Millions of Kenyans eager for a break from the threat of a life-long rent burden have a reason to be optimistic following the inclusion of affordable housing as one of the governments 4 priorities.
The right to a decent housing by all Kenyans is a constitutional obligation. The 2010 Constitution of Kenya identifies access to adequate housing and to reasonable standards of sanitation as an economic and social right.
President Uhuru Kenyatta’s affordable housing programme seeks to ensure that 1 million Kenyan families become homeowners by 2020. There is already a backlog of two million houses countrywide and that deficit continues to grow by 150,000 units every year.
Annual construction remains a mere 50,000 units against a targeted provision of 250,000 units. Housing costs have risen dramatically due to the exorbitant cost of land, construction materials and labour.
As urban populations increase rapidly, developers continue to target the few upper-middle and high-income families because large housing units generate more profit. Lack of available land for affordable housing has also exacerbated the crisis.
Due to the shortage of affordable housing, many people are forced to live in poor conditions in informal units while overcrowding has led to the degradation of utilities and services including sanitation, water and roads.
The affordable housing plan is therefore timely and necessary. Affordable housing is a complex matter and to increase the chances of success, it is important to draw lessons from the successes and failures of the numerous projects around the globe.
Similar projects that achieved a measure of success adopted joint approaches to financing, regulatory reform, incentives and the use of innovative planning and construction techniques.
Inadequate financing remains the key challenge to housing projects because housing is a capital-intensive sector. The Central Bank of Kenya reported that mortgage uptake has been on the decline with only 28,000 mortgages taken up in 2018.
Kenya Mortgage Refinance Company
The drop was mostly due to high interest rates, tight credit standards and liquidity issues including the long-term 18-month mortgage interest rates.
Establishment of the proposed Kenya Mortgage Refinance Company (KMRC) is anticipated to bridge the financing gap. KMRC will operate as a private sector driven company and provide secure long-term funding to mortgage lenders.
With joint shareholding, the government, pension and insurance firms, banks and venture capitalists can increase the affordability and availability of mortgage loans.
Pension firms for example can upscale the use of pension savings as collateral to provide members with low-interest loans against their retirement savings while at the same time increasing the share value of their social security savings.
It is critical for the government, through national and county government grants, to enroll multiple external financiers who can provide credit rates as low as 5-6 percent.
Private sector players will be able to draw the funds and offer developers and prospective home-owners longer-term mortgages at lower interest rates.
The writer is Group managing director of CPF Group.
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