Affordable housing: Will State's data-backed action now pay off?

**President William Ruto during the inspection of the ongoing construction of the 220 affordable housing units in Bomet County.** [PCS]

The Government is banking on an elaborate breakdown of Kenyans’ incomes to ensure those in need of housing units will be able to afford no matter their take home.

As the Affordable Housing Act, 2024 takes effect following President William Ruto’s signature, the Government’s approach of ‘something for everyone’ while it may appear too ambitious to be realised has been defended to be backed by data.

It is not the first time the Government has relied on data owing to the fact that it was the premise through which five years ago the State formed the Kenya Mortgage Refinance Company, a refinancer for primary mortgage lenders.

The purpose of KMRC as expressed by then-President Uhuru Kenyatta was to see the number of mortgages hit 60,000 by 2022.

By 2022, data from the Central Bank of Kenya’s Bank Supervision Annual Report 2022 shows the number stands at 27,786, a far cry from the set target. Even with data, it may seem that the Government still has a challenge determining what is affordable for the market.

This time, however, Principal Secretary of State Department for Housing & Urban Development Charles Hinga almost vows that they got it right.

The PS states that the new approach that caters for Kenyans from all walks of life will address systemic failures that makes the economy accommodate less than 30,000 mortgages.

The approach has also seen the Act have rural housing to cater for those who desire to build their homes away from the hustle and bustle of the City.

“We will see a situation that if you want to go and build your rural home you can get a loan to do it,” said the PS during an interview with The Standard Group’s Spice FM.

Data referenced by the Association of Microfinance Institutions in a housing related report in 2023 shows that the majority of Kenyans, 48 per cent, fall in the income bracket of individuals who earn Sh19, 999 and below.

Those who earn between Sh20,000 and Sh49,999 are 32 per cent, Sh50,000 and Sh149,999 are 18 per cent and those above Sh150,000 are three per cent.

KMRC single digit mortgages, however, target the mortgage bracket of Sh50,000 and Sh149,999, whose supper limit has now been pushed to Sh200,000.

KMRC Chief Executive & Managing Director Johnstone Oltetia explained to The Standard that the targeted income bracket is essential to financing that was lacking in that segment.

“While the demographic shows that it is 18 per cent and a lot more below that, who are majority of the Kenyans, the distribution is nonetheless useful so that you can have a target. KMRC targets the Sh50,000 to Sh149,000 and the Government will then target the other demographic areas which is social housing, the (slum) upgrades and others,” he said.

Mr Oltetia explained that there are two aspects that underpin affordability of units: affordability and accessibility. He said accessibility is matching what people need with what is available and that is a supply of housing issue. Affordability, on the other hand, is housing cost to income ration.

“And that usually has to be low because you do not want to live in a house under pressure, he said. “Affordability then means your housing cost to income ration should be 30 per cent. That is actually the universal standard.”

He said affordability is unique to an individual.

“For example, if you want to buy a home for Sh1.5 million it has to be affordable to you and this means the capacity to repay the loan but still, nonetheless, have disposable income for you to run other things. That means your net income must not exceed 30 per cent on housing matters,” he said.

Speaking on Spice FM, PS Hinga gave his breakdown of income brackets which shows the population is made up of 70 per cent working class.

Of these individuals, he admits many of them will require social housing. This is because 75 per cent of the working class earn about Sh50,000. Those who earn Sh20,000 and below make up 15 per cent of the working class population. Those who make above Sh150,000 are three per cent.

As such, the cheapest housing unit will be going for Sh3,2 00 per month for a one-room unit to as much as Sh41,800 monthly for a three-bedroom unit with high-end finishes on a tenants purchase agreement. A room, according to the latest inflation figures of February 2024 by the Kenya Bureau of Statistics, is Sh4,069 a month.

“We are addressing systemic failure, where a country of almost 50 million has about 30,000 mortgages,” said the PS.

Mr Hinga said with the stated monthly payments across the three cadres, the intention is to ensure Kenyans do not pay more than their current rent towards ownership.

“What we are very careful about, is to make sure we sort of equate what they are paying today but now you give them decent unit with all the basic services and utilities that they need,” he said.

A two-roomed unit under social housing will cost Sh4,800 with a three-roomed unit costing Sh6,400.

When it comes to the low middle-income range, the Government also has three typologies: a studio apartment that will cost Sh5,200, while a two-bedroom for Sh15,600. The PS said the two-bedroom is the most sold unit in this category.

For the mid to high-end market, affordable housing also has options for these customers where their units will have finishes like master en-suite. A two-bedroom in this category will go for Sh31,200 while a three-bedroom will cost Sh41,800 per month.

“Even as we urbanise and the cost of land goes high, we are one of the most unequal societies,” said the PS.” When you have high cost of land and low incomes, we start pushing the working class out of the urban core. But where do they go to?”

He added: “So as you are pushing these people out, your expectation is let them go to the Mavoko area, where there is land to settle. But they need to take two or three matatus to get to work. These individuals end up living in shacks developed by slum lords.”