Given the increasing importance of affordability in housing policy reform debates, this study develops a new composite approach to measuring housing affordability and employs it to examine the nature of urban housing affordability in Nigeria. The data used in this study are based on the Nigerian Living Standards Survey 2003-2004. The aggregate housing affordability model developed here measures housing affordability problems more accurately and classifies the housing affordability status of households more appropriately than the conventional affordability models. Findings show very high levels of housing affordability problems in Nigeria with about 3 out of every 5 urban households experiencing such difficulties. There are also significant housing affordability differences between socio-economic groups, housing tenure groups and states in Nigeria.

Within the international housing policy discourse, this thinking implicitly requires the creation or the restructuring of a housing delivery framework in a way that will enable the market to work. It advocates creating housing policy frameworks that strongly propel market forces (i.e. market demand-supply-price mechanisms) to determine the production, distribution and consumption of housing. On the supply side, it favours private sector housing development and cost recovery infrastructure financing. On the demand side, it promotes mutual credit association for housing financing, market-rate mortgage lending by banks and other financial intermediaries while avoiding any form of direct public housing grants, assistance or subsidies by the state (World Bank, 1993). Increasingly, most developing countries are being coerced by international lending agencies such as the World Bank to pursue these types of policy reforms, which will align with broad austerity policy packages in macro-economic structural adjustments of these nations. These dominant international financial institutions discourage and condemn direct government involvement in housing as distortions that hinders market efficiency insisting that pro-market policy reforms promote market efficiency and stimulate economic growth.