Of demand and supply: Why affordable housing uptake has slowed down

The lack of a pool of potential homebuyers from which the market can draw whenever units are ready is the biggest setback derailing affordable housing delivery in the country. 

A new report analysing the structures behind demand and supply notes this misalignment and proposes the creation of such a pool. 

The report by Financial Sector Deepening (FSD) Kenya calls it “The Housing Waiting List Guarantee (THWG)”.

This is a tiered waiting list that bundles potential homeowners according to their needs and financial readiness. 

Players in the sector will have access to this list and even walk with those who are not financially ready by helping them to move up the ladder. 

It is from this list that mortgage providers, developers and other off-takers will draw those who are ready to own homes and facilitate the same. 

FSD Kenya says the core intent of this strategy is to create a practical mechanism that can identify ready households in a structured and verifiable way.

They can then be matched to available housing units by geography and typology, providing a disciplined, short-duration payment-interruption backstop that enables institutional off-takers to enter into rent-to-own transactions with greater confidence. 

The report says the challenge with affordable units’ delivery in the country has been verifying demand by determining who exactly is ready, what kind of unit they want, in which location, and what their payment band is. 

The lack of such a structured intel pool has developers and other off-takers building blindly, hoping that their units will be absorbed in the market. 

THWG, as explained in the document, has four tiers based on affordability levels. Tier A has high stability and affordability; Tier B has affordability but is unstable; Tier C is stable but not yet ready, while Tier D is a low-stability, low-affordability segment. 

For tier A, allocation should be fast-tracked, while those in tier B should be monitored and reassessed as they stabilise cash flow. A coaching programme has been proposed as well for tier B. 

Households in tier C, who are stable but not yet ready, should continue to build saving buffers by being offered savings discipline tools and income pathway support. 

Those in tier D, allocation should be deferred and referred instead for social support. They are to be re-assessed in six to 12 months. 

The report titled Unlocking Construction and Institutional Off-take Financing for Urban Housing says affordable housing delivery is constrained not only by construction capacity but also by off-take friction, weak readiness evidence, and the absence of disciplined mechanisms to manage payment interruption risk. 

“THWG is designed to address these binding constraints by creating a verified demand pipeline, matching that pipeline to real unit flows, and enabling institutional off-take through a bounded, auditable guarantee facility,” it says. 

The report explains that current approaches to targeting and allocation of units fail because registration for a house does not necessarily equate to one being ready. 

“Many lists and databases track interest, not readiness,” it says. “Without tier progression and evidence thresholds, the top of the pyramid remains thin and unpredictable.” 

The current system also has weak matching capability, misprices risk and lacks clear decision rights. 

The report says allocation often occurs without robust matching on geography, typology, affordability band, and timing. 

This then increases failed allocations and creates idle unit risk. There is also the issue of payment interruptions, which the report says are common in low- and moderate-income segments.

It explains that if replacement is slow or inconsistent, arrears accumulate, and the perceived risk becomes structural rather than short-term. 

“Affordable housing need is widespread, but need does not automatically translate to a stable off-take pipeline,” the report says. 

FSD Kenya says in the report that the binding problem is that the market often lacks credible, verifiable demand, transaction readiness, and disciplined risk containment, which makes institutional participation realistic without turning the system into an open-ended subsidy. 

Transaction readiness should be verifiable through deposit buffers, payment behaviour, and other household stability indicators. 

“In the absence of these, developers and off-takers face high uncertainty. They expend resources on fragmented marketing, manual selection, and repeated allocation failures. The result is that units can remain unabsorbed or are absorbed with high churn and arrears volatility,” it says.