THE IMPACT OF INDUSTRIAL PROPERTY LOCATION ON RESIDENTIAL PROPERTY VALUES IN IBADAN CHAPTER ONE

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THE IMPACT OF INDUSTRIAL PROPERTY LOCATION ON RESIDENTIAL PROPERTY VALUES IN IBADAN

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

            Industrial revolution and subsequent growth of rapid industrialisation have caused serious threats to sustainable development of both developed and developing countries. While modem industries extracted various natural resources, other raw materials and energy from the environment to produce material goods and services, such uses and production processes have resulted in large scale emissions of wastes into the environment causing severe threats to traditional agrarian practices, suppressing the values of rural and urban property and reducing the quality of human life (Baby, 2003). Although most of the developed countries had responded to this social menace by developing a variety of technological, economic and legal regimes for regulating the polluting behaviour of firms, the developing countries have not attained sufficient progress in regulating industrial pollution and its influences on their economy and society due to lack of technological alternatives, failures of markets, institutions, government policies, mass poverty and illiteracy.

A residential area is a land use in which housing predominates, as opposed to industrial and commercial areas.  These include single-family housing, multi-family residential, or mobile homes (Kilpatrick, 1999). Zoning for residential use may permit some services or work opportunities or may totally exclude business and industry. It may permit high density land use or only permit low density uses. Residential zoning usually includes a smaller FAR (Floor Area Ratio) than business, commercial or industrial/manufacturing zoning. The area may be large or small (Knight, 2015). Residential areas are zoned for living and any industrial activities are not expected to operate in these areas so as to avoid nuisance. Industrial properties are properties used for industrial purposes. Types of industrial property include factory-office multiuse property; factory -warehouse multiuse property; heavy manufacturing buildings; industrial parks; light manufacturing buildings; and research and development parks (Barrons, 2015). The random development of small scale industrial and workshop activities in residential areas of Arab municipalities in Israelis causes environmental nuisances such as noise, air, water and soil pollution, and heat emissions. These nuisances are both harmful to the environment and local populations (Sofer, Gnaim , Potcher, 2012). Industrial sector in Kerala in India is one of the major productive and wealth creating sectors. However, it remains as a major polluter, resulting in the degradation of the health of local population and reduction in property values (Baby, 2003).

            More so, air pollution, while being a negative externality, has led to lower property values in Bogotá, Columbia (Fernado, 2000). Also, in Delhi, environmental pollution has reached alarming levels, Industry is one of the most important causes. There are over 100,000 mostly small unauthorised units located in residential areas many of them is highly polluting chemical, metal, asbestos, rubber, and plastic factories. Unhealthy conditions prevail where industry and residences are intermixed (Bentinck and Chikara, 2001). Also, there are traces of areas in developing countries such as African countries where there is concentration of industries located close to residential areas such as Kenya, Morocco, Egypt, Sudan, etc.

            Furthermore, In West African region particularly Nigeria, there are concentration of industries located close to residential areas most of which are operating illegally and it is very common in Lagos state such as Isolo, Mushin, Apapa, Ikotun, Ikeja, etc. There are also many clustering of localization of industries in various part of Nigeria such as Ogun State, Port Harcourt, Delta State, Ibadan, etc. In Ibadan, there are areas characterized by concentration of industry such as Bodija, Oke Ado, Oluyole Industrial Estate, among others. Although the development of industrial properties should be based on mono-functional policy concept of separating industry and housing, residents may be affected by industrial activities due to multiple perceived disamenities such as noise, traffic, congestion, air pollution, water pollution, land pollution, and obstruction of view. This study will contribute to the planning debate by elaborating on the implication of the presence of industrial properties such as factories on direct residential properties. This study aims at assessing negative externalities from industrial sites on nearby residential property values in Ibadan and also to assess the magnitude of such impact on the residential property values.

            The development of industrial and workshop activities in residential areas in Ibadan is causing environmental nuisance such as noise, air, water, soil pollution, and heat emission that are harmful to the health of dwellers in these areas and also affect the value of residential properties located in these areas in Ibadan. Industrial activities being a major producer of environmental nuisances are concentrated in specific zones in Ibadan, which is well monitored. Nevertheless, there are a number of cases where residential land uses are mixed with industrial activities some areas in Ibadan which may arise probably through illegal means or through conversion of use which affect residential property values located in these areas and also affect the wellbeing and safety of people that reside in these areas and in turn affect property values which is evident on the rent and prices that tenants or purchasers are willing to offer for such properties. Industrial activities directly or indirectly create problems which are detrimental to the health and survival, and wellbeing of people residing in residential properties located close to industrial sites in Ibadan, industrial activities also affect residential property values which are located close to industrial properties.

            The noise, water, air, soil pollution from industrial activities can have a negative effect on property prices (Anstine, 2003; Nelson, 2004; David 2006). It is supposed that noxious facilities would affect house values significantly. Clark (2006) finds that there are consistently negative impact on houses proximity to factories with statistically important influence on residential property values. It gives out evidence on the price drop on the real sale price of houses if the houses are located proximity to factories.

            Environmental pollution which include land, water, air, and noise pollution from industrial activities have negative effect on both residential property values and on the health and wellbeing of the occupants of those properties and thus reduces the values of residential properties because people will not want to live close to areas where their health will be endangered and where they will be disturb by frequent noise and they will want to live in areas where their health will be secured (Sofer et al., 2012). This issues have been addressed by many researchers so as to proffer a lasting solution to these negative effect but their recommended measures is yet to bring these negative externalities on residential property values as a result of proximity to industrial properties to a satisfactory level which prompted this study. This study aims at identifying the adverse effect of the operations of industrial activities on the surrounding residential properties in Ibadan.

1.2        Problem Statement

The distance of residential properties industrial sites has a statistically significant negative effect on the values of residential properties (Friso, and Henri, 2009). However the effect is largely localized within a relatively short distance from the nearest industrial site. (Bentinck and Chikara, 2001). Absence of solid waste disposal facilities by some industries in Ibadan causes discarded litters from the factories and end up in heaps along the streets. These materials may contaminate adjacent properties or be disposed of indiscriminately and contaminate residential properties. The presence of industrial areas close to residential areas in Ibadan causes overstressed of the limited infrastructural facilities provided and adverse environmental condition. Factories also cause the most serious water pollution. Industrial wastewater seeps into the groundwater, polluting the water.

It has even been claimed that vibrations caused by machines are so severe that cracks are showing up in the walls of houses (Bentinck and Chikara, 2001). Industrial machines, plants and generators, etc. is considered noise to most people. Typically, little effort is made to dispose of toxic materials from industry properly, which often are by products of manufacturing industry.  Can lead to economic obsolescence of residential properties situated close to industrial properties when there is little or no demand on contaminated properties because prospective tenants will not want to endanger their health. In cases of severe contamination sale may not be possible or the sale price may have to be reduced.

There are concentrations of industries in some areas in Nigeria, especially Lagos, Ibadan, Port Harcourt, etc. And some industrial sites are located close to residential areas. Activities from these industrial sites produces some kind of nuisance to the nearby residential neighbourhood such as air pollution (from burning of fossil fuels from factory plants and machinery, factory generators, etc.), water pollution (i.e., the discharge of industrial by-product and hazardous chemicals into streams, rivers, etc.), industrial waste generation, and noise pollution from factory machines and generators. All this nuisance produced from industrial sites directly or indirectly have an impact (usually negative) on the values of residential properties situated close to them. Although industrial properties are not meant to be situated within residential neighbourhood but there are instances in Nigeria where industrial properties are located close to residential properties such as it is found in Lagos State (i.e. Ikeja, Ikorodu, Apapa, etc.), Port Harcourt, Ibadan (i.e Old Bodija, Oke ado, Oluyole Industrial Estate, etc.). The activities from these industries will undoubtedly have impact on the values of residential properties located close to them. The activities from these industrial sites generate noise and contamination within the environment where industrial properties such as factories are located close to residential properties, and the noise and contamination in turns bring about stigma on the residential properties located where industrial operations are being held and thus affect their values. The noise and contamination produced from industrial operations also have health implication of those occupying the affected residential properties. Also, prospective tenant may not want to settle in contaminated environment and where there is undesired noise and this will have a great effect on the property values situated in a contaminated and noisy environment.

            According to Thomson (2003) industrial revolution and subsequent growth of rapid industrialization have caused serious threats to sustainable development of both developed and developing countries. He also pointed out that industrial production processes have resulted into large scale emission of waste into the environment causing severe threat to traditional agrarian practices, suppressing the values of rural and urban residential properties and reducing quality of human life. Although he and other researchers has responded to this social menace by developing and recommending measures to regulate the polluting behaviour of firms but had not attained sufficient progress in regulating industrial pollution and its influence on human life and property values.

Realizing the need for developing a sustainable economy through an appropriate environmental engineering, government has formulated a number of policies from research works and enacted legislations. Despite these initiatives, the process of industrialization continues to inflict damages to human health and property values in Ibadan. Industrial activities operating close to residential properties in Ibadan area produce impact of noise pollution and environmental contamination which have adverse effect on the health, safety and wellbeing of people occupying the residential properties and also have negative effect on residential property values. But in Nigeria, there is no legal frame research upon which noise pollution can be abated. The complexity and magnitude of the problem of environmental pollution caused by industrial activities (which this study focus on) and its impact on both occupants in the affected residential areas and the residential property values calls for effective and well planned measures in Ibadan and Nigeria at large. Based on the above discussion, the following questions agitates my mind:

Research Questions

a. What are the responses of tenants to the nuisance produced by industrial activities?

b. What are the environmental problems posed on the residential properties as a result of nearness to industrial sites?

c. What impact do environmental problems have on residential property values?

d. How are the values of residential properties affected at varying distances from industrial sites?

1.3   Aim and Objectives

The study aims at determining the associated problems of siting industrial properties within residential areas in Ibadan, with a view to determining the effect of industrial land use on rental values of neighbouring residential properties.

Towards achieving this aim, the following objectives are set to:

i. identify the industrial properties located in the study area.

ii. identify the environmental problems posed on the residents by the location of the industries.

iii. examine the impact of the environmental problems on the rental values of residential properties

iv. examine the rental values of residential properties at varying distances from the industries.

1.4       Justification of Study

Despite the fact that there is concentration of industries in many parts of the Nigeria and where in some instances, there is presence of location of industrial properties close to residential properties. Government and its agencies, and researchers in the area of real estate do not give much attention to the problems associated with siting industrial properties close to residential properties which prompted this study.  This aspect of research has not gained the focus of researchers in Nigeria and many developing countries. More so, what prompted me to this area of research is that, this area of study has not been well researched by researchers in Nigeria and most developing world, and identifying the existence of concentration of industries within residential properties in Ibadan especially in the study area and realizing the need to address the problems of siting industrial activities close to residential properties in Nigeria, brought about my interest in this area of study.

            This study will assess the effect of negative externalities produced by industrial activities on residential property values  as a result of nearness of residential properties to the industrial properties by comparing the variation in rental values and/or purchase prices (capital value, of recently sold) of the residential properties within the industrial area with the prices and rents of residential properties located a bit far away from where the industrial activities takes place in Oluyole, Ibadan. This study will also examine the impact of negative externalities of industrial activities on residential property values in the polluted areas in Ibadan by focusing and noting the size (large or small) and the nature of industrial operations. The study area of this research work is majorly characterised by medium scale industry. Thus, this study will focus on the effect of operations of medium scale and small scale industry on the residential property values in Ibadan. This study will only focus on the negative or adverse effect of industrial activities on surrounding residential property values in the study area.

            Lastly, this study will call for the attention of researchers and government and its agencies to the issue of siting industrial properties close to residential properties in Nigeria and this study will try to enlighten and educate professionals in the field of real estate the problems associated with presence of industrial properties within residential neighbourhood and the effect on residential property values.

1.5       Scope of Study

            This study focuses or is restricted to the assessment of the adverse effect or negative externalities of industrial activities operating close to residential areas in Oluyole Industrial Estate in Ibadan i.e., the adverse effect of industrial activities on the residential property values within and around, Oluyole Industrial Estate in Ibadan. This study will also be restricted to evaluating the effect of noise and air pollution, and greenhouse effect produced by industrial activities on the residential property values in the study area. This study will also compare rental and/or capital values of residential properties within the estate with the residential properties situated outside or not too close or a bit far from Oluyole Industrial Estate but within Oluyole, Ibadan area.

Oluyole Industrial Estate is an industrial estate where there is presence of residential properties located close to it. The activities from this industrial estate produces noise, air, and water pollution which affect the values of residential properties that is situated close to the industrial estate directly or indirectly which is the focus of this study. Although the industrial estate can also have positive effect on the values of residential properties located close to them in form of nearness to sources of employment. The reason behind choosing Ibadan as area of study is that there are presence of concentration of industries situated close to residential properties in some areas in Ibadan particularly the study area and it is the area am familiar with.

Finally, this study will not dwell much on positive effect of locating residential properties close to industrial properties but this study will focus on negative externalities or adverse effect of industrial activities on the residential property values in Ibadan.

1.6 Limitations of the Study

The major shortcomings of this study were that of scope, coverage, time frame, financial constraint, and lack of response from some of the respondents. Due to the nature of this study, two groups of respondent (estate firms and tenants/occupiers) are administered with two separate questionnaires. Administration of questionnaires started with the estate firms in order to ensure faster retrieval of questionnaires, but since the period for administration was not far from the festive season, some firms extended their resumption date while some firms that resumed earlier enough delayed the retrieval of questionnaires. Some firms relocated from their previous location making it very difficult to get across to them.

Administration of questionnaires on tenants during the study also posed some challenges. During the working days, the number of tenants that could possibly be captured is always very low as many of them are usually in their office or somewhere doing their various business while on weekends the tenants would seem to be available only for some of them to present series of excuses for not been able to fill the questionnaires. Incessant pleading and series of explanations had to be resorted to in order to encourage filling of the questionnaires by respondents assisted in achieving up to the number of respondent used for the study.

In addition, the time frame required for the project was a limiting factor which made it impossible for some questionnaires to be retrieved, high cost of transportation during questionnaire administration due to fuel chronic fuel scarcity, and there was lack of adequate fund meant to make this project a success. However, despite various limitations faced, it is affirmed that they contributed no negative impact or influence to the result of the study.

1.7        Study Area

Ibadan is the capital of Oyo state and the third largest metropolitan city in Nigeria, after Lagos and Kano with a population of 1,338,659 according to the 2006 census. Located between coordinates 7⁰23’47″N and 7.39639⁰N, 3⁰55’0″E and 3.916667⁰E, Ibadan is also the largest metropolitan geographical area in Nigeria. Ibadan is located in south western Nigeria, about120km east of the border with the Republic of Benin in the forest zone close to the boundary between the forest and the savannah. The city ranges in elevation from 150m in the valley area, to275m above sea level on the major north-south ridge which crosses the central part of the city. Ibadan had been the centre of administration of the old Western Region since the days of the British Colonial rule and parts of the city’s ancient protective walls still stand to this day. The principal inhabitants of the city are Yoruba people.

Ibadan has a tropical wet and dry climate (Koppen climate classification) with a lengthy wet season and relatively constant temperature throughout the course of the year. Ibadan’s wet season runs from March to October, August sees somewhat of a lull in precipitation. This will nearly divide the wet season into two (2) different wet seasons. Like a good portion of West Africa, Ibadan experiences the harmattan between the months of November and February (BBC Weather 2010). With its strategic location on the railway line connecting Lagos to Kano, the city is a major trade centre for trade in cassava, cocoa, cotton, timber, rubber and palm oil. The main industries in the city area include the processing of agricultural products, tobacco processing and cigarette, flour milling, leather making and furniture making (Lloyd et.al. 1967). The Oluyole Industrial Estate Layout lies in the heart of Ibadan and is the second most industrialized region of the city after Lagos-Ibadan expressway region in this region, various industries especially food processing and other light manufacturing industries are located.

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