LITERATURE REVIEW
2.0 INTRODUCTION
This chapter gives an insight into various studies conducted by outstanding researchers, as well as explained terminologies with regards to modern strategies for housing delivery in Nigeria.
The chapter also gives a resume of the history and present status of the problem delineated by a concise review of previous studies into closely related problems.
2.1 CONCEPTUAL ISSUES
Housing, literally is defined as buildings or other shelters in which people live, a place to live, a dwelling and toNations a critical component in social and economic fabric. Housing represents one of the most basic humanneeds. To most groups housing means shelter but to others it means more as it serves as one of the bestindicators of a person’s standard of living and his or her place in the society (Nubi, 2008). It is a priority for theattainment of living standard and it is important to both rural and urban areas. These attribute make demand forhousing to know no bound as population growth and urbanization are increase very rapidly and the gap betweenhousing need and supply becomes widen. Cultural factors such as preferences and values or social status, tasteand financial resources, also influence a house physical characteristics. In developing countries, poor housingdelivery has been attributed to inadequate mechanisms and systems for land allocation, funding, mortgageinstitutions and infrastructure (Encarta, 2007).
Despite the significance of housing adequate supply has remained a mirage to all carder of the society in Nigeria.
The situation is very particular to most developing countries where population grow at exponential rate and rapidurbanization becoming a norm, and discrepancy in housing need and supply is high. Various authorities haveproffered strategies for improving housing delivery in Nigeria. Fasakin (1998) suggested the cooperative housingmodel while Oduwaye (1998) advocate for simply land allocation system and Omole (2001) suggestedaffordable financing model.
2.1.1 Necessity for affordable Housing
Nigeria is perhaps the fastest urbanizing country in the African continent. One of the most important challengesfacing the country is the provision of affordable housing. As more and more Nigerians make towns and citiestheir homes, the resulting social, economic, environmental and political challenges need to be urgently dressed
(Raji, 2008).
A recent study of housing situation in Nigeria put existing housing stock at 23 per 1000 inhabitant. Housingdeficit is put at 15 million houses (Mabogunje 2007) while N12 trillion will be required to finance the deficit.
This is about 4 times the annual national budget of Nigeria (FHA, 2007). House prices and rents, on the otherhand, have grown ahead of general inflation. Making matters worse, the composition of houses for sale and renton the market has been inexorably shifting towards very expensive house (Nubi, 2008).
2.1.2 Past Strategies on Housing Delivery in Nigeria
Between 1975 and 1980, there were plans of deliver 202,000 housing units to the public but only 28,500 units,representing 14.1% was achieved. Also, out of 200,000 housing units planned to be delivered between 1981 andInternational Journal of African and Asian Studies - An Open 1985, only 47,200 (23.6%) was constructed. Under the National Housing Fund (NHF) programme initiated in1994, to produce 121,000 housing units, it was believed that less than 5% was achieved. In spite of a series ofgovernment policies towards housing delivery, there exists a gap between housing supply and demand.
Research has shown that 75% of urban housing is situated in slum conditions (UNDN, 2005), and indeed thequality of the housing is poor and clearly an affront to human dignity (Agbola and Olatubara, 2003). As part ofeffort to increasing qualitative, affordable housing for the masses in the country, the Federal Government in2004, pledged to adequately fund research pertaining to the manufacture and the use of local materials in the
sector.
Housing delivery in Nigeria is provided by either the Government or Private sector, but despite FederalGovernment access to factors of housing production, the country could at best expect 4.2% of the annualrequirement. Substantial contribution is expected from other public and private sectors. The production ofhousing in Nigeria is primarily the function of the private market; approximately 90% of urban housing isproduced by private developers. Due to housing demand created by rural- urban migration, which account for 65%of urban population growth, the fixed supply of urban land, and inflation of rental and housing ownership cost(taylor, 2000).
Unfortunately, the private sector is saddled with numerous problems which make supply always fall far short ofdemand and lower production quality (Nubi, 2008). The problem of affordable housing has been a concern forboth the government and individuals. Appreciating these problems, both public and private sector developersmake effort through various activities to bridge the gap between housing supply and demand, but the cost ofbuilding materials, deficiency of housing finance arrangement, rigorous loan conditions from mortgage banks,government policies amongst other problems have affecting housing delivery significantly in Nigeria ( Raji,2008).
With different Policies and user solutions that are abound for the purpose of reducing quantitative housingdeficiency. It could be possible to solve the problem if housing were used only for shelter needs. However, inaddition to serving as a shelter, housing is also a produced commodity, consumer good, assurance for families,means used for reproducing social relations and an investment tool protecting the value of money againstinflation.
2.2 STRATEGIES, POLICIES AND PROGRAMMES ON HOUSING DELIVERY
Pre- 1928: Before the advent of the colonial rule at the dawn of the 20th Century, a communal system of housingdelivery was practice in most Nigerian communities. Houses are built through communal efforts by peer groups,members of age group would turn out en masse on appointed day to assist the builder in whatever task of theproject. In return, the builder would provide sumptuous meals while the project lasted and vice versa. Thissystem continued up to 1928, and still lingers in some communities to date despite the disruption of the people'scommunitarian values by the westernization.
The Colonial period (1928- 1960): Government starts to intervene in the housing sector in 1928, during the
Bubonic Plague of 1928 – 1929 (NHP, 1991), by the then government of the defunct Lagos Colony, wading into
the housing sector brought into existence by law the Lagos Executive Development Board (LEDB) which was
charged with the responsibility of planning and Development of the capital city of Lagos. But that housing
scheme had only civil servants as its beneficiaries. It was only possible to sell the units of houses in that estate to
civil servants through payroll deduction system. During preparation for independence, the slum clearance
resulted into the construction of additional houses in Surulere which was the first attempt in urban renewal in
Nigeria.
Nigerian Building Society (NBS): Established after the World War II, by colonial government with the aim of
extending housing opportunities to more Nigerians including those in the private sector. This was a carryover
from the British system where mortgage bankers are called building societies. The effect of the NBS was felt
almost exclusively within the Lagos enclave. Only an insignificant number of people outside Lagos benefited
from the programme. But the NBS could not stand the test of time because it was dependent on government for
funding.
Urban Redevelopment or Renewal: Two of the hallmarks of the colonial approach to African urban housing in
the fifties were the Redevelopment of decaying ‘core’ areas combined with the renewal of ‘slums’ or squatter
Areas, and the construction of large rental public housing estates. The first attempt in the country was in 1951.
1952-1960: Nigeria in 1952 - 1960 was carved up into three regions namely: Eastern Region, Western Region
and Northern Region. The regions established respective housing corporations in 1964. With a function of
developing estates and at the same time providing mortgage for the people to build houses and pay back over
many years. Like the Nigerian Building Society, the housing corporations had impacts only in the capital cities
of the respective regions i.e. Enugu, Ibadan, and Kaduna. One of such is Bodija Estate in Ibadan developed by
the defunct Western Regional government (NHP, 1991).
1960 – 1975: Prior to 1975, that is, within the first two national development plans (1962 – 68) and (1970 –75),
International Journal of African and Asian Studies - An Open housing was regarded as a social sector, a consumption – oriented, less preferred, non – income generating sector.
Insignificant sums of money were accordingly located. With this type of wrong signal from the public sector, the
private housing sector which provides over 80 percent of residential units was not encouraged to invest in
housing. Investors were misled into believing that they could not recoup their investment in housing (especially
for the low – income people) as fast as in other sectors and with any appreciable margin of profit. Accordingly,
the (financial) loans to prospective house builders were few, poorly organized and ineffective.
1976 – 1985: By 1975, however, the housing problem of the country as manifested in the increasing housing
shortage, rising house rents, increased overcrowding resulting in slum and unhygienic conditions, etc. can no
longer continue unnoticed. The government felt compelled to act.
Consequently, the plan contained the first explicit statements, programmes and targets specifically aimed at
alleviating housing problems. Amongst these were significant and commendable steps taken to make housing
loans available to an increasing number of Nigerians through the manipulation of monetary instruments and the
reconstitution of the Nigerian Building Society into the Federal Mortgage Bank of Nigeria to serve as the apex
lending institution for house loans in Nigeria.
In addition, a number of administrative steps were taken to increase the source generally. Some of these were the
encouragement of the state and local governments and also private employers in the provision of houses or the
granting of house loans to their employees. It was within this framework that the Employees Housing Schemes
(Special Provision) Decree Number 54 of 1979 came into being. The decree made it obligatory on any employer
having a specified number of employees (fifty) to establish, execute and maintain a housing scheme for these
employees. The various governments were to help in the provision of land and other materials. The federal
government, through the Central Bank of Nigeria, directed that commercial banks, especially, should devote
about 5 – 6 percent of their total deposit (and the insurance companies up to 25 percent of their life deposits) in
real estates. Despite all the aforementioned steps taken by the federal and most state governments, it was
discovered that the housing delivery situation in Nigeria was getting worse.
National Housing Policy (NHP 1991): The Nigerian National Housing Policy was formulated in 1991 with the
goal of ensuring adequate access to decent and affordable housing by all Nigerians. The housing situation in
Nigeria since its formulation has shown quite glaringly that the implementation of the policy and the operational
strategies adopted for it have been deficient. The policy was revised in 2004 to take care of the problems
encountered in the implementation. A Presidential Technical Committee on Housing and Urban Development
was set up by government to address the new housing reforms. It recommended amongst other things the
restructuring of the Federal Mortgage Bank of Nigeria (FMBN) and the creation of Real Estate Developers
Association of Nigeria (REDAN), and Building Materials Producers Association of Nigeria (BUMPAN). The
new housing reforms created financial mechanisms and institutions that will make available to the private sector
(developers) funds for the production of mass houses, and allow purchasers (mortgagors) to have easy access to
borrowed money through the Primary Mortgage Institutions (Ebie, 2004). It also acknowledged, finance as
constituting the centre piece, among other major pillars, of housing delivery (Abiodun, 1999). The poor
performance of Federal Mortgage Bank of Nigeria (FMBN), which gave loan to 8,874 out of over 1,000,000
applications between 1977 and 1990, was very worrisome.
2.2 Housing Finance Structure
Arilesere, 1998 summarized the major strategies and guidelines of the National Housing Policy (NHP, 1991) on
Housing finance as follows:
• Mobilization of savings into Mortgage Institution
• Provision of incentives for the capital market to invest in property development
• Provision of policy controls over the allocation of resources between the housing sector and other
sectors of the economy.
• Facilitation of flow of domestic and international resources into the priority housing areas, such as low
income housing.
• Need for government to establish voluntary schemes, mandatory schemes and provide substantial
budgetary allocations and financial transfer to the housing finance system. Establishment of National Housing
Fund (NHF) to be administered by the Federal Mortgage Bank.
• Ensuring that Commercial Banks, Merchant Banks and Insurance Companies are given reasonable
conditions to encourage them to invest in mortgage business.
Apart from the above, the policy spelt out other functions of the FMBN – These are:
• To develop a secondary mortgage market for housing finance to improve the liquidity of the system
• To act as guarantor for loan stock floated by the primary mortgage institutions
• To manage the National Housing Fund.
2.2.1 The Federal Mortgage Bank (FMBN)
Nigerian Building Society was converted to Federal Mortgage Bank in 1977, with a capital base of twenty
million naira and increased to One hundred and fifty Million Naira (N150m) in 1979. The impact of Federal
Mortgage Bank then was insignificant as only few loans were given principally to few middle and high income
International Journal of African and Asian Studies - An Opengroups in the country (NHP, 1991). As pressure due to increase in housing deficit continue to rise, an inclusive
Housing policy was started in 1980, targeting low income group whose annual income did not exceed five
thousand Naira. The Federal Mortgage Bank (FMBN) as a vehicle for Housing delivery in Nigeria, was
combining the functions of primary and secondary mortgage institutions.
The Federal government separates the two functions by creating the Federal Mortgage Finance of Nigeria (which
is now phased out). The FMBN was therefore left to operate exclusively as a secondary mortgage market and
open the primary mortgage market to the private sector. Many leveraged that opportunity to go into mortgage
banking. But their impact on the built environment has been short of expectation. With the FMBN operating as
the secondary mortgage market, the next problem was where to source the money to lend to the Primary
Mortgage Institutions (PMIs).
In 1992, the Federal government enacts a policy which made it mandatory for every Nigerian earning up to N3,
000 monthly to contribute 2.5 per cent of his monthly salary to a National Housing Fund (NHF) (Thisdayonline,
2009). This fund was to be managed by the FMBN, from which it could lend to the PMIs. The contributors to the
fund were also entitled to borrow money from the fund, through the PMIs, after six months, to develop houses.
The Federal Mortgage Bank of Nigeria, a scion of the Nigerian Building Society, the FMBN has undergone
several transformations since it came into being in the 1970s. It is today Nigeria's secondary mortgage institution,
charged on the one hand with managing the NHF; and on the other hand, with lending money to housing
developers through the PMIs. The bank has taken a number of measures in the recent times to ensure that estate
developers can build to target prices. Akinlusi, 2007 strongly advocate for mortgage facilities as vehicles for
mass housing delivery in Nigeria.
2.2.2 National Housing Programme (NHP 1994 – 1995)
1994-1995 National Housing Programme was designed to provide 121,000 housing units nationwide, for allincome groups. The basic objectives of the programme included the following: to increase the housing stock inthe country; provide easy access to home ownership; translate the national housing policy objectives into reality;and enhance resource mobilization. Others were: to establish permanent housing delivery system which will beself-sustaining and enduring, without reliance on the government treasury, after an initial take-off grant;
strengthen institutions within the system to render their operations more responsive to demand; and encourage
greater private sector participation in housing development. The programme, nevertheless, failed due to reasons
of inadequate funding, inadequate planning and conception, flaws in execution, attenuated public confidence,
problems of access to the NHF, under-pricing and costing, inflation etc. In view of this, the FHA and the Federal
Ministry of Works and Housing were jointly appointed the executing agency of the NHP at its inception
(Thisdayonline, 2009).
2.3 PROSPECTS OF LOW INCOME HOUSING
According to a report by the Urban Institute, 25% - 40% of all low-income families in the United States experience hardships related to food and housing. This translates into millions of families with approximately 19 million children who need to be assisted.
Thus, the term "low income housing" or even "affordable housing" is used to describe housing and apartments that are within financial reach to individuals and families with low annual household incomes. Such housing is made available by many sources, including city, county, state and federal government programs. There are also programs available through non-profit organizations and foundations, and private real estate or property management firms.
HOW DOES IT WORK?
Via the federal government's Section 8 housing programs, which is also known as government subsidized housing, residents are given a place to live and only required to pay 30% of their monthly income as rent. The government itself will pay the difference, according to fair market price.
There are other low income housing programs that are not subsidized by the government, but are created and controlled by local non-profit organizations that receive grants to provide assistance to needy families. How much residents are required to pay depends on the organization's rules and regulations. Contrary to popular belief, minority groups do not make up the majority of low income households in the United States. Although some Black and Hispanic communities in urban cities can be mostly low income households, there are far more low income households overall in rural areas where mostly White Americans live. This includes areas that are 30 miles or more outside of the nearest metropolitan city.
2.4 CHALLENGES OF LOW INCOME HOUSING
Housing is one of the most basic of human needs. Provision of houses through the creation of mortgages is taken for granted in developed countries; however, it remains a major challenge in developing countries, especially in sub-Saharan Africa. All governments in Nigeria since independence highlighted housing as a major priority. Unfortunately for over 47 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. One of the major housing policy initiatives was the Policy on Affordable Housing that was initiated in 1979 by the Shehu Shagari Administration. The policy though laudable was unable to meet the nation’s housing needs because it was based on the unsustainable tenet that houses will be provided by government (this remains the anomaly that we must resolve). The implementation of the 2002 housing policy reforms was a promising beginning, but a lot remains to be done. In a recent news report on the Nigerian Housing Sector aired on African Independent Television (AIT), it was stated that between 1973 and 2006, the Federal Housing Authority (FHA) built only 30,000 housing units nationwide. According to Mr. Tunde Ipinmosho of the Federal Housing Authority (FHA), the current housing deficit is about 12 million homes. If we take the current population of 140 million Nigerians as reported by the National Population Commission after last year's census exercise and assume 30 percent of the population as working adults we have 42 million estimated working adults; assuming about 45 percent or 18.9 million of the working adults qualify for mortgage loans, and assume an average house final selling price at about Naira 2.8 million for a 2-bedroom flat, the possible size of the mortgage market is close to Naira 53 trillion. Looking at the statistics we see that there are tremendous opportunities in the Nigerian housing sector waiting to be tapped. We should note that the government alone cannot fill the housing gap. In order to fill the gap we would have to leverage on the resources available in the private sector, while also encouraging foreign investment (in short government has no business building houses). Government (federal and the sub-national governments) should focus on providing a favourable investment climate, infrastructure, and mortgage insurance to first time home buyers and low-to middle income families. We must however, note that there are challenges to harnessing the huge potentials inherent in Nigeria’s housing sector, and invariably providing affordable housing in Nigeria.
REFERENCES
Agbola, T. and Olatubara, C.O. (2003); Private Sector Driven Housing Delivery (in Nigeria): Issues, Constraints,
Challenges and Prospects, a lead paper presented at the 2nd Annual National Workshop on Private sector
Driven Housing Delivery in Nigeria, University of Lagos, Lagos, 30th – 3rd July.
Akinlusi, A. (2007): Mortgage Facilities: A Panacea for Mass Housing Development. A paper presented at
Nigerian Institute of Building conference, Lagos, November, 13, Pp9-16.
Aluko, B.T. (2002): Urban housing for low – income earners in cities of Lagos state: The Land Question,
Proceedings of a National Conference on The City in Nigeria, Faculty of Environmental Designs and
Management, ObafemiAwolowo University, Ile – Ife, pp288 – 294
EBIE, S.P.O.F. (2004): Statutory Component(s) on Housing Policy – Legislative and Regulatory.
Encarta, 2007: A Computer base Microsoft software.
Fasakin, J.O. (1998): Cooperative Housing; The Concept, Experience and applicability to Nigeria’s socioeconomic
millieu’. Seminar paper presented at the Fedral University of Technology, Akure.
Federal Government of Nigeria (FGN, 2004): National housing Policy Draft, Abuja.
Mabogunje A.I. (2004): An African Perspective. In UN-HABITAT Debate. Vol.10, No.4, Pp.12
Nubi, O.T. (2000): Housing finance in Nigeria. Need for Re-engineering “Ideal Habitat Cooperative Housing
Initiative”
Nubi, O.T. (2008): Affordable Housing Delivery in Nigeria. The South African Foundation International
Conference and Exhibition, Cape Town, October, Pp. 1-18.
Oduwaye, A.O. (1998): Beyond structural adjustment programme: Strategic options for increasing housing
stock in Nigeria.