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Key Constraints Facing The Housing Sector In Nigeria

An analysis of the existing housing situation has revealed that there are several constraints facing the housing sector in Nigeria. These key constraints have been responsible for the imbalance in housing demand and supply. This article takes a critical look at the issues undermining the housing sector in Nigeria.

There are many issues hindering socio-economic development in Nigeria, one of such is the below-par performance of the housing sector in the country. It has become common knowledge that the country suffers from a housing deficit of over 17 million units. What are the factors responsible for the staggering figures?

Some of the critical issues which will need careful consideration and prioritisation in the formulation of a national housing policy are:

1. Unavailability of land for housing

The relatively small size of the land resource base coupled with its historical and current pattern of ownership presents a serious constraint to housing. At every focus group discussion held in the various communities, the high price of land was identified as one of the major constraint to housing production. Therefore, land availability problem appears to be critical and deserving of special consideration.

In particular, the various policy makers will need to address the challenge of improving the supply of affordable housing given a small finite land resource base. Consistent with the draft Land Use Policy, specific strategies and action plans relating to government’s acquisition of available lands within communities will need to be examined in order to create housing land banks and consequentially focus on the needs of their residents. The acquisition of lands within communities for residential purposes should also be viewed within the sociological context of maintaining the community’s cultural base

2. High cost of infrastructure

Another deterrent to housing production by both the private and public sectors is the high investment cost of land infrastructure,  particularly where the development is distant from existing infrastructure. The developer fully bears the high investment cost of provision of water and road infrastructure to a new site, without future benefits for connections made off these infrastructures to other sites by other individuals or developers. This high cost of infrastructure significantly influences the final price of the serviced land and ultimately, the cost of housing to the consumer.

Therefore, there is a need to firstly re-examine the high initial cost of land infrastructure, and secondly to develop a common approach for the provision of utilities to housing developments. The cost of infrastructure accounts for about 25–30 % of housing expenditures. It is a main factor in the delivery of inexpensive housing. Authority has ignored this area and developers now deliver same, thus increasing the cost of houses. This is obvious in many gated residential communities across the populace, where the contractor provides autonomous electrical energy, water treatment plant, sewage plants, access roads to the estate, etc.

3. Increasing rural-urban migration

Rural–urban drift has not only placed a significant strain on the supply of housing, but has also resulted in severe traffic management problems. Indeed, the expressed demand for multi-family (apartment) housing in major cities is significant. At the macroeconomic level, a major challenge is the need to promote economic development policies that will reduce the rate of urbanisation by providing more employment opportunities in rural areas.

4. Inadequate finance mechanisms for low-income housing

While a review of the housing credit sector indicates a reasonable supply of financial institutions, access by low-income households appears to be limited. In particular, households with poor income are usually excluded from the formal credit sector. This is partly due to inflexible eligibility criteria for borrowing which involve steady income streams and land security.

Due to this, appropriate mechanisms for financing low-income households must be leveraged, with particular emphasis on more realistic eligibility criteria and lower interest rates.

Additionally, the institutional mechanism for administering low-interest finance to low-income households should be revisited. Given the fact that housing is one of the key basic human rights, attention is required with respect to the housing needs of the most vulnerable. While some housing assistance is provided through the government housing incentives, the mechanism for accessing these incentives remains largely unstructured. As a result, the benefits could be unintentionally diverted to higher-income groups.

It is important that clear incentive regimes be developed to specifically target low-income households. In that regard, there is a need for strategies and action plans to gather information on the socio-economic characteristics and geographic distribution of the poorest income quintile.

5. Cumbersome regulatory approval process

The lengthy and complicated regulatory approval process hinders efficiency within the housing delivery system. While certain measures instituted by the government are necessary, they tend to lengthen the regulatory process for obtaining planning approvals for land sub-division. In particular, the extensive delay caused by government referral agencies with respect to planning approvals has serious cost implications for private developers and ultimately, adversely affects in the final price to housing consumers.

6. Inadequacy of housing information system

The deficiency of information, which has also been expressed on several previous occasions, is cause for deep concern since the formulation of any successful housing policy must be based on a reliable housing information system. Therefore, it is essential that financial and human resources be allocated to facilitate the development of a comprehensive, accessible up-to-date and transparent database on the housing market. Moreover, a database with qualitative and quantitative information on housing will also serve to measure the performance of the National Housing Policy (NHP) against established targets.

 

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