How State Governments Are Fueling Real Estate Inequality Through Biased Taxation

ESV Olumba, Philip Iheanacho

Real estate is often described as a great equalizer an asset that can help individuals build wealth, secure housing, and create economic stability. But in many Nigerian states, taxation policies are doing the opposite. Instead of enabling fair access to property ownership and development, certain tax structures are widening inequality and placing disproportionate burdens on lower-income residents, small developers, and emerging investors. Through biased taxation, state governments are unintentionally (and sometimes deliberately) shaping real estate markets in ways that benefit the wealthy while locking out others.

One of the most glaring issues is land use charges and property taxes that disproportionately affect small property owners. In some states, tax rates are applied uniformly to properties regardless of income levels or local market realities. While high-end developers can easily absorb these costs or transfer them to tenants, low-income homeowners cannot. The result is a system where taxation eats into the limited earnings of ordinary citizens, pushing many into informal settlements where taxes and regulation are minimal but living conditions are poor.

Excessive fees on land titling, building approvals, and permits also fuel inequality. Obtaining proper documentation can cost hundreds of thousands sometimes millions depending on the state. Wealthy developers navigate this easily, while ordinary Nigerians see these fees as insurmountable barriers. The high cost of formal compliance drives many to build without approval, exposing them to future demolitions or legal disputes. In this way, taxation becomes a gatekeeper that determines who can participate in formal real estate development.

Another layer of inequality comes from preferential tax incentives granted to politically connected developers. In some states, large corporations and elite developers enjoy waivers, tax holidays, or subsidies that smaller developers never receive. These incentives create an uneven playing field where only big players can undertake major projects, while smaller investors remain stunted by heavy tax burdens. The ripple effect is clear: luxury estates multiply, but affordable housing remains scarce.
States also often impose multiple or overlapping taxes, including development levies, environmental fees, survey fees, and renewal charges. This cumulative burden discourages affordable housing projects, which operate on slim margins. When taxes make low-cost housing financially unattractive, developers flock to high-end projects that promise faster profits further widening the housing gap.

Biased taxation also affects renters. When developers and landlords are heavily taxed, they pass these costs on to tenants through higher rents. This makes urban living unaffordable for many working-class families, pushing them to the fringes of cities with weaker infrastructure and fewer opportunities. In effect, state taxation policies indirectly determine who gets to live in well-planned neighbourhoods and who is pushed into overcrowded, underserved areas.

To reverse these trends, states must adopt progressive, transparent, and inclusive taxation policies. This includes scaling taxes based on property value, incentivising affordable housing, reducing bureaucratic charges for low-income homeowners, and harmonising scattered fees across agencies. States should also publish tax waivers and incentives openly to curb political favoritism.

Ultimately, taxation should be a tool for promoting balanced development — not a mechanism that entrenches inequality. If state governments continue to impose biased tax burdens, Nigeria’s already severe housing divide will only deepen. But with fair reforms, taxation can help create a real estate sector where more citizens can own property, invest, and participate in the growth of their communities.

How State Governments Are Fueling Real Estate Inequality Through Biased Taxation
ESV Olumba, Philip Iheanacho
Real estate is often described as a great equalizer an asset that can help individuals build wealth, secure housing, and create economic stability. But in many Nigerian states, taxation policies are doing the opposite. Instead of enabling fair access to property ownership and development, certain tax structures are widening inequality and placing disproportionate burdens on lower-income residents, small developers, and emerging investors. Through biased taxation, state governments are unintentionally (and sometimes deliberately) shaping real estate markets in ways that benefit the wealthy while locking out others.

One of the most glaring issues is land use charges and property taxes that disproportionately affect small property owners. In some states, tax rates are applied uniformly to properties regardless of income levels or local market realities. While high-end developers can easily absorb these costs or transfer them to tenants, low-income homeowners cannot. The result is a system where taxation eats into the limited earnings of ordinary citizens, pushing many into informal settlements where taxes and regulation are minimal but living conditions are poor.

Excessive fees on land titling, building approvals, and permits also fuel inequality. Obtaining proper documentation can cost hundreds of thousands sometimes millions depending on the state. Wealthy developers navigate this easily, while ordinary Nigerians see these fees as insurmountable barriers. The high cost of formal compliance drives many to build without approval, exposing them to future demolitions or legal disputes. In this way, taxation becomes a gatekeeper that determines who can participate in formal real estate development.

Another layer of inequality comes from preferential tax incentives granted to politically connected developers. In some states, large corporations and elite developers enjoy waivers, tax holidays, or subsidies that smaller developers never receive. These incentives create an uneven playing field where only big players can undertake major projects, while smaller investors remain stunted by heavy tax burdens. The ripple effect is clear: luxury estates multiply, but affordable housing remains scarce.
States also often impose multiple or overlapping taxes, including development levies, environmental fees, survey fees, and renewal charges. This cumulative burden discourages affordable housing projects, which operate on slim margins. When taxes make low-cost housing financially unattractive, developers flock to high-end projects that promise faster profits further widening the housing gap.

Biased taxation also affects renters. When developers and landlords are heavily taxed, they pass these costs on to tenants through higher rents. This makes urban living unaffordable for many working-class families, pushing them to the fringes of cities with weaker infrastructure and fewer opportunities. In effect, state taxation policies indirectly determine who gets to live in well-planned neighbourhoods and who is pushed into overcrowded, underserved areas.

To reverse these trends, states must adopt progressive, transparent, and inclusive taxation policies. This includes scaling taxes based on property value, incentivising affordable housing, reducing bureaucratic charges for low-income homeowners, and harmonising scattered fees across agencies. States should also publish tax waivers and incentives openly to curb political favoritism.

Ultimately, taxation should be a tool for promoting balanced development — not a mechanism that entrenches inequality. If state governments continue to impose biased tax burdens, Nigeria’s already severe housing divide will only deepen. But with fair reforms, taxation can help create a real estate sector where more citizens can own property, invest, and participate in the growth of their communities.