Low incomes make mortgage unfit for housing needs - UN-Habitat

Amidst the push by successive administrations to expand the mortgage market in the country past 100,000, a new report shows that this home ownership model may not be suitable for Kenya.  

The report by the United Nations Human Settlements Programme (UN-Habitat) argues that the mortgage model is discriminatory for a developing economy such as Kenya since it serves mostly the high-income earners, leaving out a majority of the population, particularly those in the informal sector.  

The World Cities Report 2026 compares mortgage applications and approvals between developed and developing economies, which shows a stark contrast in the figures. 

For example, of 100 people who apply for a mortgage in the developing world, particularly sub-Saharan Africa, fewer than 10 are approved.  

The May 2026 report says globally, only one in four applicants (25.5 per cent) successfully secured a housing loan in 2023. 

“It should be noted that, as the majority of households in many developing countries are not even eligible to apply, the actual proportion of the global population excluded from formal housing finance is likely much higher,” the report says.  

Limited reach

It notes that though this marks an increase from 19.8 per cent in 2010, it nevertheless highlights the limited reach of conventional housing finance, particularly in certain regions. 

“For instance, while Australia and New Zealand regions record 71.5 per cent housing loan access, in Sub‑Saharan Africa this falls to just 8.9  per cent,” the report says.  

The report says these disparities stem from income differences among the regions.  

While some high-income economies such as Australia (80 per cent), Canada (78 per cent) and Japan (75 per cent) show comparatively high access, many low-income countries – particularly those with high informality, weak credit systems and limited collateral frameworks – remain far below global averages. 

“This leads to the perception that conventional housing finance functions as a ‘luxury good’, accessible primarily in more advanced economies,” the report says.  

The UN-Habitat document launched at the sidelines of the 13th session of the World Urban Forum held in Baku, Azerbaijan, notes disparities even within the same broad region, which are particularly striking and highlight that income level alone cannot explain differences in access to formal housing finance.  

“For example, in Sub-Saharan Africa, access to housing loans ranges from 32 per cent in South Africa to just one per cent in the Central African Republic and Eritrea,” the report says.

“This shows how financial infrastructure, credit information systems and policy environments can dramatically shape housing finance outcomes.” 

Urbanisation patterns

This is while in Europe and Northern America, access spans from 78 per cent in Canada and the United States (US) to less than a tenth of this in Moldova (eight per cent) and Ukraine (five per cent), suggesting that regulatory efficiency, mortgage market development, and urbanisation patterns could also contribute to variation. 

“Viewed through the lens of the right to adequate housing, these inter and intra regional gaps point to an inclusion and equity challenge, underscoring the need for more diversified, inclusive and context-responsive housing finance models,” the report says.  

When former President Uhuru Kenyatta involved the State-funded Kenya Mortgage Refinance Company (KMRC) in 2019 to finance home ownership, the goal was to grow the number of mortgages in the country from 26,000 then to 60,000 in five years.  

This goal was never achieved as it took four years (2023) for mortgage accounts to cross the 30,000 mark. 

Likewise, when President William Ruto came to office in 2022, his Kenya Kwanza manifesto spelt out the plan to expand the mortgage market from 30,000 to 100,000 in a bid to enable more Kenyans to own houses.  

The plan was or is to introduce mortgages of Sh10,000 a month, targeting the lower-income households.  

The 30,000 mortgage accounts represent 0.06 per cent of the country’s total population, 0.15 per cent of the working population and 0.25 per cent of the existing loan accounts.  

The UN-Habitat report states that in practice, access to conventional housing finance, often in the form of a mortgage, depends on three structural elements: income capacity, collateral quality, and perceived risks. 

“These three elements jointly determine whether a household is considered bankable and eligible for a mortgage facility,” the report says.

“Where any of these elements are weak or systematically unavailable for vulnerable groups, they form structural barriers that limit or even deny access to mortgage finance.” 

The report notes that a mortgage is a powerful financing tool that converts massive capital demands into manageable payments.  

Moreover, by relying on collateral – established through legally recognised tenure rights over immovable property – mortgages are priced at lower interest rates compared to unsecured debt, as the use of property as collateral substantially reduces the lender’s credit risk. 

“While mortgage lending often relies on relatively standardised eligibility criteria, a significant majority fall outside these parameters, making it difficult or impossible for them to secure any loans. The result is huge variations in access at regional and even intra-regional levels,” the report says.