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Delivering Affordable Housing in Kenya


Access to adequate and affordable housing is a basic human need. Article 43 of the Constitution of Kenya provides that every person has the right to accessible and adequate housing. In addition, under the social pillar of the Kenya Vision 2030, development of quality and affordable houses for low-income Kenyans is a priority. Further, through the Bottom-Up Economic Transformation Agenda, the government plans to close the housing gap by facilitating the delivery of 250,000 houses per year.

In 2019, the Kenya’s population was 47.5 million, of which 31% were residing in urban areas. Although most of the country’s population still resides in rural areas, the trend towards urbanization is projected to continue, with 50% of the country’s population expected to live in urban areas by 2050.

House ownership varies across the different counties, with Nairobi and Mombasa having a high proportion of rented houses as opposed to owner-occupied (Figure 1). Other counties such as Migori, Homa Bay and West Pokot have over 80% home ownership. This implies that households in Nairobi and Mombasa use a significant amount of income to pay for rent.

Figure 1: Status of homeownership and renting per county

Source: Financing Models for Affordable and Adequate Housing in Kenya (Mose, 2021)

The National government has demonstrated commitment to enhance adequate housing through housing development and human settlement programmes. The government in the period 2018-2022 committed 125 billion shillings to the housing sector to make the Affordable Housing Programme (AHP) a reality. However, the “Big Four” agenda AHP fell short of its target of delivering 500,000 units, with less than 10% of intended units being delivered by 2022.

In addition, the government has provided incentives to encourage the growth and adoption of affordable housing and close the gap between supply and demand. These include a stamp duty exemption for first-time homebuyers, housing relief at 15% of employee contributions, and exempt value added tax (VAT) on imported and locally purchased goods for the construction of affordable homes. However, despite the incentives, issues of accessibility and affordability still persist.

The Finance Act 2023 saw the introduction of a housing levy of 1.5% of employees’ basic salary payable by the employee and an equivalent of 1.5% by the employer. This was aimed at raising funds that will be utilized for the development of affordable housing and associated infrastructure such as power, water and sanitation facilities.

The objective of this blog is to highlight ways in which affordable housing can be achieved. The blog seeks to draw lessons from economies such as Singapore that have been successful in having over 80% of the population living in affordable housing.

Housing Intervention and Gaps

The policy framework to affordable housing is set out in the Affordable Housing Programme launched as part of the “Big Four” agenda in 2017. The measures for implementing the AHP are stipulated in the AHP Development Framework Guideline 2018. The policy framework provides for both the supply- and demand-side, creating an enabling environment and incentives to deliver housing.

The Housing Act Cap 117 establishes a Housing Fund under the control of the National Housing Corporation (NHC). The Housing Fund is essential in spurring private developers to build more affordable housing and serves as a link between the demand for such homes among low- and middle-income people. Additionally, the National Housing Development Fund Regulations, 2020 provide the eligibility and allocation criteria for affordable housing schemes.

The government has set up three main bodies and platforms to help with the implementation of AHP. The Boma Yangu portal is intended to increase the programme’s transparency while also making it simpler to follow its development. The Kenya Mortgage Refinance Company (KMRC) is mandated to provide home loans to potential buyers through Primary Mortgage Lenders such as commercial banks and savings and cooperative societies (SACCOs), among others, and the National Housing Corporation (NHC) is aimed at implementing policies and overseeing the development of initiated projects.

The National government through the NHC has continued to promote decent housing through schemes such as tenant purchase, outright sale, rural and peri-urban housing loans and rental housing. However, a lot of innovation is required to come up with an appropriate programme that encourages a reduction in the cost of construction to enable the realization of affordable prices and rent.

The targeting of the beneficiaries falls into three income segments: social whose income range is (Ksh 0-19,999), Low-cost level (Ksh 20,000-49,999) and mortgage gap (Ksh 50,000-149,999). The NHC Strategic Plan details the financing options for the various categories of people living in rural and peri-urban areas. An interest rate cap of 7.0% to finance individual initiatives to build housing units in those areas is also available. The mortgage gap buyers are to be financed through affordable mortgages in the open market, with interventions from the Kenya Mortgage Financing Corporation. Finally, the social level and low-cost buyers are to be financed through the Tenant Purchase Scheme (TPS) for over 25 years with a 3.0% – 7.0% interest rate.

The model of the AHP is that land is a critical infrastructure for affordable housing supply. The government intends to make serviced land available to private developers through a public-private partnership (PPP) to support a large-scale supply of affordable homes. In addition, the government will provide infrastructure such as water, sewage, access roads and power to attract the private sector.

Developers could welcome the Housing Fund because it has a big pool of money, with consistent contributions anchored in law. Developers complete the construction of the units and deliver them to the NHDF. The Housing Fund reimburses builders for completed units and enters into tenant purchase contracts with members for completed residences. The members pay affordable monthly installments and NHDF Fund can continue approving projects and financing members with continuous contributions.

Despite the progress made by the AHP, the objectives are yet to be met due to some limitations, which include the high cost of land and construction, inadequate financing, limited access to affordable mortgages, and extended timelines resulting from bureaucracies.

Conclusion and Recommendations

There are benefits accruing from having a National Housing Fund in bridging the demand and supply for the housing and making it sustainable. The government could increase the supply of serviced land by increasing investment in physical and social infrastructure. Further, increasing budgetary allocations and multiple funding sources would enable more financing to the borrowers. Moreover, alternative building technologies that are cheaper and more sustainable would keep the cost of buying lower.

Authors: Susan Thuo KIPPRA Young Professional

Austin OderaKIPPRA Young Professional

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