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Council staff reap millions from selling housing rights

By - | Published Tue, December 25th 2012 at 00:00, Updated December 24th 2012 at 21:25 GMT +3

BY MOSES MICHIRA

Old tenants living in City Council of Nairobi estates are defrauding the council by selling occupancy rights in a chain of deceitful deals that are denying low-income earners access to housing.

Rent on City Hall’s housing projects is considerably lower, about a third of the going rates in the open market that has helped the illegal trade flourish even as the cash-strapped council is borrowing from banks to meet salaries.

Our investigation has revealed that shrewd council employees are involved in the well-connected racket that is a money-spinner out of the transfer of occupancy rights among tenants who are mostly well-to-do.

Rights to rent a three-bedroom apartment in the council’s Buru Buru housing project, for instance, are selling for between Sh1.3 million and Sh1.4 million, which is payable to the tenant.

City Hall levies a monthly rent of Sh10,000 for the three-bedroom units, while the same houses are let to secondary tenants at the market rate of Sh30,000 per month.

The same scheme is replicated in Kaloleni, Jericho, and Ziwani, among other Nairobi City Council estates.

 “It is not possible to find a tenant moving out of a council house in this estate without selling the rights to the next occupant,” says Tony Karanja, one of the brokers in the trade who operates a grocery shop within the estate.

Tenancy rights for a one-bedroom apartment in the same estate are selling at Sh600,000 and attract a monthly rent of Sh4,500 paid to the City Hall, but is let to secondary tenants at Sh15,000.

The breakdown details the massive revenue losses for the NCC, which was pushed to procure a Sh5 billion bank loan from Equity Bank to settle accrued statutory deductions for its workers that had gone unpaid for years.

City Hall owns 16,632 housing units in Nairobi spread across several estates from where it collects monthly rent of a paltry Sh45 million, even as the same property would easily attract over Sh500 million.

Low occupancy rates

Mr Karanja, who has himself bought rights to tenancy in the council housing, says most of the present residents do not own the houses and are secondary tenants, whose details are unknown to City Hall.

For instance, in one block of about 14 three-bedroom apartments, four units were vacant at the time of our visit even as records at City Hall show full occupancy since the project was completed in 1975.

Most of the original tenants in the housing project are either retired or have moved houses into more affluent neighbourhoods, according to Karanja, who revealed that three of the three-bedroom apartments have been ‘on sale’ for months now.

The low occupancy rates in the council estates are believed to have replicated in several other blocks within the housing project, despite the biting shortage of homes in Nairobi, with about half of the city’s population living in informal settlements.

Senior employees at City Hall’s Social and Housing department facilitate the transfer of tenancy of houses to the buyer for an illegal fee of anything between Sh50,000 and Sh100,000.

A willing buyer is required to place a down payment of about half the purchase price to the seller, who would then begin the transfer process, which entails changing the name of the tenant in City Hall’s records and obtaining new lease papers.

The balance is settled once the tenancy is in the buyer’s name, going by recent transactions that Karanja has been involved in.

He also gets a cut from the buyer and seller as commission for the transaction.

The director of the Social Department at City Hall, JN Kariuki, claims he was unaware that any of the estates owned by the council had vacant houses and denied knowledge of the parallel housing market.

“We do not know about such transactions but it is true that tenants hardly ever want to move out of our houses because they are much cheaper compared to the market rates,” Mr Kariuki told The Standard.

 “Past attempts to review rents in the council’s housing has been met by stiff opposition from Councillors and Members of Parliament in the city,” he added.

Kariuki reckons the inability of City Hall to review the rents it charges on its residential property had become the biggest hurdle to NCC’s intention to maintain the heavily dilapidated estates.

Poor households that should be the beneficiaries of the social housing projects meanwhile continue to be left out, even as their privileged counterparts reap big from the parallel homes market.

City Hall remains the biggest loser in the racket, and faces the possibility of seeking a new loan to pay off its workers’ salaries this month.