Leveraging on Existing Legal Provisions to Deliver Adequate, Affordable and Decent Housing
The housing sector can leverage on existing legislation to steer the affordable housing agenda under the “Big Four” initiative. The target of the Government of Kenya is to deliver at least 500,000 decent, adequate and affordable housing units across major cities and towns by 2022 to bridge the annual deficit of 200,000 housing units. Over the last few years, various legal provisions have been put forward to address the challenges of housing. The legislations address the challenges of housing which include lack of access to affordable land, inadequate physical planning, lack of access to housing finance, and inadequate building and construction regulations. This article looks at the key issues in some of these areas.
Land: Access to land is one of the core components in the delivery of affordable housing. Land is a major input to affordable housing production as it accounts for 25%-40% of housing costs especially in urban areas, which consequently impacts on the end-user prices. Kenya had no clearly defined and codified National Land Policy until the enactment of Sessional Paper No.3 of 2009 which provides a framework for preparation and implementation of national, regional and local area land use plans. The policy provides for implementation of cluster settlement, also referred to as densification, which eases provision of basic services and infrastructure among residents. Cluster settlement is being implemented in emerging high end estates in major cities in KenyaIn managing rapid growth in urban and peri-urban areas, the policy provides for coordinated development of housing development which is instrumental in support of affordable and decent housing as it lays out strategies to curb haphazard development and unplanned housing developments.
Equally, the Land Act, 2012 forms an important part of the legislative environment relating to housing. Following the enactment, the statute is principal in guiding the formation of the National Land Commission whose mandate is to oversee the implementation of various plans focusing on land use planning. In reference to provision of planned housing developments, the Act emphasizes that public land shall not be allocated unless it has been planned, surveyed, serviced and guidelines for its development prepared in accordance with Section (17) of this Act. Further, the Act gives the county governments a lead role in establishing settlement schemes, through acquisition and planning for land that is suitable for human habitation.
The Land Registration Act, 2012 gives effect to Article 68 of the Constitution that provides for sustainable administration and management of land and land-based resources. Section (9) of the Act articulates that the Registrar of Land shall maintain the register and any document required to be kept under this Act in a secure, accessible and reliable format including electronic files. Also, Section (10) emphasizes that the registrar shall make information in the register accessible to the public by electronic means. In reference to the above-mentioned Sections, the ongoing automation and digitization of the land registry will ensure provision of reliable, efficient and transparent land transaction and registration processes which have continually affected investment in the housing sector. More so, the land management system needs to leverage on blockchain technology which provides end-users with the opportunity to collaborate using a common digital ledger that securely shows transaction history and real-time status of land records. There is also need to enact the pending land bills such as the Land Value Index (Amendment) Bill, 2018 which provides for harmonization of land value across the country and which is expected to ease acquisition and access to land tenure.
Finance: Significant strides have been made in streamlining and mobilizing domestic savings and making private credit and mortgage facilities affordable. The government is in the process of establishing Kenya Mortgage Refinance Company (KMRC), a public private partnership between National Treasury and World Bank whose objective is to help the country grow its mortgage finance market for affordable housing. This will be facilitated through provision of medium and long-term liquidity to mortgage lenders, banks and microfinance institutions, SACCOs and cooperatives at attractive rates. Initially, KMRC will be financed through the multilateral investment, credit lines and Government of Kenya equity investment. Based on the current move to issue bonds, KMRC will combine the multilateral investment with an equity investment from local banks together with market funding. In the long run, long-term funding to mortgage lending institutions will significantly increase availability of affordable mortgage loan especially to individuals who cannot afford loans from the formal financial market.
Following the enactment of the Finance Bill 2018, the National Housing Development Fund (NHDF) is legally recognized as the suitable channel in providing funding support for housing developments. The recently enacted Housing Fund Regulations 2018 stipulate that NHDF is expected to mobilize capital from the government through a combined contribution of 3% from the employer and employee, development finance institutions and local banks. The contributions will allow for the pooling of resources that will support the government’s bulk purchase of housing units that will be constructed by private developers. NHDF will also offer certainty of sales in the form of an off-take undertaking to developers and provide accessible finance for home buyers through a National Tenant Purchase Scheme for those in the low-cost housing bracket.
Further, taxation relief and reductions targeting the affordable housing scheme are key in ensuring affordable housing. Under the Finance Bill 2018, zero rating of stamp duty for first time home buyers will go a long way in reducing the cost of property purchase. Initially, the stamp duty charge was based on the market value of the property at the rate of 4% for urban areas and 2% for rural areas payable within 30 days of signing the sale agreement. Similarly, developers who put up at least 100 affordable housing units will now enjoy a 15% tax. The incentive will not only reduce the development cost but also encourage large scale production of affordable housing units.
Building and construction regulations: Kenya is in the process of institutionalizing the revised building code and regulations referred to as Eurocodes. Eurocodes are a set of European building rules and design codes that bring uniformity in engineering and construction products and vary from one country to another. They are set to replace building codes which are conventional building standards and have been in use since 1969 and have no reference to low-cost housing models. The outdated building codes have rendered provision of affordable housing unattainable due to lack of alternative affordable innovative technologies in construction of housing units to cater for low-income earners especially in urban areas. Eurocodes will allow the practice of high quality and coherence for all developers and permit differentiation of housing designs across counties to suit diverse climatic conditions, geology and cultural diversity in the design of affordable housing. There is need to hasten the process of institutionalizing Eurocodes regulations as it will pave way for new building technologies that significantly lower construction costs and enhance provision of affordable housing.
Physical planning: With the devolved system of government, counties have a key role in fostering access to affordable housing. Housing is a devolved function as envisaged under the County Government Act 2012, which provides for the establishment of building and zoning plans and integrated planning which includes the establishment of residential areas within urban areas and towns.The Act also provides for citizen participation in local development matters which includes but not limited to housing projects. Further, the county spatial plan is a requirement under Section 110 of the County Governments Act 2012, which clearly outlines suitable sites for public and private land developments, infrastructural investments, and areas that require strategic intervention. Currently, a few counties have completed and launched their spatial plans while others are in different stages of completion. As such, it is imperative for counties to fast-track the development and implementation of spatial plans which form a critical basis in identifying suitable sites for sustainable housing developments.
The Urban Areas and Cities Act 2011 provides for an integrated planning framework where all county governments are required to cascade into their sectoral policies and plans. The law provides for participation of residents in management of urban areas and cities, which makes residents at the center of discussions touching on issues such as access to various development projects including affordable housing. Also, the Urban Areas and Cities (Amendment) Bill 2017 sets to amend the Urban Areas and Cities Act 2011 by citing other key additional requirements for an area to be classified as a city, municipality or a town. This includes infrastructural services such as roads, street lighting, fire stations, waste disposal and disaster management capacity which are key prerequisites in provision of affordable housing development.
Another area of focus under the affordable housing planning is the mixed-use development plan that seeks to increase the density of housing units, which leads to economies of scale that translate to lower cost of housing units. Mixed-use development also incorporates the aspect of social integration to enhance productive population and infrastructural maintenance. Therefore, a policy framework is needed to guide the regeneration and conversion of old housing stock and informal settlements into mixed use development plan. A strategy is also needed on maintenance of newly built and existing housing stock.
In conclusion, implementation of affordable housing projects could, to a large extent, leverage on existing legal provisions such as the land laws and regulations which are critical in unlocking access to affordable land for housing. The physical planning laws will ensure provision of service infrastructure including roads, water and sewerage, and waste disposal systems in areas designated for residential use. Building and construction regulations such as the Eurocodes are also expected to incorporate the low-cost building technologies that will significantly lower construction costs. Provision of financial incentives such as reduction in corporate tax is expected to reduce the cost of construction and increase the housing production. KMRC will also offer long-term funding to mortgage-lending institutions which will significantly increase availability of affordable mortgage. However, there is need to push for enactment of various legal provisions that are currently underway, such as the Land Value Index (Amendment) Bill 2018 and initiate legal frameworks that inform housing regeneration process and maintenance of newly built and existing housing stock.
By Charity Kageni, Policy Analyst, Infrastructure and Economic Services Department