‘Economic recovery, increasing household incomes will fuel demand for new housing’

Notwithstanding the challenge that 23 million more rural dwellers will double the number of urban dwellers in Nigeria by 2050, a new report has revealed that the housing sector has significant potential for growth.

The report – Nigeria’s Housing Construction and Rental Activities, Cost Benchmarking and Impacts on the Economy, authored by Centre for Housing Finance in Africa, said that economic recovery and increasing household incomes will continue to fuel demand for new housing for purchase and rental.

However, this growth potential will only be fully realised if significant, concerted changes are made to Nigeria’s housing strategy. From a delivery perspective, a major shift is required in the depth (affordability) and breadth (numbers of units) delivered by all development actors in the country.

This report uses CAHF’s Housing Cost Benchmarking (HCB) and Housing Economic Value Chain (HEVC) methodologies to better understand Nigeria’s housing market. These analyses assist to identify areas of concern and to propose strategies to improve the functioning of Nigeria’s housing sector, and consequently assist to better the housing outcomes of all Nigerian households.

The five cities and countries included in this benchmarking comparison are South Africa (the least cost), Lagos, Nigeria, Dodoma, Tanzania, Kampala, Uganda and Nairobi, Kenya (the highest cost).

The report noted that comparatively small number of new accommodation units are being produced formally each year, many of which stand abandoned, vacant, or incomplete due to a lack of effective demand from Nigerian households.

“This means that the vast majority of occupied urban housing units will continue to be produced informally – either with the assistance of contracted informal builders, or through the direct efforts of the members of households themselves.

The vast majority of new housing opportunities will continue to be provided through basic development by existing landowners to accommodate the demand for small, relatively affordable units in all major urban areas.

Besides improvements in formal housing development processes, it said, a concerted effort is required to enable this market to accommodate the vast majority of households over the coming decades.

“Policies and incentives to encourage and facilitate the creation of a new range of more affordable incremental housing opportunities are required, which should include basic access to land and services, incremental housing opportunities and investment in infrastructure that creates a better urban environment for private housing investment and growth in housing construction and rental markets over time.”

Considering the housing cost benchmarking analysis, the report said, important shifts must be made in the approach to housing delivery itself. “Improved access to titled land, the removal of constraints throughout the development process, improving access to bulk infrastructure and combatting the negative impacts of corrupt practices are critical if local and foreign direct investment is to be crowded into Nigeria’s housing sector. “

Furthermore, continued efforts to improve Nigeria’s capital markets and flow of funds into housing finance -mortgage finance and other more appropriate instruments will be critical. “Understanding the composition and challenges in housing economic value chain will also assist in shaping policy that encourages the growth of vibrant local construction and rental markets, as well as supporting upstream intermediate input markets required to develop a competitive housing construction and real estate sector.”

The report said: “Given Nigeria’s location and size, it should take a larger position on the regional, continental and global building materials stage. Therefore, a vibrant and increasingly competitive local building materials supply market, and improved and more competitive construction labour markets (at the basic skills, technical skills and professional skills levels) will be imperative.”