Why State’s plan for affordable housing remains a pipe dream for many Kenyans

An aerial view of Imara Daima estate Nairobi, April 23, 2014. Influx of Nairobi population has grown over few years causing poor planning in housing. [Gilbert Otieno, Standard]

President Uhuru Kenyatta identified four key pillars that would form the core of his economic agenda – food security, affordable housing, manufacturing and inexpensive healthcare.

But even as the Jubilee administration rolls out policies that would see these projects come to fruition by 2022, analysts are already poking holes into the promise that Kenya can deliver affordable housing to its citizens in the next five years.

To achieve this promise to the electorate, President Kenyatta asserted that a million affordable housing units would be constructed. 

Data from the State Department of Housing and Urban Development indicates that the target may not be achieved due to financing hurdles and bureaucratic bottlenecks within the State machinery.

In a recent interview with the Financial Standard, Principal Secretary for Housing Aidah Munano said the plan was to ensure 200,000 units are put up annually to hit the one million mark in five years.

However, the construction of these units is way below target.

The Ministry of Housing data shows only 20,000 units can be constructed in a year.

And with the slow rate in planning and financing, especially from the private sector, it will be utterly impossible to hit the 200,000 units annual target.

 “As a whole, we planned to construct 200,000 units for social purposes for people living in informal settlements and 800,000 affordable units - the kind of houses that Kenyans can buy for as little as Sh3 million - but we are facing some challenges to that end,” said Ms Munano.

She explained that the construction has been designed to be undertaken under a public-private-partnership.

Under this arrangement, the State will provide land and the necessary infrastructure such as roads, water, electricity, sewerage systems – while private investors come in with the financing to build the houses.

However, the project which according to figures from the Department of Housing is to cost Sh2.3 trillion has been given a wide berth by private developers due to lack of facilitation by the State to acquire land, as well as pending bills in the National Assembly which are supposed to propose incentives to the investors. This is on top of clearing the many bureaucratic bottlenecks involved in the construction business. “Most of the land is held by county governments. There are a lot of regulations surrounding land acquisition held by counties for construction of State projects,” said the PS.

“Also, Treasury is supposed to chip in with some financing which is yet to come. We are talking to the exchequer about that.” 

On top of these hurdles, PPP arrangements have proved a very unreliable way to execute projects of national importance in the past.

According to a local PPP expert who cannot be named because of his professional relationship with the PPP unit at the Treasury since the PPP Act was enacted about five years ago, not a single project has come to fruition outside the energy sector.

He says PPPs in housing have proven to be almost impossible to execute. The first project that was proposed was the building of Kenyatta University hostels which has been unable to go past a PPP agreement stage.

Investors say wrangles between the national government and counties have also made it difficult for the model to work. Corruption, especially in counties, has not made things any easier. Humphrey Watanga, a senior partner at Afcorp said wrangles between The government and counties have been a disservice to investors in the housing sector.

“When you want to do a PPP with a county government, the national government is the only legal guarantor to the investment. When the State and the county wrangle, you miss out on the project,” he said.

Kenya Property Developers Association Chairman Micah Kunyiha says it is a tall order for the State to achieve affordable housing for Kenyans by 2022, housing problems associated with PPPs notwithstanding.

“The dream of providing Kenyans with quality and affordable homes is commendable. The ability to deliver will be the ultimate test of the ability of the State to implement a multi-sector project and attract capital with favourable and feasible financial structures,” Kunyiha says.

Interest rate cap

He notes that though Kenya has sufficient equity in the housing market, challenges remain getting matching debt from banks.

This is due to the credit squeeze related to the interest rate cap, housing developers being ignored by banks and inadequate financiers to partner with the state and deliver the one million units required.

Kunyiha says the government is yet to make available serviced land close to commercial hubs which can attract the investors and ensure the houses they put up will have a ready market.

An overhaul of the land registries to enable quick sale transactions is yet to be done. “Currently there are long delays in registration of leases even if we only have about 20,000 new units per year,” Kunyiha claims.

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