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Affordable Housing: A road map to Kenya's economic recovery

By Qureish Raghib | Published Fri, January 12th 2018 at 07:52, Updated January 12th 2018 at 08:02 GMT +3
[Photo: Courtesy]

Year 2017 was economically challenging and politically exhaustive for Kenya - factors that have extensively affected Kenyans in all spheres of life. 2018 is predicted to be the year of fiscal realignment and political reconciliation.

The terminology 'Rational Behaviour' in economics is defined as a part of decision making practice wherein an individual/company exercises sensible choice making that provides them with the optimum amount of benefit. Rational Behaviour describes decision making that may not always give the best possible returns materially. It however strives to achieve benefits that are most optimal in nature to the decision maker, be it monetary or non-monetary.

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A November 29, 2017 memo issued by Treasury Cabinet Secretary identifies the four key priority areas that would be the cornerstone of Kenya’s development initiatives in the next five years. Christened the ‘Big Four Plan’, the issues of food and nutrition security, affordable housing, inexpensive universal health care and manufacturing are in favour to be allocated State funds in abundance. Housing has become the defining issue of our time as it is evidently at the heart of the current world economic crisis. It is of greater political consequence than most other areas of Government policy.

HOUSING POLICIES

The world is experiencing a crisis on the deficiency of affordable housing. The call for public capital investment in housing by the Government rhymes well with the 2017 UN World Habitant theme ‘Housing Policies: Affordable Homes’ that was celebrated on October 2. “As we strive to create cities for all, an urgent action for achieving affordable homes requires a global commitment to effective and inclusive housing policies,” stated Dr Joan Clos, Executive Director of the UN Human Settlements Programme in his message commemorating the day.

Technically, affordable homes are defined as facilitating houses for rent or sale that are typically 20-40 per cent below market rates. In Australia, the National Affordable Housing Summit Group coins the definition of affordable housing as, "reasonably adequate in standard and location for lower or middle income households and does not cost so much that a household is unlikely to be able to meet other basic needs on a sustainable basis." In the United Kingdom it includes "social rented and intermediate housing, provided to specified eligible households whose needs are not met by the market."

Ironically, the provision of judiciously under-market rate houses that principally supports high-need consumers continues to be at a historic low despite the overwhelming demand for it. Foreign investors like the US based Milost Incorporated and India’s Tata Housing Development Company have subsequently seized opportunities in Kenya and have inked joint low and medium-cost housing construction agreements worth billions of shillings with local market players targeting the growing middle and lower-income segments of society.

Interesting as it is, the comprehensive ripple effects of affordable housing are on-par with building comparable market-rate units. Research has shown the supply of equitable housing tend to increase new consumer spending in moderate-income households that drive the circulation of capital inflow in the neighbourhood; generate new sources of local revenues; create job opportunities; and subsequently contribute to the regional economy. Additionally, a house within means attracts and retains the skilled and semi-skilled labour force within the fiscal parameters.

However, to avoid the negativity factors of exclusive low-income neighbourhoods such as poor quality infrastructure, mixed income housing would extensively help maintain the quality and aesthetics of low-budget housings. State-subsidised housing complex in Pormetxeta, Baracaldo, in the north of Spain, although made of prefabricated concrete, its sharp angles and modern, two-toned colour scheme prevent it from resembling traditional public housing blocks. It won first prize in a scheme design competition.

The government’s pledge to “deliver half a million decent and affordable homes to working Kenyans” by means of housing subsidy programs that include indulgent credit facilities and adoption of cutting-edge innovative technologies and materials is highly ambitious. These cost-effective measures are expected to foster multifaceted production growth starting from increase in raw material output and decrease in manufacturing cost of commodities and services related to the realty sector.

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Real estate analysts suggest that an extended decrease in construction costs can be registered with the facilitation of adequately planned supporting externalities like sewer systems and quality road networks by the government. 

POOLING RESOURCES

While focusing on Kenya’s Vision 2030 growth initiatives, regulated social housing schemes undertaken diligently along the nation’s mega infrastructural projects like the Northern and LAPSSET Corridors would help attain sustainable economic growth and social upliftment. The Herculean task at hand would certainly require an elaborate collaborative effort from private-public partnerships. Saccos for instance have tremendous potential to achieve housing financing solutions. Hopefully, “it will now become an accessible part of the Kenyan dream,” as is envisioned by President Uhuru Kenyatta in his New Year message.  

 

Mr Raghib is a communication consultant and senior partner at Equinox Communication. [email protected]


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