they fill up quickly and streets get flooded when it rains heavily.
“Demand for housing in Lagos is too high and low-income earners suffer for it,” Alhaji Olanrewaju Kanimodo, who has been a landlord in Fadeyi, Lagos for over 20 years, says. “Since housing is driven by demand, if you say you won’t pay for a place because the landlord is demanding a year or two worth of rent, someone else will take it. Also, when someone builds a house and they spend millions, they at least will want to recoup the bulk of that money as fast as possible.”
He further explains that landlords collect upfront rent because it is the norm and it is safer, a way to combat the lack of trust that hovers above many transactions in Lagos. “Most of us landlords (and caretakers) don’t live in these houses, so someone who didn’t pay upfront can just decide to pack and go away one day without us knowing.”
Container homes (or Cargotecture)
To solve this problem of expensive housing, some have suggested the use of cargo containers to build more affordable homes, but this is a concept still alien to Nigerians. While it is a good idea for temporary housing, it might not be suitable for long-term accommodation, Dotun Aderibigbe, an architect, says.
“Container spaces were designed for cars and goods but not for human beings. The average headroom of houses in Nigeria is almost 10ft (3m), regular containers are less than 9ft (2.59m), the extra tall ones are 9ft 6in (2.89m) tall, considerably less than the average headroom and this is before insulation and services like plumbing and HVAC have been installed,” he says.
According to a building expert, even the Lagos State Building Control Agency considers container houses temporary structures, making them ineligible for mortgages.
What’s more, cargotecture, as container housing is often called, requires the interested party to secure a piece of land and be able to bear the costs that come with building, something many Lagosians are unable to do. Thus, the option is still a long way off widespread adoption.
Access over ownership
There are startups fighting to help change the current rent model to one more friendly for tenants and one that better matches people’s earning structures -- daily, weekly and monthly wages and salaries.
“The world is turning to subscription models instead of upfront payments,” Adesanmi, co-founder of Spleet, says. “Millennials and working class professionals are starting to embrace the idea of access over ownership more. The remote and project-based nature of new jobs means that people don’t want to live in one place for a whole year.”
This is the logic behind Adesanmi’s Spleet and Fibre, another startup that offers “on-demand home rental solutions”. Users of these platforms can rent already-furnished homes and pay daily, monthly, or quarterly. Rent ranges from N50,000 per day to almost N500,000 per month depending on the number of rooms and size of the apartment. However, the prices on both platforms are steep for the pockets of most Lagos residents.
Both Spleet and Fibre have most of their locations in Ikoyi, Lekki, and Victoria Island -- the most expensive parts of Lagos. The reason for this, Adesanmi explains, is that most of the available houses in these areas are real estate investments by people living in Lagos Mainland and most of the people who rent homes through Spleet are young people who work on the islands and want to beat Lagos’ notorious traffic.
Can monthly rent become prevalent in Nigeria’s commercial capital?
Adesanmi believes this model of paying rent monthly can be replicated across Lagos with much education and different incentives, lowering the burden of annual or bi-annual rent. Perhaps if annual rent is fractured into monthly or quarterly payments and some extra money is included, this could incentivise landlords and also help tenants plan better financially. So, an N800,000 rent that should amount to N66,666.66 per month could become N70,000 per month, a 5% increase in monthly income for the landlord and a marginal increase for the tenant.
If monthly rent will ever become widely accepted in Lagos, the government has a role to play, Alhaji Kanimodo says. He explains that it was the government decree made many years ago that revised the norm, which was for tenants to pay rent for 2 to 5 years before moving in. “Back in the day, the government could fix housing prices,” he says. So if anything is to change now, the Lagos State Government has a big part to play.
Mrs Nina Falohun, a Spleet landlord, says that the rent model ultimately depends on what works for a landlord. “You have to look at what suits you and go for it, depending on your exposure and expenditure,” she says. She opted to get quarterly payments from Spleet, which she says she signed up to because it is “a good return on investment” and because the platform ensures her property is kept in good condition.
Mrs Falohun believes that flexible rent models are more convenient for tenants because then, people can afford to live where they want without worrying about paying heavy upfront costs. People get paid monthly, so it’ll help if they pay their rent monthly as well, she says. She also highlighted how Nigeria’s poor saving culture makes it more difficult for people to keep up with the annual rent model.
Chuma Onwuka, a Fibre user, says that the idea of paying rent monthly or quarterly instead of annually is “very useful”. “Most young adults either cannot accumulate that much cash at a go on a regular basis or would rather invest their money,” he says. The returns from investments, he argues, “can be used to offset rent payments due on a monthly/quarterly basis.”
Oyedele believes this monthly model “makes life easier for everyone” since “we get paid monthly, we should pay rent monthly. It also makes it easy to evict defaulting tenants and creates a stable income for landlords.”
Akinnawo echoes his thoughts that the monthly rent model will benefit both landlords and tenants. “Their apartments don’t have to be empty for months/years. It’s easier for people to cough up monthly rent than yearly rent. Think about it? Everyone gets paid monthly not annually,” she says.