By Olu Olanrewaju – Director, Altair International
The lack of access to decent and affordable housing is a key contributor to poverty almost everywhere in the world and Nigeria is no different.
Millions of Nigerians live in poor accommodation and in our urban cities many of the homes they live in are not fit for purpose. Earlier in the year at the successful Abuja International Housing Show, I suggested that faith-based institutions, individuals with significant wealth and other third sector organisations, in addition to Government and the private sector, should contribute to addressing this urgent crisis facing the country.
Catering for the needs of the poor is central to the tenets of all religious groups. Why are Nigerian faith-based institutions not in the forefront of advocacy for the building of decent affordable homes for those in low income? Other countries in the world with lower number of religious followers, have such institutions which have been the catalyst and major contributors to the delivery of affordable homes and also played pivotal role as advocates of change.
There are varied and broad definitions of affordable housing. It is worth stating from the onset from my vast experience of undertaking housing market diagnosis, advising national governments, financial institutions and other actors on the design and implementation of housing strategies – there is no single bullet solution that addresses lack of affordable housing. It is essential that Government enables a holistic system that works and more importantly, it requires multiple interventions that involves a broad mix of actors working coherently within an effective housing ecosystem. This means different interventions sometimes requiring subsidy would be required for different income groups and a functioning system should provide the population with different types of tenure be it housing for sale, rent, rent to own etc.
A consistent theme however, is that to achieve affordability, the cost of the house and the percentage of household income spent on housing costs needs to be based on the income profile of the population. That is the easy bit, the challenge in emerging economies where data can be difficult to collect is how you validate the accuracy of the income data presented.
This article is specifically focused on how we can encourage existing institutions to play an active role in providing solutions to the lack of access to decent homes faced by those at the bottom end of the income pyramid. At this level individuals are unable to save enough for a deposit, or unable to pay unaffordable mortgage interests (which is a feature of the housing market in Nigeria). The current obsession with mortgage finance as the primary solution to tackling the problem of affordable housing demand in Nigeria misses the crucial point that current high mortgage rates are primarily a function of macroeconomics factors shaping the country’s finances and returns offered by Government treasury bonds. In essence single digit mortgage rates would not be forthcoming in the short term and it is unlikely that subsidised rates are sustainable in the long term considering the scale of the housing deficit and the growing gaps between demand and supply of affordable housing.
To add to the depressing situation, the low income of households that make up the vast number of Nigerians within the poverty threshold, does suggest mortgage finance is not necessarily the solution for the majority of people in the bottom end of the income pyramid.
As a result, serious consideration must be given to the provision of social housing for the bottom end of the income pyramid. By social housing we mean properties let at low rents on a secure basis to those who are most in need or struggling with their housing costs. Social housing is mostly provided to those at the bottom end of the income pyramid that are unable to own or rent decent homes at prevailing open market price. A key function of social housing is to provide accommodation that is affordable to people on low incomes. To provide rents that are affordable to those on low incomes means that the difference between the market rent to fund the cost of producing a house and social rent has to be subsidised. This normally takes place in form of capital cost subsidy or revenue subsidy (from Government).
Social housing is normally owned and managed by non-commercial organisations such as local authorities or housing companies. They are normally independent, not-for-profit organisations that can use any profit they make to maintain existing homes and help finance new ones.
In the absence of subsidy forthcoming from Government in any meaningful way, we need to explore other opportunities as a number of other countries have done over the years.
This leads to the main premise of this article- why are faith- based institutions in Nigeria not in the forefront of the affordable housing deficit debate in any meaningful way? They should be the national voice of action on housing and homelessness, if they believe that human dignity is challenged by a lack of decent housing. What is intrinsically wrong with faith based organisations taking matters into their own hands by building social homes? Why do we always have to wait for Government to do the right thing?
They should be tackling homelessness and housing needs in their communities. And more importantly they should be key providers of social housing in Nigeria by deploying some of their resources to the building, management and maintenance of social housing, similar to other faith-based institutions in the US and the UK.
THE ROLE OF SOCIAL LANDLORDS
In the UK and Ireland, housing associations provide homes for people in housing need. They are the country’s major providers of new homes for rent. A housing association is formed by a group of people who are concerned about housing problem in their community. In a number of cases this could be a philanthropist, local people or faith-based institution. It is almost always housing for rent, though there are other ways in which housing associations can help those who cannot afford to buy their own homes.
As detailed above, they are non-profit making organisations that use any trading surpluses to re-invest in the maintenance of existing stock or help the development of new homes. Housing associations also come in all shapes and sizes, some focus on providing homes for niche customer groups, some focus on large estate-based programmes and others may provide additional support services.
However, whatever their size and scale, they all share a similar charitable purpose – to provide social housing for those in greatest need.
THE SOCIAL HOUSING SECTOR AND THE CHURCH IN THE UK – A COMMON HERITAGE
The social housing sector in the UK owes much to the work of churches in the past years.
From the 12th Century until the 19th Century, alms-houses were virtually the only kind of ‘social’ housing provision in England. These were often provided by the Church, but also by wealthy benefactors. They were usually provided for groups of people within the community perceived as in particular need – most often the elderly, but also those who were very sick or less able.
However, the late 1920s and the 1930s also saw a ‘wave’ of new local voluntary housing societies springing up. Much of the new subsidised housing was out of the reach of the poorest members of the working class, and little was being done to improve existing housing, so these new societies formed as a response to the perceived gap in provision – the problem of the ‘urban slums’ in towns and cities.
Over 100 new societies were formed across the country, generally small-scale, funded by private investors and faith-based institutions. One of the first was the St Pancras Housing Association, founded by Fr. Basil Jellicoe in 1924 and now part of Origin Housing (an organisation which now owns and manages more than 6,500 homes in London). Their significance was perhaps not in the scale of what they achieved, but the attention that they brought to bear on a key social issue by their actions
“We do not suppose for a moment that that the housing scheme solves the housing problem of London, although it will at least remove one dark patch which has long been an insult to our Lord. Our scheme is merely intended to demonstrate the kind of lines on which the problem must be tackled…” Father Basil founder of St Pancras Housing Association
A perceived failure by local and central government to adequately or appropriately address the problems of dilapidated urban housing of the inner cities, together with a growing awareness of homelessness, inspired – as in the 1920s – the birth of a new set of associations between 1961 and 1974. Church groups were again very prominent amongst them. Their focus was often on the rehabilitation of failing housing, in contrast to the comprehensive redevelopment approach favoured by many councils at the time. The energy these new associations provided then had a chain reaction across the rest of the sector, raising the bar on what was expected of associations.
New church-led associations included the Notting Hill Housing Trust, started in 1963 by The Revd. Bruce Kenrick, Paddington Churches HA set up in 1965 by The Revd. Ken Bartlett and South London Family HA, one of a number focused on supporting young single parents.
The British Churches Housing Trust was set up in 1964 to promote new church-led housing associations across the country and over 60 were set up. The Catholic Housing Aid Society (now part of Housing Justice) played a similar and complementary role. In 1966 to campaign for homeless people and raise funds for housing associations. It was formed by five national housing groups, including the British Churches Housing Trust and the Catholic Housing Aid Society. Launching a few weeks after the BBC screened the drama ‘Cathy Come Home’ helped to secure the new charity’s early future in the hearts and minds (and pockets) of many.
CASE STUDY OF A CHURCH LED SOCIAL HOUSING GROUP
L&Q is a housing association, based in London but with operations across the South East, East and North West of England.
It was originally established in 1963 as ‘The Quadrant Housing Association’ by 32 people who invested £2 each to create the association. Its original founder was the Reverend Nicolas Stacey who was a priest in the Church of England.
In 1973 Quadrant HT merged with the London Housing Trust (formed in 1967), to create London and Quadrant HT (L&Q). Since that time, L&Q has grown exponentially through a mix of merger activities (the latest being Trafford Housing Trust in 2019) and new build development programmes.
It is now one of the largest and most complex housing associations in the UK. It owns and manages in excess of 100,000 homes and has annual revenues of over £1bn and has one of the largest new build development programmes of all organisations in the UK (including housing associations and private developers).
It has played a significant role in tackling housing need in the UK. But this would not have occurred, had there not been initial backing from a Church of England priest and other individuals with a drive to support those in need.
HOW IT COULD WORK
Obviously this concept would require more detailed feasibility study, but the idea is premised upon large faith based institutions deploying some of their resources which could be in form of land, cash to build homes for social rents which would be rented to those in bottom end of the income pyramid.
Over time if they develop a good track record managing the homes by collecting income due, ensuring low voids and adequate maintenance of the homes, the rental income could be securitized, and money raised in the capital markets to fund expansion. The funding from the private sector complements the resources provided by the faith institutions.
There is no reason why the institutions could not start with a programme of 100 homes a year. This rate of production of homes over 5 years would produce 500 homes and with demonstrable record of good management of portfolio, further capital to supplement the church investment or to replace investment could be raised from the capital markets.
I expect some critics would suggest that the programme of homes highlighted above is a drop in the ocean, which is fair enough. The proposition here is that we should start from somewhere, get to learn the ropes and build something that works, which could then be scaled up.
The case study of the organisation set up in the UK presented above should be a source of inspiration for faith- based institutions in Nigeria, in nearly 50 years they now own over 100,000 homes with an asset value of nearly £25 billion on an initial share capital of £64.
Of course if the capacity exists to do more, why not, but the focus must be on creating a social housing business model that works, and that which down the line could attract funds from the private sector and or even the Government to supplement the resources invested by faith based or similar institutions.
The benefits of this initiative would include creation of jobs, improvement in health, supply chain opportunities, creation of large-scale housing development, facilities management industry and many other social benefits. From a purely economic point of view, the faith based organisation would own property assets that appreciate over time.
Like most property related transactions, numerous risks will need adequate mitigations. The risks ranging from delivery of the homes to time, quality and cost. Tenancy management risks such as poor collection of rents, low occupancy rates, high maintenance costs etc. The fact that the operators of the social housing portfolio are faith based organisations suggests that some degree of influence would be exerted to occupiers especially members to ensure they fulfil their tenancy obligations which might be more difficult for private companies.
In conclusion while this type of intervention requires more detailed stress testing, the fundamentals of the idea is no different from traditional roles faith based organisations have played elsewhere without initial government support, to become the leading advocate for the housing needs of the poor.
There is no reason why Nigeria should not be any different, to the contrary we are blessed with so many faith based institutions, the large institutions and private benefactors with significant resources should be playing a pivotal role in line with their social purpose to address the housing crisis the country faces, which if not addressed now leaves us to further major problems down the line.
Olu Olanrewaju – Director Altair International
Olu is a senior executive and has a wealth of experience in both the provision of affordable housing and development activities in the UK and internationally. He now works with governments, NGOs, funding agencies and other institutions across the world on a range of housing issues.
Altair International is part of the Aquila Services Group, which is quoted on the London Stock Exchange, and is the world’s leading independent housing consultancy. We provide advisory and implementation support on a wide range of issues across the housing value chain including market diagnosis, housing strategy development, financial and resource planning, governance and institutional capacity support, housing development etc.
The Centre for community and theology, 2015. Our common heritage- housing association and churches working together