How Kenya is missing the mark on the affordable housing policy

In my article published in The Saturday Standard on December 16th, 2023, I argued that our approach to affordable housing is fundamentally flawed.

We’re focusing on supply rather than the underlying issue: demand. If demand were strong and sustainable, developers would step in to fill the gap. The problem is not lack of housing; it’s the cost of accessing it, particularly through mortgages, which are currently unaffordable for majority of Kenyans.

My proposal at the time was simple: instead of putting funds into building houses, we should establish a mortgage fund to support affordable, low-interest loans. This fund could help Kenyans buy homes directly, addressing the real barrier — affordability.

Today, there are developers selling 3 bedroom housing units for Sh2.9 million, comparable to prices targeted by affordable housing initiatives. However, these units are sitting unsold because potential buyers cannot afford the mortgages.

Fast-forward a year later, and billions of shillings have been collected through the housing levy. Yet, something curious is happening. A new housing scheme is underway in Nairobi’s Jevanjee Estate. Here’s how it works: Nairobi County surrendered the land to a special purpose vehicle (SPV) company for development, with the county holding a 20 per cent stake and the developer an 80 per cent stake. The presumption is the county contributes land as equity (the 20 per cent) while the developer provides the 80 per cent investment needed to build the homes.

But what actually happened raises questions. The developer used the title deed, now held by the SPV, as collateral to secure a loan of Sh1.9 billion from a bank, of which Sh450 million has reportedly been disbursed. This arrangement raises fundamental questions about the value the developer brings.

Why did Nairobi County need the developer if the developer’s contribution was simply borrowing against public land? The county could have borrowed the money directly, contracted a builder, and kept full ownership. The developer’s role here, it seems, adds little value.

Should the developer fail to complete the units, the bank could auction the land — public land that rightfully belongs to Nairobi County.

In essence, the developer has minimal financial exposure, while the county shoulders significant risk. This arrangement seems to be turning public assets into private assets with limited public benefit.

This situation also raises broader questions about the housing levy. With billions of shillings collected, where is this money going?

Many assumed it would fund affordable housing projects by providing developers with cheap loans or grants to lower construction costs. Instead, developers are given land for free, then use that land as collateral to secure private bank loans. In such cases, public land is effectively leveraged for private gain without concrete assurances of public benefit.

Typically, joint ventures involve a landowner who lacks funds and a developer with the capital. Together, they bring these assets to the table, sharing profits based on their contributions. In the Jevanjee Estate project, however, the developer’s primary input is simply borrowing against public land — a move that undermines logic.

Once completed, who will own the land and housing? Will it be the public, which originally owned the land, or the developers who contributed minimal financial resources?
Until we address the root cause — unaffordability of mortgages — increasing the number of housing units does little to solve the problem. For homeownership to become a viable option, the cost of mortgage repayments must be close to the cost of renting.

Achieving this would require a significant pool of funds dedicated to subsidising low-interest mortgages, enabling the average Kenyan to afford a home.

This, in my view, is where the housing levy should be focused. If the Jevanjee Estate project is indicative of a broader trend, the Kenyan public may be left with little to show for their investment.