Every once in a while, you will hear someone mention the 17million housing deficit in Nigeria. It has become such a constant part of the conversation about housing that you can be forgiven if you somehow thought that the number is written somewhere in our constitution. But what really do we mean by the idea of a housing deficit of 17million and what are the real reasons why we have it?

When used in the absolute sense that is often the case, "we have a 17million deficit" can make it sound like there are 85million (average household size is 5 persons) Nigerians living under the bridges in Lagos and Abuja. That is simply not the case. In reality, when that figure is mentioned, it refers in large part to deficiency in housing. i.e. not that we have 85million homeless people, but that we have nearly that number of people who live in sub-standard housing.

But let's even pretend for a minute that we do have an absolute deficit of 17million units. Let's also stretch our imagination to the breaking point, and assume that we suddenly wake up tomorrow to find glistening new cities providing 20million new homes. The more shocking thing that we might have to admit is that, even if all these happened, we would not have solved our 'housing deficit' problem. The reason is because what we have in reality is a poverty problem.

Living under the bridge (a.k.a. living under the poverty line)

67% of Nigerians live under the poverty line (live on less than $1 per day); that's around 120 million people, or 24million households. Assuming that these 24million households are the ones who are currently 'living under the bridge', supplying 17million brand new homes will not suddenly mean that they can afford to buy one. 

We simply have 24million households that are too poor to afford formal housing, and the deficient housing (read slums) that they can afford/access, more than likely represent the deficit we keep hearing about.

The Centre for Affordable Housing Finance in Africa regularly conducts studies to determine the cost of delivering basic homes across African cities. Its most recent results shows that a 55sqm basic home in Abuja will cost about N15million (including land and infrastructure cost) to deliver. It however also reports that the cheapest new build by a developer it recorded cost about N3.6million (without elaborating on whether this included infrastructure cost which is often charged separately).

Micro Loans, Macro Costs

Now, even at N3.6million, access to finance for Nigerians living under the poverty line is either none existent or too expensive to be able to afford such a home. While seeking mortgage financing for buyers of our ongoing project, Mortgage Bankers made clear that the preference is to finance home purchases for people who work in organizations categorized Tier 1: CBN, NNPC, etc. 

Now wait for it. The loans were going to come at an eye-watering 22% interest rate. Yes, mortgage rates for preferred customers come at 22% per annum. How much then will rates be for  Baba Fasila the Fokanizer of no fixed address (he lives under the bridge)?

Informal sector workers who make up the bulk of the poor in Nigeria are largely excluded from access to credit in the banking system except from micro-finance institutions (MFIs). The thing with MFIs however is that, their rates are anything but micro. If you are lucky - you will get one to lend you money at 10%. Don't be ridiculous, that's per month not per annum. Micro-finance bank rates are actually very macro.

Getting from 100,000 to 1,000,000

And so when we discuss the effort of trying to get the current miserable total annual new builds of 100,000 (reported) to get to 1,000,000 it is useful to consider that  the supply is perhaps being regulated by the volume of effective demand. The fundamental problem then is not whether more houses can be built, it is whether those houses will be sold. 

In the end, improving access to finance, and introducing greater efficiency in land markets, procurement and construction will all help reduce the gap, but the real thing that will get people into their own home is a massive effort to bring huge populations out of poverty.