Nairobi developers shift to small houses as costs bite
HOME & AWAY
By Peter Theuri | January 7th 2021
Nairobi’s houses are becoming smaller as the city adjusts to a rapidly rising population and high cost of living.
Data from the government statistician shows that landlords are building houses will less rooms and one-roomed units that can attract tenants faster compared to bigger family homes.
In 2019, 3,940 one-room units were built in Nairobi, an 84 per cent increase from the 2,135 developed in 2015, according to the housing data from Kenya National Bureau of Statistics (KNBS) for 2020.
In between, the increase was gradual. Each year, developers visited the county’s planning department seeking to build more one-bedroom houses, signifying growing demand.
In contrast, the city had 692 new residential buildings with six rooms or more in 2015. In 2019, that number had shrunk to 442.
Plans approved by Nairobi City County between 2015 and 2019 were 288,638. Out of these, only 32,035 were for non-residential buildings.
Nairobi is the most populous county in Kenya with 4,397,073 residents according to 2019 census data, despite it one of the smallest in geographical size.
The population grew 40 per cent in 10 years from 3,138,369 in 2009.
For most of the dwellers, high costs of living mean that they have to look for the cheapest houses in a city known for being expensive.
The Mercer 2020 Cost Of Living Survey ranked Nairobi among the top one hundred expensive cities in the world for expatriates to live in.
The survey covered the prices of over 200 items including food, alcohol and tobacco, domestic supplies, housing, clothing and footwear, home services, utilities, personal care, transportation, recreation and entertainment.
Developers have come to terms with the reality, and the trends are towards smaller houses and fewer and smaller rooms.
This is also what the government is pushing through its affordable housing programme.
“The demand for affordable housing is big. The future I see for the medium term is that affordable housing will be the engine that will power the real estate sector, not the upper end,” Housing Finance Chief Executive Robert Kibaara told Home & Away in a recent interview.
The shift towards the low-end market started even before Covid-19 erupted and significantly reduced spending power.
A landlord in Kangemi told Home & Away that many developers are going for low-cost housing because it is a more rewarding investment.
“If you buy a quarter acre in the high density areas, you could easily fit in 60 prefabricated houses. If you bought the land for Sh2 million, and used Sh80,000 to develop each unit, then your total cost is Sh6.8 million,” said Onyango, who gave only one name.
“If you charge Sh3,000 per house, then you make Sh180,000 per month. You need minimal improvements in the units and within 38 months, you have likely recouped your investment.”
But for a landlord that elects to erect permanent two-bedroom houses on the same parcel of land, Onyango said, then the returns would be substantially lower.
“You will fit four units in the space at most and use Sh1.5 million per unit. The rent will be, say, Sh20,000 per house,” he said.
“You will have spent Sh8 million for buying the land and developing it, and making Sh80,000 per month, it will take you 100 months to recover your cost.”
Landlords have sought to cut as much cost as they can while maximising returns. It is now common to see multi-storeyed buildings in areas where standalone houses used to be the only feature.
Many of them have one-bedroom or bedsitter units.
With a huge population of job-seekers, many coming into the city from the rural areas, low-cost housing have been the way to go.
George King’oriah, a land economist, says even substandard houses in Nairobi are becoming unaffordable for some in spite of their low costs.
In cases where families do not have substantial incomes that could be committed every month to a mortgage, they resort to renting houses.
The affordable rent, he says, has been found to be 25 to 30 per cent of the monthly income.
“For very low income people, this competes considerably with the expenditure for other necessities,” says Prof King’oriah.
“Matters are made worse in situations like the one prevailing in Nairobi where a high rate of rural-urban migration, coupled with the natural rate of population increase and a high inflation rate have complicated the housing demand and supply situation to make the rent of low-cost housing so high that the low-income families cannot afford the so-called decent houses.”
In this case, King’oriah says, the low-income households have no choice but to live in informal settlements.
“Even then, the average rent for the shanties is also rising due to inflation and high demand, despite the substandard neighbourhoods and environments where such average shanties are located.”
The costs of maintaining the high-end houses are high for the landlords with frequent renovations to accommodate the tenants who are also high-end.
The government in 2008 projected that Nairobi would be home to more than 14 million people by 2030.
All these people will need housing amid shrinking space, and not many of them able to afford four-bedroom maisonettes in the upmarket areas.
Last year's KNBS data showed that Nairobi also hosts high-income group that include chief executives of prestigious global companies and top entrepreneurs.
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