Failure of Kenya’s affordable housing project.
Between December 2017 and June 2022, President Uhuru
Kenyatta’s administration committed to develop at least half a million low-cost
housing units.
The government planned to invest Sh127 billion to
assist make the middle-class housing project a reality by providing low-cost
finance, roads, and water.
The government has invested Sh2.2 billion, or barely
0.3 percent of the entire expected cost of the affordable housing project, with
less than two months till the end of June.
The
government now considers the project, which is one of President Uhuru’s Big
Four agenda, to be more of a journey than a destination.
However, this is only a goal shift. According to
experts, no developers are interested in developing low-cost housing. The
upcoming elections have further exacerbated the situation.
“Let me be very clear: the difficulty we have on
our side in low-cost housing is a supply shock,” KCB Group Chief Executive
Joshua Oigara said.
KCB is a major player in the affordable housing
market, with a mortgage portfolio worth roughly Sh70 billion.
The lender has approved loans for 1,370 Park Road
apartments that are still unfinished, as well as 8,000 units in the Mavoko
project on Mombasa Road that are also unfinished.
The Mavoko Sustainable Neighbourhood Dwelling Project
has 198 housing units. They’ll be available for sale soon.
Mr. Oigara, on the other hand, believes there is
something wrong with the low-cost housing project. “What I must say is that
a lot of low-cost housing projects aren’t going up as quickly as we’d
want,” Mr Oigara said, adding that he respects some of the effort that has
already gone into the projects, such as the Park Road homes.
The affordable housing project has also encountered
some challenges. The government also mentioned “lengthy periods of
bargaining with would-be investors” in its official records.
The National Housing Development Fund was one of the
ways the government aimed to de-risk developers.
The National Housing Development Fund required
salaried workers to contribute 1.5 percent of their gross pay to the fund.
Employers would likewise contribute the same percentage to the Kitty.
The Employment and Labour Relations Court temporarily
halted the contribution’s implementation three months after the President
signed the Finance Bill, 2018, alleging that it was illegal and amounted to
double taxation.
The Kenya Mortgage
Refinance Corporation (KMRC) was established by the government to refinance
and de-risk main mortgage lenders such as commercial banks, Saccos, and
microfinance banks so that they may lend to homeowners at cheap rates.
Mr Oigara pointed out that KMRC, which lends to banks
at a rate of roughly 5.5 percent, had lent them Sh1.5 billion.
He acknowledged that they had already made loans to
consumers looking to buy homes in the Park Roads and Mavoko developments.
“We should be grateful that they put in some effort.” He stated,
“We are really devoted to financing.”
Mortgages took a blow during the Covid-19 outbreak, as
occupancy levels dropped and renters requested moratoriums and discounts.
Apart from Park Road, the government claims to have
constructed 872 affordable housing units in Nairobi’s Kibera neighborhood.
It further claims that five locations for low-cost housing
developments are being developed and documented and are awaiting tendering.
Housing projects in Nairobi include those at Starehe,
Shauri Moyo, Ruai, Kibera, and Mariguini.
Aside from providing loans to KMRC, the government is
also required to provide water to affordable housing developments and construct
roads.
The government intends to construct 7,125 social
housing units in total.
The State planned to construct 20 units in the 2019-20
financial year and two in the following fiscal year.
In 2019-20, however, it only managed five.
In the financial year 2020-21, no housing units were
constructed.
The government planned to invest Sh4.2 billion
building access roads to affordable housing units, but by the end of June 2021,
it had only spent Sh322 million.
The election fears have further led to the delay in
affordable housing building, with investors wary of investing in projects that
could be rejected by the incoming administration.
“Investors are hesitant to keep putting money
into affordable housing because you never know if the Big Four agenda will be
accepted by the next government,” said real estate specialist Johnson
Denge.
The 579.6 percent over-subscription for KMRC’s debut
corporate bond was not only a shot in the arm for the struggling corporate bond
market, but also a stamp of support for the affordable housing project.
The Sh1.4 billion would be used to refinance main
mortgage lenders through commercial banks, microfinance banks, and Saccos,
according to KMRC Chief Executive Johnstone Olteita.
KMRC is expected to deliver huge amounts of low-cost
finance to major mortgage lenders, who would subsequently make loans to
homeowners with long terms and low interest rates.
Mortgage rates are substantially higher than what many
individuals pay in rent in the present market, making home ownership
unattainable.
The National Treasury has allotted KMRC Sh4.6 billion
in the 2019 budget, which begins in July.
KMRC was given Sh3.5 billion in the current fiscal
year, which ended in June.
KMRC has given nearly Sh2 billion to seven key
mortgage lenders since September 2020, according to National Treasury Cabinet
Secretary Ukur Yatani, and is now processing an additional Sh7 billion.
The government had intended to construct 10,000 social
housing units, similar to those in Kibera, between March 2019 and June 2022 at
a cost of Sh40 billion.
However, by the end of June 2021, it had only invested
Sh5.38 billion in total.
According to the Housing Ministry, a court
disagreement has caused a delay in the construction of 2,960 social housing
units in Mariguini, South B, Nairobi.
This has subsequently been settled, according to the
ministry, pending Attorney General Kihara Kairuki’s advice on contract signing
for Kibera Soweto East Zone B. (4,435 units).
Read original story as told by Standard.