With the demand for commercial and residential properties rising with reckless abandon in proportion with the rise in population, the affordability of such properties could pose a serious problem.
Even though the Government intervened through the enactment of the Rent Control and Recovery of Residential Premises (RCRRP) Edict (1997), the increasing demand for commercial and residential properties has caused a significant increase in rental values.
Rent control is a lingering matter under the 1999 constitution. As a result, most of the states in Nigeria have their individual rent control laws, spearheaded by Lagos State.
So how effective are the rent control laws that exist? Are tenants still not at the mercy of their landlords? How many tenants can go to court when treated unfairly? How many Nigerians have really being vindicated by the supposed laws as even the Lagos tenancy law of 2011 seems not to have done much to address the plight of helpless tenants? In a city such as Lagos where the population is alarming, as compared to the available land, what really is the effect of the law on residential rental values.
The rent control is usually an intervention by Government through measures put in place 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 forces of demand and supply of residential accommodation. Such demand often rises at a geometric rate while supply rises at arithmetic rate thereby causing galloping increase in rent from year to year.
In other words, Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a “rent ceiling,” on what landlords may charge tenants.
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If rent control is to have any effect, the rent level must be set at a rate below that which would otherwise have prevailed. If rents are established at less than their equilibrium levels, the quantity demanded will necessarily exceed the amount supplied, and rent control will lead to a shortage of dwelling spaces. In a competitive market and absent controls on prices, if the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage. But controls prevent rents from attaining market-clearing levels and shortages result.
Though rent control regulates the money landlords would charge before they can lease their property, it does have its effect when implemented. Houses will be in high demand yet the supply to equal the demand would be unavailable. Rent control can be destructive or counterproductive.
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 orders 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 very 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 the size of the room, the 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, scholars 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 to move to more desirable neighborhoods since the only units available for rent are very high priced (Carter, 2001).
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).
Truth be told, Rent control or not, shylock landlords still 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 the value of residential properties in Lagos State Nigeria? How effective is the Lagos Tenancy law? Has rent control benefited residents in Nigeria? Is there really any significant difference between a statutory rent and open market rental values in Nigeria?