1

AN ASSESSMENT OF CO-OPERATIVE SOCIETIES 
AND HOUSING SUPPLY IN LAGOS STATE. 

 
 
 
 
 
 
 

By 
 
 

OYALOWO, Basirat Ashabi. (089053010) 
B.Sc (Estate Management); M.A (Housing Policy and Management) 

 
 
 
 
 
 
 
 
 

A thesis in the Department of Estate Management submitted to the School of 
Postgraduate Studies in fulfillment of the requirements for the award of the 

degree of Doctor of Philosophy (Ph.D) in Estate Management of the 
University of Lagos, Nigeria. 

 
 
 
 
 
 
 
 

JANUARY, 2018 
 



 
 

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CERTIFICATION 
This is to certify that the thesis: 

An Assessment of Co-operative Societies and Housing Supply in Lagos State. 

 

Submitted to the School of Postgraduate Studies 

University of Lagos 

For the award of the degree of 

Doctor of Philosophy (Ph.D) 

Is a record of original research carried out 

 

By 

Oyalowo, Basirat Ashabi. 

In the Department of Estate Management 

 

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SIGNING OFF OF OWNERSHIP RIGHT OF THESIS 
I hereby agree to give the University of Lagos through the University of Lagos Library, a non-
exclusive, worldwide right to reproduce and distribute my thesis and abstract (hereinafter ‘‘the 
work’’) in whole or in part, by any and all media of distribution, in its present form or style or in 
any form or style as it may be translated for the purpose of future preservation and accessibility 
provided that such translation does not change its elsewhere. 
 
By the grant of non-exclusive rights to University of Lagos through the Library under this 
agreement, I understand that the rights of the University of Lagos are royalty free and that I am 
free to publish the Work in its present version or future versions elsewhere. 
 
Warranties  
I further agree as follows: 

i. That I am the author of the work and I hereby give the University of Lagos the right 
to make available the Work in the way described above after a three (3) year period of 
the award of my doctorate degree in compliance with the regulation established by 
the University of Lagos Senate. 

ii. That the Work does not contain confidential information which should not be 
divulged to any third party without written consent. 

iii. That I have exercised reasonable care to ensure that the Work is original and it does 
not to the best of my knowledge breach any Nigerian law or infringe any third party’s 
copyright or other Intellectual Property Right. 

iv. That to the extent that the Work contains material for which I do not hold copyright, I 
represent that I have obtained the unrestricted permission of the copyright holder to 
grant this license to the University of Lagos Library and that such third party material 
is clearly identified and acknowledge in the Work. 

v. In the event of a subsequent dispute over the copyrights to materials contained in the 
Work, I agree to indemnify and hold harmless the University of Lagos and all its 
officers, employees and agents for any uses of the material authorized by this 
agreement. 

vi. That the University of Lagos has no obligation whatsoever to take legal action on my 
behalf as the Depositor, in the event of breach of intellectual property rights, or any 
other right, in the material deposited. 

 

 

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DECLARATION 
 

 

AN ASSESSMENT OF CO-OPERATIVE SOCIETIES AND HOUSING SUPPLY IN 
LAGOS STATE 
 
 
 

I declare that this thesis represents my original work in the Department of Estate 

Management, University of Lagos. It has not been accepted for any previous application 

for a higher degree or previously published by any other person. 

 

I authorise the University of Lagos to lend it to other institutions or individuals for the 

purpose of scholarly research. 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oyalowo, Basirat Ashabi.  

December, 2017 

 

 



 
 

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DEDICATION 
 

This thesis is dedicated to Almighty God, the Most Gracious, the Most Merciful. All Praises, 

Worship and Adoration are due to HIM ALONE, the King of the Worlds.  

 

Also, to my sister, Mrs Kudirat Adeola Agboola, of cherished memory, who was the first to seek 

a Ph.D. but was not destined to accomplish it. May God continue to rest you in Al-Jannah 

Firdaus (Amin). 

  



 
 

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ACKNOWLEDGEMENT 
First and foremost, this thesis would never have been completed without the support, 

encouragement and tireless push of my first supervisor, Professor T.G. Nubi, who at different 

stages took on the role of mentor, father, brother, friend and task master to ensure the completion 

of this work. I pray that our collective vision for housing development in this Nation be realized 

during our lifetimes. I also appreciate the support and encouragement of my second supervisor, 

Dr A.C. Otegbulu (Associate Professor) whose sustained interest, constructive criticisms and 

advice has contributed to shaping this work.  

 

My heartfelt gratitude to My Parents, Major M.A Odunmbaku (Rtd.) and Alhaja M.O. 

Odunmbaku, who nurtured me with an invaluable thirst for knowledge, both spiritual and 

material: May your days remain long to enjoy the best that life has to offer (Amin). 

 

I also want to thank Prof M.M. Omirin, the current Head of Department, Estate Management, 

who has remained a pillar of support for me from the inception of my studies to the end. May 

God reward you all in manifolds (Amen).Special thanks to the Estate Management students 

(Class of 2017/2018) who made significant contribution during the field work stage. This 

appreciation also extends to the co-operative leaders that took part in the focus group discussion 

and all those who took time to properly fill out the questionnaires. 

 

To the entire staff of Kadiri Associates, I owe a debt of gratitude for providing conducive and 

comfortable office space at the various times I needed solitude to write up the thesis. I specially 

thank my uncle, Tpl (Alhaji) Waheed Kadiri, a scholar, seasoned and renowned town planner for 

always being concerned about my progress in life and for being the first person to say to me “Go 

and get a PhD!’. On this note too, I thank my sisters: Mrs Sherifat Olaniyan and Dr Adeoti 

Okaga,  for helping me not to lose focus in the early days of the PhD. My siblings Mrs Modinat 

Abiona, Mrs Bunmi Gbogboade, my niece,Mrs Abimbola Thomas and Ruqoyah Odunmbaku; 

my sister in law,my brothers Mr Quasim Odunmbaku and Mr Akeem Odunmbaku, I say thank 

you for your moral support! 

 



 
 

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I appreciate also, Mrs Toyin Adeniyi for providing crucial secretarial support and Dr Julius 

Faremi for his readiness to offer guidance during the last stages of this work, and also every 

member of staff of the Department of Estate Management both teaching and non-teaching 

(especially Mr John and Mrs Joy Avona).  My appreciation goes to very senior colleagues that 

have monitored the progress of this work: Professor M.M Omirin, Dr G.K Babawale, and of 

course, Dr H. Koleoso, my tireless Postgraduate Co-ordinator. To my sisters in the Faculty: Dr 

Taibat Lawanson (Associate Professor) and Dr Ini John; I wish to acknowledge your sustained 

interest and encouragement. Also, my colleagues, Esther Thontteh, Afees Alabi, Funlola 

Famuyiwa, Uyi Osagie, Dr M.I Anyakora, OBA Idowu, and my own office mate and ‘BFF’ 

Yetunde Ohiro, we are alltogether!  

I also appreciate all my students, past and present, who have contributed in no small way to the 

actualization of this work, especially Idris Tella (OOU, Ibogun); Kayode, Oreoluwa, Isreal, 

Eniola, Afolabi, John Oloba, Badejo and Elizabeth all of Estate Management Department, 

UNILAG.  

 

Finally, I cherish my children for being there. In the completion of this thesis, they have made 

several sacrifices and have had to cope with frequent absences, short tempers and hurriedly 

cooked meals! Thank you for supporting mummy, may you all never lack! Then to my husband, 

Tpl Dare J. Oyalowo for his support spiritually and financially, for providing the challenge to 

carry out this study. I say thank you ! 

 

To all these sweet people and others within and outside the University of Lagos community, I 

say thanks and to God be the Glory! 

 

 

 

 

 

 

 

 



 
 

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Title  i 

Certification  ii 

Author’s Statement  iii 

Declaration  iv 

Dedication  v 

Acknowledgement   vi 

Table of Contents  vii 

List of Tables  xii 

List of Figures  xiv 

List of Abbreviations  xv 

Abstract  xvii 

CHAPTER ONE:  INTRODUCTION 1 

1.1 Background to the Study 1 

1.2 Statement of the Research Problem 5 

1.3 Aim and Objectives of the Study 7 

1.4 Research Questions 8 

1.5 Research Hypothesis 9 

1.6 Significance of the Study 10 

1.7 Scope of the Study 11 

1.8 Operational Definition of Terms 12 

CHAPTER TWO: LITERATURE REVIEW 14 

2.1 Introduction 14 

2.2 Concepts in Housing Supply 14 

2.2.1 The Housing Supply Value Chain 14 

2.2.2 Housing Affordability as a concept 17 

2.2.3 The Concept of Housing Supply in an imperfect market 19 

2.2.4 Determinants of Housing Supply Decisions 22 

2.2.5 Housing Supply Elasticity, Housing Suppliers and Affordability  25 

2.3 A Typology of Housing Suppliers in Nigeria 28 

2.3.1 Government Activities in Housing Supply in Nigeria 30 

2.3.2 Private Sector Provision of Housing in Nigeria 33 

TABLE OF CONTENTS 



 
 

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2.3.3 Housing Supply in Nigeria 37 

2.3.4 A Review of the Literature on Constraints to Housing Supply 38 

2.3.5 A Conclusive Note on the Review of Housing Supply Constraints 53 

2.4 Definitions and Conceptualizations of Co-operative Societies 55 

2.4.1 The Study of Co-operative Societies as Business and Social Organizations  57 

2.4.2 Emergence of Co-operative Societies in Nigeria 59 

2.5 Co-operative Societies and Housing Supply 60 

2.5.1 An Historical Account of the Origin of Co-operative Housing 62 

2.5.2 Overview of Co-operative Housing Developments around the World 66 

2.5.3 Summary: Principles and Benefits of Co-operative Housing  80 

2.5.4 Addressing Housing Market Peculiarities through Co-operative Societies: 

The experience in Developed Countries  

83 

2.5.5 General Challenges Facing the Global Co-operative Housing Sector 97 

2.6 A Review of Academic Papers on Housing Supply through Co-operative 

Societies in Nigeria 

99 

2.6.1 The Structure of Co-operative Societies in Lagos State 107 

2.6.2 Regulatory Guidance for Co-operative Societies’ Participation in Housing 

Supply  in Lagos State 

108 

2.6.3 Selected Co-operative Housing Estates in Lagos State 110 

2.7 Theoretical Framework 118 

2.7.1 Theories about the Structure of Firms and Application to Co-operative 

Societies 

118 

2.8 Conceptual Framework 132 

CHAPTER THREE: RESEARCH METHODOLOGY  

3.1 Introduction 136 

3.2 Research Paradigm 136 

3.3 Research Design 137 

3.4 The Quantitative Phase 140 

3.4.1 Study Population 142 

3.4.2 Sampling Units 142 

3.4.3 Sample Size 143 



 
 

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3.4.4 Sample Size Distribution and Survey Response Rate 144 

3.4.5 Sampling Strategy and Technique 144 

3.4.6 Data Collection Instrument and Measurement of Variables 145 

3.4.7 Validity and Reliability of Research Instruments 147 

3.4.8 Pilot Study 148 

3.5 The Qualitative Phase 149 

3.5.1 Data Collection Strategy 149 

3.5.2 Sampling Unit, Strategy and Participant Selection 150 

3.5.3 Moderation 151 

3.5.4 Recording and Note-taking 151 

3.5.5 Data Collection Instrument 151 

3.5.6 
Validity and Reliability Tests of Qualitative Data: Computer Aided 

Qualitative Data Analysis System 

152 

3.5.7 Qualitative Data Analysis 153 

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSIONS 157 

4.1 Introduction 157 

4.2 Response Rates 157 

4.3 Descriptive Statistics  158 

4.4 Analysis of Research Objectives and Test of Hypothesis 162 

4.4.1 Analysis of Research Objective 1 162 

4.4.1.1 Test of hypothesis for Research Objective 1 165 

4.4.2 Analysis of Research Objective 2 170 

4.4.2.1 Analysis of Qualitative Data for Research Objective 2 173 

4.4.3 Analysis of Research Objective 3 176 

4.4.3.1 Test of Hypothesis for Research Objective 3a 176 

4.4.3.2 Test of Hypothesis for Research objective 3b 177 

4.4.3.3 Test of Hypothesis for Research Objective 3c 179 

4.4.3.4 Test of Hypothesis for Research Objective 3d 181 

4.4.4 Analysis of Research Objective 4 184 

4.4.5 Discussion of Findings 188 

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CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 

5.1                  Introduction 205 

5.2 Summary of Findings 205 

5.3 Conclusion 208 

5.4 Recommendations 211 

5.4.1 Recommendations for the Co-operative Sector 211 

5.4.2 Recommendations for Policy Makers/Co-operative regulators 212 

5.4.3 Recommendations for Academia 213 

5.5 Contributions to Knowledge 213 

5.6 Directions for Further Research 214 

REFERENCES 215 

APPENDICES 231 

 

 

 

 

 

 

 

 

 

 

 

 

 



 
 

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LIST OF TABLES   

Table 2.1: Indices of Housing Finance by the Federal Mortgage Bank of Nigeria 32 

Table 2.2: Summary of   Literature Reviewed 116 

Table 3.1: Reliability Test Results of Quantitative Instruments  148 

Table 4.1: Survey Response Rates 157 

Table 4.2: Co-operative Society Characteristics 158 

Table 4.3: Co-operative Society Characteristics (II)                                                            159 

Table 4.4: Leaders’ Demographic Characteristics 159 

Table 4.5: Members’ Socio-Demographic Characteristics  160 

Table 4.6: Members’ home ownership characteristics and co-operative Financing 162 

Table 4.7: Extent of Participation of employment and non-employment based co-

operative societies in housing supply 

163 

Table 4.8 Co-operative Land Acquisition for Housing Purposes 164 

Table 4.9 Housing units to be released from co-operative land holdings 165 

Table 4.10: Results of t-tests and descriptive statistics for level of participation  in 

housing activities by membership base of co-operative societies  

166 

Table 4.11: Sampling Adequacy Test   170 

Table 4.12: Components Table  172 

Table 4.13: Results of t-tests and Descriptive Statistics for Transaction Costs  177 

Table 4.14: Results of t-tests and descriptive statistics for production costs by 

membership base of co-operative societies 

179 

Table 4.15: Results of t-tests and descriptive statistics for member involvement  by 

co-operative leaders and members  

180 



 
 

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Table 4.16: Results of t-tests and descriptive statistics for access to external 

support by membership base of co-operative societies  

182 

Table 4.17: Results of t-tests and descriptive statistics for level of satisfaction with 

co-operative loan services according to employment base 

183 

      

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 



 
 

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LIST OF FIGURES 
 

Figure 2.1: Housing Development Value Chain.      15 

Figure 2.2: Housing Suppliers in Nigeria.       32 

Figure 2.3: FCH Co-operative housing in Egypt.      69 

Figure 2.4: FNCoopHLM Co-operative housing in France.     70 

Figure 2.5: Yesilkent Koop Cooperative Housing in Turkey .    77 

Figure 2.6:Co-operative Villa, Badore.                111 

Figure 2.7: Lekki County Estate by Total EP Co-operative.               113 

Figure 2.8: Mobil Co-operative Estate, Lekki               115 

Figure 2.9: Theoretical Framework for the Study               131 

Figure 2.10: Conceptual Framework for the Study     133 

Figure 3.1: Visual map for research strategy                141 

Figure 4.1: Word cloud chart                  168 

Figure 4.2: Word tree diagram for the theme “Problems”              173 

Figure 4.3: Categorization of Constraints experienced by co-operative societies               192 

Figure 4.4: Action Plan for Integrating Co-operative Societies in Housing Supply 

in Lagos State        204 

 

 

 
 
 
 
 
 
 
 
 
 



 
 

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LIST OF ABBREVIATIONS 

CAHF= Centre for Affordable Housing Finance 

CAQDAS= Computer Aided Qualitative Data Analysis Software 

CBN= Central Bank of Nigeria 

CLT= Community Land Trusts 

CMHN= Chicago Mutual Housing Network 

CSI= Co-operators’ Satisfaction Index 

EFInA= Enhancing Financial Innovation and Access 

FGD= Focus Group Discussion 

FGN= Federal Government of Nigeria 

FMARD= Federal Ministry of Agriculture And Rural Development 

FMBN= Federal Mortgage Bank of Nigeria 

GDP= Gross Domestic Product 

GRA= Government Reserved Area 

HML= Habitations a loyer modere 

IDI= In-depth Interview 

IMF= International Monetary Fund 

IOF= Investment Oriented Firms 

LASCOFED= Lagos State Co-Operative Federation 

LEC= Limited Equity Co-Operatives 

LSDPC= Lagos State Development and Property Corporation 

MIF= Mortgage Indemnity Fund 

NBS= National Bureau of Statistics 



 
 

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NHF= National Housing Fund 

NIE= New Institutional Economic Models 

NTF= Neo-classical Theory of the Firm 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



 
 

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ABSTRACT 
 
The severity of the housing supply deficit in Nigeria has necessitated the participation if co-
operative societies in the housing sector. However, their activities have remained under-
researched. The aim of this thesis is to establish the scope and constraints of co-operatives’ 
housing supply activities in order to develop a set of guidelines that would integrate them as 
functional housing suppliers in Lagos State. Objectives of the study are: one, to assess the 
current activities of co-operative societies in housing supply; two, to determine constraints to 
their participation; three, to examine differences in constraints experienced by employment based 
and non-employment based co-operatives and four, to examine success factors of co-operative 
societies that have successfully developed housing on their land. Objective five recommends an 
action plan for their effective participation in housing supply.  The study adopts an explanatory, 
sequential QUAN-qual mixed method design that starts with a major, quantitative study, 
followed by a smaller scale qualitative study. For the quantitative phase, a survey based on 
systematic random sampling of co-operative leaders was carried out; a total of six hundred 
questionnaires were distributed with response rate of seventy five percent being achieved. For 
objectives one, two and three, analysis was done with descriptive and inferential statistics with 
the use of independent T-tests and multivariate techniques.  For the qualitative aspect, a Focus 
Group Discussion was carried out and analysis done with a computer software. This was carried 
for objectives one, two and four. Integration of results was utilized to achieve objective five. 
Findings show that co-operative societies are most active in land acquisition activities but are 
constrained by eight categories of constraints such as production costs, pre-construction costs, 
issues in member involvement and lack of external support, amongst others. Findings also show 
that across the three activity areas (land, finance and housing construction); employment based 
co-operatives are more active in the housing supply process than non-employment based co-
operatives. As contribution to knowledge, the study discovered seven crucial success factors for 
co-operative societies’ involvement in housing supply which have not been identified by 
previous researchers in this study area. These provide fresh policy directions for the sector. The 
study also generated a time-bound, integrative action-plan to release thousands of co-operative 
housing units in Lagos State. 

Keywords:Co-operative housing, co-operative societies, housing delivery, housing supply, 

housing supply constraints. 

 

 

 

 

 

 

 

 



 
 

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CHAPTER ONE 

INTRODUCTION 

1.1 Background to the Study 

Affordable, decent housing is beyond mere assemblage of bricks and mortar (Ayeniyo, 2011; 

Nubi, 2015). Housing’s fundamental linkage to good health, well-being and economic 

development is evidenced in its inclusion in global and regional development agenda. It is both 

an investment and consumption good (Glaeser and Gyourko, 2017), being a major source of 

economic growth for countries such as China (Sun, Zheng and Geltner, 2017) and in countries 

such as Britain and America, constituting a major source of household wealth for over seventy 

percent of the households who own their homes (Gorea and Midrigan, 2017).However, it is very 

unlike other assets. While it is a great source of investment, its high capital requirements has 

resulted in itsbecoming a social needso that its attainment (or lack of)is often times a great sign 

of economic inequality in most societies (O’Dea, 2012).  

 

The National Bureau of Statistics, NBS (2013) indicates that Nigeria’s major urban centres 

(Lagos, Abuja, Ibadan and Kano) are experiencing an increase of 20% in housing demand per 

annum; and over 65% of Nigerians reside in substandard homes in several slum communities due 

to inability to afford decent homes (Centre for Affordable Housing Finance in Africa CAHF, 

2015). These are indicators of both current and future quantitative and qualitative housing need.  

The Federal Government had historically adopted a direct construction strategy to address supply 

shortfalls but this has achieved minimum results in over 20 years that it was practiced (Federal 

Government of Nigeria, 2002;Nubi, 2012; Obialo, 2005). Subsequent attempts to pass on the 

responsibility for housing provision to the private sector has also met with less than significant 



 
 

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success, with low rates of mortgage uptake (Nubi, 2006; Okonjo-Iweala, 2014) and preference of 

developers to build for the middle-high income earners who can afford to pay market-rates and 

also qualify for mortgage loans (CAHF, 2015; Eni & Danson, 2014; Nubi, 2010). This has 

resulted into a situation where decent housing reaches only a minor segment of the population. In 

trying to meet their housing need in the face of the multi-faceted problems surrounding housing 

affordability and access, most households  then rely on self-financing through own equity, loans 

and gifts from friends and family, remittances from abroad and contribution from co-operative 

societies.  

 

Co-operative societies, in particular, have long been utilized by households as a medium to 

address problems they are incapable of solving individually. From its origins by the Rochdale 

Society in the UK in 1844, co-operative membership has spread to other countries including 

Nigeria, which now has about 82,460 co-operative societies of various categories with over 1.4 

million members in 605 local Governments (Enhancing Financial Innovation and Access EFInA, 

2012). As obtains in other parts of the world, the co-operative societies operate in various 

categories. There are employment based co-operatives, which are domiciled in formal 

organizations and provide an avenue for employees to address their welfare issues. There are 

also various categories of non-employment societies (such as community based co-operatives, 

agriculture based co-operatives, artisanal co-operatives, gender based co-operatives and so on), 

all of which provide opportunities for people to assist one another outside the formal sector.  Co-

operative societies could therefore serve various purposes: production-based, consumer support, 

thrift and credit societies and so on, depending on the needs of its members. 

 



 
 

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Thus, given the rationale for setting up co-operative societies, the socio-economic importance of 

housing and its high capital outlay,there is a logical assumption that they should be involved in 

addressing the housing supply challenges in cities such as Lagos, which show visible housing 

need evidenced by large slum communities. This assumption is fuelled by the positive track-

record of co-operative societies in achieving improved socio-economic outcomes for their 

members as evidenced in Aderounmu, Odeyemi & Adeleke (2014), EFInA, (2012), 

Ezekiel(2014) and Olaleye (2007). Indeed, the National Housing Policy of 2004 section 7.3(iv) 

and section 7.3(ix) placed on housing co-operatives, responsibility for direct construction, 

distribution of building materials and possibilities of accessing funds from the Federal Mortgage 

Bank of Nigeria (The  Federal Government of Nigeria, 2002).  In addition, academics and other 

stakeholders advocate for deeper co-operative societies’ involvement in the housing sector 

(Danmole, 2004; Ndubueze, 2009).However, despite these general optimism amongst key 

stakeholders that co-operative societies are veritable tools for increasing the nation’s housing 

stock, their current contribution to the nations’ housing stock remains insignificant (Ndubueze, 

2009).  

 

Inevitably, while the literature on co-operative activities in agricultural and commercial activities 

is available, there is scant empirical research on the extent and depth of current activities of co-

operatives in the housing sector.  This is evidenced by the non-recognition and non-

documentation of their activities in the 2012 global compendium of co-operatives involvement in 

housing and their non-visibility in the housing policy framework for Lagos State in the last few 

administrations. However, anecdotal views suggest their participation in land assembly- as seen 

from various billboards in the city peripherals that announce vast acres of undeveloped land as 



 
 

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being owned by one co-operative society or the other. However, it is not clear the motivation 

(social need, investment or speculative) for these acquisitions. The efforts of some co-operative 

societies at housing provision for members are also to be seen in housing estates developments, 

but it is also not clear, the depth of these activities across the entire co-operative sector (whether 

employment based or non-employment based) in Lagos State. 

 

The few studies on the activities of co-operatives in housing supply in Nigeria are also limited in 

some aspects, such that more research is needed in this area. For instance, Adeboyede and 

Oderinde (2013); Odum and Ibem (2011); Oyewole (2010) have studied the role of co-operative 

societies in housing finance and land assembly components of the housing development value 

chain in Ibadan, Ogbomoso, Oyo and Enugu. Also, in advocating for institutionalization of co-

operatives societies in housing supply in Nigeria, other researchers such as Danmole (2004), 

Ndubueze (2009) and Nubi (2008) have provided descriptive appraisal of the co-operative 

system. In terms of methods, these studies have either adopted quantitative or qualitative 

approaches, and in terms of geographical scope, they have been directed towardsurban areas with 

less intense housing need than Lagos State. Thus, with the peculiarities of the state as the 

nation’s sole megacity which accounts for 31% of estimated national housing deficits (The 

World Bank, 2016) recommendations from such studies might not be applicable in their entirety 

to address the housing problems in the state.  

 

It is therefore important to provide focused research specific to this case study area. In addition, 

in terms of subject area scope, past studies have been limited to housing finance and land 

assembly components of the housing development value chain. Moreover, these studies have not 



 
 

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shown a detailed analysis of co-operatives and housing supply that is based on theoretical 

postulates. It is important to note that despite the differences in research design, while all these 

studies agree that, as recommended in the National Housing Policy, co-operative societies should 

have a more impactful role in housing supply in Nigeria, they have not provided a depth of data 

that would provide policy directions for the sector in Lagos State. 

This thesis therefore seeks to address these gaps by expanding the scope of research on co-

operative societies and housing supply in Lagos State. This is to be done by utilizing a mixed 

method paradigm to provide a state-wide appraisal of the activities of co-operative societies 

along three key components of the housing supply value chain (land acquisition, finance and 

construction); thereby generating stylized facts on how they can be integrated as housing 

suppliers in Lagos State such that they can begin to fulfil their assigned role in the Nation’s 

housing policy. 

 

1.2  Statement of the Research Problem 

The central research problem that this thesis addresses is that of the limited participation of co-

operative societies in housing supply in Lagos State, the need to ascertain the causal factors that 

have produced this, while also determining strategies by which the co-operative structure could 

be utilized to address housing challenges. 

 

This problem requires research attention due to a number of reasons. For instance, the 

antecedents of co-operative societies in housing for rental and home-ownership in countries such 

as Pakistan, Poland, Sweden, Germany and Turkey indicate the critical role they play in the 

housing provision framework. These societies are also recognized as a pathway to achieving 



 
 

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housing supply and affordability goals in Wales; and in Egypt, Kenya, India and Malawi they 

have been supported by State agencies and international organizations to provide self-built 

housing for members and in supporting urban regeneration. In Nigeria, however, the situation 

appears not to be the same. Lagos, with a current population of 21million has the highest 

population in Africa and is expected to achieve a population of 28 million people by 2020.  

The deficiencies in the institutional capacity to cope with the associated housing need are already 

evident. Literature avers that the state has a housing supply deficit of 2 million units, in addition 

to 3 million housing units that need to be upgraded to decent standards in order to improve the 

lives of close to 70% of Lagosians who reside in several slums across the State (Lagos State 

Ministry of Economic Planning and Budget, 2013; Nubi 2015). It is acknowledged that attempts 

have been made to address these deficits as records of the housing construction activities of the 

state governments are available with its ministries and agencies, the efforts of both corporate and 

individual housing providers are quite visible, but the contribution of the co-operative sector in 

housing supply in the state remains undocumented. This is a problem that requires research 

attention. 

 

Another aspect of this problem is that while literature shows that although the number of 

registered co-operative societies in Lagos State rosefrom 1,040 in 2013 (Lawanson & Oyalowo, 

2016) to 2,516 in 2015,only 14 are currently registered as housing co-operatives.However, other 

types of co-operatives are known to be involved in housing issues,for instance, employment 

based organizations and multi-purpose co-operative societies are also involved in housing 

provision for their members. However, probably because of the dearth of empirical study and 



 
 

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systematic data on the structure and workings of these activities, these efforts have not been 

given significant policy attention in the state.  

 

Without a composite approach to address these problems, the implication is that the current 

housing activities of co-operative societies in Lagos State will remain unrecognized, unstructured 

and unregulated, and the potential that the sector has for increasing the housing stock will not be 

realized. If this situation continues, the housing need of co-operative members who have 

probably joined co-operatives to satisfy capital intensive needs such as housing, would remain 

unmet and the potential contribution of co-operatives to reduce the housing deficit in Lagos (and 

indeed Nigeria) would remain untapped. Besides, an empirical investigation would permit the 

use of theory in understanding the behaviour of co-operatives in the highly market dominated 

housing sector,  and how decision making processes in these societies affect the depth of 

participation of co-operative societies in housing provision activities.  

 

The current study therefore sets out to address the issues in the existing knowledge area about the 

activities of co-operatives in housing supply in Lagos State.  

1.3  Aim and Objectives of the Study 

The aim of this research is to assess the operations of co-operative societies and their housing 

provision activities in Lagos State, with a view to developing a set of guidelines that would 

integrate them as functional housing suppliers in Lagos State. 

Accordingly, the objectives of this thesis are to: 



 
 

25 

1. assess the current activities of both employment and non-employment based co-operative 

societies across three levels (land acquisition, finance and construction) of the housing 

supply value chain; 

2. determine the constraints to co-operative societies’ participation in the housing supply 

process; 

3. examine the differences in the level of constraints experienced by employment and non-

employment based co-operative societies;  

4. determine the success factors of co-operative societies that have successfully developed 

housingon their land; and 

5. recommend an action plan for co-operative societies’ effective participation in housing 

delivery in Lagos State. 

 

1.4 Research Questions 

The following are the research questions formulated to guide the study: 

1. what are the current activities of both employment and non-employment based co-

operative societies across three levels (land acquisition, finance and construction) of the 

housing supply value chain? 

2. what are the constraints to co-operative societies’ participation in the housing supply 

process? 

3. what are the differences in the level of constraints experienced by employment and non-

employment based co-operative societies? 

4. what are the success factors of co-operatives that have successfully developed housing on 

their land? 



 
 

26 

5. What action plan can be developed to enable effective participation of co-operatives in 

housing delivery in Lagos State?  

1.5 Research Hypotheses 
 

In line with the mixed methods design adopted for this study, not all the research questions have 

corresponding hypothesis. The following null hypotheses for research objectives one and three 

were found relevant for this study: 

Ho1: there are no significant differences in the current activities of employment based and non-

employment based co-operative societies across three levels (land acquisition, finance and 

construction) of the housing supply value chain. 

Objective 2: No hypothesis is required. 

Ho2 (Objective 3): there are no differences in the level of constraints experienced by 

employment and non-employment based co-operative societies. 

Within objective 3, the following sub-hypothesis was tested: 

Ho2a: there are no differences between employment and non-employment based co-operative 

societies with respect to transaction costs constraints. 

Ho2b: there are no differences between employment and non-employment based co-operative 

societies with respect to housing production constraints. 

Ho2c: there are no differences in the responses of co-operative leaders and co-operative 

members with respect to level of member involvement in land acquisition decision-making.   

Ho2d: there are no differences between employment based and non-employment based co-

operatives with regards to external support. 

Ho2e: There are no differences in member satisfaction in co-operative loan management services 

across employment and non-employment based co-operatives.  



 
 

27 

Objectives 4: No hypothesis is required. 

Objectives 5: No hypothesis is required. 

 

1.6 Significance of the Study 

The primary beneficiaries of this research are the over 1.4 million people who belong to co-

operative societies all over Nigeria,co-operative managers and leaders, researchers, co-operative 

society regulatory agencies as well as policy makers and funding organizations.  

In research objective one, the study presents the scope of co-operative housing activities to 

provide a better understanding of their activities in the housing sector. The result of this is useful 

for all stakeholders because it will serve as a baseline upon which other decisions relating to 

areas of possible intervention can be addressed. Thereafter, in research objectives two and three, 

the peculiar problems that constrain co-operative housing activities are examined in depth using 

both qualitative and quantitative means, and results provide rich contextual knowledge on why 

and how these constraints have emerged and are inter-related. Taken with research objective four 

that provides a narrative discussion of housing sector success factors from the co-operatives 

themselves, this study provides a template for sharing best practices amongst co-operatives 

societies themselves and useful guidance for funding agencies seeking to strengthen the 

participation of co-operatives in the housing sector. 

 

The study utilizes the Transaction Cost theory to derive study variables, explain the behaviour of 

co-operatives in the face of housing market constraints and  also utilizes the stakeholder and 

resource dependency theories to recommend actions necessary to improve performance of the 

sector. This is beneficial for researchers seeking theoretical basis in this study area. The study is 



 
 

28 

based ona pragmatic paradigm executed on a mixed method design. This permits the linking of 

quantitative and qualitative methods to better understand the phenomenon being studied. This 

study therefore provides a linkage between theoretical knowledge and practice resulting in a 

better focused methodology for co-operative societies’ participation in the housing sector. It is 

hoped that this will provoke further academic and policy-driven research in the problem area. 

 

The resulting action plan that this study proposes in realization of research objective five is a 

time-bound strategy that could be implemented immediately to propel housing construction 

activities by the co-operative sector and hence release thousands of housing units into the 

markets while also helping to integrate these societies as vibrant housing suppliers in the state.  

The study is therefore significant in three respects: contribution to knowledge, contribution to 

policy development and contribution to organizational development. 

 

1.7 Scope of the Study 

In terms of scope in subject matter, this study is primarily focused on co-operative societies as 

potential housing suppliers for members. It is specific to the supply context. Demand-side 

variables of members such as income, housing preferences, and so on are analyzed only to the 

extent that they impact on supply decisions by the societies. This is because of the difficulty 

associated with the empirical identification of all factors affecting both the demand and supply of 

housing: some factors affect the demand side, while other factors affect the supply-side (Wong 

and Rickman, 2017).  

It is also limited to the activities of co-operative societies in the first three steps of the housing 

supply value chain. These are land acquisition, housing finance and housing construction. The 



 
 

29 

higher levels of the value chain (housing finance through the primary and secondary capital 

markets) are not sufficiently matured in the mainstream housing market and are therefore not 

considered in this study. In addition, while it is known that there are several types of co-operative 

societies in operation in Lagos, to facilitate conciseness, these have been aggregated to two: 

employment based and non-employment based co-operatives. 

 

Finally, in terms of geographical coverage, the study is limited to Lagos State. This is  on 

account of the dearth of literature on the co-operative and housing sector in the state and also on 

account of the depth of the housing need and the significant number of co-operatives that are 

registered in the state, when compared to other urban centres or states in the country.  

 

1.8  Operational Definition of Terms 

Co-operative Housing: Any form of intervention in housing supply by any type of  co-operative 

societies, through direct construction for renting or sales, at market or subsidized rates, for the 

benefit of  members and non-members alike.  

Co-operative Societies: These are entities that are set up by a group of people to collectively 

address issues relating to their welfare that require substantial and collective resource 

mobilization. 

Employment Based Co-operatives: Co-operatives whose membership is drawn exclusively 

from the staff base of a host organization; such as a company, government agency or other 

formal organization. 

Housing Co-operative: A co-operative society specifically set up only for the purpose of 

addressing the housing needs of its members, and in some cases, non-members as well. 



 
 

30 

Housing Supply Value Chain: This term is used synonymously with housing supply process, 

housing development value chain and housing development process. It relates to the stages 

inherent in the process of housing supply: land acquisition, financing, infrastructure 

development, construction and accessing the capital market for sustained growth. 

Housing Supply: This is the number of completed, decent housing units injected into the market 

by a housing provider, at any given point in time. It is used as a synonym to housing production. 

Governance variables: These are variables, such as member involvement that relate to the 

internal mechanism of leadership and followership in the co-operative society.  

Market Constraints: These are constraints, such as production costs, that are external to the co-

operative society; being dictated by the macro-economic conditions in which co-operative 

societies operate. 

Non-employment based co-operatives:  These are co-operatives that draw their membership 

base from trade groups or from the local community alone, but sometimes, in addition to the staff 

of a host organization. 

Transaction Costs: These are non-direct costs of production, associated with administrative 

expenses, the acquisition and purchase of inputs, obtaining regulatory permits, information 

seeking, arranging contracts and all such other costs that nonetheless affects total housing supply 

costs.  

 

  



 
 

31 

CHAPTER TWO 

LITERATURE REVIEW 

2.1 Introduction 

This literature review section begins with an overview of issues surrounding housing supply and 

thereafter, examines thoroughly the concept of co-operative societies as housing suppliers as the 

dependent variable. In carrying out the review, the study adopts elements of integrative literature 

review which summarizes key themes in the literature under study, and methodological review, 

which focuses on the methods and definitions associated with the independent and dependent 

variables. This is followed by a review of theoretical postulates that could impact on the study. 

From all of these, a theoretical framework is developed for the study. Thereafter, a conceptual 

framework is provided as a synthesis of the relationship between the variables, outcomes and 

theoretical underpinnings of the study.  

2.2 Concepts in Housing Supply 

2.2.1 The Housing Supply Value Chain 

The study of the dynamism of housing supply is important given the contribution the process 

itself is capable of making to the national economy. When housing is supplied in a total system 

that ensures forwards and backwards linkages, it creates a value chain which consists of inputs 

and outputs that come together to create industry sectors. 

 

It is suggested that the housing value chain produces linkages between over 250 ancillary 

industries (Rao and Apparao, 2012) and 50% of all tangible asset wealth held in housing (The 

World Bank, 2016). Thus, in agreement with Erguden (2001), this study proceeds on the position 

that housing should not be looked at as a problem area requiring major financial commitment, 



 

but as a means for promoting and mobilizing savings, expanding employment and as an 

economic activity capable of providing significant mult

Nubi (2010) identified the housing development process in 

that found in other countries. The process consists of site selection, development appraisal, 

development research and design, arranging development finance, building contract/construction 

management and disposal of finished pro

construction or regeneration of existing stock to bring them to decent standards. Ideally, it would 

be elements of both strategies. Whatever the case maybe, the end 

complete, decent homes designed for ownership or rental housing.

Fig2.1: Housing Development Value Chain 

Source:  Nubi(2010) 

As shown in figure2.1, land acquisition, entitlements, infrastructure development, vertical 

development, primary capital markets and 

processes for housing supply, each op

industry works through chains of land acquisition processes to supply r

 32 

but as a means for promoting and mobilizing savings, expanding employment and as an 

of providing significant multiplier effects in the economy.

the housing development process in Nigeria as being closely related to 

that found in other countries. The process consists of site selection, development appraisal, 

development research and design, arranging development finance, building contract/construction 

management and disposal of finished products. This process could be designed for new housing 

construction or regeneration of existing stock to bring them to decent standards. Ideally, it would 

be elements of both strategies. Whatever the case maybe, the end product of the value chain is

e, decent homes designed for ownership or rental housing. 

Chain  

, land acquisition, entitlements, infrastructure development, vertical 

development, primary capital markets and secondary capital markets all represent market led 

s for housing supply, each operating within its own sub-industry. The land development 

industry works through chains of land acquisition processes to supply raw land (or developable 

but as a means for promoting and mobilizing savings, expanding employment and as an 

iplier effects in the economy. 

as being closely related to 

that found in other countries. The process consists of site selection, development appraisal, 

development research and design, arranging development finance, building contract/construction 

This process could be designed for new housing 

construction or regeneration of existing stock to bring them to decent standards. Ideally, it would 

product of the value chain is 

 

, land acquisition, entitlements, infrastructure development, vertical 

apital markets all represent market led 

industry. The land development 

aw land (or developable 



 
 

33 

land) to the housing market. It works in recognition of entitlements on lands, the restrictions to 

their use and government regulations to ensure that land is developed to prescribed densities. 

This process, termed horizontal development process is integral to the next stage, which is the 

vertical development stage. 

 

In the vertical development stage, the real estate management industry comes to fore, with  

infrastructure development processes, such as road construction, water provision, electricity 

supply, and so on being carried out, producing improved lots. Further vertical development 

processes see the construction of the desired structure, be it residential units, office complex or 

shopping arena, and other such forms of real estate. This process produces leasable real estate 

asset or real estate asset space for owner-occupation. In well advanced systems, these units, by 

way of their asset or mortgage value are turned over from their origin as primary constituents of 

the capital market to the secondary capital markets where their finances are securitized and 

traded on the stock exchange. This is achieved in the financial/capital asset management 

industry. It is noticeable that throughout the process, finance plays an integral role, providing 

avenues for the acquisition of all inputs in the value chain. 

 

A distinct character of all processes of the housing development value chain is that each stage is 

imbued with risks, opportunities and constraints which all interact to produce the unique 

character of the housing market. In reality, housing suppliers (whether government, non-

government or private) all possess, though to varying degrees, the ability to marshal the various 

risks and elements of the housing supply value-chain to produce housing whether in single units 

or hundreds of units as the case may be.This chapter thereafter proceeds to present an 



 
 

34 

understanding of how the housing market works to influence decision-making amongst suppliers 

in the housing market.  

2.2.2 Housing Affordability as a Concept 

The concept of affordability has its origin in the Engel-Swab law that states that: “as household 

income rises, the portion which is spent on basic necessity such as housing decreases” (Bentzien, 

Rottke & Zietz, 2012).  However, its entry into academic discourse can be traced to the 

19thcentury studies of household budget which was expressed as “one week’s pay for one 

month’s rent”(Hulchanski, 2005).  Academics in the United Kingdom and United States have 

thereafter progressed with this discourse from the 1960s, although application to policy has been 

different in both countries (Duan, 2011).  

 

In providing a definition of the term, Bentzien et al (2012) noted that the social policy point of 

view of affordability addressed the concern of whether low income households will be left with 

sufficient resources to cover their non-housing needs, such as food and clothing. Further, Nuuter, 

Lui and Tupenaite (2014) argued that like the housing market itself, affordability is highly 

localized, so that in defining it, certain issues need to be addressed such as: the targeted 

households, the period for which affordability is assured and the standard of affordability. These 

issues are themselves subject to localized perceptions. Worthington (2012) defines “affordable 

housing as an “acceptable’ relationship between household income and expenditure on housing 

costs for housing market participantsespecially first and low-income home buyers.” 

 

Affordability therefore depends on the threshold above which the financial burden is considered 

unbearable and state support will be granted (Bentzien et al, 2012) and its determinants vary 



 
 

35 

from country to country. Indicators of housing affordability are however, generally accepted to 

be the house price to income ratio which is set as 25-30% of income. While this benchmark has 

been prominent in the literature and is generally adopted by policy makers (Glaeser and 

Gyourko, 2017), it has been described as the least sophisticated of all housing affordability 

measures as it does not take into cognizance that the 70% of income left after deducting the cost 

of housing may not produce an acceptable standard of living. Further, Glaeser and Gyourko 

(2017) argued that even though there are social merits to the 30% affordability threshold, it is 

defective from an economic perspective because it conflates poverty and income inequality 

issues with a malfunctioning of the supply of housing units. Nevertheless, it has been widely 

accepted by policy makers and subsequently applied to rent setting, mortgage lending conditions 

and the design of allowances (Camilleri, 2010; Glaeser and Gyourko, 2017). 

 

The housing expenditure to income ratio is an alternative housing affordability measure that 

takes account of the cost of borrowing for housing as well as house prices.  A similar measure is 

the mortgage payment to household income ratio (UN National Association of Realtors, 2009). 

The US Department of Housing and Urban Development (2009) defined affordability as the 

conventional mortgage on the median values’ house sold; while Glaeser, Gyourko and Saks 

(2006)  posited that affordability is measured as the house price relative to the fundamental costs 

of production. Their position is reiterated in Glaeser and Gyourko (2017). 

 

Housing affordability as a construct is therefore defined and measured in varying terms. 

However, its measurement is dependent on two factors: a country’s economic development and 

second, the on-going cost of housing related to household income. National economic 



 
 

36 

development affects macro-economic indices such as interest rates, subsidy rates, housing 

finance structure and indeed the level of maturity of the housing market. It also affects both 

demand and supply-side indices such as income levels, disposable incomes, propensity to save 

and so on. It also affects the on-going cost of housing to the home-owner, which is measured as 

the rent passing or the monthly mortgage payments.  

 

Housing affordability often generates much government intervention policies, especially in 

countries where home-ownership is a government policy (Phang, 2009),and its attainment as a 

citizen right is at the crux of the imperfection inherent in housing markets. This is examined in 

the next section. 

 

2.2.3 The Concept of Housing Supply in an Imperfect Market 

The perfect market is defined as one where there are many buyers or sellers, with an 

homogeneous product, perfect knowledge of transactions in the market and the inability of one 

supplier to influence prices. In a perfect market, the price is acceptable to both the buyer and the 

seller.  With each transaction increasing the volume of market information that is accessible to 

both buyers and sellers,the reaction to information within the shortest possible time creates states 

of temporary equilibria and disequilibria (Wong and Ho, 2017), making market adjustments 

possible in the short term.  

Conversely, the property market is remarkable in its level of imperfection (Ajayi, 1998). 

Anundsen and Jansen (2011) affirmed a generally known fact that housing markets are 

characterized bydecentralized trading, imperfect information, high transaction costs and inelastic 

supply due to a number of factors peculiar to the sector. Inherent features of the housing market 



 
 

37 

such as quality heterogeneity leads to delay in responses from both suppliers and households as 

they learn from the market trends and adjust their behaviour accordingly, a process that is quite 

lengthy (Wong and Ho, 2017) and subject to the vagaries of bounded rationality. In addition, the 

product of the housing market differs from financial assets, which typically have a fixed supply, 

whereas, housing supply is not fixed, ashousing suppliers can respond to changes in prices with 

new construction (Nathanson and Zwick, 2017). 

 

The question of affordability of housing as a social good in particular, cements it as a market that 

is prone to imperfections and hence government intervention. Elaborating, Worthington (2012) 

observes that macro-economic factors such as population growth, rate of household formation, 

availability of housing finance and so on, all influence housing affordability, but that since nearly 

all of these are slow to adjust and often requires substantial alteration to a nation’s economic, 

institutional, social, political and regulatory framework, government’s intervention is often 

required in the housing market.  

 

Therefore, it is often argued that government intervention is required to repair market failure that 

gives rise to inefficiencies in housing markets.Government intervention also arises as a result of 

the recognition of the important role urban property markets play in macro-economic growth and 

local fiscal revenue (Sun, Zheng, Geltner and Wang, 2017). It is often said that the result of this 

is thepromotionof broader economic performance by encouraging the release of land for 

productive use and thepromotion of equity and social considerations that link housing with the 

broader social outcomes that guides acceptable standards of housing.  

 



 
 

38 

OECD (2011) provided the various structures on which government intervention in the housing 

market could be based. These are through fiscal means such as taxes and subsidies; direct 

provision of social housing and rent allowances. Phang (2009) identifiedother forms of 

government intervention such as mortgage interest payments that are tax deductible, special 

treatment of capital gains from housing, tenant protection laws that negatively impact the value 

of investment properties, mass privatization, supply-side subsidies for state agencies mortgage 

interest subsidiaries, mandatory housing finance contributions, direct grants for housing 

purchase, property tax subsidies, planning laws, limitations as the supply of rental housing etc as 

some form of government intervention that has been produced as a consequence of imperfections 

in the housing markets.  

 

In some cases, restrictions can be placed on the supply, purchase and even demand of housing. 

Sun et al (2017) provided an evaluation of such restrictions in China, where the Chinese 

government owns urban land and plays the dominant role in controlling and managing housing 

supply, demand, and finance.  This is achieved through regulations on land supply, access to 

credit, and the permission to purchase properties. For instance, the Chinese Government placed 

an anti-speculation policy in Beijing, known as the home purchase restrictions (HPR), which 

restricted home purchase to registered households and had the impact of dropping house prices 

by 17-24%. It however, had the unexpected impact of pushing newer households that did not 

have the requisite permits towards rental housing. 

 

In Post Second World War Germany, government intervention was needed to address the 

4.5million housing deficits resulting from the War. This was achieved by the provision of fiscal 



 
 

39 

subsidies and monetary support to private sector housing developers and housing associations. 

Rent regulations were needed to keep prices affordable, and the revival of the co-operative 

movement was found to be integral to successful intervention in the housing market (Wijburg 

and Aalbers, 2017).  

 

On the other end of the continuum, governments often intervene in the housing markets as 

housing producers themselves, and often times create special conduits of suppliers for targeted 

households.For example, even with its being rated as “the freest economy in the world”, the 

Hong Kong government has been deeply involved in housing development as the primary 

supplier of its Home Ownership Scheme Housing policy as well as its public rental housing 

schemes(Wong and Ho, 2017). 

Thus, the housing supply market has been subject to much policy direction. Thus, the 

segmentation of the housing market and the quest for affordability by governments for specific 

households often result into the creation of special channels of suppliers in addition to the 

traditional profit-seeking suppliers. Ultimately, it is noticeable that the responses of these 

different categories of suppliers to government intervention and market processes impact 

critically on house prices, affordability and available housing stock. 

 

2.2.4 Determinants of Housing Supply Decisions. 

While the literature on housing demand is quite voluminous, literatures directed towards 

understanding the supply-side is much scanty.Nathanson and Zwick (2017) provided a primer on 

the typical supplier behaivour, starting with the purchase of land at market prices in a 

competitive, though imperfect market, which is then converted into homes at constant resource 



 
 

40 

costs. Housing providers necessarily make forward looking decisions, since the supply of land is 

fixed and subject to geographic and regulatory constraints.  

 

Housing supply is therefore determined by the decision of landowners to invest in direct housing 

construction. In taking a decision to invest, they are conscious of their ownership of the 

development risks involved in the process of housing construction, constantly revising their 

expectations about the path of future land and house prices and also acting on the decision to 

develop a given parcel in the current time or at a later time. Owners of undeveloped land choose 

how much land to develop and hence intrinsically determine how many new houses that will be 

put in the market (Pacieorek, 2013). It has also been asserted that the decision to develop housing 

stems from the availability of incentives to so develop and absence of restrictions and delays in 

land assembly. 

 

Mayer and Somerville (2000) model new housing construction decisions as a function of 

changes in house prices, changes in the cost of capital and changes in construction costs. 

However, later studies have included land use regulation as another variable to consider. Like 

Mayer and Sommerville, FTI consulting (2012) linked housing supply and elasticity of response 

to changes in prices. They identify two underlying factors that influence the level of housing 

supply and elasticity of supply in most country settings.  

First,is the planning system which has the role of mediating land use activities in response to the 

fixed nature of land supply and the competitive uses to which land is to be put while also 

determining the level and the rate at which land is released for development. The planning 

system also affects housing supply in three ways: by regulating the amount of land that is made 



 
 

41 

available in a given period of time, the length of time it takes for land to be released or approved 

for construction and the uncertainty of obtaining planning permission. It might be argued that 

these occur in well-regulated systems where planning systems are faithfully enforced. However, 

it is argued that the planning system in developing countries also brings about negative 

externalities in housing supply where they are not efficiently applied resulting in costly delays in 

the housing supply systems. Here, housing suppliers react by simply not adhering to planning 

regulations, thereby increasing the incidence of informal settlements and substandard housing.  

 

The second underlying factor is the long lead times in the construction of housing, which can be 

understood as the period between project inception and the final stages of supplying a decent 

home. Delays in construction times are specific features of the housing supply industry itself, and 

issues arise from the specific details relating to the time taken for financing, land assembly, site 

identification and a construction process that is imbued with various delay-prone elements. All 

these lead to a large gap between when land is released and its rate of take-up for housing 

projects. It also acts to increase the risk elements in housing supply for even developed countries 

with advanced housing markets. These risk factors affect housing supply, so their impact on the 

largely informal housing suppliers operating in the housing markets of developing countries need 

to be measured empirically.  

 

In developing countries, housing supply decision making is constrained by absent or ill-defined 

strategic housing supply system, or inefficiencies in the system. This is manifested in lack of 

access to housing supply inputs such as land, building materials and credit facilities and has 

resulted in the proliferation of informal settlements (Erguden, 2001).Conversely, efficient 



 
 

42 

housing systemsreduce the inelasticity of housing supply by providing suppliers with strong 

opportunities for accumulating capital for housing construction. In this system, housing suppliers 

are also able to accumulate and direct technical expertise of their preferred approaches in land 

acquisition, planning and financing in such a way that they can increase their housing supply 

output within their preferred profit margins. Thus, where housing supply operate in a well-

defined system that permits all categories of housing suppliers to access inputs, develop expertise 

and establish returns (which may be pecuniary or non-pecuniary), it is probable that this results 

in effective housing delivery for various income categories in the city.  

 

2.2.5 Housing Supply Elasticity, Housing Suppliers and Affordability 

Kemeny et al (2002) argued against mainstream economic literature which predicts that 

developers analyze market opportunities and maximize their profits inter-temporally and this 

influences their decision to construct housing units. This approach predicts that when there is 

sufficient demand for new developments and they expect to earn an adequate return on their 

investment, housing developers purchase land and other resources needed to produce housing 

and put them on the market, so that an equilibrium is achieved in the short term.  

The position of Kemeny et al is that several factors could cause inelasticity of this response to 

demand, which could create long term disequilibrium.  However, the disequilibria vanish when 

developers are able to adjust their supply to suit the discrepancies between observed market 

conditions and actual production. They argued that where the share of developers that initiate 

projects on basis of markets analysis is small, thenit is unlikely that house-building can be 

explained or predicted with standards economic models of supply and demand. For instance, 

according to FTI Consulting (2012), up to the year 2006, firms developing more than 2000 units 



 
 

43 

have contributed to about 50% of the total new housing development in the United 

Kingdom,whereas, firms producing between one to ten units have contributed to less than 10% 

of new housing. This signifies that large firms possess the economics of scale that help them to 

dominate the housing supply market in the country. However, it is agreed that the imperfection 

of the housing market is underscored by its inelasticity to house prices, and hence housing 

affordability, which in itself creates the need for government intervention and hence more 

imperfection in the market.  

 

Extensive research into new built housing shows that the price elasticity of housing supply refers 

to the degree of responsiveness of housing supply to changes in price. The supply of housing is 

generally inelastic in the short run, as housing suppliers speculate on how long price increases 

could be sustained that could sufficiently cushion the risk of housing production without eroding 

returns. It only becomes more elastic in the long run as suppliers adjust their production 

mechanism to price changes. Researcherssuch as Gyouko and Molloy (2014), Glaeser andWard 

(2009) and Paciorek (2013) have shown that the response rates are sluggish. Establishing the 

consequence of this, Worthington(2012) observed that strong housing demand but with limited 

and slow-to-react housing supply are the most obvious and cited reason for increase in house 

prices and deterioration in housing affordability, which necessitates government intervention. 

This occurs in a number of ways. 

 

Government regulations influence the quality, quantity and pricing of housing. For any group of 

housing suppliers, delivery can be constrained by both policy and non-policy induced factors 

such as physical limitations on land for development and degree of urbanization. Similarly, in 



 
 

44 

establishing the land market impact of housing supply, it is feasible that where availability of 

suitable land is limited, it might be possible to increase supply by increasing densities. However, 

this is not often permissible by specific government regulations which limit the use of land in 

certain ways, adding extra costs to the construction project, and consequently limiting supply. 

 

Current research has also provided evidence that housing supply is reduced where there are strict 

land use regulations that increase the cost of housing production and hence house prices (Mayer 

and Somerville, 2000; Monkkonnen and Ronconi, 2013). In fact, literatures in the US 

hypothesize that cities with more stringent land-use regulations have lower housing supply 

elasticity and hence higher housing and land prices (Monkkonnen and Ronconi, 2013). Higher 

demand for housing would lead to increased pricing in areas that are constrained by 

governmental or geographical restrictions to supply more housing. However, in areas that are not 

so constrained, construction activities increase. Monkkonnen and Ronconi(2013) further noted 

that price increases could lead to housing suppliers’ expectations of future price increases; and 

when this occurs alongside a relaxation of credit constraints, demand could also increase, 

therefore forcing more production in unconstrained or loosely regulated markets. This is so for 

developed countries as confirmed by Vermeulen and Hilber (2014) for Britain and Gyourko and 

Molloy (2014) for America. In addition, Glaeser and Gyourko (2017) showed that when building 

is unrestricted by regulation or geography, housing supply curves seem relatively flat, so that 

production costs remain low. They also found that both geography and regulation severely 

restrict the ease of building in some parts of the US, which directly increase building costs by 

increasing time delays and reducing the amount of available land, and indirectly, by reducing the 

motivation for mass supply over unit builds. Hilber and Vermeulen (2014) went on to note that 



 
 

45 

lack of house-building activity has coupled with strong demand to lead to increased house prices, 

which have negative impact on access to housing by first time buyers.  

 

Contrarily, some researchers provide evidence that there could be exceptions to the negative 

effect of regulation on new housing construction starts; as it may actually lead to increased 

construction starts, at least in the short run. Mayer and Sommerville (2000) contend that 

regulatory delays may stimulate developers to acquire larger parcels of land and hence obtain 

“wholesale” development permits and hence start off construction; whereas, in cities where 

regulations are low to the extent, developers may not be motivated to acquire ‘wholesale’ 

development permits and so have lower number of plots to develop. In the same vein, Bjornland 

and Jacobsen(2010) suggest that house prices may also have a stimulating effect on housing 

construction and supply. 

 

Notwithstanding these exceptional cases, in the long run, studies in this area posit that the 

theoretical implications of regulatory delays are clearly the financial and time costs that reduce 

housing supply.  

  

2.3  A Typology of Housing Suppliers in Nigeria 

Housing suppliers in Nigeria can be categorized mainly into two types: private sector suppliers 

and public sector suppliers. The latter is made up of government ministries, parastatals, agencies 

andgovernment corporate entities established by law, which have been given responsibility for 

housing provision through new construction or regeneration. These operate at both federal and 

state government levels. 



 

Private sector providers are recognized to be 

have been very active in the informal housing

registered under the Real Estate Developers’ Association of Nigeria, REDAN.

government corporate entities established by law such as the Federal 

operative societies occupy a grey area between being formal or informal suppliers. 

Figure 2.2 shows an adaptation of the supplier framework in Nigeria.  The activities of these 

suppliers are elaborated in subsequent sections. 

 

Figure 2.2:Housing Suppliers in Nigeria.

Source: Nubi, (,2010). 

 

 46 

Private sector providers are recognized to be in three categories: first, individual suppliers who 

informal housing supply sector. Second, there are 

registered under the Real Estate Developers’ Association of Nigeria, REDAN.

government corporate entities established by law such as the Federal Housing Authority

operative societies occupy a grey area between being formal or informal suppliers. 

2 shows an adaptation of the supplier framework in Nigeria.  The activities of these 

suppliers are elaborated in subsequent sections.  

Suppliers in Nigeria. 

first, individual suppliers who 

there are corporate bodies 

registered under the Real Estate Developers’ Association of Nigeria, REDAN. Third, there are 

Housing Authority. Co-

operative societies occupy a grey area between being formal or informal suppliers.  

2 shows an adaptation of the supplier framework in Nigeria.  The activities of these 

 



 
 

47 

2.3.1 Government Activities in Housing Supply in Nigeria 
 

The direct construction of housing has historically been the conduit through which the Nigerian 

Government supplied housing units for the populace, but this strategy achieved minimum results 

in over 20 years that it was practiced (Federal Government of Nigeria, 2002; Nubi, 2012; Obialo, 

2005).  

 

Historically, in the pre-independence period, the Nigerian government had intervened in housing 

provision for expatriates in the country with direct construction of housing units in Government 

Reserved Areas (GRA). After independence, the Federal Government, in its Second National 

Development Plan of 1970-1974 embarked on direct housing construction for the general 

populace. A National Housing Scheme was established to supply 54,000 units in two years. 

Several institutions were also set up to facilitate the achievement of this target. For instance, the 

Nigerian Building Society was set up to provide mortgage loans for individual home 

construction and State Housing Corporations were set up to construct housing estates, carry out 

estate agency and management functions as well as fund mobilization from the general public. 

Unfortunately, targets were not achieved during this period.  

 

Similar targets set for direct housing construction during the Third National Development 

Planning period from 1975-1980 were also not met as the Federal Government was only able to 

achieve 19% (8,500) of the target set for Lagos, and 25% of its national target. Not surprisingly, 

subsequent efforts in the Fourth National Development planning period from 1981-1985 was 

also unsuccessful as the Federal Government was able to deliver only half of the 20,000 units 

targeted annually. Limited coverage, budget cutbacks, unrealistic standards and specifications 



 
 

48 

giving rise to escalating cost of construction, problems with land acquisition and lack of 

construction expertise were some of the problems that affected the achievement of these goals 

(Federal Government of Nigeria, 2002; Nubi, 2012;Obialo 2005).Thus, over a period of 19years 

(1975-1994) only 81,750 (42.70%) houses were delivered out of the 570,000 units proposed 

within that period representing less than 50% achievement over a considerable length of time. 

 

The Federal Housing Authority, Nigeria’s largest housing corporation has supplied only 30,000 

units in over 34years of its existence (Nubi, 2010). With the adoption of a National Housing 

policy in 1991, the government decided to take a facilitator/enabler role; while passing the 

responsibility for low-income home construction to the private sector. This shift facilitated the 

establishment of several primary mortgage institutions wherein individuals could access 

mortgage funds for home ownership. However, the rate of uptake has been low (Okonjo-Iweala, 

2014; Nubi, 2006).  

 

The Federal Mortgage Bank is Nigeria’s apex mortgage institution and is charged with 

implementing the National Housing Policy, which is a funding mechanism that accepts 

mandatory contributions from salaried employees earning above N3000 monthly at 2.5% of such 

salary. Annual interest rates of 2% are paid to contributors and they are entitled to apply for 

NHF-sponsored loans, with a maximum loan of 15million per subscriber. The scheme has 

achieved a penetration of only 1.5% with about 60,000 houses being built with its funds since 

origination. Table2.1shows the salient features of the policy as managed by FMBN. 

 

 

 



 
 

49 

Table 2.1: Indices of housing finance by the Federal Mortgage Bank of Nigeria 

Item Remarks 

Subscription Salary earners of over N3000 

Annual interest rates 2% 

Maximum loan obtainable N15m 

Down-payment  10%-30% of loan value 

No of subscribers 4m 

Amount available N2.4b/month 

Market Penetration 1.5% with 60,000 houses from 1995 date 

Source: Adapted fromCentre for Affordable Housing Finance (CAHF),  2015. p.157) 

 

Through the National Policy on Housing (2006), the Federal Government set a target of delivery 

of 1million housing units every year, to be actualized through land swap initiatives, affordable 

and mass housing schemes and accessible mortgage finance for low and middle income earners. 

There are currently partnership arrangements with real estate developers in various states, but the 

impact are yet to be felt in the face of the massive housing deficit. 

 

Like the Federal Government, successive governments in Lagos state have also attempted to 

tackle housing deficits by setting up several agencies; such as The Lagos State New Town 

Development Authority, The Lagos State Urban Renewal Board, the Ministry of Housing which 

constructed over 5,000 housing units in 10 years, and the Lagos State Development and Property 

Corporation (LSDPC), which constructed over 20,000 housing units in several housing schemes 

across the State. Despite these, according to NBS (2013) survey, as at 2009, 80% of households 



 
 

50 

in Lagos still live in a single room home; and the Lagos State Government (2014) estimates that 

70% of its population resided in slums.  

According to the Lagos household survey (2011), about 72% of Lagos residents are paying as 

high as 50% of their monthly income on rents, while most of the existing accommodation is 

supplied by private landlords.  

 

The Lagos State Ministry of Housing and the Lagos Building and Investment Company (LBIC) 

commenced direct construction of houses and have supplied 7,850 units and peak annual rates 

for the private sector peaked in 2015 at 3,929units with offers for installment payments very 

common 

 

2.3.2 Private Sector Provision of Housing in Nigeria: 

The private sector has consistently been providing over 90 per cent of the housing stock in 

Nigeria (FGN, 2002). Private sector provision takes place through two channels: the activities of 

individuals (often regarded as the informal sector) and provision by corporate real estate 

providers (often classified as the formal sector).    

2.3.2.1 Informal Housing Sector 

The informal housing sector remains the single largest contributor to the housing stock in 

Nigeria, whether in terms of rental housing or owner occupied. The UN-Habitat (2014) estimates 

that between 70 and 90% of all new housing built in developing countries are to be found in the 

informal sector. Housing finance in this sector is sourced from personal savings, incremental 

construction and remittances from abroad, loans and gifts from family and friends, as well as 



 
 

51 

loans from their co-operative, thrift and credit societies. All these are methods of finance outside 

the formal mortgage market.  

In addition, the period of construction is inordinately long; recent studies suggest that low-

income households build incrementally over a period of five to fifteen years. It is therefore not 

surprising that even though this sector is very important for low-income housing delivery in 

particular, it cannot meet up with supplying the Nation’s housing needs.  

 

The quality of build has also been a matter of concern to stakeholders, asin a bid to save costs, 

there are generally compromises on building design and specifications. In fact, it is very common 

for households to construct only a core unit of living space, move into it, and then continue the 

construction of the rest of the house over time. Sanitary spaces, cooking spaces and services such 

as water and electricity are generally given lesser priority. The process also involves the use of 

temporary construction materials, in the hope that this will be replaced with more permanent 

ones as time goes by.  The harmonisation of the housing product as a component of the 

environment is therefore severely undermined, resulting in slum developments and its attendant 

socio-economic implications. This has also contributed to the shortfall in housing supply, as it 

does not allow for housing industrialization and the benefits accruable from scale of production 

(Nubi, 2008). 

 

2.3.2.2 The Corporate Private Sector  

The failure of direct provision has led to the devolvement of the housing supply function from 

the government to the private sector, which is seen as a vehicle for promoting efficiency, 

accountability and effective project delivery. 



 
 

52 

 

The role and contribution of the corporate private sector was envisioned in the National Housing 

Policy (2004). These organizations were required to participate fully in housing delivery 

particularly in the area of compliance with the provisions of Employees Housing Scheme 

(Special Provisions) Act (Cap 107); they were encouraged to establish primary mortgage 

institutions or building societies, thrift and credit societies, etc. They were also to participate in 

the development of estates, and houses for sale or for rent, or shared ownership and co-operate 

either with Federal, State, Local Governments or any agency of Government in the provision of 

houses, and economic growth.  

 

The corporate private sector is therefore charged with provision of affordable housing for all 

categories of Nigerians, and was expected to achieve this through the establishment of the Real 

Estate Developers’ Association of Nigeria (REDAN) and the National Housing Fund in 1991. 

The National Housing Fund was designed to supply mortgage finance to Nigerians through 

Primary Mortgage Institutions.  Implicit in this approach is the government’s assumption that the 

private sector is willing and ready to provide such funds and that mortgage finance is the most 

suitable route of housing finance for all income classes in the country.   

 

However, it is generally known that the mortgage industryis relevant to the housing finance only 

to the extent that the conditions necessary to stimulate industry growth are present. Two primary 

conditions are (i) the availability of mortgage-able housing stock with good legal title and (ii) 

highly developed home building industry with capacities for new construction and retrofitting of 

old stock (Nubi, 2010).  Nubi (2010) further observed the situation in England, where housing 



 
 

53 

supply increased by 59% between 2000 and 2008; compared to the accomplishment of the 

Federal Housing Authority of construction of only 30,000 houses in over 34 years of existence. 

His research also showed that very few private developers can deliver up to 1000 units annually 

in Nigeria. Mortgage loans in Nigeria are therefore generally construction loans, secured with 

land titles and carrying enormous construction and credit risks. 

 

Other conditions for a sound mortgage industry include:  the strength of the legal rights of 

lenders, commonly measured by the ability of lenders to foreclose on properties in the event of 

defaults.  Foreclosures in Nigeria are rare as the law is generally on the side of the borrower, and 

even where possible, the market for uncompleted and abandoned houses is also very thin like the 

general property. 

 

The strength of the credit information system is a significant institutional factor affecting 

mortgage system of any country and as an extension, the interest of the formal sector in 

providing housing finance to all segments of the country. The documentation of borrowers’ 

income is necessary and should form the basis of objective assessment of capacity to repay loans. 

Similarly, an objective assessment of a borrower’s credit history assures increased capacities to 

take informed risks and hence the development of alternative finance products for various classes 

of lenders (IMF, 2008).  Oyalowo & Nubi (2013) showed that lack of credit information systems 

is an important deterrent to the participation of formal financial institutions to mortgage lending 

in Nigeria and West Africa at large. They also identified several other criteria necessary for 

mortgage fund mobilization ranging from availability of information sharing institutions, to 



 
 

54 

adequate legal, tax and accounting framework, macro-economic stability, property registration 

systems, urban planning policies and depth of financial markets. 

Apart from these conditions, in several developing countries, it has been shown that mortgage 

lending does not work for the generality of the people; principally due to their engagement in 

informal employment, where they earn undocumented incomes and possess unverifiable credit 

histories. These are two crucial conditions (salaried income and credit history) for participation 

in formal housing finance market.  

2.3.3 Housing Supply in Nigeria 

Nigeria’s main urban centres are Lagos, Abuja and Port Harcourt. About 47% of the country’s 

population reside in urban areas;although a significant proportion (80%) live in substandard 

housing supplied through informal channels.CAHF (2015) affirmed that, like most housing 

markets in Africa, the Nigerian housing market is characterised by high urbanization rates, a 

growing middle class and a shortage of housing supply, although compared to Indonesia (84%), 

Kenya (73%) and South Africa (56%), the country also has a low home-ownership rate of 25%.  

 With an annual urbanization rate of 4.61%, Nigerian housing supply market works to produce 

the ranking of the country at 170 out of 178 countries in the World Bank’s Doing Business 

Reports of 2014/2015. Here,  an average of 12 procedures is required to complete the registration 

of properties, in an average of 70 days, at a cost of 18.6% of average property values (World 

Bank, 2015), although the federal government is working on reducing transaction costs from 

16% to 3% (CAHF, 2015). Whilst the Nigerian real estate sector is acknowledged to be the 6th 

largest sector in the economy (CAHF, 2015),housing stock is poor due to the cost minimization 

(rather than value maximization) orientation of the construction industry, which is inevitable in 

an environment characterized by constantly increasing costs of production.  



 
 

55 

 

It is widely accepted that Nigeria requires housing supply of close to 17 million units to bridge 

its housing deficits. It is also clear that at the prevailing economic conditions, this supply levels 

cannot be achieved in the short run, especially since a feasible long-term housing policy to guide 

the bridging of this gap has not been clearly enunciated by the current administration.  

 

All these point to the quantitative need for housing supply, with attention to new builds and 

regeneration of the old. Thus, with existing shortages and a rising population, the demand and 

need for housing in Nigeria will continue to significantly outstrip supply. The implication of this 

is that despite rising housing demand, and high house prices, the response of suppliers remains 

low. Suffice to note that supply should respond to effective demand rather than housing need, 

thus where significant proportion of those exhibiting housing need are in the ‘subprime’ category 

meaning that they cannot afford market priced housing, interest in supply by private developers 

may not be significant. This is because housing suppliers carefully consider household types and 

also target locations with the greatest likely future (effective) demand (FTI consulting, 2012).  

 

Nigerian suppliers are therefore drawn to the high end market, where they can appropriately 

price risks and charge market rates for their developments (CAHF, 2015). This calls for the entry 

of new supply pathways that can appropriately cater for this sector. 

 

2.3.4 A Review of Literature on Constraints to Housing Supply 

Thissection is based on the review of four categories of studies on housing supply constraints. 

The first category are policy driven public domain papers on housing supply constraints, a 



 
 

56 

second category are studies that utilized econometrics in their analysis and most of them focused 

on the impact of regulation as a constraint to housing supply in developed countries. In the third 

category are literatures that have situated housing supply in developing country contexts and 

finally, there are studies that have tried to identify the housing supply problems in Nigeria.  

 

2.3.4.1 Policy Papers on Housing Supply in Developed Countries. 

Publicly available policy papers by government agencies generally identify, then group 

constraints under various categories. They are based on descriptive accounts and review of past 

documents on the subject matter, and generally recommend actions for implementation.  

 

For instance, San Benito County (2006) identified the constraints of residential housing supply 

and grouped them into two categories: non-governmental and governmental constraints. Non-

governmental constraints relate to the topographical structure of available land such as steep-

slopes, watershed land, erosion hazard, significant habitat and fire hazards. Existence of 

floodplains and earthquake fault-lines are other topographical features that naturally constrain 

housing supply by reducing the amount of available developable land.  

Land costs are identified as one of the most significant non-governmental constraints to the 

supply of housing. Other constraints identified are construction costs which include the costs of 

building materials and transportation of materials and equipment. Financing of new housing and 

infrastructure capacity are also identified as non-governmental constraints.  

 

Government constraints, according to the Report, are land use controls that affect the cost of 

housing by limiting the density and type of use of land; extending the time required for approval 



 
 

57 

for a development thereby increasing the cost of financing. Also building codes, fees and site 

improvements can also increase the development costs which are then passed to home-

purchasers. The fees that government charge to process and issue building permits all impact on 

housing supply. 

 

Similarly, the City of Beverly Hills White Paper on Housing Elements Update (2014-2021) 

categorized constraints to housing supply under three headings: market constraints, 

governmental constraints and third, environmental and infrastructural constraints. Here, market 

constraints are identified as non-governmental, market forces that may hinder the development, 

improvement and maintenance of housing. They act to constrain production of various housing 

forms, thus having a negative effect on the availability and affordability of housing. By their 

categorization as a market factor, these are not within the direct control of the state, although the 

government could intervene to mitigate negative impacts on policy targets. Indicators of market 

constraints are construction costs, under which details of the construction mechanism such as 

custom versus tract development, choice of materials, site condition, finishing details, amenities, 

structural configuration and square footage, all of which can influence the total construction 

costs. The cost of building materials is a key component of construction costs. The cost and 

availability of land relates to the cost of raw land, site improvements, and all costs associated 

with obtaining government approval, all of which generally account for 2% of the total housing 

production costs. Very high land costs may make housing development infeasible unless 

expected rents or sales prices are high enough as to make it profitable. The cost and availability 

of financing infrastructure is also considered in the construction element of housing supply.  

 



 
 

58 

The City of Beverly Hills White Paper on Housing Elements Update (2014-2021)  also addressed 

governmental constraints in the area of land-use and development regulations through the use of 

zoning, development approval and process; environmental review process, building codes and 

enforcement as well as fees. There are also on and off site improvements which require site 

investigation to cover the range of water, sewer, circulation and other infrastructure needed to 

support development. 

 

The Report documents environmental and infrastructural constraints that limit or affect the type 

and density of housing development. These include topography and flood areas, hazards and 

safety concerns, lack of sufficient infrastructure capacity.  Environmental constraints are 

specifically seismic hazards, landslides and scope hazards, flooding hazards, urban and fire 

hazards. Infrastructural constraints include lack of access to infrastructure such as water 

facilities, sewer facilities, streets and sidewalks needed to maintain and develop new housing. 

A privately commissioned report on housing supply to inform policy in Britain by FTI consulting 

(2012) also links housing supply and elasticity of response to changes in prices. It identified 

underlying factors that influence the level of housing supply and elasticity of supply: the 

planning system and market structure. The market structure and conduct variable is an attempt to 

understand housing supply behavior in relation to the size of firms and opportunities they have to 

achieve economies of scale in housing production. The study maintains that the fixed supply of 

land, long delivery period, planning requirements make the housing sector a risky industry that 

also impacts on access to finance, and this affects smaller firms with lesser and smaller 

sophisticated financial management processes. The place of innovation and skills in making 

production more efficient, increasing potential supply is identified as a third factor and 



 
 

59 

innovation would be constrained in both output and input markets. Firm behaviour and 

management culture can also constrain innovation. Innovative methods require costly investment 

and building and planning regulations can act as constraints to innovativeness.  

 

Another policy paper by the UK’s Department for Cities and Local Government Research CLG 

(2010); found that land unavailability and high and growing regulatory burden were the two 

greatest concerns for house builders in the UK. Component of the regulatory burden are 

regulatory costs that have to be complied with, the costs of uncertainty due to regulatory 

decisions, planning requirements, building regulations, sustainability policies: all of these 

hamper efforts to increase supply.  

 

2.3.4.2 Review of Literature of Studies Specific to Developed Countries 

These sets of studies are econometric studies that have been utilized on large datasets of housing 

transactions in various housing submarkets of the US and UK. One of these is the recent study of 

the economic implications of housing supply in the US byGlaeser and Gyourko (2017). The 

authors investigated whether market prices equalled the full social costs of producing the 

housing unit. They showed that a local housing market is functioning well if housing units are 

delivered at their minimum production costs, but the market is expensive if prices are above this 

cost, and where prices are below the production costs, they argue that it reflects an unexpected 

drop in the economic fortunes of an area, and is not the consequence of a failure in the housing 

market. However, arguments can be offered against this last proposition, because housing 

markets are inevitably tied to prevailing economic conditions. 

 



 
 

60 

As shown in previous sections of this thesis, the housing market has some innate characteristics 

that renders it imperfect. For instance, its heterogeneity dictates the presence of various sub-

markets that influence the economic fortunes of local areas, and market failures are therefore 

inevitable. For instance, poor neighbourhood quality and predominance of foreclosed properties 

are often precursors to drops in property values and hence prices. Even though these might be 

temporary conditions, they are non-the-less indicators of the imperfect market. Further, a study 

by Anundsen and Heeboll (2015) showed that in most industrialized countries, national house 

prices have played a crucial role in transmitting shocks to the real economy; and sometimes; 

national house price cycles are often driven by developments in certain regional markets, and 

this is also conceivable for local and regional markets. 

 

In their study of the impact of sup