CHAPTER ONE

INTRODUCTION

Background of the Study

Housing is one of the three basic needs of man and it is the most important for the physical survival of man after the provision of food (Turner, 1983; Munonye, 2009 and Olayiwola et al, 2005). It has a profound influence on the health, efficiency, social behaviour, satisfaction and general welfare of the community. Okedele et al (2009) opined that, in the evaluation of man’s comfort, growth and development, it is inevitable that housing be considered as a critical element.

This issue was highlighted at the United Nations conference on Human Settlement (Habitat 1) which was held in Vancouver, British Columbia, Canada in June, 1996; during the international year of shelter for the homeless in 1987 and at the Habitat II conference held at Istanbul, Turkey in June 1996. These emphasise the importance of providing adequate and affordable houses in every human society and dispensation. The United Nations Organisation (UNO), (1996) affirms this by declaring that housing is very crucial to the survival, welfare and health of individuals.

Consequently, serious attention has been given in many developing countries to housing problems and housing policies to address the problems. Nigeria ranks among the rapidly urbanising countries in Africa and the challenges therein, especially in the provision of adequate housing and basic services (FMR&UD, 2003).

With a population of 140 million people plus (preliminary census, 2006) Nigeria is the most Urbanized country in population in black Sub-Sahara Africa The United states Census Bureau projects that population of Nigeria will reach 264 million by 2050 and that Nigeria will be the 8th most populous country in the world (Wikipedia, 2007).

Over the years, governments had embarked on several housing intervention programmes, with the objective of making housing available and affordable to the majority of the population. These housing interventions are reflected in the annual budgetary provisions for housing urban development, and in the establishment of institutional framework for housing development (Diogu et al, 2006). According to Aribigbola, (2009) despite the various efforts of government, individuals and agencies both locally and internationally to improve housing provision in Nigeria, housing problems particularly shortage and affordability still persist. This lends credence to the growing international concern over the issue.

According to the national Rolling plan, the national housing requirement is between 500,000 and 600,000 units, considering the prevailing occupancy ratio of three and four per room (Ojenuwah,2006). As Muoghalu (1999) puts it, the rapid population increases coupled with rate of urbanization have contributed in no small way to the shortage of urban housing in Nigeria.

The income of the average Nigerian is usually not adequate to meet his needs to own a house of his choice or rent an apartment of his taste. Some other challenges faced by Nigerians on housing affordability as enumerated by Onyike, (2007) are cost of land and building materials, high interest rates on mortgages, poorly developed mortgage finance system, administrative bottlenecks that makes the processing and securing of approvals for building plans, certificates of occupancy and other necessary government permits a nightmare, and the unmitigated corruption in the allocation of government land within the framework of Land Use Act, Cap 202 LFW, 1990.

The increasing urbanization in major cities of Nigeria as occasioned by rural urban migration has led to the over population of these towns and cities including Idah, a local government headquarters in Kogi State. This has constituted the focus of many studies. Only a few focused on affordability of housing that is a serious problem in these centres.

The United States Department of Housing and Urban Development (HUD) policy makers stated that for a housing scheme to be affordable, the family should pay nothing more than 30% of its total income on rent and utilities, where they own their own house, not more than 30% of their mortgage payment, insurance, taxes and utilities. This definition recognizes the fact that every household have additional essential expenses to keep. Housing is thus affordable only if it meets this 30% test.

Affordable housing, according to Andrew (1998) is that housing which does not cost more than 30% of the income of the occupant household. And that any family that pays 50 percent or more of house hold income are under severe housing burden. Families that pay more than 30 percent of their income on housing are considered cost burden and may have difficulty affording other necessities, such as food, clothing, transportation and medical care (HUD, 2005). Cox and partelich (2010) are of the opinion that for metropolitan area to rate as affordable and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual house hold income. In plain terms, AHURI, (2004) states that housing affordability refers to the capacity of households to meet other basic cost of living. Thus it will be seen that the housing affordability issue is a crucial determinant of quality of life of people.

It is crucial to state that while the state governments built estates are more or less allocated to civil servants on owner occupier basis, the ones built by private developers are sold at exorbitant rates.  This situation is explained by Adejumo(2008) when he asserted that, in all cases the houses are not for rent, but for sale, because these developers have taken large loans from banks to finance their building projects, their objective is necessarily to get a quick return on their money; hence they prefer to sell these houses, usually at high prices, to ensure that they have a minimum of 50% profit. After completion of the sale, they usually have 100% profit, if not more. This leaves Nigerians who are not civil servants and are not rich in cold in matters of adequate shelter.

The cost at which the house reaches the market will go a long way to determine affordability. The income of an employee determines his ability to afford a house. Where per unit cost of building is abnormally high as we have today, the simple implication is that few people will be able to afford it (Bello, 2008). The limited finance available will not be able to spread around the potential home owners. The gap between income and shelter cost in Nigeria is very wide. This has eliminated the low-income earners from the housing market. According to Bello (2008), high cost had been attributed to the following: Rising cost of building materials, inflation rate in the economy, high space and quality standards adopted by designers, fees of professionals involved in designs and construction, excessive profit of contractors.

The average income of Nigerians is too low to support the construction of buildings within a short or even medium time span (Opaluwa, 2010). Many even find it difficult to cope with regular and prompt rent payment. This makes the aspiration of the average Nigerian to own a house or occupy adequate rented apartment almost elusive. Ademiluyi and Raji(2008) explains that a recent World Bank report noted that two of the most critical urban development issues facing Nigeria are the financing of urban infrastructure and the institutional arrangements for housing delivery in urban centres. The provision of basic utilities and services particularly housing is partly the responsibility of the government, which has been handicapped in recent times by declining political will and many more factors.

Ajanlekoko(2001) posit that, housing finance by its very nature is capital intensive venture which if it is to be financed through personal finance resources will require slow and tedious accumulation of savings. However, since housing provides benefits over many years, long term credit financing is a more logical option as it will spread the repayment burden. But this requires the availability of long-term funding, and for which there must be institutional capacity, structure and mechanism that will allow a convenient and effective linkage between the savers/ investors and the consumer of such funds.

The concept of the National Housing Fund or proposed in the National housing policy is to ensure a continuous flow of long-term funding for housing development and to provide affordable loans for low income housing.

The promulgation of the National Housing Fund Decree heralded the emergence and establishment of a battery of mortgage finance institutions in Nigeria. Quite a number of them had been in operation in Nigeria. Good as the intention of the scheme appear, the technicalities and modalities of releasing the loan to the mortgage institutions to lend to the members of the public have not been worked out and as such most potential clients have been frustrated by the high interest rate and cost of funding.