Presented by Dr. Banke Abejide, Head of Strategy and Business Performance, Family Homes Fund.
Kingsley U.N Chikwendu
Housing is a key component that makes complete the entire being of a human, and it is akin to a nation striving to grow its economy. The drivers of a nation’s economy are the people who go out every day, seeking for ways of improving their households.
Decent housing provides means of comfort for a man, it is extremely difficult for an individual to strive for growth in an uncomfortable environment or poor living condition without affecting his health. Therefore, a dwindling economy that is seeking for avenues to resurrect, needs the growth of the housing sector for rapid development.
At the recently concluded workshop titled ‘Financing Affordable Housing Development in A Depressed Economy’, the Family Homes Fund [FHF] in its presentation made by Dr. Banke Abejide, representing the Managing Director, Femi Adewole, she enumerated ways on how housing can contribute to the growth of an ailing economy. She also made the audience understand the roles that the FHF has played in the past and present to see that the housing industry plays key contributions to the growth of the Nigerian economy.
Below are other issues she highlighted. Excerpts:
What is the role of housing in a depressed economy? A lot of us here are experts, we know these statistics about these contributions. But, what is more concerned as we look at a depressed economy? How exactly does housing contribute?
Housing has a significant opportunity to contribute to the economy, both when an economy is doing well or depressed, from a built GDP, we have a huge potential to continue to expand in Nigeria.
Again, we continue to push strongly for ways to come out of a depressed economy because, it has a significant multiplier effect on other sectors of the economy as stimulated. A study in Russia shows that one rubble of housing investment produced, has four rubbles of value produced. And in the Philippines, a parcel invested in housing, brought about more than 16.60 contribution to its GDP. It also helped in developing the manufacturing sector.
If we continue to invest in making sure that we have home grown solutions to our storms, we can significantly contribute to improving the manufacturing industry for the interest of our economy.
We have to see that housing has a significant opportunity to add to the economy which has been made even more stark during the Covid-19 pandemic. Housing helps to meet potential needs for shelter, it helps in improving quality of life and standard of living, if we look at the multi-dimensional poverty indicators. Looking at what are the standards of living, you will see that if you live in a decent home and have access to good cooking and sanitation, drinking water, electricity, all of these things are connected to a house and living conditions.
Employment from construction jobs can also lead to an increase in purchasing power, it reduces vulnerabilities from nature and other forms of insecurity that are attached with Covid, decent homes and ensure that people have access to good mental health. And, it also helps to improve work productivity and learning when it comes to the children.
One of the quotes by Matthew Desmond said “I don’t think that you can address poverty unless you address the lack of affordable housing and the thing is, as an economy becomes more and more depressed, you find out that the level of poverty increases”. And, we all are here today because, this is a collective problem and Jonathan Rexford, the CEO for Habitat for Humanity made us to understand that “we are all connected when we have solidarity in times of crisis”.
Thus, the title of today’s presentation, I am saying that in a depressed economy, how can we continue to ensure that people have access to affordable housing? Because, we are all in this together.
So, very quickly, we then move on to the economic issues in the eco-system and what the FHF Intervention Model is? For those of you who are not familiar with the Family Homes Fund [FHF], we are a social housing intervention fund that was set up as a private limited liability company, our shareholders are public at this time.
But, we are set up in such a way that we can leverage both the financing from government but, reach across the lines to be able to get capital from elsewhere, to be able to fund housing solutions. What are some of the things that the Family Homes Fund is doing? The major one that we are working on now is providing construction financing. As we all are aware, we have high level organization and unplanned settlements.
There is the need for the development of not just houses but, decent and affordable housing. So far, by the end of 2019, it was estimated that we had about 42 million units of housing but, 75 percent of this were considered as sub-standard. We also have significantly high interest rate for housing development.
So, what is Family Homes Funds doing? What is our model like? Well, we are invested in providing construction financing to both the public and private sectors developers. We also offer technical and transaction advisory services to our development partners to ensure that their products are adequately prepared and put together for financing.
What has been our progress so far? In about eight states now, we have a portfolio of over 2000 homes that have been completed. These include Nasarawa, Delta, Kaduna, Ogun and Kano state, they range from one-bedroom, two-bedroom to three-bedroom houses, with a range of different prices.
There are also others that are under construction in addition to the five states that have been mentioned. There is this one the Borno State government is doing by building houses for IDPs in the state, we have in Bauchi, Adamawa and Niger states, making those under construction over 9000. Finally, we have another estate in Ogun that is about to start for about 980 homes.
What else is Family Homes Fund doing? Apart from investing to provide construction financing, in a depressed economy, one issue that keeps coming up is the fact there are limited range of options to fund the offtake of homes. We find the mortgage industry under developed. We have less than one percent mortgage contribution to GDP.
We also have significantly mortgage interest rate that is high as 27 percent in most cases. The CBN has noted that in 2019, we had non-performing loans as high as 56.69 percent. Part of this may be the fact that the interests rate are so high and equity contributions are also high. There are interventions in the industry but, they are not yet enough.