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Publication Date: December 25, 2020

DOI:10.14738/assrj.712.9369. Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized

Private Sector Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

Housing Affordability In Nigeria: A Comparative Analysis Of

Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing

Samson Akinbamide Omobayo Adegoke (Ph.D)

Department Of Estate Management and Valuation,

Osun State College Of Technology, Esa-Oke, Osun State

ABSTRACT

Housing delivery in Nigeria has been dominated by the On-Site-Builders,

each building incrementally as private individual for his household. The

need to take advantage of economy of scale in housing delivery to enhance

affordability led to the emergence of Organized Private Sector Housing

Delivery in Nigeria. Despite this initiative, the majority of the people are

not accessing housing from the Organized Private Sector Housing

Developers, still employing their incremental housing approach. This

study is therefore a comparative analysis of housing affordability of

beneficiaries and non-beneficiaries of Organized Private Sector Housing

Delivery in Nigeria. A cross-sectional survey design was adopted. The

respondents, beneficiaries and non-beneficiaries, were selected by

systematic random sampling technique. Ten percent of beneficiaries’

household heads were selected from the occupied houses (19500) in the

estates. The respondents among the non-beneficiaries were selected

among the occupied housing units within 1km radius of the houses

around each of the sampled estates until equal numbers of respondents

from beneficiaries was selected, where possible. Thus, there were 1,950

and 1,332 number of respondents among beneficiaries and no- beneficiaries respectively. The structured questionnaire administered on

the heads of households’ elicited information on demographic

characteristics (age, sex, household size, etc) and housing affordability

variables such as (household income, housing expenditure, access to

mortgage, other non-housing expenditure, etc). The questionnaire

administered on Organized Private Sector Housing Developers (OPSHDs)

seeks information on types of houses produced, selling prices, sales terms,

among others. We rely on affordability rating scale of: normal ≤30%;

tolerable 30.1-50% and stressed ≥50% to measure and compare housing

affordability of beneficiaries and non-beneficiaries. They study revealed

that while about 42% of beneficiaries fall within normal housing

affordability, about 76% of non-beneficiaries are in that category. About

37% of beneficiaries are in tolerable housing affordability category while

only about 16% of non-beneficiaries are there. Those under varying

degrees of housing affordability stress are about 21% and 8% among

beneficiaries and non-beneficiaries respectively. The major policy

implication of the findings is that direct support to non-beneficiaries – the

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On-Site-Builders by government, through serviced plots and mortgage

facility may be a more veritable approach for resolving the current

housing crisis in the country.

Keywords: On-Site-Builders, Housing Affordability Profile, Tolerable Housing

Affordability, Non-Housing Expenditure, Housing Expenditure.

1.0. INTRODUCTION

Housing is a fundamental right, as citizens can hardly enjoy other rights without it. Housing delivery

in Nigeria was initially treated as a social responsibility of government. In the Third National

Development Plan, government came out boldly to state that “government now accept it as part of

its social responsibilities to participate actively in the provision of housing for all income groups

and will therefore intervene on a large scale in this sector during the plan period” (FGN, 1975).

Since that time, a lot has changed, with housing moving through the trajectory of social good to

commercial and to full privatization in Nigeria. This paradigm change has also make “affordability”

to replace “need” in housing policy discourse. Therefore, housing has traversed from the public end

of public-private partnership continuum to the private sector end resulting in full privatization of

housing delivery. Thus today in Nigeria, housing provision has become more of a function of the

market and less the responsibility of governments. Therefore, the shrinking role of the state in

many developed and developing countries over the past three (3) decade due to the neo-liberal

economic policies has brought housing affordability to the fore in global housing discourse.

According to Whitehead (1991), recent housing debates in the UK have shifted away from

discussion of housing need to more market-oriented analysis of affordability. Similarly, the fact that

Nigeria has embarked on a pro-market housing reform that is private-sector-driven, has placed

affordability concern at the forefront of the Nigerian housing policy discourse (Ndubueze, 2009).

The 2002 National Housing Policy has as its main thrust “to seek vigorously to make an increasing

majority of Nigerians home owners on the basis of mortgage finance (Mabogunje, 2004). This

implies that not all Nigerians can be captured in the policy implementation. In truth, not only that

all Nigerians are not captured, the fast majority is not. Thus, despite the new Organized Private

Sector Housing Delivery, fast majority of Nigerians still build their own houses unaided by

government. The question this paper seeks to answer is “which one is more affordable between

governments facilitated organized private sector housing and the one privately built by the owners

with or without government assistance?” Therefore, this study is an assessment and comparison of

housing affordability of beneficiaries and non-beneficiaries of organized private sector housing in

Nigeria. The findings from this study will be highly valuable for government, politicians and policy

makers in taken decisions on the best approach to adopt to enhance housing affordability of

majority of Nigerians.

2.0 LITERATURE REVIEW

The term housing affordability simply implies the ability to afford housing. However, beyond this

point, any attempt to precisely define and grapple with the concept becomes slippery. The term

housing affordability come to popular usage in the last three decades replacing “housing need” at

the centre of debate about the provision of adequate housing for all (Whitehead, 1991; Swarts and

Miller, 2002). Although “affordability has been in widespread use in US housing policy since 1960s,

it was not until late 1980s that it became part of policy discourse in Australia and UK. Its usage can

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 455

be traced to the promotion by governments of neo-liberal modes of housing. Confirming this view,

Heywood (2017) asserted that the shrinking role of the state in many developed countries over the

past three decades due to neo-liberal economic policies brought housing affordability to the fore in

global housing discourse. The adoption of neo-liberal economic policies in Nigeria led to the

adoption of the current national housing policy with emphasis on the market and private sector

driven housing provision. This paradigm shift has therefore make clarity and measurement of

housing affordability imperative in Nigeria.

Generally, affordability is a measure of ability and capacity of consumer to pay for goods and

services to be consumed. Therefore, in a market economy, price will not only allocate quantity, but

also, the quality of goods and services that each household will consume based on their level of

affordability. According to UNCHS/HABITAT (1991), housing affordability is an assessment that

relates a particular housing solution to the amount that can be paid for without unduly stretching

the payer’s resources. This view of affordability is of wider applicability, as it is applicable to

renters, as well as those who want to build or buy their houses without recourse to mortgage facility.

According to Arthur et al, 2002), housing affordability is more difficult to define as it involves the

capacity of households to consume housing services, specifically; it involves the relationship

between household incomes and housing prices and rents. Maclennan and Williams (1990) gave

one of the most quoted definition of housing affordability as “a measure with securing some given

standard of housing (or different standards) at a price or rent which does not impose, in the eye of

some third party, (usually government) an unreasonable burden on household income.

In a more explicitly way, Whitehead (1991) pointed out that definitions of housing affordability

usually focus on the relationship between housing expenditure and household income and that they

seek to establish a standard in respect of which the amount of income spent on housing is defined

unaffordable. This standard can be defined in terms of absolute residual income, once housing costs

have been met or as a ratio measure, specifying the acceptable proportion to be spent on housing.

However, in a mortgage-based housing delivery, housing affordability can be conceptualized as

ability and capability of household to meet their periodic mortgage obligations without jeopardizing

their health or reducing their family nutrients intake (Agbola, 1990; Olatubara and Agbola, 1992).

This is mortgage affordability; the ability to meet all requirements to quality to raise enough fund

through mortgage to buy a house. On the other hand, repayment affordability considers the burden

imposed on a household of repaying the mortgage and ability to cope without failing to meet other

non-housing necessities. Income affordability is simply a measure of the ratio of house prices to

household income. Finally, there is the renter housing affordability which specifically measures the

ability of renters to pay rent of a minimum standard housing without jeopardizing the ability to

meet other non-housing needs. All these variants of housing affordability further attests to its

complexity, contentious nature and implications for different segments of the population.

The contestation in housing affordability debates does not end with its definition. The greater

debate is in the approaches to measuring housing affordability. Notwithstanding the controversies

in the housing affordability measure methods/approaches, it has gained wider global recognition

and acceptance in housing policy outcomes analysis. According to Bramley (2012) affordability

measure, over the last 25 years, has become a more commonly used even ubiquitous, term in

housing policy discourse. Affordability measure has come as the most concrete measure to relate

anticipated policy outcomes to the households, and therefore has become a kind of acid test for the

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analysis of policy outcomes. However, due to its increasing popularity, acceptability and

application, housing affordability measure has equally become extremely controversial, generating

intense intellectual discourse and ultimately leading to refinement in operational modalities. This

intellectual debate has pitched the proponents of housing affordability measure into two major

divides (Adegoke, 2016).

Therefore, most recent research efforts and debates are concerned about how the affordability

measure should be operationalized – particularly whether a housing costs-to-income ratio

approach or residual income relative to subsistence approach should be adopted. (Bramley and

Kantley, 2004; Kulty, 2005; Stone, 2006; Gan and Hill, 2009; Chen, et al; 2010 and Bramley, 2012).

According to Stone (2006), mathematically, the relationship between housing costs and income can

be computed either as ratio or as a difference. These two approaches are the formal foundation of

the prevailing affordability paradigm and its principal challenger respectively.

Housing costs-to-income ratio approach expressed affordability as the ratio of housing costs to the

household income (Kulty, 2005). This approach has the longest history and widest recognition

(Stone, 2006). It is the most common measure of housing affordability (Chen, 2011). The threshold

of the price or housing expenditure-to-income has been set at 25%, 30% and 50% and households

that exceed these ratios are regarded as having housing affordability problem (Kulty, 2005).

Housing costs-to-income approach appealed to many researchers and professionals because of its

“mathematical simplicity,” also, because ratios are pure numbers, they can be compared across time

and space and are susceptible to being verified as universal and lawful (Stone, 2006). However,

despite the widespread recognition and acceptance of this approach, it has several drawbacks

which invariably led to agitation for an alternative approach (Adegoke, 2016). Prominent among

the flaws are lack of theoretical foundation for the concept or particular ratio or ratios that are used;

it ignores differences in quality and preference (Kulty, 2005; Stone, 2005). It also fails to

appreciate/capture income constraints and differentials among household and cannot distinguish

between households that willingly and those that are forced to spend more than 30% of their

income on housing.

Residual income approach emerged as a result of the perceived flaws and several criticism of the

ratio approach. Mathematically, it is a measure of the difference between household housing

expenditure and the household income. This approach relied on the fact that for the fast majority

of households, housing expenditure is by far the single largest chunk of their income. According to

Stone (2006), the approach arises from the recognition that because of housing’s distinctive

physical attributes in comparison with other necessities its costs makes the largest and least flexible

claim on after-tax income for most households. This approach can also be anchored on the “housing

and other goods theory” by Jameson (2004), where he asserted that: “from a theoretical base, the

trade-off between spending on housing and spending on other goods in the consumption basket

follows from the neo-classical theory of consumer choice. The outcome of such a trade-off is

determined by a result of the interaction between an individual’s preferences (tastes) and their

budget constraints” (Jameson, 2004). In essence therefore, the non-housing expenditures are

limited by how much is left after paying for housing consumption. Essentially, residual income

approach measures whether the household’s income after deducting the costs of standard housing

consumption is sufficient to meet minimum acceptable non-housing consumptions. Thereafter, the

approach indicators of housing affordability should be the difference between housing costs and

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 457

the residual income after paying for housing (Luffman, 2006). Stone, a leading advocate and

proponent of residual approach further clarified the approach in his publication when he developed

the concept of “shelter poverty” which he described as a situation when housing costs are too high

that household cannot meet the minimum acceptable non-housing consumption. Kulty (2005)

similarly came up with “housing induced poverty,” which he described as the situation when a

household cannot afford the minimum non-housing goods after paying for housing. The strength of

residual income approach includes taken the housing decisions of individual households and

socially acceptable level of consumption into consideration; which make it possible to establish

under and over consumption. This approach also offers a more precise treatment of how to identify

housing needs and problems, which promotes the allocation of housing subsidies in a more efficient

and impartial way (Kulty, 2005); Stone and Chen, 2010; Stone et al; 2011; Bramley, 2011). One

major weakness of residual income approach however remains how to define and establish the

“minimum standards” of adequacy for non-housing consumption (Gabriel et al; 2005; Stone, 2006

and Yang et al, 2011).

By and large, residual income approach has enriched the debate on housing affordability measure

by introducing some variables which invariably make it to capture more aspects of housing

affordability that ratio approach neglected. Despite that, Stone and one of the strongest advocates

of the adoption of residual income approach, admitted that residual income is neither well known

nor widely understood, let alone accepted. That notwithstanding, the approach is sound and very

robust and sooner or later, it will effectively compete with, if not replace the traditional paradigm

of housing affordability measure (Stone et al, 2011). Generally however, whichever of the two

major approaches that will be employed, the starting point is to properly define housing

affordability. According to Bramley and Karley (2004) affordability is of a decent home, within the

means of the family. While affordability ratios measure the “housing costs-to-income,” residual

income approach measures “what percentage of income is left” (residual) relative to subsistence

needs after paying for housing.

This review of literature has revealed absence of serious theoretical efforts and application of the

two major contemporary measures of housing affordability and a narrow application of measure of

repayment affordability in public housing scheme in Nigeria. More importantly, there is a

noticeable dearth of empirical investigation of housing affordability of urban dwellers in Nigeria at

a national scale and across all income groups. This therefore exposed major research gap in national

housing affordability. This research fills this major gap and provides a basis for contributions to the

ongoing global debates on housing affordability from the Nigerian perspectives. More importantly,

this research is becoming imperative in view of the rising costs and increasing housing deficit; as

well as rising homelessness and increasing vacancies currently emerging in Nigeria urban centres.

3.0 CONCEPTUAL AND THEORETICAL ISSUES IN HOUSING POLICY AND DELIVERY

Housing policy and delivery are shaped by the theories of economics and political economy adopted

by any government. This is because while economists focused largely on “the allocation of scarce

resources among competing ends,” political economy helps to extend the focus of classical

economics to include analysis of “allocation of scarce resources, not only among competing ends,

but also among competing users.” (Agbola, 2005). Therefore, who gets what, where and how is

central to political analysis and distribution is critical to political economy, normatively in judging

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the desirability of economic outcomes (Boyce, 2002). Therefore, few of the theories and concepts

that shape housing policy, delivery system and distribution are discussed in this section.

3.1 Housing Delivery System

Housing delivery system is a combination of many interrelated processes that determine housing

production and ultimate distribution to consumers. This system is influenced and affected by many

exogenous and endogenous variables. The system consists of the production of housing units;

renovation of existing ones and the distribution of new and old houses to all consumers. Therefore,

the housing delivery system is a collection of production mechanism, regulatory and administrative

devices by which housing services are provided to the consumers. Generally, the principal

components of the housing delivery system are: land and infrastructure; construction technology,

labour and management, building materials, housing finance system, and the distribution

mechanisms. This general housing delivery system is captured by the housing delivery model, which

was developed by Housing Strategy Western Australia.

3.2 General Housing Delivery Model

The model provides a broad conceptual framework for considering the principal

components/drivers that shape the housing delivery system (Housing Strategy WA, 2001). This

model is presented in Figure 1.

Figure 1: Housing Delivery Model

Source: Housing Strategy WA (2001) p. 5.

DEMAND

DRIVERS

INDUSTRY

CAPACITY

HOUSING

SUPPLY

EXISTING

HOUSING

STOCK

EXTERNAL

IINFLUENCES

SOCIETAL

CHANGE &

ASPIRATIONS

SUPPLY

DRIVERS

FINANCE

TAX &

WELFARE

SETTINGS

EFFICIENCY

HOUSING

DEMAND

AFFORDABLE

Ownership & Rental

ACCESSIBLE

Marginalized

Complex Needs

Indigenous

Youth, aged, etc.

SUSTAINABLE

Society

Economies

Environment

TENURE

LOCATION

Home Ownership

Private Rentals

Public Housing

Community Housing

Regional & Remote

POPULATION

OUTLOOK

ECONOMIC &

Demand

Profile

INTERVENTION

Land & Servicing

Labour& Materials

Technology

Careers

Housing

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 459

The model is an exposition of the major drivers of the general housing delivery system and their

interrelationships. These major drivers are categorized as demand drivers, supply drivers and

government intervention mechanism.

The supply side is represented by the house building industry, which supplies houses based on the

demand generated by the economy or stimulated by government policies. The housing demand and

supply as managed through the housing policy, particularly towards the achievement of equity

objective in the distribution of housing stock, will generate housing outcomes, which in turn have

socio-economic impact on the whole economy.

The demand drivers essentially include the economic and population outlook. This relates to

population growth rate, particularly household formation, distribution pattern between the urban

and rural areas; the income levels and distribution, all of which will substantially influence demand.

The societal changes and aspirations as they affect housing concept, standards, etc. Finally, the

demand profile and housing careers will focus on the cohort projections plus changing

demographics and socio-economic profiles, which will influence housing careers and the demand

for various types of housing.

The supply side drivers are the factors that stimulate the supply of housing in response to the

demand generated in the system. This will include the determination of the capacity of the existing

housing stock; which will include the understanding of the current housing stock in terms of age,

size, location, tenure and access by different income groups. Also, the Industry Capacity is a major

supply side driver. Thus, in determining the industry capacity, issues such as land and their

servicing, labour and materials for house construction and finally, the level of technology in the

country are major supply factors.

Government interventions that will affect housing supply and demand are finance, taxation and

other welfare settings. Also, availability of mortgage to developers, buyers and renters and the

terms of such mortgages are critical. The issue of taxation is particularly important as they affect

property taxation on property transactions and their effects on affordability. Other taxation policies

as they affect building materials and the building industry as a whole will impact greatly on supply

and the price at which housing come to the market. Finally, the welfare packages such as subsidies,

in various forms, will greatly affect housing demand and affordability.

3.3 Housing Delivery System in Nigeria

The housing delivery system in Nigeria is a bit unique as it exhibits certain features that the general

model does not explicitly explained. In Nigeria, housing delivery is basically through the public and

private sectors. The private sector suppliers can be further categorized as organized private sector

suppliers and individual members of the private sector that build for themselves and others, either

for personal use or rental purpose. These categories of people supply from single units to many.

Therefore, for the private sector operators in Nigeria, there are five categories of private builders.

Surprisingly, they collectively supply the bulk of the houses in the country, at a ratio of 4 to 1

between them and the public sector (Agbola, 2005). The five categories of private sector builders

are:

(i) Marchant Builders

(ii) Builder Investors

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(iii) On-Site-Builders

(iv) Prefabricators, and

(v) Land Developers/Speculators

3.3.1. Merchant Builders: These consist of wealthy industrialists, syndicate groups and corporate

organizations who build primarily for commercial purpose. This group, are organizations that will

take a single design (prototype) and build many units to take advantage of economies of scale and

dispose of the houses at a price that will allow them to recoup their investment quickly. The bulk of

those in this category are now in the organized private sector with the advent of 2002 National

Housing Policy. They are now mostly members of Real Estate Developers Association of Nigeria

(REDAN); an association that was facilitated by the government to serve as fulcrum of the housing

delivery in Nigeria.

3.3.2 Builder Investors are similar to the merchant builders, but are distinguishable by the

scale/number of units they supply and the fact that they retain ownership of their estates/houses.

This group is equally becoming prominent in housing delivery as some of them are taking advantage

of the impetus offered by the 2002 National Housing Policy to join REDAN and widen the

scope/scale of their operation.

3.3.3 On-Site-Builders: This is the most common type of builders in the private sector in the

country, and bye and large, the major suppliers of housing. They collectively contribute more to the

housing delivery pool than all other groups combined, including the public sector. This group is

made up of individuals who build for the use of their household. They are the individuals who build

instalmentally, trying to own a house as fast as their resources could permit. They buy land first,

perhaps through the cooperative system; use the land for farming (to confirm ownership and ward

of predators) before it is his turn to collect cooperative again after which he lays the foundation ad

rest again until the process is finally completed many years after. This is the common process by

which most households own their houses in Nigeria. The typical process is depicted in Figure 2.

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 461

Fig.2 Stages in The Sequential House Building Process in Nigeria.

Agbola (2005) Pg. 8

3.3.4. Prefabricators: This is the category of private builders who take advantage of industrialized

system to mass-produce housing elements/components to maximize cost savings. This is not very

popular in the country. It is only an Israeli firm – HFP that is experimenting with this type of house

production in Nigeria, and the results have not been particularly beneficial to the beneficiaries of

the resulting units (Agbola, 1989).

3.3.5 Land Developers/Speculators: This category are those that acquire land, lay it out and

service it with infrastructure ready for occupation or purchase while the latter (speculators)

acquire the land but holds it without any improvement, only to sell later; and reap the unearned

income when the land appreciates in value. The land developers in some instances do site and

service, where they made serviced plots ready for sale to individuals or the rich On-Site-Builders.

Some members of REDAN now do this for interested individual members of the public.

In this study, the beneficiaries are those that purchase or rent from merchant builders – the

organized private sector, who are all members of REDAN; while the non-beneficiaries are mostly

the On-Site-Builders around the estates developed by members of REDAN.

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3.4 Equity, Housing Policy and Delivery System

The conception of equity pursued will greatly shape housing policy and impact on housing delivery

system and distribution. Usually, one of the cardinal objectives of any housing policy is equity in

the distribution of housing. Therefore, housing policies are usually initiated by governments either

on the basis of government willingness to accept responsibility or as a reflection of the demand and

pressure emerging from various interest groups. Hence, arguments about housing policy are

usually based implicitly, if not explicitly, on different conceptions of equity or distributive justice

(Heady, 1978). Equity therefore has always been a major consideration in any housing policy. The

question then is to what extent has housing policies and delivery system achieved equity among

various income groups and different tenures? Or, put in another way, despite the equity objectives

in housing policy and delivery, why are inequalities so prevalent in housing distribution or

allocation? The basic answer is that there are different conceptions of equity. According to Frank

et al (1974), equity has a number of specific meanings, but they recognized three (3) standards of

equity as market equity, equal opportunity and equal results.

The advocates of liberal or market equity contends that there should be “the free interplay of market

forces in the housing sector, primarily for reasons of efficiency rather than equity” (Heady, 1978).

This conforms with the market equity of Frank et al (1974). The idea of market equity is based on

the assumption that market mechanism is the most suitable strategy for sharing resources such that

would allow the maximum use of all the factors of production. The liberal conception of equity

advocates succinctly maintain that the nature of the house individual household wants to choose

should be determined by income and affordability. This implied that equity would be determined

by income at one’s disposal. The liberal scholars see government intervention in the market

operation through public expenditure and construction of houses as a mere interruption, which

destroy and distort market conditions. The liberal group believes strongly that government should

not be involved directly in housing construction, but rather facilitate the operation of the housing

delivery system and allow the market forces to allocate/distribute the housing stock produced. This

is the theoretical foundation and argument for organized private sector led housing delivery in

Nigeria. According to Freedman (1969), housing delivery should be left to the private sector to

manage; as the heart of capitalism is that it is more productive, more efficient and more successful

than government ownership and operation.

The foundation and core values of social democracy as found in the battle cry of the French

revolution are; freedom, equality and solidarity. The realization of these core values will lead to a

just society – where social justice prevails (Havek, 1979). The social democratic group believes that

equity as the equal distribution of goods is not in need of justification. It is the deviation from this

that must be defined and negotiated from the standpoint of justice. They asserted that genuine

freedom unconceivable without equity. Social justice refers to all aspects of justice including legal,

political and economic. It demands for distribution of public goods, institutional resources and life

opportunities. This implied that the conception of equity by this group essentially is about an

egalitarian society. This implied that the limited opportunities should therefore be distributed

“fairly” as against merit based justice. This equity conception is the foundation for a welfare state;

which in housing distribution, means treating all citizen equally and fairly. The achievement of this

perception of equity is however largely dependent on the interest of the political power class, their

sincerity and benevolence.

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 463

The view of the Maxist of equity in housing distribution is that resources be distributed from “each

according to his ability” to “each according to his needs” (Heady, 1978). This group believes that a

policy maker in the area of housing can hardly take a decision that would allow distributive justice.

What this group opposes is the continued existence of inequalities often perpetuated by the

lopsided economic plans to the neglect of the larger majority needing the houses. To the

protagonists of this group, equity is not achievable because the state apparatus is controlled by the

powerful class who careless about the housing condition of the low-income group.

The last group is the elitist group. Their perception of equity revolves around the common saying

that “to him that has, more shall be given,” or what Frank et al (1974) called “the more, the more

the syndrome” and which they traced to the Bible in Mathew Chapter 25, verse 29, which says “for

whoever has will be given more, and they will have an abundance. Whoever does not have, even

what they have will be taken from them.” But from him that hath not shall be taken away even that

which he hath.” This conception of equity is not often consciously pursued, but many housing

policies often end up with such outcomes.

3.5 Housing and Other Goods Theory

Another important theory relevant to housing policy study is the “housing and other goods theory”.

This is the anchor theory for this study. The theory assumed that there are only two items in the

consumption basket – housing and all other goods needed for a healthy living by a household. The

main thesis of the theory is that there is always a trade-off between spending on housing and all

other items in the consumption basket of a household. This theory follows from the neo-classical

theory of consumer choice. According to Jameson, et al (2004), the outcome of such a trade-off is

determined by the result of the interaction between an individual’s preferences (tastes) and their

budget constraints. The housing and other goods theory is a model of consumer choice in housing.

The diagram in Figure 3 depicts this model.

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Figure 3: Choosing Between Housing and Other Consumption Goods

The axes of the above diagram represent increasing quantities of each good, for simplicity, there are

two goods-housing and others to be consumed. With that, the model can be interpreted as follows:

(i) An individual’s (or household’s) preferences reflect the desire to consume a combination of

housing and other goods. Furthermore, this preferred combination varies as more housing

is consumed and the ratio at which housing is willingly swapped for other goods also varies.

(ii) This ratio is reflected in the diagram as the slope of the curves shown. The preferences

curves themselves represent combinations of housing and other goods that jointly provide

the individual with the same level of satisfaction (utility). The higher the preference curve

indicates a higher level of satisfaction (e.g. the dashed curve shown) while shifting along one

curve represents different combinations of housing and other goods that provides the same

level of satisfaction.

(iii) An individual’s (household’s) budget constraint is determined by the combination of

available income as well as the prices of housing and of other goods.

v The triangle that is bordered by the two axes and the solid straight line, depicted in

figure 3.3 illustrated the combination of housing and other goods that are available to

be chosen.

v The budget constraints will expand outward as the income increases, thereby

expanding the choice set to encompass more possible combinations of housing and

other goods.

v The budget constraint will also change where there is a change in the price of housing

relative to other goods. Such a change will alter the slope of the budget constraint. For

example, a fall in the price of housing – relative to the price of other goods would

‘flatten’, the budget constraint, bringing more “housing intensive” combinations into the

available choice-set.

Other

consumption

QO

Budget

constraint

Preference

(indifference curve)

Housing

consumption

Source: Jameson, B & Nana, G. (2004), p. 11.

QA

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 465

v Given the depicted sets of preferences and set of budget constrained choices, this

individual will choose QA units of housing consumption and Qo units of other goods.

This represents the combination of housing and other goods of highest preference

(satisfaction) that is available to the individual that is within its budget constraint.

The key aspect of this theoretical model that makes it relevant to this study is to present an

argument that the choice between housing and other goods depends on the preferences, income

available and price of housing relative to the price of other goods. Thus, if any of these three

influences alter, then the chosen quantity of housing to be consumed (QA) will also change.

Conversely, if housing consumes too high a proportion of income, a household will be forced to

consume less of other goods of necessity, since a certain minimum of housing must always be

consumed by a household. Affordability measurement is a measure of degree of incursion of

housing expenditure into what the household will normally expend on other goods. This is the

anchor for the residual income approach to measure housing affordability and for this study.

4.0 CONCEPT OF HOUSING AFFORDABILITY

Affordability generally is a measure of ability and capability of consumer to pay for goods and

services to be consumed. In a market economy, price will not only allocate quantity, but also, the

quality of goods and services that each household will consume based on their level of affordability.

According to UNCHS/HABITAT (1991), housing affordability is an assessment that relates a

particular housing solution to the amount that can be paid for without unduly stretching the payer’s

resources. This view of affordability is of wider applicability, as it is applicable to renters, as well

as those who want to buy their houses without recourse to mortgage facility (UNCHS/HABITAT,

1991). According to Arthur et al (2002) housing affordability is more difficult to define, according

to them, it involves the capacity of households to consume housing services; specifically it involves

the relationship between household incomes and housing prices and rents. This is aptly captured

by MacLennan and Williams (1990) when they gave one of the most quoted definitions of housing

affordability. “Affordability is measured with securing some given standard of housing (or different

standards ) at a price or rent which does not impose, in the eyes of some third party, (usually

government) an unreasonable burden on household income.” Whitehead (1991) pointed out that

definitions usually focus on the relationship between housing expenditure and household income,

and that they seek to establish a standard in respect of which the amount of income spent on

housing is deemed unaffordable. This standard can be defined in terms of absolute residual income

once housing costs have been met or as ratio measure specifying the acceptable proportion to be

spent on housing.

However, in a mortgage-based housing delivery system, housing affordability can be conceptualized

as the ability and capability of household to access and meet their periodic mortgage obligations

without jeopardizing their health or reducing their family nutrients intake (Agbola, 1990; Olatubara

and Agbola, 1992). That is, ability to meet all requirements to qualify to raise enough funds to buy

a house. On the other hand, repayment affordability considers the burden imposed on a household

of repaying the mortgage and ability to cope without failing to meet other non-housing necessities.

Income affordability is simply a measure of the ratio of house prices to household income. Finally,

renter housing affordability specifically measures the ability of renter to pay the rent of a minimum

standard housing without jeopardizing the ability to meet other non-housing needs. All these

variants of housing affordability only further confirms the complexity of housing affordability and

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 12, December-2020

its implications for various segments of the population. Measurement of affordability is problematic

as what individual household can afford is often underestimated. The often quoted rule of thumb

is that household should not spend more than 30 percent of their income on housing unless they

choose to do so. Therefore, according to Arthur et al (2002) measuring housing affordability is thus

complicated by the inability to determine whether household spend more than 30 percent of their

income on housing by necessity or by choice. They further identified other measurement problems

with housing affordability to include the definition of income – whether permanent or transitory,

liquid or illiquid, personal or household and the definition of housing expenditure – whether

voluntary or involuntary, total or per unit of housing services, nominal or real rents, mortgage

payment or down payment. Similar view had been expressed by Agbola (1990) that statistical

studies of what individual household can afford often considerably underrate the ability of the

households to improve their housing circumstances over time. This, according to him, is because of

the admitted restrictive assumptions underlying the calculation and the snapshot image of

household’s income, which disregards the income and family life cycles through which household

tend to pass. Thus, only the income of the breadwinner is relied upon, thus disregarding the income

of other members of the household that are working and who are often willing and able to

contribute towards house ownership of their family.

In the context of this study, therefore, affordability is viewed broadly as the ability of the household

to meet condition for ownership and or occupation, which will include ability to pay the purchase

price of a house, meet rental obligations; and down payments requirements, meeting periodic

mortgage repayment obligation without sacrificing the household’s health and nourishment. The

incomes of the household are considered as all formal and/or informal, incomes accruable to the

breadwinner of a household on monthly basis. This is because it is difficult to know the other

members of a household that may be willing and able to contribute towards the household housing

expenditure. The view of affordability by Agbola and Olatubara (1992) is what Gan. and Hill (2009)

called “Repayment Affordability” but which is better described as “Mortgage Affordability”. This

means that in discussing the concept of housing affordability, there could be five variants. These are

general housing affordability, purchase affordability, mortgage (repayment) affordability, income

affordability and rental affordability.

Conclusively therefore, housing affordability can be broadly conceptualized to be wider than any of

the different conceptions above. According to UN-HABITAT (2011), it is more than the often used

simplified conception of house purchase price to household income. The various components of

housing affordability is captured in Figure 4. In figure 4, the two principal sets of variables are:

capital variables (house purchase price or construction costs) and occupational variables (costs

associated with keeping the house or cost of occupation). This is in tandem with the concept of cost- in-use.

Page 15 of 21

Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 467

Figure 4: Basic Components of Housing Affordability

Source: UN-HABITAT (2011).

The figure above shows the various dimensions of housing affordability. This paper adopts this

broad conceptualization in the measurement of housing affordability.

5.0 RESEARCH SETTING AND METHODOLOGY

5.1. Research Setting

This study is based on survey conducted with the three stakeholders. These are:

(i) The Organized Private sector Housing Developers (OPSHDs) who are members

of Real Estate Developers Association of Nigeria (REDAN).

(ii) The Beneficiaries, who are purchasers and renters of houses developed by the

Organized Private Sector Housing Developers (OPSHDs).

(iii) The Non-Beneficiaries (the on-site-builders; individual owners or renters who

are within 1km radius) of the Organized Private Sector Housing Developers

(OPSHDs) estates sampled for this study.

The study was conducted with the beneficiaries of Organized Private Sector Housing Estates

(OPSHEs) developed across the six (6) geo-political zones of Nigeria and the non-beneficiaries

within 1km radius of the sampled estates. As a result of the new impetus given to private sector

participation in 2002, organized private sector Real Estate Developers (REDAN) emerged with

members developing housing estates for Nigerian in all parts of the country. Two (2) states with the

prevalence of organized private sector housing developers in each of the six (6) geo-political zones

were selected. These are Lagos and Ogun States in South-West; Edo and Rivers in the South-South;

CAPITAL VARIAB L E S

Material/House Inputs

Land

Infrastructure

Building Materials

Labour & Profit

Finance

Down payment

requirement

Savings and debts

Savings and other assets

(minus)

Outstanding debts

Material/House Inputs

Land lease/rates

Service costs

Building Maintenance

Finance

Interest rates and

loan period

Income and expenditure

Income

(minus)

Non-housing

expenditure

OCCUPATIONAL VARIABLES

Ability to

finance

purchase

Ability to

finance

service

House

Purchase

Cost

House

Purchase

Cost

Housing

affordability

for households

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 12, December-2020

Enugu and Abia in the South-East; Federal Capital Territory (FCT) Abuja and Nassarawa in the

North-Central; Kaduna and Katsina in North-West and Bauchi and Gombe in the North East.

5.2The Study Area

Nigeria is a country of about 200 million people on a total land area of about 910,770km2. The

country operates a unitary federalism, made up of thirty-six (36) States and a Federal Capital

Territory, Abuja. The country is grouped into six (6) geo-political zones, with three (3) zones

consisting of six (6) states each; these are North-East, South-West and South-South. North-East

consists of seven states, North-Central is made up of six (6) States and a Federal Capital Territory

of Abuja, while South-East consists of only five (5) States.

In the unitary federalism operated in Nigeria, most laws and policies are formulated at the national

level and implemented throughout the country. Therefore, since the introduction of the First

National Housing Policy in 1991 to the Third National Housing Policy of 2002, the national housing

policies have been accepted as the main documents setting the tones for housing delivery

throughout the country (Adegoke, et al, 2020). The details of the six (6) geo-political zones in

Nigeria are shown in Figure 5.

Figure 5: Map Showing the Six (6) Geo-Political Zones in Nigeria

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Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 469

5.3 Research Methodology

A cross-sectional survey design was adopted. Multi-stage sampling technique was employed to

choose residents of the sampled estates (beneficiaries) for interview. The respondents;

beneficiaries and non-beneficiaries were selected by systematic random sampling technique. Ten

percent household heads were randomly selected from the occupied houses (19,500) in the estates.

The respondents among the non-beneficiaries were selected among the occupied housing units

within 1km radius of the houses around the sampled estates until equal number of respondents

from beneficiaries was selected where possible. The total number of respondents from beneficiaries

was 1,950 while that of non-beneficiaries was 1,332. The difference in the number of respondents

among the two groups was due to remote location of the OPSHEs, which in most cases are just

developing. The questionnaire administered on both beneficiaries and non-beneficiaries elicit

information on households’ social, economic and demographic attributes. These are household size,

income, housing expenditure, choice of housing unit, among others. The information collected is

essentially to determine the proportion of household income consumed by housing (housing

expenditure) and to establish the residual that is available for other necessities (non-hosing

necessities). The intension is to determine the extent of incursion of housing expenditure into what

is available for all other non-housing necessities for a healthy living by each household (a measure

of housing affordability).

6.0 DATA ANALYSIS AND DISCUSSION

The major anchor for this study, as can be seen from the previous section, is the “housing and other

goods theory”. To this end, our data analysis relied on the Residual Income Approach to establish

the housing affordability profiles of both the beneficiaries and non-beneficiaries. This entails the

calculation of the proportion of household consumed by housing expenditure and the residual

therefrom established. This is because we have established from our anchor theory that by the

nature of housing, it cannot be consumed in part. In view of this, it means that a certain minimum

must always be consumed by a household; and housing usually take first priority, and it is whatever

remains that is always available for other non-housing necessities (Jameson et al, 2004). The

comparative housing affordability profile of beneficiaries and non-beneficiaries was analyzed based

on a ten percentile scale. These are those that are spending 1%-10%; 10.1%-20%; 20.1%-30%;

30.1%-40%; 40.1%-50%; 50.1%-60%; 60.1%-70%; 70.1%-80%; 80.1%-90%; 90.1%-100% of the

household’s income on housing.

6.1 Broad Categorization of Housing Affordability Profile

International Labour Organization (ILO) recommended a maximum housing expenditure of 30% of

household’s income. This was corroborated by Crouch and Wolf (1972); Buting, Walks and Fillion

(2004); and Bramley and Karley (2004). Based on this position, housing affordability can be

categorized into three (3). These are:

(i) Normal Housing Affordability: these are households that are spending between 1% and

30% of their income on housing. This is regarded as normal because it falls within the

maximum housing expenditure canvassed by the International Labour Organization

(ILO).

(ii) Tolerable Housing Affordability: These are households that are spending between

30.1% and 50% of their income on housing. This is presumed tolerable, because it is

believed that this level of income can be spent on housing without jeopardizing other

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 12, December-2020

non-housing necessities needed for the household for a healthy living, particularly for

the upper-medium and upper income groups.

(iii) Housing Affordability Stress/Burden: These are the households spending more than

50% of their income on housing. The households in this category are believed to be

under varying degrees of housing affordability stress or burden. The more the housing

expenditure is moving away from 50%, the more the household is tending towards

homelessness and expulsion from the formal housing market, unless they receive

housing assistance in one form or another, particularly if they belong to low income

group.

(iv) Comparative Housing Affordability Profile of Beneficiaries and Non-Beneficiaries:

Based on these broad categorization; the comparative analysis revealed that while only 42.42% of

beneficiaries fall within the normal affordability category, about 76% of non-beneficiaries enjoyed

normal housing affordability. In the tolerable housing affordability zone, we have about 37% of the

beneficiaries while only 16.40% of the non-beneficiaries are within that category. About 21% of the

beneficiaries are experiencing housing affordability stress of varying degrees while only about 8%

of the non-beneficiaries have similar experiences. These comparative analyses revealed that while

about 92% of non-beneficiaries are theoretically within comfort zones, only about 79% of

beneficiaries are in that category. In contrast, while about 21% of beneficiaries are under varying

degrees of housing affordability stress/burden, only about 8% of the non-beneficiaries are

experiencing such.

The comparative housing affordability profiles of Beneficiaries and Non-Beneficiaries are as

depicted in Figure 6.

0

10

20

30

40

50

60

70

10-Jan 10.1 -

20

20.1 -

30

30.1 -

40

40.1 -

50

50.1 -

60

60.1 -

70

70.1 -

80

80.1 -

90

90.1 -

100

Frequecy (%)

Housing Expenditure (%)

Non- Beneficiaries

Frequency

Page 19 of 21

Adegoke, S. A. O. (2020). Housing Affordability In Nigeria: A Comparative Analysis Of Beneficiaries And Non-Beneficiaries Of Organized Private Sector

Housing. Advances in Social Sciences Research Journal, 7(12) 453-473.

URL: http://dx.doi.org/10.14738/assrj.712.9369 471

7.0 FINDINGS, POLICY IMPLICATIONS AND CONCLUSION

7.1 Findings and Policy Implications

The major findings of this study are that majority (about 92%) of non-beneficiaries are within

housing affordability comfort zone. In contrast, only about 79% among the beneficiaries are within

that zone. Conversely, this implied that while only about 8% of non-beneficiaries are under varying

degrees of housing affordability burden/stress, about 21% of beneficiaries are in similar

circumstances. The implication of this is that, generally, the non-beneficiaries enjoyed better

housing affordability than the beneficiaries. Various reasons account for this; they include the fact

that non-beneficiaries choose their design and develop their houses incrementally, at their own

pace. Also, the quality of finishing varied widely among the non-beneficiaries; reflecting their status

and financial ability. On the contrary, the beneficiaries are affected by cash and carry sales policy of

developers, limited access to mortgage facility and hash mortgage terms, where available. Finally,

the problem of prototype design and finishing of houses leave beneficiaries with limited choice

despite variation in their financial capacities. The implication of the findings above is that if

individuals are allowed to build their houses, they will build cheaper houses, that will be a true

reflection of their status; and that can be done with varying amount which in most cases could cost

around #5 million to build an acceptable housing unit.

The policy implications of the findings are that if organized private sector housing will substantially

alter housing affordability status of Nigerians, beneficiaries must have enhanced access to mortgage

facility at more favourable terms. Therefore, there is the need to reform and harmonize mortgage

terms in the country in tandem with the global best practice to enhance mortgage affordability and

penetration. Furthermore, option of site-and-service scheme will enhance the ability of

beneficiaries to choose their design and finishing in tandem with their current financial

circumstances, which can be upgraded as their financial circumstances improved. Finally, the

research finding that non-beneficiaries (on-site-builders) enjoyed better housing affordability than

the beneficiaries is a pointer that if these categories of people can be supported by government, it

may be a veritable approach for resolving the housing crisis in the country.

7.2. Conclusion

This comparative study of housing affordability of beneficiaries and non-beneficiaries has further

corroborated the findings from previous studies that organized private sector housing delivery is

not affordable to most Nigerians (Adegoke, 2020). The findings from this study also revealed the

significance of the contribution of on-site-builders (non-beneficiaries) to housing delivery in

Nigeria. The imperative of an enhanced mortgage affordability and penetration to both the

beneficiaries and non-beneficiaries for better housing affordability is equally brought to the focus.

Finally, this study has escalated the importance of the need for multiple strategies in resolving the

housing crisis in the country.

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