International Courant
If you happen to’ve lived in Lagos, you already know that the rental state of affairs is without doubt one of the metropolis’s most urgent issues. Over the previous 5 years, Hire in Lagos has elevated by 91%. As in any a part of Nigeria, the town in Nigeria usually makes use of the annual cost system, the place tenants are sometimes required to pay one and even two years’ hire prematurely. This construction favors landlords, however places an enormous monetary pressure on tenants.
In 2016, the Lagos State Authorities introduced plans to introduce a month-to-month cost plan for its home-owner mortgage schemes, popularly known as Lagos HOMS, in a number of areas inside the state. The then Governor of the state, Akinwunmi Ambode, said that his administration had determined to scale up the rent-to-buy coverage by introducing a month-to-month cost plan so that folks pays month-to-month as a substitute of being compelled to make a down cost of 30 p.c of the whole price or pay for a yr. Nevertheless, aside from just a few startups making an attempt to speed up it, it was not extensively adopted. Since then, the federal government has been making an attempt to introduce a brand new option to get it adopted each eke market day.
A couple of days in the past, the federal government introduced plans to launch a brand new digital platform for month-to-month hire funds to make it simpler for residents. The platform will probably be a joint undertaking with businesses such because the Ministry of Housing and tech companions.
Allow us to first analyze the issue the federal government is making an attempt to unravel. Lagos, a megacity with a inhabitants of over 20 million, has a housing market that’s as aggressive as it’s costly. It is because it’s Nigeria’s most populous metropolis and its financial hub. Town’s housing market is characterised by excessive demand and inadequate provide, resulting in excessive rents. In response to a 2023 report by the Lagos State Ministry of Housing, the typical price of renting a two-bedroom house in Lagos can vary from ₦600,000 to ₦2.5 million per yr, relying on the situation.
For a lot of residents, these quantities are merely unachievable. A 2022 Nationwide Bureau of Statistics (NBS) survey discovered that over 40% of Lagos residents earn lower than ₦100,000 per 30 days. This disparity between revenue and rental prices forces many to reside in overcrowded or substandard housing situations. The annual advance mannequin disproportionately impacts center and low-income earners, who usually battle to entry funds or should accept substandard residing situations.
The problem doesn’t finish with the primary cost. Lagos has a notoriously unpredictable financial local weather. Marked by inflation, a risky alternate charge and an unstable labour market, tenants reside in fixed concern that they gained’t have the ability to meet the subsequent rental demand, probably resulting in eviction and subsequent homelessness.
Enter hire cost platforms. These digital options promise to revolutionize the rental market by permitting tenants to pay hire in smaller, extra manageable installments: month-to-month, quarterly, and even weekly. The thought is straightforward: as a substitute of creating a hefty upfront cost, tenants unfold out their monetary obligations, higher aligning with their money circulate and lowering stress.
One instance is RentSmallSmall, a Lagos-based platform that has gained reputation in recent times. In response to a 2023 report from the corporate, since its inception in 2018, they’ve helped over 25,000 tenants safe houses with versatile cost plans. This mannequin has confirmed fashionable amongst youthful professionals, who might not have the financial savings to pay a yr’s hire up entrance however do have a gentle revenue to handle month-to-month funds.
These platforms sometimes act as an middleman between landlords and tenants. The tenant pays the platform, which in flip pays the owner the agreed-upon annual payment up entrance. The tenant then continues to make periodic funds to the platform till the whole hire is roofed. Some platforms even provide extra companies reminiscent of credit score checks, tenant screening, and insurance coverage choices, making the rental course of smoother for each events.
On paper, the idea is interesting. It addresses one of many greatest ache factors for renters: discovering a big sum of cash without delay. By letting renters pay in installments, these platforms might probably democratize entry to higher housing and supply some monetary respiratory area.
Nevertheless, real-world implementation in Lagos presents a number of challenges. First, landlords could also be hesitant to undertake this technique. The prepayment mannequin is deeply entrenched out there and provides landlords a way of safety and a hedge towards inflation. Convincing them to just accept month-to-month or quarterly funds, particularly from a 3rd social gathering, might require vital trust-building and incentive constructions.
Secondly, there’s the problem of charges. With many of those platforms, there’s all the time a catch within the type of charges, which may make the whole hire that tenants pay larger than if they’d paid upfront. Whereas the comfort of smaller funds might offset this for some, others might find yourself paying extra in the long term. For instance, a platform like RentSmallSmall costs a service payment of round 3-5% per transaction, which may add up over time. Apparently, the federal government hopes that the month-to-month rental platform will rake in round ₦2.5 billion per yr from round 100,000 customers. How do they plan to extend this? By charging a 5% transaction payment each time hire is paid by means of the platform.
Can a digital answer remedy Lagos’ rising rental disaster?
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