LAGOS, Nigeria — Low household incomes, expensive mortgages and poor access to housing finance are deepening the housing affordability crisis in Lagos, with high land and construction costs, infrastructure gaps and inefficient land administration compounding the challenge, a new report has revealed.
The report, titled “Beyond Rent: Mapping Lagos’ Housing Led Capital Expansion,” was unveiled at the hybrid Lagos Housing and Capital Forum organised by GTI Investment Group in Lagos.
The forum, themed “Housing, Capital and the Future of Lagos,” featured the presentation of GTI’s 86-page research publication by the company’s Head of Research and Strategy, Mr Abiodun Ogunniyi.
The report identified low incomes, high mortgage interest rates, limited access to mortgages, infrastructure deficits, land administration challenges and high construction costs as the key constraints to homeownership.
It noted that mortgage penetration remained extremely low, with only about 0.6 per cent of Nigerian households currently accessing mortgages.
The findings also challenged the assumption that reducing cement prices alone would significantly address Nigeria’s housing deficit.
According to the report, modelling showed that even an 82 per cent reduction in cement prices would lower house prices by only about 14 to 15 per cent.
The report further revealed a widening gap between rent inflation and headline inflation in Lagos, with annualised rent growth exceeding 40 per cent on mainland corridors and reaching about 51 per cent in prime areas of the Island.
This compares with Nigeria’s headline inflation rate of 15.9 per cent as of June.
It said about 80 per cent of respondents surveyed considered Lagos severely unaffordable, with even households earning about N500,000 monthly facing rent burdens of between 40 and 60 per cent in some mainland locations.
The report also warned that cheaper housing on the outskirts of Lagos could become more expensive once transportation costs were factored in.
Using Marina as a benchmark, researchers analysed 3,200 property listings across 15 submarkets and found that commuting expenses could erode much of the savings associated with lower rents in peripheral locations.
Infrastructure was also identified as a major driver of property values, with properties located within one to two kilometres of rail stations commanding significant value premiums.
The report said Lagos was gradually evolving into three broad housing markets comprising capital preservation locations, productive employment corridors and peripheral areas where the city continues to expand.
It also identified a major mismatch between housing demand and supply, noting that properties below N15 million accounted for about 55 per cent of demand but represented only a small share of available supply.
In contrast, luxury properties valued above N200 million accounted for a significant portion of new developments.
“This is a capital architecture problem,” the report stated, noting that developers were increasingly concentrating on luxury housing while affordable and middle-income homes remained undersupplied.
To address the challenge, the report urged the government to reform land administration and convert informal land holdings into formal, bankable assets that could serve as collateral for mortgages and development finance.
It also called for greater mobilisation of long-term institutional capital into housing, particularly pension funds.
The report noted that pension fund administrators currently manage more than N31 trillion in assets, with about 75 per cent invested in government securities.
It said part of the long-term funds could be channelled into productive sectors, including housing, through Real Estate Investment Trusts and other structured investment products.
The researchers also recommended infrastructure value capture mechanisms, betterment levies and urban regeneration financing to support housing development.
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They advised the government to prioritise mid-density housing corridors where large numbers of working-class residents live, while urging developers to explore opportunities in the underserved affordable housing market.
For households seeking mortgages, the report recommended keeping repayments within 30 to 35 per cent of household income and called on financial institutions to adopt more location-driven underwriting models.
It added that stronger collaboration among policymakers, developers, financial institutions, academics and capital market operators was essential to closing Lagos’ widening housing finance gap. (NAN)
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