According to then Governor of lagos state Babatunde Fashola, Lagos state’s annual population growth rate was 8%, an estimated 800,000 people every year. Based on that statistic, the high level of housing need in the state would remain. As much as there is a housing deficit the fact still remains that people can only acquire what they can afford. Therefore, it is practically important to consider the structure of the demand for housing vis-a-vis the need for housing. Housing need refers to what is desirable for each household while effective demand refers to what is affordable. This report would examine what exactly constitutes affordable housing in Lagos, the role of social housing and the various means through which home-owners are purchasing houses.
Housing Market Indices
A survey showed that from the total adult population of 87.9 million in Nigeria, only 3.6 million or 4% earn above N70, 000 per month. So it is not surprising that this income level cannot support affordability of high or medium cost housing. In Nigeria, supply of housing is mainly targeted at the high income earners, and selling price which are termed ‘low’ are unaffordable to the lower income bracket. House costs at the minimal can be estimated at N5, 000,000 (USD 31,250), and this is in only a few locations in the country. Therefore, the high demand will remain if indices, statistics and features in the industry remain unchanged.
‘Affordable housing’ can vary in meaning for different people, as affordability varies according to a household’s individual circumstances. Affordability of housing can be measured as the relationship between housing expenditure and total household income, and it defines a standard required by the households in order to live a satisfactory life.
Generally, affordable housing is housing that is suitable for the needs of a range of very low to moderate income households and priced so that these households are also able to meet other basic living costs such as feeding, clothing, transportation, education and health care Affordable housing is also expected to be reasonably adequate in standard and location, well designed and connected to services. As a global common practice, housing is usually considered affordable if it costs less than 30 percent of gross household income, just as mortgage repayments are often structured to be not more than 33.33% of one’s income monthly. The affordability termed at 30% was adopted in the 1980s as a general rule.
Determining an exact cost for affordable housing is complicated, but affordability can be related to income earnings. The World Bank and United Nations recommended the ‘Median Multiple indicator’ as an approach to measuring housing affordability, whereby median house prices are divided by gross annual median household incomes. Consequently, housing affordability is rated on a scale of 0 to 5, as indicated by the results, with categories 3 and under being affordable.
Nigeria is described as a lower middle economy. In Nigeria, the minimum income wage for an employee is N18, 000.00 (USD 112.15) per month. Calculated in terms of mortgage structuring, 33.3% of USD 112.15 will be USD 37.37; and a monthly payment of this sum over a 30-year period will amount to N2.15 million (USD 13,453) which is averagely lower than the cost of a housing unit in the country. It is important to note that a mortgage period of 30 years or a housing unit for N2.15 million is hardly accessible, and this amount excludes interest rates to the mortgage facility.
In Nigeria, even the middle income earners struggle to have access to affordable housing. There is hardly affordable housing in Nigeria, especially in locations with higher density. In 2004, the Lagos State Government estimated that 51% of men and 54% of women resident in Lagos live below the poverty line.
In most developed countries, affordable housing is achieved through assistance from the government, including through planning incentives, tax concessions, land provision, infrastructural support and required building approval concessions. The Nigerian government has made efforts to adopt policies, systems and schemes for the development of the housing industry, but these have unfortunately not been very successful.