Making Affordable Housing a Reality in Kenya

The Kenyan government’s aim of building one million affordable homes in five years, if successful, could ignite a lagging real estate sector, and place Public-Private Partnerships (PPPs) at the center of economic life for one of Africa’s most rapidly urbanizing countries.

This is according to Kfir Rusin, the Managing Director for the upcoming 2018 East Africa Property Investment (EAPI) Summit whose main focus will be Developing a Strategy for realizing the Government’s Goal.

KFir notes that the summit is meant to bring together private and public-sector stakeholders together with the aim of developing the roadmap to making affordable housing a reality in Kenya.

President Kenyatta’s announcement, in November 2017, energized a tepid real estate market, still recovering from its worst performance in six years, but the Chairman of the Kenya Property Developers Association, Mucai Kunyiha, argued that there was still a lot that needs to be done before everything else is achieved.

“Our members are keen to unlock the key obstacles that have hindered progress in the sector in the past, including proper planning by local authorities, provision of adequate infrastructure, and a complete overhaul of the Land Registries, whose ability to deal with the existing volumes of transactions is already strained,” said Kunyiha.

The demand for affordable housing is one of the most significant opportunities for PPPs in Africa, with Kenya having the opportunity to create a workable model for the continent to adopt.

Kecia Rust, the executive director of the Centre for Affordable Housing Finance in Africa (CAFH), argues that the opportunity for affordable housing is immense and could lead to the creation of 1.3 million jobs across the continent and $400 Billion in direct economic activity. Kenya, she argues, is one of the markets that could lead the way by creating a workable PPP model: however, certain fundamentals must be addressed.

Rust believes that the state has an essential role to play in making it attractive for developers to invest in the housing by providing incentives and infrastructure financing.

One solution, she says, is to split funding between housing and infrastructure, with the state issuing 100-year bonds to fund bulk infrastructure (roads, water) projects. This strategy would reduce development costs and make affordable housing projects more attractive for developers.

The need to develop bulk infrastructure has been a principal driver for developers in focussing on higher-end consumers alone, in delivering an estimated 35,000, mostly unaffordable, homes per year, while the lower and middle end of the market continues to be underserved.

Reducing costs and providing finance for aspirant homeowners is critical, in a market facing such an acute shortage. Prices have risen dramatically in Nairobi since 2010, with a ten-fold increase in price from 400,000 shillings to 4 million shillings for the most inexpensive home. Yet mortgage uptake remains low with only 25,000 mortgage-purchased homes, in total.

While the government remains tight-lipped on what an ‘affordable home’ is; Kunyai defines it as a building costing up to Sh4 million to buy, and aimed at households that earn between 40,000 shillings and 100,000 shillings per month.

Addressing the shortage of homes will provide an economic stimulus to the entire economy through the creation of jobs and increased investment, which is likely to spill over into the regional economy. While PPPs are not a new route to large infrastructure development, globally, the scale, social focus, and timeline of the projects will lead to increased attention by investors, developers and public-sector stakeholders across the continent.