Small houses, less income: Where State's affordable houses miss target

The availability of small units in the market, which are unfit for family-oriented individuals and low-income Kenyans, is a major mismatch that ails the affordable housing initiative.

A report by financial services firm Zamara highlighted this mismatch while analysing pension contributions of 150,000 individuals.

The report published in November 2025, by the Centre for Affordable Housing Finance Africa (CAHF) notes that a majority of Kenyans in the formal sector earn less than Sh100,000, which makes it almost impossible to afford a mortgage under the Kenya Mortgage Refinance Company (KMRC) initiative.

Further, most of the individuals who can afford a mortgage, aged between 30 and 40, and with families, would require larger units such as three and four bedrooms, whose price range is above their pay grade. Such units are also not largely available in the market.

The report titled “The Role of Pension Funds in addressing Kenya’s Affordable Housing Crisis” documents an online residential housing market survey in Kenya conducted by Zamara, which reveals that the average formal sector employee earns around Sh75,000.

This is about Sh55,000 net, which the report says is insufficient to sustain a conventional mortgage financing.

“For instance, purchasing a modest home valued at Sh1.5 million through a 20 to 25-year mortgage at an average of 15 per cent annual interest rate would require monthly repayments ranging between Sh19,800 and Sh20,500, which still surpass the recommended 30 per cent income affordability threshold for sustainable home ownership,” the report says.

Zamara explains that this repayment amount represents about 36 per cent of an average worker’s net income, placing it beyond reach for the majority of earners.

The firm says over 57 per cent of formal sector employees in Kenya earn below Sh50,000 per month, underscoring the widening gap between income levels and housing costs.

As such, there is an urgent need for innovative and inclusive financing mechanisms, such as pension-backed mortgages, employer-assisted housing programmes and low-cost housing schemes, to make home ownership a realistic goal for Kenya’s middle and lower income earners.

“Consequently, a large portion of Kenya’s workforce remains effectively locked out of home ownership, perpetuating reliance on rental housing and informal settlements. Yet, within this challenge lies a transformative opportunity,” says Zamara in the report.

Financial stability

From the analysis of the 150,000 pension scheme members, the firm found that the average age of members was 43, which represents mid-career individuals focused on financial stability and long-term goals such as home ownership.

The average monthly income stood at Sh104,000 which positions a majority within the lower-middle income bracket.

“However, after accounting for statutory deductions, household expenses and existing financial obligations, most members are left with limited disposable income, significantly constraining their ability to sustain mortgage financing,” the report says.

Zamara says the income structure of pension scheme members underscores the central issue in Kenya’s housing affordability crisis, noting that the distribution, drawn from a detailed analysis of the 150,000-member dataset, reflects the broader income dynamics of Kenya’s formal sector workforce.

From the analysis of the subject individuals, only 11 per cent earn above Sh150,000. A majority, 47 per cent, earn below Sh50,000 and 42 per cent make between Sh50,000 and Sh150,000.

Mortgage financing

Overall, the data shows that nine in 10 workers (89 per cent) earn less than Sh150,000 per month.

This group, Zamara says, forms the backbone of the formal economy comprising teachers, civil servants, healthcare workers, factory employees, information technology professionals and financial officers.

“Despite their critical role in sustaining Kenya’s productivity and fiscal stability, they remain largely excluded from the formal housing market,” the report says.

“This exclusion stems from a fundamental mismatch between income levels and mortgage financing structures.”

This mismatch extends to the availability of units in the market.

Zamara references survey data from previous public outreach that revealed a critical mismatch between market supply and household needs.

The report notes that under the subsidised KMRC rate of 9.5 per cent, a household earning of Sh100,000 per month can qualify for a mortgage of about Sh3.4 million, enough to purchase a typical affordable housing program (AHP) unit.

However, the report says, AHP’s current housing stock primarily comprises studio, one-bedroom and two-bedroom units designed to meet affordability targets rather than family requirements.

“Our survey indicates that most members predominantly in their 30s and 40s aspire to own three or four bedroom homes suitable for families with children. This points to a fundamental disconnect between policy intent and market demand,” the report says.

It adds that while the AHP may be solving the ‘price equation’, it fails the ‘liveability test’.

“This insight underscores the need for a recalibrated approach to affordable housing that integrates income-based financing models like pension-backed mortgages with demand driven design that reflects real household needs,” the report says, adding that bridging the gap between affordability and liveability is essential if Kenya’s housing programmes are to achieve economic inclusion as well as social impact.