Nigeria is in dire need of tax revenues. Currently, the country scores among the lowest in the world on tax to GDP ratio. And tax experts argue that there are scores of potentially taxable outlets that are being ignored, especially in the real estate sector.
While an acute deficit of housing units has forced Nigerians to do a survival brace-up in sprawling towns and cities across the country, hundreds of thousands of unoccupied buildings litter virtually every state. For reasons unclear to the regular reasoning person, house owners, especially in highbrow areas in the federal capital territory and Lagos, prefer to leave their property for years, which sometimes span into decades unoccupied.
For all intents and purposes, that action, or inaction constitutes gross economic waste, which in some climes amount to crime.
The United Nations (UN) Special Rapporteur on Rights to Adequate Housing, Ms. Leilani Farha, recently urged the federal government to impose taxes on unoccupied or vacant homes across the country.
The UN charged the Nigerian government to develop appropriate strategies to deal with the situation because most of the unoccupied houses or estates were proceeds of money laundering and other illicit funds.
The empty housing units do not fulfill any housing or economic need, with many remaining vacant as vehicles for money laundering or investment.
As a matter of fact, the act to tax empty property is evolving around the world. New York is in the process of having rent control laws passed; Los Angeles is planning to put a vacant homes tax on the ballot for 2022, in the face of a mounting homelessness crisis. Hong Kong officials are considering taxing condo developers to deter them from hoarding new units. Ireland is exploring its options. Barcelona has gone as far as threatening to seize landlords’ empty apartments — paying half of market value — and convert the units into affordable rentals. Paris tripled its tax on second homes in 2017.
As policymakers struggle to control an affordable housing crunch, officials in some of the world’s biggest cities have their sights set on the tactic: taxing the empty homes of the rich.
In the case of Nigeria, it could be used as a source to fund the mounting budget deficit.
However, some lawmakers say the trends are depleting inventory, making it tougher for low- to middle-income renters and homebuyers in an already squeezed and pricey global market. The hope is that the taxes will fund affordable-housing efforts or push landlords and the wealthy to put their properties on the market.
Economists say factors such as record-low interest rates, population growth, an imbalance between supply and demand, and a lack of affordable-housing construction have a bigger effect. Critics say the taxes are more political posturing than a meaningful revenue stream, much less an approach that will make a dent in the global affordable-housing crisis. Some of that comes down to design, some to enforcement. Others worry the concept is flawed altogether. So, can these taxes succeed?
“Don’t think you’re going to solve working-class housing affordability by imposing these taxes,” said Thomas Davidoff, professor of real estate finance at the University of British Columbia. “Foreign-buying, and especially empty-home owning, is concentrated at the high end.”
But the situation in Nigeria is not quite identical to occidental clime.
It is true that some buildings are empty due to the fact that they don’t meet the taste of prospective tenants. But there can be no gainsaying the fact that more than 90 percent of the time it is a result of intentionally high rental costs, which may just be a ploy to keep tenants away. And it may not bother the homeowner that such a building is lying fallow because it may not have been built for investment purposes.
When a well-designed tax on property law is passed, if proper records are kept on such property for an entire fiscal period, and the property is not occupied, there should be investigations and the necessary measures taken to render such action economic sabotage.
Increased economic activities in the real estate sector as such will rev up economic activities, thus increasing the country’s GDP.
As a matter of fact, those empty properties are a latent source of economic growth.
