Why affordable housing remains Kenyans' elusive dream

However, the affordability of mortgages and the formal structure of the financial system in the country does not match this perceived market that needs houses.

Housing Finance Group Executive Director Joseph Kamau breaks down the numbers. Out of the 2.47 million employed Kenyans, just about two per cent earn above Sh100, 000.

"That means most Kenyans cannot spend more than Sh30,000 (monthly) towards owning a home through rent to own or mortgage. That explains the informality of our neighbourhood. You find a lot of people building houses just to accommodate people and not really decent housing," he explains.

Data from the Kenya National Bureau of Statistics (KNBS) shows that in 2021, there were 2.7 million Kenyans in wage employment. Of this population, 79,909 are those who earn Sh100, 000 and above.

A majority of them (774,468) earn between Sh30,000 and Sh49,999. For someone in this bracket, how one can afford mortgage payments equal to their pay is impossible.

This now explains what has been alluded to by Housing Principal Secretary Charles Hinga on the country churning out units that are biased to the upper market.

Hinga, during an interview with a local media, mentioned that prior to 2017, the country's deficit of housing was over two million units. This is against an annual demand of 250,000 yet the market could only deliver 50,000.

This means every year the market adds a deficit of 200,000 units.

"Interestingly, when you dig deeper to find out what is the composition of the 50,000, what will shock you is that 49,000 of the 50,000 are houses for the high end," he said. "That is three per cent of the entire population. That means for 97 per cent of Kenyans, we were only able to deliver 1,000 units a year."

"Now you get to understand why we have slums mushrooming everywhere," he added.

To ensure more Kenyans can afford housing, the government deployed several ambitious plans to deliver 500,000 units by 2022 as part of President Uhuru Kenyatta's infamous Big Four Agenda where affordable housing is one of the pillars.

While several strides have been made, one of them being the incorporation of KMRC to unlock funding for financial institutions in order for individuals to afford a single-digit mortgage rate, the wage gap where just about 80,000 make Sh100,000 and above still leaves millions out.

Mwaura notes that there is a big mortgage gap where 72 per cent of Kenyans operate. This is the space where Kenyans earn Sh150,000 and below operate. This is the population the government is targeting with the affordable housing programme under KMRC.

"These are mortgages which are currently priced at single digit that you can walk into a bank and get 20 or 25-year mortgage priced at 9.0 or 9.5 per cent," Mwaura says.

The argument for these housing units not being as affordable as the market would expect has been blamed on the high cost of land and other inputs.

PS Hinga noted that when he took office, it was found that land constitutes up to 60 per cent of the total cost of construction. This is compared to 10 per cent in developed economies.

These costs, says Kamau, are what are looked at when determining the affordability of a unit.

"You can buy a house for sh1 million but it can cost you Sh30,000 monthly to commute to work," he says. "An affordable unit is one that does not consume more than 30 per cent of your income."

Mwaura believes as long as one can pay rent, then they can and should be able to afford a mortgage.

He claims that 86 per cent of Kenyans who live in urban or peri-urban areas rent their dwelling. The plan, he says, should be to reduce this population to at least 20 or 30 per cent,

"Those people who are raising Sh20,000 or Sh30,000 rent, I have them. They say: 'Yes I qualify for a four or five-year loan with my Sacco or bank but how can I qualify for 20 years mortgage?"