As the economic impact of the COVID-19 pandemic ripples across Nigeria, another wave of uncertainty may creep in for property owners as the novel coronavirus keeps people at home and closes businesses, leaving tens of thousands out of work.
Even before coronavirus struck, property owners and many of the businesses that leased their space were under strain due to high vacancy rate and rents default.
Their woes seem to multiply now as jobs and the economic effects of the pandemic have hit incomes of thousands of people. Experts predict that property owners could face cash crunches as renters default and many renters will move in with family and friends or relocate to less expensive locations.
Housing advocates say the coronavirus economy could upend housing in major cities like Abuja, Lagos, Port Harcourt and Kano reducing apartment rents that have risen by 50 per cent. They also blamed the overheated rents for rise in homelessness.
For instance in the outskirts of Lagos, a two bedroom flat goes between N300, 000 to N350, 000 per annum while a three bedroom flat is rented between N400, 000 to N500, 000. A self-contained goes between N150, 000 to N250, 000. In the city centre, such as Gbagada and Ikeja, the rents are quite higher.
They argue that the current situation may do little to alleviate the housing crisis, with more than 20 million housing deficit in the country. The crisis has been pinned to unfavourable housing policies, ineffective mortgage system and Land Use Act. Currently, some people are uncertain of their jobs after the lockdown, and those that depend on daily stipends or income cannot meet their obligations.
Consequently, tenants whose monthly or yearly rents are due in March and April have used the lockdown as an excuse not to remit their rents to their landlords or property managers. Renters have called for the government’s intervention and eviction moratorium for residential tenancies.
There are also calls for homeowners to be given relief from banks like freeze on mortgage loans so that landlords can have extended loan periods and suggestions for rent holidays for tenants to cushion the effects of the pandemic.
Though built professionals defer in their opinions on the issue, they all agree that the government has a part to play to ensure stable rents and reduce evictions in the housing industry.
They say, the gridlocked coronavirus economy would heavily impacts on both owners and renters, some landlords may lose a significant portion of income to retain some tenants while others may engage in rent discounting and rent concessions.
While some estate surveyors and valuers want that state government to protect tenants who due to lack of income caused by covid-19 are not able to pay their rents as and when due from eviction; others are agitating for proper housing data to enable government plan for the industry.
A past president, International Real Estate Federation, (FIABCI) Nigeria, Chief Kola Akomolede, added, “this protection should not be extended to those tenants who have been habitual rent defaulters before covid-19.”
According to him, banks can assist landlords by waving mortgage repayments for the period of the pandemic. No one should be sanctioned by non-payment of mortgage during the period either by way of penalties or foreclosure.
“Interest can also be canceled for the period of the pandemic. In the same way interest on loans should be waived for property developers who are forced to stop work throughout this period. If this is not done, they will be forced to increase house prices, which will lead to increase in rents and cause inflation generally,” Akomolede said.
He continued: “It is a good idea, if landlords can grant rent holidays but it is going to be difficult to implement. Don’t forget that the same landlords are also affected by the lockdown just like their tenants. They too cannot work or earn income during the period from their normal businesses.
“Again, it will depend on the magnanimity of each individual person. I will not advise any legislative or law to this effect but it can be encouraged by appealing to landlords to grant rent holidays to their tenants for the period of the lockdown.”
For the chairman, Nigerian Institution of Estate Surveyors and Valuers (NIESV), Faculty of Estate Agency and Marketing, Mr. Sam Eboigbe, the call for rent holidays has to be holistic, as it would require the understanding and collaboration of other stakeholders.
“Our situation is different from other developed countries as they have thriving enabling and friendly environment provided by the government through various policies.
According to him, most of the commercial landlords have pending mortgage arrangements and will essentially require the inputs of the banks and other stakeholders at renegotiating loan repayment terms and conditions accordingly.
He said: “It is generally believed that the government should also be able to intervene by offering tax incentives to these commercial landlords. The government can afterwards firm up the proposals through enactment of legislation at the parliaments. This would spell out the framework and guidelines in determining the categories of tenants as beneficiaries of this tax holiday.”
Akomolede does not subscribe to the implementation of rent control. “Rent control at any time is a negative way of housing provision. It has never worked anywhere the world. It will only lead to black market. House owners will not bring them into the open market for fear of sanctions. It will discourage people from investment in housing, which will eventually lead to lower supply of housing and results to higher rents.”
He stressed that rent control can lead to less maintenance of properties by landlords, which can lead to health and other social problems, adding, “instead of rent control, efforts should be made to increase the supply of housing that is the only antidote for high rents.”
Eboigbe said, there is a measurable degree of certainty of an impending crisis in the real estate sector triggered by the effects of the lockdown due to the outbreak of convid 19.
“With the various levels of interventions in other climes by way of enactment of emergency legislations to save the sector from collapse, it is now also imperative for a swift intervention by the appropriate arm of government.”
He agreed that the state governments should provide eviction moratorium for residential tenancies. “Since the outbreak of the virus, other countries through the appropriate agencies have similarly intervened in making sure no residential tenants are evicted from occupation on account of inability to pay rent to landlords.
“Some have granted three months and six months accordingly as job losses and delayed payment of remunerations is envisaged during this unavoidable lockdown. This is not aimed at rent cancellation but a specified time frame in favour of the tenants who should no longer be at risk of default judgment.
In his submission, an urban regeneration expert and founder, Centre for Housing Studies, University of Lagos, Prof. Timothy Nubi, said lack of appropriate data for housing will hinder the government’s
The CEO of Northcourt Real Estate, Mr. Tayo Odunsi, disclosed that several scenario will make the tenants not to pay rent due to the COVID-19.
Firstly, where a blanket provision for such has been made in the tenants’ contract. “A clause advising that should any event stop the Tenant from beneficially occupying the property, rent payments will not be made, must be in the tenancy agreement.”
Secondly, the government for “overriding public interests’, may exercise its eminent domain powers to instruct private landlords to suspend rent. In such an instance, government may find alternative media to alleviate the rent loss on the landlords by way of tax rebates/deferrals or other compensation.
Another is on compassion grounds from the landlord. “In a case where a tenant has been a good sitting tenant and has a good relationship with the Landlord, s/he may be granted either a rent deferral or rent holiday for the period of the lockdown freely or upon request,” Odunsi added.