Real reasons many Nigerians are priced out of housing market, homeless

Adverse macroeconomic conditions are, indeed, very strong reasons many Nigerians, particularly the working population, are priced out of the country’s housing market and are, therefore, homeless.

Cost-push inflation, high interest rates, and volatile exchange rates have never been good friends to housing development. They not only delay, but also push up the cost of construction significantly.

High construction costs mean the price of housing has to go up to enable developers to recoup their investment, make profit, and borrow more to build more housing to meet growing demand.

Besides these are other reasons that border on income level, cost of finance, and poor mortgage system, which explain why the country has a ballooning housing deficit and an active rental market, which is second only to Kenya, known for its urban development and growing rental market, especially in cities like Nairobi and Kisumu.

Income level in the country is quite low, especially in the public sector, where an average worker earns as low as N70,000 per month, giving about N840,000 per annum, which is about $600.

For this class of Nigerians, owning a home is a tall dream. Even renting is difficult because, at the moment, the rental market is in crisis. Chudi Ubosi, principal partner at Ubosi Eleh & Co, noted in an interview with BusinessDay that, in the last 24 months, rent prices in Lagos have surged by 50 percent to 200 percent.

According to him, “the surge in rental prices has pushed the income-to-rent ratio to nearly 70  percent, significantly exceeding the United Nations’ recommended 30 percent affordability benchmark. This situation has led to a rental boom, with many tenants facing financial strain and having to relocate to find more affordable housing.”

To be able to buy their own houses, these income earners have to think of obtaining a mortgage, which is not a good option either because of their low income, high interest rate, almost impossible repayment charges, and short tenor.

The Federal Mortgage Bank of Nigeria (FMBN) comes closest to solving this challenge of high interest rates and short repayment tenor with its National Housing Fund (NHF) scheme, which offers housing loans at 6 percent interest rate for 30 years.

However,  despite these unmatched concessions, many Nigerians – including long-standing contributors to the NHF – still cannot afford to access these mortgage products.

“This is a reality that we must face boldly, and one that requires fresh ideas, new partnerships, and innovative financing solutions beyond what we have done in the past,” Ahmed Dangiwa, an architect and former minister for housing and urban development, said.

Dangiwa stressed that “low interest alone is not enough. We need to think differently, to look for mechanisms that will further scale down the effective cost of mortgages.”

Adedeji Ajadi, CEO, Mortgage Banking Association of Nigeria (MBAN), agrees with the minister, adding that at the commercial rates of between 18 and 30 percent,  access to mortgage is not only limited but also a daydream for home seekers, most of whom are low-income earners.

“At the prevailing rates, home ownership is largely unrealistic for the average Nigerian earning below N500,000 per month,”  explaining that mortgage repayment for even a modest home exceeds 40 percent of monthly income, which, according to him, is far above global affordability thresholds.

“Even at 33 percent, which is the statutory repayment amount, many Nigerians cannot still afford mortgage because most of the so-called middle-class workers earn less than N300,000 per month. Paying 33 percent of this amount leaves the borrower under intense pressure from other household and personal needs,” Ajadi noted.