As in Nigeria, low income housing devt in US difficult, costly

As in Nigeria where developers avoid low income housing development because of the risk and high cost, builders in US are also facing challenges building $200,000 entry level homes because of  regulatory requirements which comprise nearly 25 percent of the cost of a new home.

Nigerian developers say infrastructure cost as a component of construction cost is always higher in low income housing which requires virgin land where it is difficult to find any form of infrastructure which the developers have to provide, estimating that infrastructure alone constitutes 30 percent of construction cost.

However, unlike Nigeria where the housing market is struggling, outlook for housing development in the US in 2017 is bright and it is expected that the number of new family homes to be built there will gradually rise this year and next after dipping slightly at the end of 2016. In Nigeria, there is no such hope as the country is not likely to get out a crippling economic recession any time soon.

Last year, the National Association of Home Builders (NAHB) projected 1.16 million total housing starts in 2016, which was up nearly 5 percent from the previous year. Now NAHB is forecasting a 10 percent increase for 2017 and a 12 percent rise for 2018.

Data from the US Department of Housing and Urban Development shows that family housing units fell 4 percent  to a seasonally adjusted rate of 795,000 in December but it was still the fourth highest since the recession.

“Builders remain confident and we expect further growth in the single family market in the year ahead. We expect that 2017 will be another year of gradual, steady improvement in the housing market”,  said NAHB Chief Economist, Robert Dietz.

“Multi-family starts have been volatile in recent months, but should level off as supply meets demand. Meanwhile, single family production continues to gain momentum but is limited by supply side headwinds”,  he added.

Regionally in December, combined single and multifamily housing production rose 31.2 percent in the Midwest, 23 percent in the West and 18.5 percent in the Northeast while the South posted a loss of 1.4 percent.

But Dietz pointed out that there will be pressing challenges as builders look to increase their supplies this year. “While positive developments on the demand side will support solid growth in the single family housing sector in 2017, builders in many markets continue to face supply side constraints”,  he said.

Indeed, some 64 percent of builders reported low or very low lot supplies and Dietz added that the industry needs to recruit more workers and get more land in the pipeline, but it will take time.

“Builders are particularly facing challenges building $200,000 entry level homes. Regulatory requirements comprise nearly 25 percent of the cost of a new home, which has made construction on lower cost homes more difficult”, Dietz explained.