Landlords are killing us!!

The housing situation in Ghana and Nigeria started reaching acute proportions from the late 1960s. That was probably the immediate post independence period when the urge of many people to move from the rural areas into the urban areas started. New hospitals and clinics had been built and new ones were being constructed helping in reducing death rates while birth rates still remained high fuelling the rapid growth of populations in African countries. This was consequently the time that housing shortages started.

The Ghana Statistical Service projected that the country’s housing deficit would be 2,000,000 (Two million) by 2020. The Executive Secretary of the Ghana Real Estate Developers Association (GREDA), Samuel Amegayibor, in an internet article on Ghana’s housing shortage, on the other hand projected a housing shortage of 5.7 million by the year 2020.

In Nigeria, the housing deficit is currently projected at 17,000,000 (Seventeen million), The UN’s statistics, on the other hand, projects Nigeria’s current housing deficit at 22,000,000 (Twenty two million).

Such huge housing shortages have become a bonanza that has attracted more housing and estate developers into the real estate business. By the laws of demand and supply, the huge housing deficit in the two countries has led to huge increases in rent and unreasonable tenancy conditions.

By the early 1970s, landlords in Nigeria and Ghana were demanding two years and sometimes three years rent advance payment. With soaring rents in these two countries, there is even no guarantee that tenancy will be renewed by landlords and landladies after the two or three years’ tenancy.
The Rent Act of Ghana, 1963 (Act 220), Part VII, Clause 25 (Offences), Paragraph (5) states the following:

“Any person who as a condition of the grant, renewal or continuance of a tenancy demands in the case of a monthly or shorter tenancy, the payment in advance of more than a month’s rent or in the case of a tenancy exceeding six months, the payment in advance of more than six months rent shall be guilty of an offence and shall upon conviction by the appropriate Rent Magistrate be liable to a fine not exceeding one hundred pounds.”

The Ghana Rent Act was passed in 1963, that is 59 years ago, but the issues are still clear. If a tenant takes a lease on a house or apartment for two years, they must pay a rent advance not exceeding six months. Any landlord or landlady who asks for an advance of two years for two years tenancy is guilty of an offence and will “be liable to a fine not exceeding one hundred pounds.”
Let us overlook the “one hundred pounds” fine. The depreciation of currencies in Africa has been continuous for a long time and those who framed the act most likely wanted to use a more stable currency such as the British pound as the standard for judgments.

Now, two questions one may ask are the following

Are the Ministries for Housing in the two respective countries aware of the fact that landlords and landladies are taking rent advance for two and three years tenancy, irrespective of the laws governing tenancy?
Secondly, which salaried worker is ever paid two years advance salary in Ghana and in Nigeria?

No worker, at the time of first employment, is ever paid one year or two years, not even two months salary in advance. The normal mode of salary payment in most parts of the world is the monthly salary. Our information from an African who has lived in the State of New Jersey in the USA for over 30 years is that rent in New Jersey is paid monthly as usual. Landlords, however, take three months rent advance from the tenant as security against damages. This amount is put in a bank account and attracts interest. For two years’ house rental, the three months security payment plus part of the bank interest accrued is paid to the tenant after the two years, if the tenant has not caused any damages to the property. If the bank interest is 3 percent, the landlord takes 1 percent of the interest on the security deposit and gives the total of the tenant’s security payment plus 2 percent of the bank interest on the security payment to the tenant.
If, on the other hand, the tenant has caused some damages to the property, the total cost of the damages is deducted from the three months security payment, and the balance, together with the bank interest, paid to the tenant. The tenant does not get any of the security payment where severe damages have been caused to the property. In some cases, the tenant will have to make extra payments for repairs to the property.

The history of a person’s tenancy follows them to their next tenancy. If a tenant leaves a good record in their first two or three tenancies –no damages to property, good behaviour etc,- the tenant may not necessarily be required to make the three months security payment on their forth and subsequent tenancies.

Obviously, this is a well thought-out process in the New Jersey housing regulations with a central idea that ensures a tenant does not get away after causing some damages to a landlord’s property, and secondly ensures that a tenant’s three months security payment attracts some bank interest for the tenant, and a little for the landlord as well.

Besides the New Jersey housing regulations, the state has a law that ensures that increases in rent do not go beyond 4 percent per year. In Ghana, rent can go up by 40% anytime because the landlord says so.

Can young men and women ever raise investment capital?

Ghana and Nigeria have large numbers of itinerant traders peddling household items going from door to door or selling in the streets on commission from larger traders. There are other young men and women selling minor household items from table top near their homes with the aim of gradually building up enough capital to set up a small shop in their neighbourhoods. The ambitious ones dream of moving to the towns or cities where they hope to make their fortune. Their struggle and savings in their home villages become fruitless after a number of years because they cannot make adequate savings to pay two years advance rent to landlords and landladies in the towns and cities.

In some of the towns in Ghana, the rent for a two-bedroom apartment will range from Ghana cedis 500-600, that is, just about 83-100 US dollars per month. A two-year rent advance, using the monthly average rent range, will be 2,208 US dollars.
For a three-bedroom apartment in the towns, the rent will range from the equivalent of Ghana cedis 700-850, that is, 117-142 US dollars per month; and an amount of 3,108 US dollars for two years rent advance.
Rent is fairly reasonable in the larger villages fairly close to urban centres Rent for a two-bedroom apartment in such villages will be about Ghana cedis 300 per month with rent advance of one year at 600 US dollars, and 1,200 US dollars for two years. Many of such areas have electricity supply but not adequate water supply.
In the national capital, and in some of the regional capitals, the rent for a two-bedroom apartment will range from Ghana cedis 1,200-1,400, that is, 200-233 US dollars per month. For two years rent advance, the approximate amount will be 5,200 US dollars.
And a three-bedroom apartment in the national capital will range from Ghana cedis 1,700 and above; that is 283 US dollars and above. Using the minimum rent per month, a two-year rent advance for a three bedroom apartment will be minimum of 6,792 US dollars.

These two year rent advances may seem paltry sums of money to people living in high income and high middle income countries. But to the average person with tertiary education qualifications and at least 5-10 years work experience in West Africa, these are princely sums of money that cannot be easily acquired. With such levels of rent advance, ambitious young men and women with bigger dreams and bigger goals are stuck in mud houses in their villages without clean running water.

Ambitious young men and women who wish to move to a town or city in their country cannot fulfill their dreams because they can never save enough money to pay two years rent advance. They cannot pay the minimum two years rent advance of 2,208 US dollars even if they have to share the apartment and the rent with a friend.

There is no perfect law. What we need is fairness. The rent practice in the State of New Jersey is fair and humane. The system where landlords and landladies are allowed to dictate their own rental conditions is chaotic and inhuman. The system stifles ambition; slows down individual savings, and reduces the number of citizens who could have saved enough to start a business or invest their monies in some assets and pay taxes to increase the national revenue. In California, as we read on the internet, persons with monthly income below a defined level and who pay rent for their accommodation receive state credit every month.

It is the responsibility of our governments to maintain equity and fairness in the tenancy system to ensure that landlords and landladies do not take undue advantage of tenants.

Where else in the world do tenants pay two years rent advance to their landlords? Where?

It is the normal practice in most parts of the world to pay rent at the beginning of each month of tenancy. Rent is paid at the beginning of using the facility for one month and at the beginning of every month till the end of the tenancy agreement in most parts of the world. In Ghana and Nigeria rent is paid two years in advance before using the facility. The landlord or landlady takes two years rent advance from the tenant and immediately puts that money into a bank account and earns interest on two years’ credit deposit every year. And our governments are quiet on such matters. Why? Because landlords are providing part of the solution to the huge housing deficit and have therefore become untouchable.

Ghana’s Act 220 cannot bite because people need homes and are prepared to do everything to pay rent advance. In Ghana, the Executive Secretary to GREDA says that the country needs “to provide 100,000 houses each year compared to present 35-40,000 per year.” In Nigeria, it is estimated that the country needs 700,000 houses annually.

Given the urgent housing need, people will even offer to pay higher rent advance than what the landlord has asked for in order to beat the competition. The need for housing is so great that people would borrow to get themselves in debt to pay rent advance. Definitely, a roof over the head of a person and their family has higher value than money in the bank, as confirmed by Maslow’s theory on basic human physiological needs: food, water, shelter and clothing. The housing situation has become a bull market and is presently a situation in which governments are helpless.

Effects of current housing rent advance payment

The taxes citizens and businesses - public and private - pay each month cumulatively make up the national revenue; at least a significant part of the national revenue. The more people and businesses pay their taxes, the greater the national revenue grows for national development. On the other hand, if citizens lock up their savings with landlords, government loses the potential tax benefits it would have derived if citizens had invested their money in businesses and in other paper assets such as government bonds and treasury bills.

First, the results of locked up savings of most people, held in the hands of the small band of landlords, are slow growth in national economies and stagnation in development arising out of inadequate national tax revenue.

Second, locked up savings reduces personal investment.

Third, the housing situation in Ghana and in Nigeria is deepening the financial gap between the Have’s and the Have not’s.

Forth, the rapid increases in house rent are creating a situation where people become poorer, greedy and callous. University lecturers print their lecture notes and sell to their students. Vendors of all types of food and goods find ways for using poor quality materials for their products and sell at the normal going prices.

Can governments alone meet the housing needs of their people?

It is the responsibility of governments generally to provide affordable housing as one of the measures to reduce poverty and greed in society. However, since governments cannot do everything, they support real estate developers both directly and indirectly to provide housing, quite apart from the affordable housing estates governments usually provide.

In Nigeria, a Real Estate Developer, Osokoya Adewole Morenukeji “has called on both the Federal and State governments to partner with private real estate developers and financial institutions, to provide good and affordable housing for Nigerians.” Osokoya states that the “government alone cannot meet the housing needs of the people.” Describing the housing situation in Nigeria “as alarming,” he notes “that in the next ten years, the number of Nigerians with no homes would have doubled if care was not taken.”

It is urgent for governments in Africa to provide affordable housing for the poorer and middle income sectors of their populations. Affordable housing or low-cost housing, referred to as social housing in Europe, is provided for over a third of the population in Sweden, Netherlands and in other European countries. Housing deficits will keep rising in Ghana, Nigeria and in other African countries until governments’ initiate positive action to provide affordable housing and until fertility rates are forced to drastically decline in order to reduce the high demand for housing. Before then, the call of the real estate developers, Osokoya Morenukeji and James Ogunnaike for partnership between government and private real estate developers in Nigeria is important and urgent. African governments must partner private real estate developers to provide affordable housing for the larger segment of the people who cannot afford to pay rent advances to landlords.

It is by partnership between government and private real estate developers that real estate developers could maintain their higher standard of living rather than taking rent advances from poor tenants and fledgling business companies who need to be supported to grow into larger businesses to be able to pay more income tax to government. It is the government support to real estate developers in America that helps to provide more housing, stabilize rent and eliminate unreasonable rent increases.

Affordable housing time plan

Since potential tax revenue losses is one of the key causes of the slow development of the African continent, it is suggested that governments should develop a time plan for providing affordable housing estates in partnership with private real estate companies in their countries. By beginning with 10% completion of current housing deficit in the next two or three years, progression could be made annually till the percentage of 40% or more of housing deficit is attained in the next 10-15 years.

Improving housing and tenancy conditions

In his book, “Retire Young Retire Rich”, Robert Kiyosaki (2002) shows some of the tax breaks and tax credits, and in some cases, direct payments the American government gives real estate developers. These are monies and tax reliefs provided by the American government to real estate developers out of the taxes paid by citizens and businesses of the nation. The bigger the housing projects and apartment complexes real estate developers provide in the nation, the bigger their tax reliefs and direct government credits. These are the sources of state funding that creates wealthy real estate developers in America and in other parts of the world.

It would be useful if landlords and landladies, industrialists, association of tenants, national opinion leaders and government representatives in Ghana, Nigeria and in other African countries could seek information from the relevant section of Kiyosaki’s book; seek more information on the housing laws and regulations in the United States and in a few other countries, and work together to develop a fairer and advanced system of housing and tenancy system for their respective countries.

There is also information that Rwanda has an excellent housing system that could be studied by other countries. By adapting the American system and other suitable systems, with necessary modifications to reflect local needs, the burden of providing finance for a significant portion of national housing needs essentially shifts to the government, using the tax money paid by citizens and businesses annually and not directly to the poor struggling tenant. America got its independence from Britain in July 1776. Africa’s independence is set at 1960, as indicated already in the November 2021 issue of Africa Supreme magazine. Theories and principles in science, in the arts and in all fields of endeavour are carved out after exhaustive reading of the literature on the topic of interest for both supporting and opposing evidence. There is no harm in learning from those who have gone before us. We have to read and we have to consult. If we do it right from the start, the rest will be easier and less chaotic.