Housing deficit widens as investors abandon rental projects

Nigeria’s housing deficit is expected to deepen as investors continue to pull back from residential rental developments despite surging demand in urban centres, industry data and officials show.

Developers are increasingly shifting to built-for-sale projects, short-let apartments and vacation homes, citing faster returns and quicker recovery of capital in a challenging economic environment. The move has reduced the number of new rental units entering the market, further tightening supply.

Nigeria produces between 50,000 and 100,000 housing units annually, far below the estimated one million units required each year to address a housing shortfall of more than 15 million homes, according to sector estimates cited by housing authorities.

Minister of Housing and Urban Development, Ahmed Dangiwa, said Nigeria’s rapid urbanisation is intensifying pressure on existing housing stock. He noted that the country is urbanising at about 3.8 per cent annually and is now more than 50 per cent urbanised, with projections indicating that nearly 60 per cent of Nigerians will live in cities by 2030.

The demand for rental accommodation remains high, with data from NOI Polls indicating that between 51 and 85 per cent of Nigerians live in rented housing, particularly in major cities. However, supply constraints and rising costs have pushed rents upward, worsening affordability for low- and middle-income households.

“Each time a developer sells a completed unit instead of renting it, one more potential rental home is lost,” a Lagos-based developer said, highlighting the trade-off between immediate returns and long-term rental supply.

Industry experts attribute the shift away from rental housing to high construction costs, limited access to long-term financing and regulatory challenges. Developers face interest rates of between 25 and 28 per cent on loans, making it difficult to sustain projects designed for long-term rental income.

President of the International Real Estate Federation (FIABCI), Nigeria chapter, Akin Opatola, said the financing structure in the country does not favour rental investments.

“The minimum a bank would give you now is about 25 to 28 per cent interest, and there is no moratorium. That doesn’t favour real estate, which is a long-term investment,” he said.

He added that many developers are compelled to sell up to 80 per cent of their units to repay loans and meet obligations, leaving little room to build rental portfolios.

Legal and institutional challenges have also contributed to investor hesitation. President of the Association of Housing Corporations of Nigeria, Eno Obongha, said weak coordination among housing institutions and the absence of structured land banks continue to limit large-scale rental development.

“Without coordinated efforts, it will be difficult to scale up rental housing as a viable segment of the market,” Obongha said.

Despite these challenges, rental housing remains the primary option for most Nigerians, with homeownership rates estimated at about 25 per cent and mortgage penetration below five per cent.

Government agencies have introduced housing initiatives in recent years, including projects by the Federal Mortgage Bank of Nigeria and state-level interventions, but delivery levels remain below demand.

Industry stakeholders say improving access to long-term financing, strengthening mortgage systems and reforming regulatory frameworks will be critical to attracting investment back into the rental housing sector and addressing the country’s growing housing needs.