Affordable housing: What Kenya can learn from American model

Walk through Nairobi’s Kibera, Mathare, or Mukuru slums and the scale of Kenya’s housing crisis becomes immediately visible.

Tens of thousands of families crowd into makeshift iron structures, often sharing single rooms across generations. This reality exists despite decades of housing policy discussions and numerous government initiatives.

The problem is not new, but its urgency grows as Kenya’s urban population swells.

Currently, the country faces an estimated two-million-unit housing deficit, with only 200,000 being constructed annually.

The gap widens annually as urbanisation accelerates faster than housing delivery.

The Kenya Kwanza regime, after taking over power in September 2022, has a plan through the Affordable Housing Programme (AHP) to deliver a million units by 2027.

By the end of December last year, around 140,000 affordable homes had been completed or were in advanced stages of development, less than 60,000 of the annual target.

From the US, it addressed and reduced urban slums, particularly in the mid-20th century, through large-scale, federally funded urban renewal and “slum clearance” programmes.

Starting with the Housing Act of 1937 and accelerating with the Housing Act of 1949, these programmes demolished deteriorated housing and replaced it with public housing, highways, and commercial redevelopment.

According to Stephen Kuria, who runs Arena Homes Ltd, a Kenyan firm working on early-stage development concepts for affordable residential projects in America, there are some lessons Kenya can learn from the United States as far as affordable housing is concerned.

Kuria has operated in Kenya’s property sector since 2014 through 2024, and later engaged with American housing frameworks through professional research and benchmarking before relocating in 2024.

It is this cross-market exposure that informs his analysis of what Kenya might adapt from more established markets.

“The key lesson Kenya can learn from the US housing market is that increasing housing supply and maintaining policy certainty are critical to affordability,” said Kuria Real Estate during a recent interview.

“Evidence suggests that regardless of economic development level, the fundamental economics of housing remain constant. When supply is restricted, prices rise. When policy changes unpredictably, developers retreat and investment dries up.”

Between 2020 and 2024, Kuria said Kenya’s housing challenges exposed the limitations of government-only approaches, with delivery falling far short of annual demand.

He points to specific American financing mechanisms that could be transformative if adapted for Kenya’s context, though he cautions that these models require careful localisation. “US financing models that could work in Kenya include housing tax credits, mortgage guarantees, and long-term fixed-rate financing,” Kuria explained.

 “These tools have proven effective at mobilising private capital toward affordable housing in America, though implementation must account for Kenya’s banking sector structure and interest rate environment.”

The Low-Income Housing Tax Credit (LIHTC) in America, for instance, is the largest federal programme for creating affordable rental housing, offering a dollar-for-dollar reduction in tax liability for developers and investors who build or rehabilitate low-income units.

It encourages private investment by providing 10 years of tax credits in exchange for maintaining rent-restricted units for 15 plus years. The LIHTC was enacted as part of the 1986 Tax Reform Act and has been modified numerous times. It has generated over 3.5 million units in all since its inception. From 2000 through 2016, LIHTCs supported the construction or rehabilitation of an average of 115,000 affordable rental units each year.

The federal government issues tax credits to state and territorial governments. State housing agencies then award the credits to private developers of affordable rental housing projects through a competitive process.

Developers generally sell the credits to private investors to obtain funding.  Once the housing project is placed in service (made available to tenants), investors can claim LIHTCs over 10 years.

Kuria advocates particularly for several approaches that align with Kenya’s needs. “Kenya should adopt mixed-income development, rental-housing support and incremental housing approaches, as is the case in the US,” he recommends. Mixed-income developments, where market-rate and affordable units coexist, he said, reduce stigma and create financially sustainable projects.

The developer says rental support addresses the reality that not all households can or should pursue home ownership immediately.

However, industry analysts have noted that mixed-income models face resistance in Kenya’s stratified housing market, though pilot projects could demonstrate viability.

He cautions that technology transfer must be cost-conscious and context-appropriate. “Kenya can leverage US housing innovations affordably through modular construction, standardised designs and technology-driven approval systems,” he noted. Rather than importing expensive materials and skills, Kenya should instead focus on process innovations that reduce time and bureaucratic costs.