Since the supposed regulation of property values in Nigeria via the Rent Control and Recovery of Residential Premises (RCRRP) Edict in 1997, have Nigerians being the better for it or are they worse hit by it. Has the law really being effective or is it moribund? This article analyses the effect of rent control or regulation of property values in Nigeria on her citizenry.
Demand in commercial and residential properties will always be on the rise as long as the population continues to increase with reckless abandon. It’s now the affordability of such properties that could pose a problem. Having said that, real estate business is an evergreen enterprise that can be money spinning if square pegs are not placed in round holes.
Increasing demand for commercial and residential properties has caused increase in rental values while the Government was seen to have intervened through the enactment of the Rent Control and Recovery of Residential Premises (RCRRP) Edict (1997).
That notwithstanding, rent control is a residual matter under the 1999 constitution. As a result, most of the states in Nigeria have their individual rent control laws, spearheaded by Lagos State.
Rent control laws may exist but is the law really effective? Are tenants not still at the mercy of their business-mined landlords? How many tenants go to court to seek redress? How many Nigerians have really being vindicated by the supposed laws, even the Lagos tenancy law of 2011 seems not to have done much to address the plight of helpless tenants.
What really is the effect of the law on residential rental values in Nigeria, especially in a city such as Lagos where the population is alarming, as compared to the available land.
Come to think of it, won’t it be better for Government to provide an enabling environment for investors to provide low cost housing units that would in the long run reduce rental values, rather than pretending to regulate the real estate market?
Rental housing accounts for more than a third of most tenants’ income and rent controls are a very sensitive issue for the renting public. Rent control is the standard ceiling placed on the rate that a landlord can charge while allowing a landlord to set the rent freely when letting to a new tenant but subject to the tenant’s right not to accept and preventing the landlord from raising the rent or ejecting the tenant (Basu and Emerson, 2003).
Compared with other government-mandated price controls, it is the law placing maximum price on what landlords may charge tenants and usually set below that which would have otherwise prevailed (Block and Edgar Olsen, 1981); while it sometimes functions as price ceiling and a collection of laws regulating how much a landlord can raise or must reduce the rent, and limiting the reasons for eviction, working together with eviction protections so that the landlord does not get around a rent limit by evicting the tenant (Carlson, 2006).
Rent control or regulation of property values in Nigeria is usually an intervention through measures put in place by government on the pretext of protecting the urban dwellers from being pushed off the open market in the course of securing accommodations by putting a ceiling on the maximum rent payable on all classes of residential properties.
Such measures include legislation on rent control to check incessant and arbitrary increases brought about through the interplay of demand and supply of residential accommodation. Such demand often rises at geometric rate while supply rises at arithmetic rate thereby causing galloping increase in rent from year to year.
Prior to the advent of rent control in Lagos State, the Lagos urban poor and low income earners were at the mercy of shylock landlords who often resorted to taking court order through the back door without serving the tenants proper notices, called jankara judgment (in Lagos parlance), to force them out without due process of law.
Many of the property owners increased rent on an annual basis and at high rates, demanding advance rent of up to two years, not minding the unsanitary conditions of such accommodation units.
Consequently, in 1997 the then military administrator of Lagos State signed into law an edict, which is cited as the Rent Control and Recovery of Residential Premises Edict No. 6 of 1997 (also called Rent Edict) with effect from the 21st day of March 1997.
The most striking provision of the edict was the involvement of Estate Surveyors and Valuers in determining the standard rent payable on residential accommodation in each of the zones into which Lagos State has been delineated and stipulated in relations to size of room, number of rooms, facilities provided, and locations.
In determining the effects of government intervention in property market through the imposition of property tax on sustainable housing delivery, scholar and researchers found that government intervention through the imposition of statutory formula for determining the amount payable by property owners as land use charge was inappropriate and that high tax and penalties would discourage investment in new housing and maintenance of existing stock.
Other arguments against rent control posited that the policy which was meant to assist poorer residents, harms far more citizens than it helps and limits the freedom of all citizens. It was argued further, that very few moderately priced rental units are actually available in rent-controlled cities with most advertised units priced well above the actual median rent, whereas in cities without controls, moderately priced units are available.
In many cities, controls drive out residents and businesses; as controls hold down rents for some units, costs for all other rental housing skyrockets; tenants in rent-controlled units fear moving to more desirable neighborhoods since the only units available for rent are very high priced (Carter, 2001).
The high rates of homelessness are a manifestation of rent control and non-regulation of property values in Nigeria, with individuals having difficulty in finding new apartment in rent control cities; while crowding is a manifestation of rent control.
Rent control is a disease of the mind that soon becomes a disease of the market and those cities that resist infection by having a healthy tolerance for the rights of others are rewarded with a normal competitive housing market in which housing is available at every price level.
Those cities that succumb to the disease of rent control are doomed to never ending, house-to-house warfare over an ever diminishing supply of unaffordable housing. It is more likely to harm the market and lead to lack of investment in new rental housing and dis-investment in the existing stock. This causes deterioration of building and leaves tenants worse off over the long run.
The nature of the controls in place seem to do little harm to housing markets modest benefits to tenants, without solving the problems of the poor in urban housing markets and provision of affordable housing for the poor must be accomplished by other means (Keating, Teitz and Skaburskis, 1998; Carter, 2001).
Rent control or not, the landlords find other means to exploit their tenants.
With this at the background, a number of questions arise: What is the effect of property market regulation on value of residential properties in Lagos State Nigeria?
Is there really any significant difference between a statutory rent and open market rental values in Nigeria?
This is a subject for intense debate