Affordable Housing in the Nairobi Metropolitan Area (NMA)

In 2017, the President, H.E Uhuru Kenyatta launched the Affordable Housing programme as one of the key pillars of the ‘Big Four Agenda’. The government had planned to deliver 500,000 by 2022 and with the president’s five-year term almost coming to a close, the government is already far out of reach since only about 1,000 units have been delivered through the Pangani and Park Road Ngara projects. Even before the onset of the COVID-19 pandemic, the government had no sustainable plan on how to fund the initiative despite increasing its budgetary allocation by 75.0% to Kshs 10.5 bn in FY’2019/20, from Kshs 6.0 bn in FY’2018/19. 

We have previously tackled two topicals related to affordable housing: 

1. Affordable Housing in Kenya – in April 2018 we talked about whether the delivery of affordable housing can be a reality and concluded that the initial plan was very useful but some elements needed to be addressed to increase the likelihood of success, and, 
2. Accelerating Funding to Affordable Housing – in May 2020, we discussed ways of accelerating funding for affordable housing and concluded that there was need to mobilize alternative sources of funding, particularly the opening up of capital markets access to developers, to provide a low-cost capital raising mechanism. 

This week, we look into the status of affordable housing in the Nairobi Metropolitan Area (NMA) and benchmark with more established case studies with the aim of giving recommendations on what can be done to enhance achievement of the initiative by covering: 

1. Introduction to Affordable Housing, 
2. Demand and Supply of housing in Kenya, 
3. Affordable Housing Programme in Kenya, 
   1. Background, Status and Progress of the Affordable Housing Programme (AHP), 
   2. Achievements of the Affordable Housing Programme (AHP), and, 
   3. Challenges facing the Affordable Housing Programme (AHP). 
4. Lessons Kenya Can Learn from Other Countries, 
5. Recommendations, and conclusion. 

Section I: Introduction to Affordable Housing 

According to the Economic Times, affordable housing refers to housing units that are affordable by that section of society with the median household income or below. Based on this definition and with the statistics from Kenya National Bureau of Statistics (KNBS) on income distribution in the formal sector indicating that 74.4% of employees earn the median gross income of Kshs 50,000 or below per month, affordable housing in Kenya would therefore be units employees in median gross income bracket can afford; assuming a maximum of 30.0% of their gross income is spent on housing costs, these are individuals who can afford to pay rent of Kshs 15,000 per month and below. 

 According to the government’s Blue Print, affordable houses range between at Kshs. 1.0 mn to Kshs. 3.0 mn per unit on average, and would therefore fit into the budget of two individuals earning at least Kshs. 50,000 each per month which is the Kenyan median income.