Housing in Nigeria: Why We Desperately Need 17 Million More Homes!

Housing is one of the best indicators of a person’s standard of living and his place in the society. Like food and clothing, housing ranks among the 3 basic human needs. Its availability is very crucial to the welfare of every human.

The performance of the housing sector is one of the yardsticks by which the health of a nation is measured. In most developed economies, the housing sector is seen as an important sector for stimulating economic growth.

However in Nigeria, access to affordable housing has largely remained an unfulfilled dream to the vast majority most especially, the middle and the lower class of the society. In this article, I will be taking you behind the scene to uncover the challenges of housing in Nigeria.

Let’s get started!

Housing in Nigeria: the STATS and the NUMBERS

Nigeria is the most populated nation in Africa. It is also one of the most rapidly urbanizing countries in Africa and over 48% of the population in Nigeria lives in the urban areas, covering less than 10% of the habitable land areas.

With an estimated annual national population growth rate of just over 2% and an annual urban population growth rate of about 4%, Nigeria has a population that is becoming more and more skewed to the urban areas, towns and cities.

Nigeria with a population of about 174 million people is currently facing a national housing deficit of about 17 million units. In 1991, the Nigeria housing deficit was at 7 million, it has since increased from 7 million in 1991, to 12 million in 2007, 14 million in 2010 and currently 17 million units.

The implications of this very high housing deficit is that tenants in rented apartments pay as high as 60% of their average disposable income far higher than the 20-30% recommended by the United Nations.

Also, experts believe that it is only 10% of those who desire owning a home in Nigeria can afford it, either by way of purchase or personal construction as against;

• 72% in USA,
• 78% in UK,
• 60% in China,
• 54% in Korea
• 92% in Singapore.

A World Bank study projects that the cost of bridging this 17 million housing deficit is N59.5 trillion, indicating the vast and untapped investment potential of Nigeria’s real estate sector. Currently, our housing and construction sector accounts for only 3.1% of our rebased GDP while the total current housing production is at about 100,000 units per year, for a country of nearly 174 million. Therefore we need at least about 700,000 additional units each year to have a chance of bridging this huge gap!

Housing in Nigeria: What’s Responsible for the 17 Million Housing Deficits?

Housing problems cannot be totally eradicated. Even the developed countries still have some pockets of homeless people. With a population of over 174 million people and over 35% living in the cities, the housing problem is very cumbersome.

The problem can be narrowed down into two key areas; Rural and Urban. The problem in the rural areas has to do with qualitative housing while the problem in the urban centre is quantitative in nature.

• Rural Housing Problems:

Housing problems in the rural areas are connected with qualitative deficiencies like place, degree of goodness and the value of the house. Rural housing is incomplete because social services cannot be adequately linked with them. Social services required with housing include electricity, water supply, as well as transportation facilities. All these are deficient in rural areas.

• Urban Housing Problems:

The urban housing problems in Nigeria are;

• Shortage of housing
• Homelessness
• Slum dwelling
• Squatting and overcrowding
• Poor living condition

Despite these Rural and Urban classification of the housing problems in Nigeria, there are certain other factors clearly responsible for these deficits. They are;

1. Poverty/Affordability Gap:

The gap between the need for housing and the capacity to acquire the desired housing type has led to a demand crisis for affordable housing in the country. While it is clear there is a housing deficit, it is crucial to recognize that people can only require what they can afford.

Affordability analysis shows that low income earners can afford housing units at N2 million. Building a house in Nigeria is expensive!

The construction costs for a simple three-bedroom house in Nigeria is about N8 million (or US$50,000); compared to US$36,000 in South Africa and US$26,000 in India.

The costs are high for three reasons:

• High costs of building materials,
• High costs of skilled labor, and
• The costs of associated public infrastructure (such as sewers, roads, etc.).

About 75% of households in Nigeria’s urban areas live in dwellings constructed with concrete. Cement prices in Nigeria are also reportedly about 30-40% higher compared to neighboring countries or to the world market prices.

 2. Ineffective Housing Finance:

Limited access to finance is a major challenge to housing in Nigeria. This could be attributed to underdevelopment in our mortgage industry as it generated less than 100,000 transactions between 1960 and 2009.

According to World Bank Report (2008) the contribution of mortgage finances to Nigeria’s Gross Domestic Product (GDP) is close to negligible with real estate contributing less than 5% and mortgage loans and advances at 0.5% of GDP.

For example, let’s take a look at the size of the mortgage finance (as a share of GDP) of various countries.

• In the UK, mortgage finance to GDP ratio is about 80%,
• In the US it is 77%.
• For Hong Kong, this ratio is 50%,
• Across Europe the average is about 50%, and
• For Malaysia it is 32%

In Africa, South Africa is the outlier with mortgage finance at 31% of GDP. For many 4 African countries, this ratio is low: it is only 2% for Botswana, 2% for Ghana, and only 0.5% for Nigeria.

Aggravating the situation is the Efina Report (2010) that less than 5% of land in Nigeria has formal title registration. This indicates that majority of Nigerian land owners are not even qualified to apply for mortgage/loan facility as no financial institution will grant facility with an unregistered title as collateral.

Unless something radical is done to encourage land owners to move from informal market and embrace formal market which entails land titling and registration, development of mortgage industry in Nigeria may remain a far cry!

 3. High Population Explosion:

The ever continuous increase of Nigeria’s population far outstrips its housing needs with the direct consequence being lack and inadequate housing. With a population growth rate of 2% in a population of 174 million, the current housing production of 100,000 units is not good enough.

4. High Rate of Urbanization:

As stated above, with an estimated annual national population growth rate of just over 2% and an annual urban population growth rate of about 4%, Nigeria has a population that is becoming more and more focused to the urban areas, towns and cities.

The high growth rate of the urban population arises from both a higher birth rate and more importantly the increasing rural–urban migration. More and more people move away from the rural areas, abandoning their homes and occupations for the supposedly better infrastructure and better job opportunities of the cities.

This trend in population growth, coupled with expanding economic activity and rising rural-urban migration has put much pressure on the existing housing infrastructure. This is causing pervasive housing crisis, particularly in the urban cities and other highly habitable areas. This has increased demand for housing over the last two decades resulting in overcrowding and increased number of slum communities.

 5. High Cost of Building Materials:

The relentless inflationary pressure on building materials and labour market has made construction cost to remain high. The high cost of labour is ever on the increase. Cement prices in Nigeria are also reportedly about 30-40% higher compared to neighboring countries or to the world market prices.

There is need for the nation to explore local raw materials if it is desirous of achieving sustainable housing development. Imported materials could be blended with local materials to the advantage of the nation.

 6. Shortage of Infrastructural Facilities:

Infrastructural facilities are critical to housing provision. The fact that provision of infrastructural facilities like roads, water, electricity, sewerage systems etc encourages the private sector to embark on housing provision.

The absence of these basic infrastructural facilities has led to an in increase in housing deficits as well as rudimentary technology of building.

7. Bureaucracies in Land Acquisition:

Of all the ingredients needed for housing, land is of paramount importance. Land is very crucial in building a house therefore its accessibility is vital to efficient and sustainable housing delivery.

The bureaucracies involved in land acquisition poses the greatest difficulty to effective housing delivery especially in most urban areas. Challenges faced in Land accessibility includes land affordability, availability and ease in acquisition.

 8. High Cost of Land Registration and Titling:

This is another hindrance to housing delivery as seen in the foregoing. To be able to register and process your land titling in Nigeria requires 21 procedures to be followed and the entire process of transfer also last up to 274 days. The situation whereby it takes up to 2-5 years to obtain certificate of occupancy and much more the high cost of land transfer delays rapid construction of houses.

Conclusion

In conclusion, it is the dream of every family to own a house of their own but the various challenges associated with housing in Nigeria is obstructing these dreams. In Part 2 of this article, we shall be proffering solutions to the housing challenges in Nigeria.

Watch Out!