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Affordable Housing

Challenges Of Affordable Housing And The Way Forward

Housing has a central importance to quality of life with considerable economic, social, cultural and personal significance. Though a country’s national prosperity is usually measured in economic terms, increasing wealth is of diminished value unless all can share its benefits and if the growing wealth is not used to redress growing social deficiencies, one of which is housing. Housing plays a huge role in revitalizing economic growth in any country, with shelter being among key indicators of development.

The universal declaration of human rights gives one of the basic human rights as the right to a decent standard of living, central to which is the access to adequate housing (United Nations, The Human Rights – article 25, 1948). Housing as a basic human right demands that urban dwellers should have access to decent housing, defined as one that provides a foundation for, rather than being a barrier to, good physical and mental health, personal development and the fulfillment of life objectives

Affordable housing is a term used to describe dwelling units whose total housing costs are deemed “affordable” to those that have a median income. A median income refers to the average pay scale level of the majority people in a population which is often low. Although the term “affordable housing” is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the concept is applicable to both renters and purchasers in all income ranges.

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Low-income housing is aimed at individuals without enough income to provide adequate housing for themselves and/or their families. These families are usually unable to purchase a home because they fail to qualify for a mortgage. Most families choose to rent based on their income and family situation; unfortunately, there may not be enough rental housing or enough good-quality rental housing for low-income families

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Provision of adequate, affordable and decent housing for low income households is clearly in short supply. The players in this industry are too few and there seems to be a minimal interest of other private sector housing developers to provide low income housing units. These private sector developers as by their success in the middle and high income housing markets, implies that they may have the capacity and skill set to supply the low-income housing required to alleviate.

There are also many other factors affecting the supply of housing from private sector housing developers prominent of which is the cost of production and the opportunity cost to the developer’s finite funds in either providing middle income housing or high income segment housing or low income housing. The developers have to consider the rate of return to their investment and how fast they’ll realize this. But these are not the only factors affecting the supply of low income housing and the other factors should also be put into consideration. Provision of low cost housing to the increasing number of lower and middle income classes in the country has also been hugely affected by the cost of land and inadequate infrastructure.

All governments in Nigeria since independence have highlighted housing as a major priority.Unfortunately, for 50 years of its independence, Nigeria is yet to develop a vibrant mortgage market and houses continue to be provided through the tortuous traditional method of buying land and building over some years, which could be an individual’s entire life time. In many cases such buildings are left uncompleted or individuals have to deplete their entire life savings in order to build a home.

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Ministry of (Power, Works and Housing) is tasked  with the provision of housing  across the country, since  inception, it  has been putting up efforts to see that housing, especially  affordable ones are provided for the teeming Nigerian population.However, in spite of the laudable strides of the Ministry in seeing to the reduction of wide housing gaps among the citizens of Nigeria, especially among the middle and low class, the gap still yawns wider.


Registering property constitutes one of the challenges facing the housing sector in the country. According to the World Bank report, “Doing Business in 2007 – How to Reform”, Nigeria’s reforms have led to a reduction in the time required to complete the process of property registration from 274 to 80 days, but a lot still needs to be done because it takes only 1 day in some other countries such as Norway and Singapore. We should however note that part of the reduction in time is likely a result of improvements in property registration which has been implemented in Abuja and Lagos.  It is pertinent for other state governments to replicate the improvements achieved in the Abuja Geographic Information System (AGIS) and Lagos State, in their various states as investors are comfortable in environments where registration is automated and procedures are minimal, and will be glad to invest in such places.

In the aspect of risk sharing, unfortunately there is no mechanism for risk sharing that will encourage banks and other financial institutions to extend mortgage loans to people at the lower income level.High cost of building materials is also a key factor that has led to the high construction cost in Nigeria.

Similarly, lack of basic infrastructure like roads, water and electricity is a major challenge to providing affordable housing, which accounts for about 30 percent of housing costs. In most cases developers have to provide the infrastructure which invariably increases the cost of the houses they produce thus making such houses unaffordable.

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The Way Forward

In order to bring down materials costs and stimulate construction, as well as make housing more affordable to the Nigerian population, government should continue its reconsideration of restrictions on the importation of cement and other building materials. Another alternative is  to  explore more on how we can use local materials such as clay and other local building materials.

Government can provide guarantees in the form of mortgage insurance to lenders for loans granted to first time buyers with no credit history and low to middle income families once such mortgage loans meet prescribed underwriting standards. In the event of default, the government indemnifies the lenders to a prescribed level.The three tiers of government should not shy away from their responsibility of providing primary infrastructure if we must achieve our goal of providing affordable housing.

The goal of providing affordable housing can be achieved, but the necessary ingredients have to be put in place. Investors can work in difficult environments in the short-term if there is convincing evidence that reforms that will improve the investment climate will be implemented as quickly as possible.

We must keep working at improving the investment climate, and this can be achieved by just studying what other countries have done and implementing international best practices. In doing this we must not miss the goal of ensuring macroeconomic stability, such as keeping inflation and interest rates down.

SOURCE: Affa Dickson Acho.


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