What does 500,000 affordable housing units in Kenya mean to you? Is the government over ambitious? Or is it an achievable project. According to the Daily nation article, “The government’s pledge to deliver half a million decent and affordable homes to working Kenyans by means of subsidy programmes that include credit facilities and adoption of cutting-edge innovative technologies and materials, is highly ambitious. These cost-effective measures are expected to foster production growth starting from increase in raw material output and decrease in manufacturing cost related to the real estate sector.
Further, Research has shown that the supply of equitable housing tends to increase new consumer spending in moderate-income households which drives the circulation of capital inflow, generates new sources of local revenue, creates jobs and grows the economy”.
But what is affordable housing locally and abroad? Locally, it refers to housing units that are affordable by that section of society whose income is below the median household income and as a result, it becomes the increased responsibility of the government to cater to the rising demand for affordable housing. The government of the day comes up with policies and regulations that will it achieve the goal. These include subsidizing the unit costs by 20% less the market rate. Secondly, creating an enabling environment with the private sector for objective partnership.
In Australia, the National Affordable Housing Summit Group (NAHSG) defines affordable housing as, “reasonably adequate in standard and location for lower- or middle-income households and does not cost so much that a household is unlikely to be able to meet other basic needs on a sustainable basis”.
In the UK, it includes “social rented and intermediate housing, provided to eligible households whose needs are not met by the market”.
Therefore the Uhurus’ led government must consider the two aspects of standard and affordability. Standard housing means using techniques that are recommended for mass housing without the units looking congested, disorganized and unattractive. Key elements such as sewer lines, clean water, roads and electricity must be aligned in the project proposal to avoid future possible problems. Materials used must meet the maximum standards without compromise in delivery and lack in construction skills.
The owners of the houses will be the salaried employees working with the government and possibly the private sector. Measures that will be put in place to ensure the houses are payable in installments will attract or turn away possible buyers. Also, the rates must consider their basic pay to enable them take care of everything else without been burdened with housing loans.“The lowest recorded interest rate on a mortgage in Kenya is 17.1 %, as of September 2016, and requires at least a 10 % down payment. There are currently 24,458 mortgages in the country, with the average mortgage size being US$ 81,717. The cheapest newly built house by a developer recorded by CAHF is US$ 15,753, which is for a 30 square meter unit”. The Centre for Affordable Housing Finance .
According to Mehnaz Safavian, Lead Financial Sector Specialist and co-author of the report, “Kenya can make housing more affordable to many more Kenyans, and in turn create new channels to boost overall economic growth both at the national and county levels.” He further states four aspects towards affordable housing. Among them been, “effective policy reforms to include the standardization of mortgage contracts, the establishment of appropriate mortgage foreclosure regulations, a clear legal and regulatory framework for mortgage-backed securities and covered bonds, and the creation of an environment conducive to mobilizing long-term domestic capital. Underpinning these is the inclusion of cooperatives and SACCOs.
Embedding affordable housing in the big four agenda, its notable that the demand for housing compared to supply is high. National housing finance indicates that Kenya has a cumulative housing deficit of 2 million units growing by 200,000 units per year being driven mainly by i) rapid population growth of 2.6% per annum compared to the global average of 1.2%, and ii) a high urbanization rate of 4.4% against a global average of 2.1%. Supply, on the other hand, has been constrained with the Ministry of Housing estimating the total annual supply to be at 50,000 units. The Ministry indicates that 83.0% of the existing housing supply is for the high income and upper-middle-income segments, with only 15.0% for the lower-middle and 2.0% for the low-income population. In summary, while 74.4% of Kenya’s working population requires affordable housing, only 17.0% of housing supply goes into serving this low to lower-middle income segment.
We can conclusively state therefore that with collective housing policy and regulations setting, enabling manufacturing environment, Public-private partnerships, political goodwill and subsidized housing financing solutions the 500,000 housing projection is achievable.