Affordable Housing

Affordable Housing Crisis

Affordable housing is a big problem everywhere. People are concerned about their ability to afford this basic necessity that is fast becoming a luxury. In some countries, the government have subsidized housing for their worker, providing a long term payment plan for most to fit into. If you are not a government worker, there are schemes to apply to; like rent to own, done majorly by developers or outright buying or payment by installment. Other than that, there is the plain old buy land and build. You can read more on the options available on: Is it too Late to Own a House in Lagos this year?

Housing especially in urban areas are preplanned and organized in arrays called estates and even in unstructured environment are made to have some bit of similitude in arrangement and design which primarily is the job of those in the Urban development department or unit of the local government.

Affordable Housing | Estate Building
Affordable Housing | Estate Building

You will notice that in some places we have estates with bungalows only or even if not within an estate, you will notice landlords in the area are only allowed to build low building for reasons the government have as a plan for the future or a reason clear enough for all to see like if you live near an airport. As you get closer to the airport the array of building in site is mostly bungalows or just a duplex.

So for these reason, the types of building differ from place to place and so do the cost. Another very important reason for the difference in pricing of a house is: How developed is the area in mind? Where you have a residential area within close proximity to an urban area or within an urban area. The cost of accommodation there would be higher. So house affordability is based on your earning power and the area where you have in mind to either build or buy a house.

Now on build or buy. You can read more on that from my previous blog: Is building a house cheaper than buying?

Affordable Housing | Lets Discuss

Now to the crux of the matter?

How do we make housing cheap enough for everyone to be a part of, housing that wouldn’t put a hole in your pocket? That’s the problem most governments around the world and even the United Nations have been trying to solve for over seventy decades now. The housing deficits in a lot of countries around the world is real and more and more people cannot afford them even on as low as $100 a month.

Affordable Housing | Building-Construction-Estimate
Affordable Housing | Building-Construction-Estimate

Lets say: The cost for building a bungalow today is $34,000.

If $100 is to be paid monthly for 30 years by the occupier. That would be $36,000, which means the investor would make $2,000 profit (5.5%) over a 30 year period for a home provided.

Two problems: The time is too long for a developer to agree to and the profit too small for a 30year period but most governments can afford it but then there are bigger questions to answer.

  1. How can such a house be funded for tens of thousands, so it can be spread for their citizens to live in and pay $100 a month for the next 30 years.
  2. How can it be cheatproof so that it is not highjacked by corrupt officials that would end up buying the houses to sell for gain?
  3. Would the government be able to get their monies back and would the citizen be consistent to pay this $100 for the next 30 years?
Affordable Housing | I dont know

Please when you have the answers to these question? Let me know.

These are the reasons a lot of government back off housing projects and just focus on infrastructure leaving the housing deficit problem for developers to solve.

Like stated above, most developers want more profit in as short a time as possible so they embark on providing let’s say the same bungalow for a cost of $36,000 payable in just 3-5 years. To be sure you can afford the payment, they make you do a down payment of 20-30% and spread the rest for the 3-5 years. This totally throws housing beyond the means of the common man.

Affordable Housing | Lets Calculate

Let’s calculate:

20% of $36,000 is $7,200.

Monthly payments of $36,000 – $7,200 = $28,800.

Let’s say duration is 5 years: 5×12 =60 months. So, therefore, monthly payments would be 28,800/60 = $480 a month.

A lot of people don’t even earn $7,200 in a year. Which cuts off the housing access to more than half of a developing countries population. But still these people would need to be housed, that’s where mass housing projects comes in place. Which still needs to be affordable?

That’s where a minimum wage per worker comes in? Which needs to be above $10 an hour?

That’s where enforcement comes in which is not the priority of the government to private business owners.

Now we are back to the questions above.

For as long as the government is more interested in profit generation than housing plans. There is still going to be huge housing deficits and affordable housing for all will keep being a mirage. The housing problems in most developing nations are no longer a warning sign, it has fast become an emergency.

For more on this. Get my ebook on Amazon: ‘Five Reasons why you must own the roof over your head.’

Tony Usoro
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