As a fulfilment of his promise to think outside the box to find a solution to Nigeria’s humbling housing problem, Ahmed Dangiwa, minister for housing and urban development, has come up with an innovative initiative aimed at boosting housing affordability.
The initiative, known as cross-subsidy, is an important policy tool used by governments and urban planners to address housing affordability issues and promote inclusive urban development.
According to the minister, the approach involves redistributing the costs and benefits of housing development across different income groups, adding, “The reality of the affordable housing debate is that many civil servants and other Nigerians working in the public sector cannot even afford a decent mortgage with their salaries.”
“Our mechanism will be to promote market-based prices for high-end developments to those who can afford them, thereby subsidizing housing costs for lower-income households,” he added.
He disclosed that the ministry’s vision for implementing cross-subsidy was rooted in a commitment to social equity and inclusive urban development, hoping that by strategically channelling profits from high-end housing projects, the ministry would promote a housing landscape where every citizen, regardless of income level, finds a place to call home.
“This approach is not merely about constructing houses; it’s about fostering communities where opportunities are equal, and prosperity knows no bounds,” he stressed.
Explaining further, the minister said that cross-subsidy has to do with housing projects that are designed with a mix of units catering to varying income levels. With the initiative, market-rate units are priced higher, often reflecting the actual cost of construction and profit margins for developers.
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Within the same project, a certain percentage of units are allocated as affordable housing. These units are sold or rented at prices significantly lower than the market rate. Revenues generated from the market-rate units are used to subsidise the construction and maintenance costs of affordable units.
The minister’s expectation is that this subsidisation will allow lower-income families to access housing at a reduced cost. He believes that the initiative will ensure that diverse income groups can reside within the same community, promoting social integration and preventing the formation of economically segregated neighbourhoods.
The initiative, which the minister unveiled in Abuja recently while reviewing affordable housing options presented by the Ministry’s Affordable Housing Building Design Committee, is also aimed to revolutionise inclusivity and affordability in Nigeria.
The minister established the committee during his first week in office to review designs of the ministry’s projects and ensure that houses that the ministry promotes fall within price ranges that low- and medium-income earners can afford.
He promised to redefine housing accessibility by integrating a mix of low, medium, and high-end housing projects, and ensuring inclusivity for Nigerians of all income brackets.
The revised designs feature several cost-saving changes including organic one-bedroom bungalows to lower the cost of purchase while allowing beneficiaries the latitude to expand to two and three-bedrooms as their income increases’ optimized space management, smart roofing techniques and basic internal finishing among others.
Dangiwa commended the design team for their creativity and emphasised the necessity of embracing innovative concepts like cross-subsidies to counter the challenges posed by inflation, and the soaring costs of building materials, leading to an increase in planned house prices.
“I am impressed with the work that the Team has accomplished, thus far, in reducing the cost of houses that we plan to promote so that all Nigerians can benefit. While there is progress, the escalating cost of building materials has almost taken off all the savings from the revised designs,” he lamented.
Continuing, he said, “For us to achieve our goals, we have to think out of the box and embrace creative solutions. This is why we plan to work out a comprehensive framework for introducing cross-subsidies in projects delivered through Public Private Partnerships and the agencies under the ministry.”