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Bumpy road to cheap homes

Geoffrey Kerosi reviews Kenya’s housing finance policies to find out to what extent they promote or constrain access to the housing units

One of the Big Four agenda pillars announced by President Uhuru Kenyatta during his Jamhuri Day Speech, last year was delivering one million affordable and social housing units by 2022.

During the Fifth Annual Devolution Conference in April, the President urged county governments to realign their development plans to contribute towards achievement of the Agenda.

While the Budget Policy Statement for 2018/19 directed all government ministries, departments and agencies to realign their spending towards the Big Four agenda, resources required are yet to be computed and spread over the five years, raising doubts over how much is needed, and whether such a plan is actually feasible.

Can the national and county governments deliver one million housing units (out of which 800,000 will be affordable housing and 200,000 units will be social housing) by 2022?

According to Infrastructure Cabinet secretary James Macharia, Sh2.6 trillion is required for the project. This is the equivalent to the 2017/18 Bugdet and is more than the expected cost of the Kenya section of the Lamu Port South Sudan-Ethiopia Transport corridor, estimated at Sh2.4 trillion by the Vision 2030 secretariat.

In the Big Four — Immediate Priorities and Actions: Specific priorities for the New Term the national government intends to raise 10 per cent or Sh260 billion of the total funding from the State budget, with 30 per cent (or Sh780 billion) expected to come from the National Social Security Fund and 60 per cent or Sh1.56 trillion will be raised by the private sector.

It will be difficult for the government to meet its housing targets.

To put the 10 per cent government share of the Sh2.6 trillion in perspective, raising Sh260 billion will require a minimum of Sh65 billion annually from the total national budget over the four years to 2022.

However, the government has only allocated Sh8 billion for the Urban Development and Human Settlement programme 2018/19, and the counties are set to spend Sh7.2 billion on housing, amounting to Sh15.2 billion, leaving a budget gap of Sh49.8 billion.

The table summarises the national and county government efforts towards provision of affordable homes in billions of shillings. It shows that over the last three financial years, the government has spent Sh18.4 billion while the counties have spent Sh19.3 billion on housing totalling Sh37.7 billion, far short of the Sh195 billion that it should have raised by now.

There is also the matter of land. Social and affordable houses will cover 7,000 acres of land spread across five major urban areas  — 800 acres in Nakuru, 1,200 in Mombasa, 3,000 in Nairobi, 1,000 in Kisumu and 800 in Eldoret.

Scarcity and the resulting high cost of land will be a challenge,  particularly in Nairobi, with the Cytonn Nairobi Metropolitan Area Land Report 2018 noting that land prices in 18 suburbs and 11 satellite towns in the Nairobi Metropolitan Area have increased by as much as 19.4 per cent per year between 2011 and 2016.

Using resources raised by the private sector is feasible, but setting up a Public Private Partnership (PPP) takes a long time, in some cases years.

A report on the State of Housing in Kenya by the Economic and Social Rights Center concludes that the current PPP framework is too cumbersome to allow for collaboration between government and private corporations. If the legal framework for PPPs is not revised, the State will not be able to raise the 60 per cent financing as envisioned in its plan.

One of the strategies to reduce the cost of providing housing will be through taxing idle land. The author of the State of Housing Report, Eco-Build Africa’s Alfred Omenya, argues that this approach may fail because it will have a negative impact on land speculators who dominate in senior government positions.

While housing is a county government function according to the fourth Schedule of Constitution, majority of the counties have not made serious budgetary commitments towards provision of affordable homes.

However, counties such as Nairobi and Mombasa have identified undeveloped sites for construction of social housing and made some progress towards initiating these projects. The housing pillar of the Big Four agenda needs a well-thought-out plan for delivery of affordable housing given the challenges enumerated above. 

Raising the required funding will need collaboration between the national and county governments and the private sector in order to fully realise the goal of one million housing units by 2022, and accomplishing this goal will need sustainable funding models, along with input from multiple stakeholders and extensive planning as well. – The writer is a PesaCheck fellow. The infographics are by Eunice Magwambo, a graphic designer.

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