Making mortgages work for Kenyans: A practical path through partnerships and patient capital

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For decades, Kenya’s housing challenge has been framed as a question of supply. The prescription, naturally, has leaned toward supply-side solutions.

This is what explains a relentless drive to build.

However, at its core, it is not just a question about how many units we build. Evidence points decisively to a deeper constraint: affordability. 

The latest Central Bank of Kenya Bank Supervision Annual Report 2024 points out that the structure of our mortgage market—characterised by high interest rates, short repayment tenors, and limited access to long-term funding—has effectively excluded the majority of Kenyans from formal home ownership.

With just 30,000 active mortgages and a loan book of Sh279.3 billion, the market remains significantly small relative to the need. Pricing tells the story. Average mortgage rates of 14.9 per cent and tenors of about 11 years translate into difficult monthly repayments, placing formal home ownership beyond the reach of most households.

Banks are right to point to the fundamentals. Incomes are too low, property prices too high, and long-term finance too scarce. But these are not isolated failures—they are systemic.

High land costs, costly titling processes, and regulatory frictions all compound the problem, inflating the final price of housing. Demand is not absent; it is simply priced out.

To put this into perspective, an average borrower must service monthly instalments exceeding Sh100,000.

Yet the income distribution tells a very different story: more than 85 per cent of formally employed Kenyans earn below that level, effectively locking out the vast majority from mortgage financing.

Joint studies by the Financial Sector Deepening Kenya (FSD Kenya) and the Centre for Affordable Housing Finance in Africa (CAHF) indicate that only about four per cent of Kenyans can afford a Sh10 million mortgage.

Without addressing this mismatch, Kenya risks entrenching a two-tier housing system: one for a thin upper tier, and another where the majority remain perpetual renters.

The World Bank framed Kenya’s housing challenge as a financing problem, noting that most households are “unable to access long-term housing finance,” which led to the creation of the Kenya Mortgage Refinance Company (KMRC) to inject long-term liquidity into the system.

There are signs of progress.

The KMRC is helping to lengthen tenors and lower borrowing costs.  The KMRC acknowledges that persistently high, double-digit interest rates—reaching up to 18.7 per cent—continue to “effectively constrain mortgage affordability,” despite efforts to bring down rates through refinancing mechanisms.

While KMRC-backed loans  have lowered borrowing costs to less than 10 per cent in some cases, these remain limited in scale relative to demand.

From a macro-financial perspective, the affordability crisis reflects deeper structural distortions highlighted by institutions such as the IMF and the Kenya Bankers Association (KBA): high interest rates, short-term funding structures, and risk-based pricing frameworks continue to keep the cost of credit elevated.

Mortgage rates still range broadly between 11 and 16 per cent even after recent monetary easing, underscoring the persistence of expensive credit.

Banks, as the Kenya Bankers Association (KBA) notes, remain cautious, balancing credit growth with financial stability in a high-risk environment.

In effect, Kenya’s housing market is trapped in a feedback loop—low affordability suppresses demand for mortgages, which in turn limits scale, keeps costs high, and perpetuates exclusion.

Until long-term funding, lower rates, and income growth converge, mortgage finance will remain a privilege rather than a pathway to mass homeownership.

Fixing affordability will require coordination, not isolated interventions—government to unlock land and streamline regulation, banks to innovate on pricing and risk, and capital markets to provide patient funding.

One such innovation and practical way to expand mortgage access in Kenya is through structured employer–bank housing schemes, where companies partner with lenders to de-risk borrowers and improve affordability.

The latest such innovation is the Safaricom Kikao, in which institutions such as Stanbic Bank Kenya have demonstrated how preferential staff mortgage terms—lower interest rates, longer tenors, and payroll-based repayments—can materially improve access.

Similarly, corporates such as Safaricom can leverage its scale and stable payroll base to negotiate favourable housing finance arrangements for employees.

Internationally, such models are well established: in markets like the UK and South Africa, employer-assisted housing schemes reduce default risk by anchoring repayments to predictable income streams, enabling banks to price loans more affordably.

For Kenya, scaling this model beyond blue-chip firms could be transformative. By pooling employees across sectors, standardising agreements, and linking them to long-term funding from institutions like KMRC, lenders can extend similar benefits to a broader segment.

It is possible for such properly structured schemes to align incentives across employers, banks, and employees, and turn housing finance from a high-risk product into a manageable, scalable asset class.

The writer is the head of products at Stanbic Bank Kenya