What is the Status of Affordable Housing in Nairobi Metropolitan Area?

In 2017, the President, H.E Uhuru Kenyatta launched the Affordable Housing program as one of the key pillars of the Big 4 agenda. The government planned to deliver 500,000 units by 2022.

Well, we are in the year 2022 and the government is already far out of reach since only about 1,000 units have been delivered through the Pangani and Park Road Ngara projects.

Even before the onset of the COVID-19 pandemic, the government had no sustainable plan on how to fund the initiative despite increasing its budgetary allocation for the sector by 75.0 percent to 10.5 billion shillings.

Now that this project was seemingly doomed to fail from the start, the big question we are asking today is, what is the status of affordable housing in the Nairobi Metropolitan Area?

What is Affordable Housing?

First, let’s get something straight – affordable housing refers to housing units that are affordable by that section of society with the median household income or below.

Affordable housing in Kenya are, therefore, units employees in the median gross income bracket – those earning a gross income of 50,000 shillings – can afford.

Assuming a maximum of 30.0 percent of their gross income is spent on housing costs, these are individuals who can afford to pay rent of 15,000 thousand per month and below.

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According to the government’s BluePrint, affordable houses range between 1 million shillings to 3 million shillings per unit on average, and would therefore fit into the budget of two individuals earning at least 50,000 shillings each per month, which is the Kenyan median income.

The Affordable housing initiative in Kenya comprises three types of housing that target formal income earners as follows:

• Social Housing – Designated for individuals earning up to 14,999 shillings monthly, accounting for 2.6 percent of the formal income earners (KNBS),
• Low-Cost Housing – Designated for individuals earning between 15,000 shillings and 49,999 shillings monthly, accounting for 71.8 percent of the formal income earners, and,
• Mortgage-Gap Housing – Designated for individuals earning between 50,000 shillings and 100,000 shillings monthly, accounting for 22.6 percent of the formal income earners.

With the above categorization indicating the initiative is targeting 97.0 percent of the formal income earners, it is quite worrying that only 3.0 percent of the formal income earners can comfortably afford to own homes hence it is necessary to address this problem to enhance homeownership in the country.

In a nutshell, while 74.4 percent of Kenya’s working population requires affordable housing, only 17.0 percent of the housing supply goes into serving this low to lower-middle-income segment.

This supply issue has remained a challenge attributed to factors such as high construction costs, inadequate supply of development land, and, inadequate infrastructure.

Status of Affordable Housing in Nairobi

Although less than 1.0 percent of the project target has been achieved, the initiative continues to take shape in various towns.

The table below indicates some of the notable ongoing affordable housing projects in the NMA;

Source: Online Research

Other projects on the pipeline are Shauri Moyo, Makongeni , and Starehe houses.

The private sector has also played a major role in the roll-out of these housing units to fast track their delivery and provide affordable housing financing to their clients below markets rates, with flexible repayment plans, and longer repayment periods.

Some of the projects by the private sector include;

Source: Online Research

Despite the private sector’s efforts in complementing the government’s efforts in achieving the initiative, the roll-out of the projects has remained a challenge.

This is mainly due to the overreliance on traditional sources of funding projects such as bank debt as opposed to alternative sources of funding.

Additionally, the bureaucracy and the slow approval processes in the construction industry have contributed to the delays in some of the projects breaking ground, especially during the lockdown period when operations were temporarily halted to adhere to COVID-19 measures.