State housing board hires advisor to help monetise property agreements

The Affordable Housing Board (AHB) has on-boarded a transactional advisor to oversee the process of monetising the tenant purchase scheme (TPS) agreements through the capital markets.

The plan, according to the board, is to help raise its revenue, which is currently made up of the Affordable Housing Levy and sales of units either through cash buyers or TPS agreements.

Additionally, the board seeks to change its model of selling units, adopting the offtake method common in the Kenyan market among private developers.

Such will ensure the board recoups a larger amount of its cash earlier than how units are being sold at the moment.

According to AHB Chair Jeremiah Simu, there are plans to raise the affordable housing levy to Sh9 billion monthly from the current Sh6.2 billion, which is largely from the 1.5 per cent levy on gross pay.

The Sh6.2 billion is an increase from Sh5.5 billion when the levy was first enacted.

The high investment required to bridge the gap of 200,000 units annually is what informs the intention to develop products from the TPS agreement that would eventually raise more money for re-investment.

Simu, while speaking at the Kenya Affordable Housing Conference 2025 organised by the Kenya Mortgage Refinance Company (KMRC) said plans are underway to start selling units under the affordable housing programme (AHP) on an offtake basis.

He said the amount required to bridge the housing needs surpasses what the board can currently raise.

“Funding requirements for the housing programme are in excess of what we are collecting. To do one million units based on the modelling we have done will be an investment of about Sh2.3 trillion,” he said.

Kenya is said to have a shortage of two million units, according to the State Department for Housing and Urban Development. However, the construction sector only manages to do 50,000 units annually, with a majority of them being market-rate units, locking out ordinary individuals in need of affordable and social housing.

While making a presentation at the event, Simu said monetising TPS agreements will assist the board in recycling the invested cash faster.

“We will put it in the capital markets, allowing us to recycle and receive it quicker,” he said. “We know it has been done in other markets and we have just completed the process of onboarding a transactional advisor so that we can work towards that monetisation of our TPS book.”

A common way TPS agreements have been monetised, according to Financial Sector Deepening (FSD) Kenya, through the capital markets, is by using real estate investment trusts (Reits).

This is where the monthly payments towards ownership of the units paid by tenants are invested in Reits where they earn an income.

TPS can also be converted into bonds, a common practice in advanced markets.

Apart from the levy and sale of units, the board also raises cash through donations, accrued income, investment income, loans voluntary contributions, budgetary allocations and gifts and grants.

The board is expanding the sales model to include offtake at earlier stages of construction. The idea is also to recover much of its funds over the period of construction.

“We have been on a model where largely we have been building and then pre-sales follow towards the end. But we are working with partners - banks, Saccos and realtors – to ensure we are bringing pre-sales of the units early into the construction phase and not later,” said Simu.

So far, the affordable housing programme has completed 3,171 units, which are occupied, with 128,028 units under construction.

“When the levy started about a year and a half ago, it was about Sh5.5 billion. Part of the oversight function of the board is to ensure we also put in place strategies to grow the levy. That is why the monthly levy is at about Sh6.2 billion and we have a target to get it to about Sh9 billion,” said Simu.

The affordable housing programme, according to Housing Secretary Said Athman, has an ambition of bridging the over two million-unit gap in units over 15 years. “If you take an average of Sh2 million per unit, we are talking about Sh6 trillion investment that is required,” he said.

Lands, Public Works, Housing and Urban Development Cabinet Secretary Alice Wahome estimated the amount required for the 200,000 units annually to be Sh400 billion.

She said the demand on her desk, apart from what KMRC offers through banks, is way above what the government can deliver.

“What has given us pressure and demand to channel out is the institutional housing both for our uniformed officers and learning institutions,” she said.

“Our big secondary schools have made written requests to the President, board (Affordable Housing Board), Ministry and even the Principal Secretary.”

Wahome said from the current Sh72 billion raised annually through the levy, the government anticipates to up this figure to Sh90 billion.

She said financial institutions are key in bridging the gap between the Sh400 billion required and the Sh72 billion raised.

“It is a big opportunity for investors and banks to come up with products that speak even outside what we are offering so that we can raise the balance of that projection,” she said.