www.covenantuniversity.edu.

ng

Raising a new Generation of Leaders

URBAN LAND ECONOMICS

(ESM 415)
LECTURE SLIDES ON:
URBAN LAND USE AND PROBLEMS: HOUSING PROVISION

LECTURE DAYS: Wednesdays; TIME:10am-12pm; VENUE: Hall 202

 Housing
• Housing can be described as a house or shelter
together with the surrounding environment. The
surrounding environment is made up of roads,
drainage, electricity, water supply and open
spaces.
• Housing, therefore, is more than mere shelter and
can be described as a residential environment
which man uses for shelter and the environs of
the structure needed or designed for his physical,
mental, as well as, social well-being.
2
 Categories of Housing
• Housing can be categorized in different ways, as it
is not a homogenous product. The categories are:
i. By type: Under this category, the type of
houses include tenement buildings, block of
flats, bungalows, detached and semi-
detached buildings, terraced houses, duplex,
multi-storey buildings, etc.
ii. By location: Houses can also be categorized
based on where they are specifically located.
It could be urban, semi-urban, rural, town,
city, urban centre, outskirts, etc.
3
Categories of Housing
iii. By Age: Houses can be distinguished
according to their age such as old,
new, middle-age, etc.
iv. By size: Another category of houses can
be distinguished based on size or
number of rooms or accommodation
capacity such as one-bedroom, two-
bedroom, three-bedroom, etc.
4
 Categories of Housing
v. By developer: In this regard, it can be
private or public housing. That is, those
developed by private individuals, and
those built by the government and their
agencies (public developers).
vi. By tenure: This is the type described by its
tenurial status such as: owner occupier,
rental, family house, official quarters, etc.

5
 Categories of Housing
v. By quality: This is categorized by the house’s structural
characteristics and in-house environmental facilities.
They include low quality, medium quality, high
quality.
vi. By density: This is assessed by the number of housing
per plot of particular size, the site coverage as well
as room include: low density, medium density, and
high density.
vii. By building materials used: This is assessed by the
dominant materials used for the walls such as: mud,
brick, sandcrete, wooden, metal, stone, bamboo. etc.
viii.
6
 Categories of Housing
• viii. By speciality: This is assessed by special
use of dwelling unit such as: transient housing
(pilgrimage camp, refugee camp, hotels, mobile
houses, etc.), special home (aged, disabled,
orphanage homes etc.), mass housing, students
housing (hostels, dormitories), special quarters
(legislative quarters, presidential suite/governor’s
lodge), barracks, prisons, other quarters
(company quarters, staff quarters).
7
Housing Demand and Supply
• Housing demand is an estimation of the number of household
that are willing and able to acquire a particular housing
package.
• Housing demand has an economic connotation and
expressed in two aspects; the effective demand¸ which
expresses the desire of housing, the number of households
which have ability to pay for housing at a pre-determined
price or rent, while ineffective demand expresses an equal
desire for housing but in this case, the household does not
have the economic ability to satisfy such desire.
• Demand for housing can also be seen as the totality of house
(Building) which people want and are willing to buy, lease or
let at a specified price and at a given period of time, all
other factors being equal.
8
Factors that determine or affect demand for
housing
1. Increase in urban population/total
population.
2. Income level/per capita income of the
population.
3.Rate of new household formation/Family
formation.
4. Price of housing.
5. Interest rate.
6. Availability of mortgage facility.
9
Housing Supply
• Housing supply refers to the total amount of
housing units that are produced annually
by both private and public sector that are
ready for consumption.
• It is the total number of housing units the
suppliers (private and public) are ready to
offer at a particular time for a particular
price.
10
 Factors that affect housing supply
• Inadequate and poor national policy.
• Inaccessibility of land.
• Economic recession.
• High standard and stringent condition by the town planning authority
and delay in planning approval.
• High cost of building materials.
• Lack of enough knowledge in developing and use of local building
materials.
• Defective housing mortgage systems.
• Cost of provision of environmental amenities – school, clinic, open
space etc.
• Over population/rapid urbanisation.

11
 The Housing Challenge
• Housing, despite being one of the essential elements
in the sustainability of human existence, remains a
challenge both in developed and developing
nations.
• However these challenges or problems are more
pronounced in developing countries like Nigeria.
• Research has shown that the majority in need of
housing are the low income earners. Thus, the two
major components of any government’s framework
with regards to housing provision should address
the fundamental issues of availability and
affordability.
• 12
 Social and Economic Factors in Housing

• These refer to society related economic and

social factors, they are:
• Employment – level of employment of the
members of the society or the environment.
• Education – the level of education of the
populace.
• Income and Occupation of the populace – level
of income and assets. Culture and ethnicity.
• 13
 Social and Economic Factors in Housing

• Religious belief.
• Health and Lifestyle.
• Quality of neighbourhood.
• Rate of inflation.
• Rate of Interest.
• Demographic changes.
• Fiscal and monetary policies.

14
 Housing affordability
• Housing affordability refers to the ability of
individuals or families to afford housing costs
relative to their income.
• In recent years 'housing affordability' has become
a common way of summarizing the nature of the
housing difficulty in many economies.
• A household is said to have a housing affordability
problem, in most formulations of the term, when
it pays more than a certain percentage of its
income (usually 30%) to obtain adequate and
appropriate housing.
15
 Factors in housing affordability and housing
prices
1. The gross domestic product:
• In terms of the link between the real interest rate on
housing loans and housing prices, Sutton (2002)
argues that there is strong link between the real
interest rate and housing prices.
• Scholars have argued that the structural changes in the
economy affects housing prices.
• When the real interest rate on housing loans fell, this
reflects in the increase of housing prices. The decrease
of real interest rates in housing loans will reflect in the
increase of housing prices while an increase in real
interest rates will reflect a decrease in housing prices.
16
 Factors in housing affordability and housing
prices
2.Demographic and labour market factors
• The supply side is reflected in housing prices through
constructions costs, which influence housing prices
through prices of land, real wages of construction
workers, and material costs.
• The real wages as a component of construction costs
have an impact on real estate prices through
improvements in housing quality, which according to
empirical evidence has an influence over the housing
prices, especially in those countries where the initial
housing quality was lower (Égert and Mihaljek 2007).

17
 Factors in housing affordability and housing
prices
3. Construction costs:
• Another theory has it that construction costs
play a role in the housing prices, according to
the theory the construction cost is supposed
to be one of the fundamental factors
affecting housing prices.
• A scarce supply of land for construction can
therefore explain relative price increases in
housing relative to construction costs.
18
 Factors in housing affordability and housing
prices
• Affordability:
• When there is increase in people’s incomes what it
implies or mean is that people are able to afford to
spend more on housing.
• In periods of increased economic growth, demand for
houses tends to increase. Also, demand for housing
tends to be a luxury good.
• So a rise in income causes a bigger percentage rise in
demand. Demand for housing can rise much faster
than earnings, suggesting there are many other
factors influencing demand – at least in the short run.

19
 Factors in housing affordability and housing
prices
• Confidence:
• Demand for housing in most case depends on
consumer confidence. In particular, it
depends on people’s confidence about the
future of the economy and housing market.
• If people expect prices to rise, demand will rise
so people can gain from rising wealth. In a
boom, demand for houses rises faster than
incomes.
20
 Factors in housing affordability and housing
prices
• Population:
• Population is a very important factor as far as
housing demand and supply is concerned.
• It is not just the number of people but
demographic changes. e.g. growing number
of single people living alone has led to
increasing demand for houses.
• The demand for housing doesn’t just depend
on the population but also the average size of
a household.
21
 Factors in housing affordability and housing
prices
• Mortgage availability:
• Another factor that determines the effective
demand for houses is the willingness of banks to
lend mortgages.
• If banks give mortgages with bigger income
multiples, then the effective demand for houses
is greater.
• The willingness of banks to lend mortgage finance
can vary depending on the strength of the
interbank lending sector. T
22