Concept of Housing and Housing Demand

Concept of Housing and Housing Demand

Introduction

Housing is one of the three basic needs of man. It is the most important factor for physical survival of man after provision of food. A deficiency in housing can profoundly affect the health, welfare and productivity of man. It is an indispensable necessity without which man’s survival is impossible. Beyond the fabric, services and the contents of the dwelling, housing encompasses all that surround the dwelling to stimulate healthy living. Housing has to be quantitatively and qualitatively adequate in order to fulfill its basic purposes (Aderamo and Ayobolu, 2010).

 

Housing as a key determinant of quality of life, can be measured at individual, household and community levels as well as human rights in the cycle of human life (Magigi and Majani 2006). It is unique among consumer goods in its pervasive economic, social, and psychological significance. The physical and social environments, within the house and the neighbourhood, support family functioning and children's personal growth. Adequate and decent housing provision has been the central focus of developing countries’ government.

 

Housing demand has witnessed unprecedented increase in the past decades. The low level of economic development, physical, social and cultural factors have created, among others, immense obstacles to the provision of adequate housing to the majority of population. The population growth rates are growing faster than the provision of new housing and housing infrastructure. This has resulted in intensive usage of the existing stock of housing and deterioration of housing environments. Some of the manifestations of housing and residential land use intensification are increasing room occupancy levels, housing adjustments involving physical changes in housing space and housing space conversion (Awanyo, 1992).

 

Housing in all ramifications is more than a shelter since it embraces all the social services and utilities that make a community or neighbourhood a livable environment. The result is manifested in growing overcrowding in homes, neighbourhoods and communities as well as increasing pressure on infrastructural facilities and rapidly deteriorating environment (National Housing Policy, 2006).

The housing demand in Nigeria can be examined from urban and rural perspectives. In the urban centres the situation is characterized by acute shortage exacerbated by the rapid rate of urbanization with its associated high population growth rate. This problem of housing shortage is also highly associated with overcrowding and insanitary conditions. The situation in rural areas is characterized by poor quality housing with inadequate utilities like potable water, electric power supply, all season roads etc. In addition to the urban and rural perspectives of the Nigerian housing situation is that of poverty. About 70% of the Nigerian population are poor or are of low – income groups (Federal Office of Statistics, 1996) 

 

         Housing Demand

Housing means many things too many people and the understanding of the concept depends on individual perspective. Housings defend not only as a shelter (four walls and roof) but together with its supporting infrastructure such as water supply, electricity, roads (transportation facilities ) shopping facilities and good enabling environment.

 

Iyangba (1997) see housing as the residential environment roar neighborhood and the physical structure that mankind uses for shelter including all services, facilities and equipment needed for physical health and social well-being of the family. From this definition, housing can then be explained as more than a mere shelter, as it comprises of all the social services and utilities that makes a community a livable environment.

Bounne (1981) gives an illustration of early cave. Man had shelter in a cave from the harsh effect of the weather, wild animal etc. but having his own house to include exterior environment where he can hang his skin to dry became necessary. To this end, it can be deduce that housing and services environment that provides comfort, dignity and health for individual and family living.

 

Quigley (1976) extended the theoretical analysis of the demand for housing to incorporate the spatial dimension (and thus the residential location decision), as well as the choice of housing type. In particular, we address the choice of housing type and residential location in a metropolitan area, which may have several work places. In this short-run analysis, the spatial distributions of the stocks of various types of housing are given. The theoretical model indicates how choices among housing are related to systematic variations in the relative prices faced by households for the same types of residential housing. The model indicates that these prices, in turn are heavily dependent on the interaction of work place location, the spatial distribution of the stock of housing, and the characteristics of the urban transport network. In housing, demand is seen as the housing need of the people backed up with purchasing power or the ability and wiliness to pay that could be expressed in term of purchasing power, function of income family size location tradition etc. Housing demand is different from need, it is only when the need is backed up with the price or rent that is it said to be effective demand. According to Robinson (1997), “there are three main components of housing demand in Nigeria which are; demand from new housing holds, demand from movers between tenure group and demand from existing household within a particular tenure group. This is because the majority of households who could not build or purchase their own homes after resort to renting.”

Demand for housing differs from place and across socio-economic groups, for instance, demand in the city differs from that of the rural areas. Demand also differs among the high, medium and low-income groups. Housing demand also charges with time, social and economic situation. There is a gap in knowledge between requirement for housing and the ability to obtain the preferred housing type, which result in an effective request crisis for affordable housing in the country. Although it is clear there is a housing shortfall, it is fundamental to know that people can only obtain what they can meet the expense. Affordable housing to low- and middle-income households is the affordability gap. This is defined as the difference between the required monthly mortgage repayments on the least expensive house and the 33% (an industry standard as recommended by the international labour organization) that can be deducted from the total salary of a potential homeowner. The gap affects 52% of the population or 65 million households. While some households achieve affordability with supplementary, informal income, this is not counted in loan origination procedures.

 

Arunsi (2006) identified the four effective factors that determine housing demand to include household formation, acquisition of second homes, vacancies, and other factors associated with the supply of housing. He declared that in estimating housing demand, certain basic information is required such as population characteristics (total population distribution) of the settlement by type and household size. The population will give the quantitative inventory of the existing housing stock in terms of total number of dwellings, distribution of dwellings by room size, number and provision of utilities like water, electricity, toilet etc.However, the demand for housing may not necessarily be the same as the need for it. Every family needs a dwelling whether it can afford it or not. The effective demand on the other hand, depends among other factors upon the ability to pay economic price or rent. In Nigeria, the provision and construction of houses is very much an individual’s concern, thus most of the houses are privately built and owned. An examination of the country’s response to housing needs and demand are pertinent at this time when every person’s demands in housing provision are too many and varied (Abiodun,1974).

 

Femi and Khan (2014) explained housing demand as the willingness and ability of housing consumer to pay for a particular dwelling depending upon such consumer’s incomes, house type, location preferences and local prices. He indicated that demand is the quantity of good or service that consumers are willing and able to buy at a given price at a particular given time period. Demand for housing at certain price refers to the value that is placed on a house linked with the satisfaction derived in such house. In economics, this is termed as utility. Housing need relates to social housing while housing demand is related to private housing, effective housing demand is different from Desire housing demand. Effective housing demand can be explained as a desire to buy a house that is backed up with an ability to pay for it. On the other hand, Desire housing demand can be termed to be willingness to buy the house with the consumer’s lack of the purchasing power to be able to buy the house. Until there is purchasing power in terms of money to buy the housing unit, such housing demand has not become effective housing demand (Alison, 2004).

 

          Trends of Housing Demand

Urban populations have increased as a result of both urbanization and natural population growth. One fifth of urban residents are relatively newcomers to urban areas (i.e. first generation residents) and urban areas are expected to continue to grow at a rate of 2.7% per annum. It is noted that there is high housing demand in the country as result of this increase in population. Owusu (2008) revealed that the sharp increase in the level of urbanization is characterized by limited infrastructure (including housing).According to him, the existing housing condition in Nigeria is as a result of rapid urban growth fuelled by increased population growth (both natural and rural-urban migration) and exacerbated by economic liberalization and globalization. Increasingly, the effects of liberalization and globalization are re-configuring the housing supply and demand dynamics resulting in increasing land and property values and rent, which is pushing some middle-income Nigerian to slums and other poor neighbourhoods.

 

Struyk and Roy (2006) revealed that the population of Kyrgyzstan has increased by 500,000 people since 1998 to 5.22 million inhabitants, despite a strong outward migration in the same period. Due to migration from rural to urban areas, the biggest part of this increase concerns the capital city, Bishkek and to a much smaller extent, the city of Osh. In many parts of the country there seems to be no housing demand. This situation contrasts to that of housing production. The housing stock grew in the same period of time only half as fast as the population, from 1.05 to 1.10 million units, i.e., below 5%. He estimates that 166,000 families are in need of new housing in 2007; whereas the estimate levels of new housing construction was 20,000 to 30,000 dwelling units a year. He argued that under these conditions, it would take 15 years to recover to the same level performance of housing provision as was being achieved before independence.

 

Scott (2004) stated how the nature of demand for government-assisted housing in South Africa has changed significantly over the last five years: According to him, an average population growth of 2.1% per annum has resulted in the population increasing by 10.4% or over 4.2 million people between 1996 and 2001. If this growth has been sustained since 2001, the extrapolated population for 2004 is 47.5 million people; In addition, the country has experienced a 30% increase in the absolute number of households, where only a 10% increase was expected. This has been caused by the drop in average household size from 4.5 people per household in 1996 to 3.8 in 2001. Urban populations have increased as a result of both urbanization and natural population growth. One fifth of urban residents are relatively newcomers to urban areas (i.e. first generation residents) and urban areas are expected to continue to grow at a rate of 2.7% per annum. He stated that there is high housing demand in the country as result of this increase in population.

 

Tufour (2008) revealed that the rapid population growth and an uncontrollable rate of urbanization have made housing one of the critical issues facing the Government of Ghana. Various data suggest that housing deficit is in excess of 900,000 units whilst supply figures vary between 25,000 and 40,000 units per annum as against annual requirement of 100,000 units. Currently, the annual housing supply to demand ratio (for new housing) is estimated at about 35%. Ghana is experiencing significant demographic change; which has implications for its cities and towns. The rate of urbanization in Accra is 15%; urban population was 31% in 1980 and rose to 44% in 2000. By the year 2010 more than half (51.5%) of the population is expected to be living in urban areas. As Ghana’s economy continues to grow, transition from a predominantly rural to a predominantly urban society is taking place. The rate at which urban population is growing since 1970 ranks higher than that of national growth. In 1993 alone the urban population in Ghana had shoot up to 35 percent and is expected to double by 2010 earlier than the globally predicted time of 2030 (World Bank, 2002 on quote). With the population estimated at 2.2 million, Accra, Ghana’s capital shares 25 percent of urban population. He indicated that the rapid population growth and uncontrollable rate of urbanization have made housing one of the critical issues facing the government of Ghana. That various data put it that housing deficit is in excess of 900,000 units, while supply figures vary between 25,000 and 40,000 units per year as against annual requirement of 100,000 units.

Ademiluyi (2010) opined that, the ever mounting of crises in the housing sector of the developing world has various dimensions. These include absolute housing shortages, emergence and proliferation of the slums/squatter settlements, the rising cost of housing rent, and the growing inability of the average citizen to own their houses or procure decent accommodation of their taste in the housing market. He revealed that in Nigeria, even though there are no accurate data on the nation’s housing stock, earlier studies and observations strongly suggest quantitative and qualitative housing problems across the country. He observed that policymakers in Nigeria are not really aware of the magnitude of the housing problems facing the low-income earners in the country.According to him, the increasing high rent is a pointer to the fact that there is a decrease in housing stock.

He estimated that the nation’s housing needs for 1990 to be 8,413,980; 7,770,005 and 7,624,230 units for the high, medium and low income groups respectively. The same study estimates for the 2020 stands at 39,989,286; 35,570,900 and 28,548,633 housing units for high, medium and low income groups respectively.

 

Again, the National Rolling Plan from 1990 – 1992 estimated the housing deficit to increase between 4.8 million to 5.9 million by the year 2000. The 1991 National Housing Policy estimated that 700,000 housing units needed to be built each year if the housing deficit was to be cancelled. The document, in fact, indicated that no fewer than 60% of new housing units were to be built in the urban centres. This figure had increased at the time the 1991 housing policy was being reviewed in 2002. In 2006, the Minister of Housing and Urban Development declared that the country needed about 10 million housing units before all Nigerians could be sheltered.