Is low-cost housing by the government a pipe dream?

The Constitution of Kenya recognizes housing as a right under Article 43 (b) thus: “Every person has a right to accessible and adequate housing and to reasonable standards of sanitation.” Affordable housing is one of the President Uhuru Kenyatta’s big four action plan as he resumes office for his second term. As we are made to understand, this will be achieved through provision of low cost housing.

Kenya’s urban housing demand is estimated at about 250,000 units annually with an estimated annual supply of only 50,000 units resulting in a large deficit. The World Bank housing report released in April 2017 further expands that there’s an estimated accumulated housing deficit of over two million units, and nearly 61 per cent of urban households live in slums. Despite many challenges, Kenya has one of the more developed and stable economies in East Africa, and its housing sector is more advanced than the neighbouring countries.

Income sources of majority of urban residents are low and informal, making it difficult to access mortgages. According to a report by the Central Bank of Kenya the number of mortgage loans fell by 1.5 per cent to 24, 085 in 2017 from 24,458 in 2015. This is despite the capping of interest rates on September, 2016.

Majority of the urban dwellers are low income earners and lack access to bank loans to facilitate construction of homes.

Stakeholder engagement

In order to achieve low cost housing, different players in the real estate sector will have to be involved. They include; Government, Professional bodes such as (National Construction Authority, Institution Surveyors of Kenya, Estate Agent Registration Board) and financial institutions. The construction sector got a boost from the government by reducing corporate tax from 30 per cent to 15 percent for developers who construct at least 400 units through the Financial Act, 2016. This tax incentive is expected to encourage mass housing development to bridge the demand-supply gap. But is this enough?

The thorny question of land

Land is another major constraint in the provision of low cost housing since it’s a one of the key factors of production. From time immemorial, land has been a thorny issue in Kenya. Cases of land fraud have been on the rise which has seen many people lose land through the hands of the quacks masquerading as property agents. It is essential to check and recheck the validity of a title before purchasing the land.

Land prices have been skyrocketing each year leading to escalation of house prices. This has forced low income urban population to live in high density informal settlement with limited or no access to potable water, sewerage and power supply. The government can establish zoning in certain areas to control the demand and price of land. The on-going land reform ought to look compassionately at the landless as it seeks to deal with the question on idle lands held by the state and speculators.

Alternative building materials

The high of cost of building materials has resulted to pushing the prices of houses upwards. The government should be committed to promoting research on appropriate and alternative building technologies that are cost effective and which reduce construction time. The investors also should be encouraged to put up local plants for production of innovative building material and elements.

REITs as a viable innovation in Kenya real estate

In an attempt to address finance constraints in real estate markets, all the stakeholders can make use of Real Estate Investment Funds Trusts (REITs). A (REIT) is an investment tool designed to collect diverse sources of funding from the investors to acquire real estate portfolio for income generating properties. Property developer can use REITs to tap money from the public and private sector to develop low cost houses with cheap and long term credit. Sadly, the real estate sector in Kenya is still maturing as was demonstrated by the low uptake of the Fahari REIT by Stanlib and the D-REIT by Fusion Capital.


High inflation has led to an increase in the cost of materials and land. This risks discouraging developers from expanding their portfolio of developments as they would wish to. On the other hand, the rate of adoption of alternative building materials and techniques has been slow in the construction sector. It is also worth noting that banks have tightened access to mortgage financing since capping of interest rates was introduced. In any case, majority of urban dwellers are low income earners in the informal sector who lack access to mortgages due to the absence of collateral.  There is also the risk of the middle class gobbling up houses meant for low-income earners. If these challenges are not mitigated, yes, the deficit of 200,000 units per year will most likely fail to materialise.


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