Government needs to borrow working ideas from countries such as Singapore, South Africa for the one million homes project to succeed
Milliam Murigi @millymur1
Too many houses remain unaffordable to the middle class, let alone the poor. This is because 83 per cent of the estimated 50,000 homes available annually are for high-income and upper middle-income earners, with only 15 per cent for lower-middle income and two per cent for low-income segment.
This is the reason why the government intends to deliver one million homes in the next five years. Of these, 800,000 (comprising bedsitters, as well as one, two, and three-bedroom) will cost between Sh800,000 and a million shillings, which is considered affordable.
The remaining 200,000 units will be social housing, which involves upgrading slums. They will comprise one and two-room units, and will cost between Sh600, 000 and Sh1 million. The project is to be implemented on 7,000 acres in five urban centres, namely Nairobi, Mombasa, Nakuru, Kisumu, and Eldoret.
However, Patricia Wachira, a Senior Research Analyst at Cytonn Investments, says the government could learn from Singapore, believed to have the best housing solutions in the world and closer home, South Africa for the ambitious one million homes project to suceed.
Since 1994, South Africa has built more than 2.8 million units, approximately 133,000 units annually. “As a result, South Africa has reduced its housing deficit from three million units to 2.1 million units,” Wachira told journalists at a media briefing on the status of affordable housing in Kenya .
And how did this African country manage all this? Wachira says South Africa has managed this by offering subsidies for low-income populations. Through the Reconstruction and Development Programme (RDP), all households with a gross income of $295 (Sh30,000) or less are entitled to housing subsidies worth $13,515 (Sh1.4 million), with a preference given on individuals above 40 years and the disabled.
Additionally, access to finance in South Africa is fuelled by low lending rates of 10.3 per cent per annum and the presence of a secondary mortgage market. The country has longer tenors for government employees scheme providing 30-year mortgages, pension-backed housing loans.
Interestingly, South Africa has a high private credit bureau coverage at 64.4 per cent of adults compared to Kenya at 30.4 per cent. “In Kenya we need a clear eligibility criterion to boost home-ownership, flexible solutions that match individuals’ income, and minimum occupation periods for those who qualify, and use of social security payments as down payment for housing,” she says.
Wachira says Kenya aso needs a more comprehensive, well-thought out and sustainable plan that integrates a set of solutions since there is no silver bullet. For instance, the government needs to consider taking a little bit more time to flesh the idea of affordable houses out to include more and better integrated sets of solutions.
These include provision of subsidies beyond just bringing in current stock of government land and efficient urban planning to not only meet housing demand but to also do so in a sustainable manner. “It will be challenging to deliver affordable housing without a comprehensive urban plan, of which housing is just one component,” she says.
Moreover, private developers still require further incentives, beyond free land, to provide affordable houses according to the government standards. Exemption of VAT on construction costs, for example, will reduce construction costs by at least 13.8 per cent,” she says.
However, Wachira says, there is need for a better-integrated framework with the State as the driver of the initiative and increment of budgetary allocation from the current 10 per cent. The government also needs to set up and adhere to strict rules and eligibility measures for house-purchase, for example.
These include minimum occupancy periods for a house after purchase and housing-to-income level ceilings to lock in needy buyers. “There is need for legislative review to allow use of pension to guarantee house purchase,” Wachira says.
Inadequate supply of affordable development land, high construction costs, high cost and access to financing and ineffectiveness of PPPs are the main limitations to the supply of affordable housing,” she says.
Wachira says introduction of affordable houses might end up compromising many things, such as space and size. Currently in Nairobi, the average size of a mid-level one-bedroomed unit ranges from 45 square metre (sqm) to 50 sqm, while that of a two-bedroomed unit ranges from 70sqm to 80sqm. In contrast, the minimum set standards according to the Ministry of Housing for low to middle-cost house size ranges from 36sqm to 60sqm for units with two to three habitable rooms.