An Econometric Study of Urban Housing in Nigeria: A Case Study of Selected Metropolitan Centres; Lagos; Kaduna and Enugu.

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Eneh, M. G.
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University of Lagos
Theories of residential location are traceable to the earlier works of Von Thunen (1826) which investigated the patterns of urban land use based on the assumption of a monocentric city. From the late fifties and early sixties, however, the widely acknowledged trade-off model, alternatively known as the accessibility and space consumption model, has become the standard tool for analysing urban residential location beginning with the seminal work of Alonso (1964): One of the virtues of the trade-off theory which in addition to being based on the assumption of a monocentric city and homogeneity of the housing market is that it simultaneously explains the aggregate rent (or house price) gradient and individual location decisions. Another virtue of the trade-off theory is that it has facilitated the analysis of the housing issues through the use of an urban-theoretical framework such that the tools of economic theory can now be introduced in an urban setting thereby facilitating the use of quantitative techniques relevant to the study of supply and demand relationships. Of recent, new views have begun to emerge regarding residential location theories with the environmental approach which emphasizes the importance of environmental preferences and neighbourhood characteristics in residential location choices being the most prominent.The environmental approach acknowledges the usefulness of the trade-off theory but questions its homogeneity postulate. A spin-off of the environmental theory has also emerged. Known as the hedonic demand theory this approach follows the Lancasterian reasoning that goods are valued for the utility derivable from their inherent characteristics.Some questions that have arisen with respect to urban residential theory relate to whether the market for a multidimensional commodity like housing should not more properly be regarded as being heterogeneous rather than the homogeneity which is assumed under the trade-off theory. Also some theorists contend that modern cities, rather than being monocentric might actually be polycentric, in which case the possibility becomes real that the rent gradient could be positive with the possible diffusion of workplaces. In addition, the question also arises as to whether the housing market could be regarded as being homogeneous across city centres in a national setting. If the heterogeneity of the commodity, housing, were to be more realistic, then housing demand can be better explained through the individual estimation of separate housing characteristics for all the housing markets as disaggregated into submarkets either locationally or according to tenure categories.Based on the foregoing questions, this study therefore had among its major objectives.(i) the testing of the validity of the negative rent gradient postulate of the trade-off theories for Nigeria. Following from the contentions of the environmental theorists, other key objectives were to; (ii) identify the factors that influence the demand for and supply of housing in Nigerian urban centre; (iii) establish the elasticities of housing demand with respect to various residential location characteristics, including prices and income; (iv) determine the crucial location variables in Nigeria urban space, whether they be proximity to place of work, environmental factors, neighbourhood characteristics, rent paid on dwelling units, ethnicity, etc; (v) determine the critical factors that jointly operate on both the demand and supply sides of the Nigerian urban housing market and how these factors interact.In the course of determining the foregoing we were able to generate a comprehensive primary data set on various characteristics of the Nigerian housing market through a field survey which involved the administration of 4000 questionnaires distributed in Lagos (2000), Kaduna (1000) and Enugu (1000). The empirical analysis based on the above data sets using the OLS estimation/technique for single equation-models and the 2SLS technique for the interactive housing market (i.e. demand and supply sides) model, led to the following findings: (i) that as between the two main competing theories of residential location, there is support not only for the negative rent gradient postulate but at the same time the environmental approach has relevance in the Nigerian context. In other words, it is true that Nigerian urban centres are basically monocentric although elements of polycentricity, with the emergence of employment centres removed from the CBD, are now visible. In addition, we were also able to individually estimate the various housing characteristics which confer on the commodity, housing, its heterogeneity property. (ii) that the main variables found to influence housing demand in Nigeria are household income, house prices, age of the dwelling unit, parking space, private bathroom facilities, good building maintenance, frequency of garbage collection, distance to the nearest refuse collection centre, accessibility to the main centres of activity, family size, age of a respondent and marital status. In other words, income, house prices, housing attributes, accessibility and demographic factors are the vectors/variables identified as having highly statistically significant effects on housing demand. (iii) The elasticity coefficients of all the housing characteristics generated from our classical least squares estimates were less than unity, indicating that these characteristics are generally inelastic. By comparison the income elasticities for Nigeria appear lower than those derived from U.S. - based studies. Also, renter income elasticities for Nigeria were found to be lower than those found for other developed and middle-income developing countries. Furthermore, it was observed that income elasticities for owner-occupiers in Nigeria were greater than for renters, a result similar to that of a comparative World Bank study of sixteen selected cities in eight developing countries (see Mayo and Gross, 1985). And in general, most of the elasticity estimates for housing characteristics show higher values for owners than for renters. A few of the policy implications of our findings include, (i) a need to adopt an innovative approach to reducing the serious deficit in the supply of housing in Nigeria. Towards that end "sites and services" and slum upgrading projects deserve serious consideration by the Nigerian authorities; (ii) a need to strengthen the nation's mortgage financial sector to enable the sector provide the necessary support to the informal sector which produces the bulk of the nation's housing stock; (iii) an urgent need to articulate a new and comprehensive national housing policy. Such a policy would draw lessons from the shortcomings of previous approaches (including massive direct construction programmes) to solving the nation's housing problems. Greater emphasis would need to be given to the provision of support services and incentives such as concessional interest rates which will make for greater efficiency in the use of available scarce resources in the housing sector.
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Econometric Study , Urban , Housing
Eneh, M.G.(1988), An Econometric Study of Urban Housing in Nigeria: A Case Study of Selected Metropolitan Centres; Lagos; Kaduna and Enugu. University of Lagos School of Postgraduate Studies Phd Thesis and Dissertation Abstracts 384p.