The Social Impact of Affordable Housing:
Ever since man became civilized, shelter has been at the core of his struggle. It is second only to food. Due to its significance, many nations have sought to control its supply and production to efficiently manage its population and resources. Being a pivotal component to socio-economic development of a population, the provision of decent housing remains endemic in every region of the world. Decent housing refers to housing that meets the minimum standard statutory criteria for housing, is in a reasonable state of repair, has reasonably modern facilities and access to basic infrastructure. From slum/ghetto residents to middle-income households in wealthy cities and capitals around the world, there are millions of individuals finding it very difficult to access decent affordable housing without putting a strain on their financial capabilities.. It is estimated by the International Monetary Fund that over 330 million households are affected by the lack of decent affordable housing around the world. Forecasts further estimate that by 2025 (ten years from now) an estimated amount of 440 million households will occupy poorly developed shelters.Various studies have linked the lack of decent affordable housing to a variety of social challenges. One that is most critical is health care. For instance, a recent survey by the Los Angeles County in California showed that “majority of families who have trouble paying their rent also can’t afford healthy food or medical care”. The stress of constant financial pressure has been connected to mental health problems. Depression, anxiety and hopelessness have also been linked to a lack of a stable place to live, particularly for kids. According to this study, housing instability is associated with behavioral issues in children as well as increases in teen pregnancy, drug use, crime and depression in adolescents.”
The benefit of developing decent affordable housing extends beyond just providing shelter. Housing that is deemed affordable has a proven ability to increase residential stability. This in turn leads to improved educational results for children and improved labor outcomes for adults. It contributes greatly to the wider community by ensuring economic development of distressed neighborhoods, and provides support for the special needs segment of the population such as the elderly, homeless and people living with disabilities. Affordable housing as such creates economically balanced communities which are a clear pathway to sustainable growth and prosperity for such societies.
Often times, affordability is erroneously discussed or understood purely in terms of the absolute cost or value of a unit. An example will be a public housing program that is incentivized or subsidized by a government in order to create units to be offered for sale under a specified price ceiling. This premise considers that the actual cost of housing is less crucial than the ability to afford payments for ownership or lease. Such programs are better defined as “subsidized housing” and should not be confused with the term affordable housing.
So what exactly does “affordable” mean to housing?
Housing affordability is better understood and defined by the actual payment burden that the residents bear. A specific understanding of “affordability” in housing must be defined by the particular country or project in a given region or location. For such a definition to be effective, the outlined initiatives must be made clear as to who needs (demand) affordable housing. For instance, when gauging affordability in rental and ownership scenarios, the monthly housing payment for a resident/owner, including utilities, insurance, etc. should be compared with the family’s income and other non-housing costs. In ownership housing this payment takes into account the cost of housing as well as the terms of the debt that is available to finance its acquisition. In rental housing, this accounts for payments paid to the property owner in rent.
Globally, definitions of affordable housing vary. However, the most internationally accepted definition considers housing to be affordable if monthly payments do not exceed 30% of a family’s income. However this may not hold true in every case; considering all income bands around the world, the lower end or bottom of the pyramid spend a higher proportion of income on basic needs such as food and transportation, thereby limiting their payment for capacity for housing to at times less than 15-20% of income.
In economies without clear goals, regulation and incentives like Nigeria, the market tends to serve the upper and middle-income demand, as it is easy to make “affordable housing” for those with more to spend. So it is paramount for governments to set parameters around the various income groups that a housing program or project seeks to serve in order to define affordability.
For countries like Nigeria that have an extremely uneven distribution of income across its population, it is vital to carefully set appropriate parameters to qualify individuals for adequate housing. Targeting specific income segments and evaluating cost burden is a more sophisticated approach to defining affordability and can help to ensure that the limited public and private resources are being applied to those most in need.