Income problem with the State's housing agenda

A few weeks ago, the country was treated to yet another circus by televangelist Apostle James Maina Ng’ang’a, this time over his dismissive remarks towards a congregant, Milka Moraa.

Ms Moraa, believing the words in Matthew 11:28, come to me all who are weary, and I will give you rest’ cried the man of the cloth, seeking help to have her Sh4,000 house rent arrears paid.

Apostle Ng’ang’a quickly dismissed her, telling her that his church was for spiritual matters. “I deal with spiritual matters. If it is about housing, go to the government,” he said, referring her to the affordable housing programme being undertaken by the Kenya Kwanza administration.

These remarks evoked sympathy from Kenyans who raised over Sh500,000 for Ms Moraa. The State Department for Housing and Urban Development slithered in to facilitate her housing issues.

At a recent television interview, Lands, Public Works, Housing and Urban Development Cabinet Secretary Alice Wahome who referenced this case, detailed how the government’s affordable housing caters for many classes such as Ms Moraa.

Ms Moraa was allocated a unit at the Mukuru kwa Rueben social housing programme. “The people we are targeting live in a very poor state. The case of Ms Moraa speaks for itself,” said the CS who noted that she needed just a Sh64,000 down payment out of the Sh640,000 selling price to secure herself a studio apartment in the project. While Ms Moraa has been paraded by government officials who have used the opportunity to sell the gospel of how affordable the affordable housing units are, in the background, it raises the question of income among those targeted.

Ideally, if such units, as allocated to Ms Moraa were meant for people like her, she should have been able to afford without fundraising. According to the CS, the affordable housing programme develops social, affordable and institutional housing. The government has 140,000 units in the pipeline and is expected to provide a million units in five years.

By the end of March, 4,888 units will be released to their new owners according to the CS. Thereafter, up to 5,000 units will be released every quarter in an overdrive to satisfy the estimated two million deficit of units in the country.

“The (social) houses we are talking about, with Sh3,900 you will be able to own a studio,” said Ms Wahome. “And nobody is asking you to pay the Sh640,000 because obviously, no one has that kind of money. Even those with bigger pockets, it’s not an amount you can raise in the morning and the evening, you have a house,” the CS added, downplaying the possibility that the units may be perceived as expensive.

While Ms Moraa received cash donations from well-wishers and a job that would ensure she could pay the Sh3,900 as per the tenant purchase agreement (TPS) with the government, her predicament raises the affordability question amid the push for more units, even to the lowest of income earners. If this is looked at from a market rate point of view, then it means even more Kenyans in need of housing will not afford it.

A report on developing a suitable credit policy for TPS by Financial Sector Deepening (FSD) Kenya, prepared by AIS Capital Advisors for Mi Vida, a private developer in the affordable house space, details these challenges as well.

The report titled Developing-a-Tenant-Purchase-Scheme-Credit-Policy, notes that while industry standards suggest housing expenses should not exceed 30 per cent of gross income, there is not enough data that state how much exactly households spend on rent.

“Various small sample studies suggest that this proportion could be either higher or lower than the figures presented,” the report says. “This method however does not account for other debts or financial obligations beyond housing.” As such, if 30 per cent is the maximum, then for one to afford a standard studio as those developed by Mi Vida, their monthly payments including service charges would be Sh23,000 which denotes an income of Sh76,667.

A one-bedroom will attract Sh30,000 monthly repayment for earners taking home Sh100,000 while a two-bedroom needs someone who makes Sh223,333 to afford Sh67,000 monthly charges.

The report portrays another scenario used by banks that is based on the level of indebtedness. This guideline stipulates that the monthly repayments should not exceed 50 per cent of net income to prevent excessive debt accumulation. This means someone making Sh58,700 can only afford a market-rate standard studio to pay Sh23,000 monthly for a TPS. To afford Sh67,000 monthly payments for a two-bedroom unit, you need Sh188,000 as gross income.

“The main implication of the affordability analysis is that, given the current financing costs and interest rates, the TPS with a 20-year payment plan is likely to be unattainable for many individuals as it would be expected that not many households can allocate 30 per cent of gross income or 50 per cent of net income to housing,” the report says.

The report, referencing data from the Kenya National Bureau of Statistics says just 371,895 workers as of 2023 earned more than Sh100,000 per month. Some 1.36 million earn between Sh50,000 and Sh99,999 while 1.28 million make a monthly income below Sh49,999.

However, Ken Gichinga, chief economist at Mentoria Economics pointed out that by introducing the affordable housing levy, at 1.5 per cent of gross pay, the purchasing power of Kenyans has been eroded.