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Meeting Nigeria's 17 Million Housing Deficit

The housing deficit in Nigeria is estimated at over 17million and previous approaches to tackling this problem has been anchored on construction of new builds. The limited success achieved with this approach is evidenced by the estimated 70% of Nigeria’s over 173 million people who continue to live in substandard housing. This is a challenge and an opportunity for (changes in) the country’s housing policy. As Nigeria prepares for a change in government and hand-over in its Federal and 36 State governments, it is imperative that a change in approach to housing provision and financing is adopted; which recognizes the realities of the social, economic and demographic structure of the country (such as a predominantly subprime employment sector, prevalence of informal and incremental housing construction mechanism, prevalence of informal land holding practices and lack of credit history records amongst others). This paper makes the case for urban regeneration as a strategy of improving housing supply with limited emphasis on direct new build construction. This could be achieved by creating decent homes from the substandard stock and the release of stocks of uncompleted housing into local markets.

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Meeting Nigeria's 17 Million Housing Deficit

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  1. MEETING NIGERIA’S 17MILLION HOUSING DEFICIT: AN AGENDA FOR CHANGE PRESENTED BY PROFESSOR. T. G. NUBI Department of Estate ManagementUniversity of Lagos, Akoka, Lagos. AT THE HOUSING RESEARCHERS/LECTURERS WORKSHOP CENTRE FOR HOUSING STUDIES UNIVERSITY OF LAGOS, AKOKA, LAGOS 20TH – 21ST MAY, 2015.

  2. 1. Introduction: The importance of housing…

  3. Housing and The Economy • Housing is an important contributor to economic growth • a. Construction of new homes (private residential investments) • consumption spending on housing services(13% of USA’s GDP) • Consumption spending on housing upgrades • Housing finance and related services (mortgage finance, insurance finance, e.t.c) • Housing and construction: a source of mass employment across professional , skilled and semi-skilled workforce: • India each new housing unit =2direct and 8 indirect jobs. • South Africa each housing unit =5 direct jobs and 3indirect jobs • Housing wealth is synonymous with private wealth • Increase in home-ownership increases investment in homes and the need for housing related facilities and services • Increase in home-ownership increases demand for public infrastructure like roads, schools, healthcare, hence greater investment and employment generating opportunities • Increase in taxes (land use charge, ground rent, tenement rates

  4. 2. Qualitative housing problems in developing countries like Nigeria?

  5. 3. What are the factors responsible for this state of Affairs in Developing Countries, Nigeria inclusive?

  6. Low ratio of Mortgages as % of GDP across Africa. Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

  7. Problems across the housing development value chain Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

  8. Cost of registering property across Africa Source: Centre for Affordable Housing Finance in Africa (2014) - http://www.housingfinanceafrica.org/document/housing-finance-in-africa-2014-yearbook/

  9. 4. The Nigerian Situation

  10. The Housing Need • The problem of housing has become an every day discussion in all quarters of the public and private services of the developing countries of Africa. It has become increasingly glaring that most of the urban population live in dehumanising housing environment while those that haveaccess to average housing do so at abnormal cost. • Rent in major cities of Nigeria is about 60% of an average workers disposable income. This is far higher than the 20-30% recommended by United Nations. • With an estimated population of 170 million as quoted,Nigeria needs to produce 720,000 housing units per annum based on an estimate of 10 dwelling units a year per 1,000 of population. This is a very big challenge to the building industry. • Despite Federal Government access to factors of housing production, the country could at best expect 4.2% of the annual requirement from her. Substantial contribution is expected from other public and private sectors.

  11. Mass Housing in Nigeria…Challenges N12-20 trillion required to finance housing deficit Absence of real estate backed capital market instruments • Housing in Nigeria estimated to be 2.3 per 1000 inhabitants Over 70% of the population lacks decent quality/ urban life Estimated housing deficit of 16 -20 million houses Absence of significant social housing initiatives 5.5% rate of urban population growth, twice the national population growth rate of 2.9%. Absence of new town development initiatives for several decades More than seven cities with populations above 1 million

  12. The Mass Housing Need Indicators • Millions in the informal sector • Over 200,000 military personnel • Over 200,000 teachers • Over 250,000 police personnel and civil defence personnel • Over 500,000 public servants at state and federal levels • Over 500,000 students • The National Housing Policy of 1991, the Federal Government set a target to deliver 8 million houses by the year 2000 and to deliver at least 700,000 houses per annum • Government White Paper of 2002 recommended “the implementation of a program of constructing 40,000 housing units per annum nation-wide with at least 1,000 units in each state” • The imperative is how to deliver AFFORDABLE HOUSING on a sustainable and UNPRECEDENTED SCALE.

  13. Low Capacity of Real Estate Developers • Low financial capacity to carry out mass development : no real estate developer has capacity to produce more than 1000 houses per annum • Weak Corporate Capacity: Most are registered as sole proprietorship and partnerships • Experiencing deep macro-economic induced challenges • Enduring significant challenges across the real estate development value chain

  14. Inability to Tap into Latent Suppliers • 36 State Housing Corporations • Over 700 Local Governments • Thousands of Co-operative Societies • Pension Fund Wealth

  15. Income • Low income as major obstacle • 70% of Nigerians earn below $1 per day • Less than 10% are gainfully employed. • About 70% of Government workers between Grade level 1-7 with earning less than N50,000 per month • Price of a simple 2 bedroom flat with minimum finishing is about N2.5.

  16. Depth of Financial Markets • High interest rates reflecting risk and source of funds • Absence of long term mortgage finance • Housing delivery models not replicable – projects carried out in silos • Foreclosure laws • Lack of institutional depth • Affordability gap between cost of houses and income of end users

  17. Housing Delivery Technique • Acute shortage of housing stock • Inadequate scale of delivery • Over 80% of houses built by individuals • Absence of quality assurance framework • Fragmented industry • Artisanal construction • Absence of community management to preserve asset value

  18. Land Assembly • Absence of clear property and security rights • Mandatory Governor’s consent for all land transactions • Inefficient land management system • High cost of land transactions

  19. 5. A model for effective housing delivery in the next dispensation of our governance using housing sector as tool of economic recovery and development.

  20. A Policy Proposal….. • A multiple approach to housing provision in Nigeria • Mass housing supply could be on regeneration rather than new build • Recognizes the various stakeholders needed to deliver this mandate • Recognizes that housing delivery at this scale must be tailored towards the effective demand of the Country’s various income classes and economic groups • Current activities of housing delivery agencies in the Country need to be integrated into a holistic delivery framework.

  21. Strategies TargetGroups Funding Delivery Models • Slum improvement programs • Home Completion loans • New Builds • Cooperative housing development scheme • State Housing Corporations • Local Government Housing • Social Housing Programme • PPPs • Key workers • Defense sector • Public sector employees • Private sector workers • Informal sector • Special groups: students, widows&rural dwellers • Internally displaced people • National Housing Fund • Cooperative Home Loans • Prime Property development • Microfinance Industry • Government Revolving Fund • Concessionary Funding • Private Sector “Regeneration Programmes, home completion loan services shall be the fulcrum of government’s policy for releasing uncompleted housing Stock to the market, while the private sector would be enabled to provide accessible housing solutions to the general populace.” Finance • High interest rates reflecting risk and source of funds • Absence of long term mortgage finance • Housing delivery models not replicable – projects carried out in silos • Foreclosure laws • Lack of institutional depth • Affordability gap between cost of houses and income of end users

  22. ANNEX H TO FHA/EC/HM DATED AUGUST 2007 FUNDING MODEL Legend Flow of Funds Funding Instrument Flow of Houses Housing Development Fund • Capital markets • Revenue from sale of Federal Government landed property • Redevelopment of Federal Government prime property revenue • N25 billion Government seed fund investment Securitisation Construction Finance Affordability Gap Finance Wholesale Repayments Housing Stock Mortgage Loan FMBN, PMI & AHFC Development Agent End Users e.g. Cooperatives Construction Finance Loan Repayment H-1

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