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Sink or swim? Uhuru’s housing plan in acid test as corona rages

REAL ESTATE
By Mwangi Muiruri | Apr 16th 2020 | 4 min read
By Mwangi Muiruri | April 16th 2020
REAL ESTATE

An artist's impression of the Pangani Affordable Housing project being undertake by Technofin under the government's Big Four Housing agenda. [Photo: Courtesy]

The continued rise of coronavirus numbers across the country is threatening to stall the realisation of President Uhuru Kenyatta’s housing agenda.

This is the State shifts resources to fight the pandemic that has so far killed 10 people in Kenya, and efforts to contain its spread lead to restricted movement and a slow down in economic activity.

While the country’s gross domestic product (GDP) was projected to grow by 6 per cent from last year’s 5.9 per cent, the virus has hurt key sectors, with the Central Bank and the Treasury revising growth estimates downwards to as low as 3 per cent. The International Monetary Fund (IMF) puts its projections at 1 per cent.

Key elements

In a recent update, investment firm Cytonn said the effects of the pandemic on the economy would back-pedal progress made in the country’s housing sector.

“The government had taken a bold initiative to deliver on affordable housing. The initial plan had useful and constructive elements, but the net effect of the Covid-19 pandemic will batter some key elements in the plan,” the firm said.

Cytonn, however, believes that strengthening the integrated framework, revising eligibility criteria, reviewing flexibility to fit varied incomes and upscaling of private capital participation will see the housing sector rebound.

On its part, UN-Habitat says the housing agenda will face hurdles, “but not to a level of collapse”.

“The time-frame and mode of achieving the agenda are solid, but not immune to coronavirus and its economic aftermaths. But it is broader and has time to recover,” said UN-Habitat Programmes Officer John Ougo, noting that the country’s New Urban Agenda runs to 2036, not 2022 as widely cited.

But according to former Parliamentary Budget Committee chair Elias Mbau, who is an economist, the virus has dampened hope for the housing agenda.

“The situation looks bleak because we need taxes to finance the construction of those housing units. We need donor funding, as well as a public-private partnership to speed up the housing agenda. We only have two years left to take stock of this agenda. We most certainly will not meet it,” said Mr Mbau, who is the chair for the New Partnerships for African Development (Nepad).

He added that the collapse of economic sectors in the face of the viral scourge presents a major leak for future budgetary estimates.

“With production now strained, it means the consumption aspect of the economy will suffer. That is how we will lose the agenda on housing,” he said.

Wanjumbi Mwangi, a public policy analyst, said the resources required to deliver on the agenda were never clearly computed in the Budget Policy Statement for 2018-19.

Parliamentary Budget Committee Chairman Kimani Ichung’wa concurs that it will be hectic to marshal the necessary resources in the wake of the Covid-19 crisis.

“We are not even at 10 per cent on realising this housing agenda where we were targeting to build 800,000 affordable housing and 200,000 social housing units by 2022,” he said.

“We only have two budgets (2020-21 and 2021-22) remaining for President Kenyatta’s term to end in 2022. How we will achieve 90 per cent of this housing agenda within two budgets is simply unrealistic.”

He said the 2020-21 budgetary estimates will now be revised to factor in the aftermaths of the Covid-19 scourge that is eating into the heart of the country’s economic lifelines.

Last August, Transport and Infrastructure Cabinet Secretary James Macharia said Sh3 trillion was needed to midwife the housing agenda by 2022 — a figure that is bigger than the total estimates of the entire 2017-18 fiscal year

Mbau added that even before Covid-19, the housing agenda was in the “wrong hatchery” after stakeholders failed on the basics of funding it.

“Coronavirus is just the last straw that broke our beautiful housing agenda. We will now focus more on securing our people healthwise, not housing them. We cannot build houses for a dying population. It is an issue of priority,” he said.

Higher ground

He explained that housing could have been struck by Covid-19 while on higher ground if stakeholders had agreed fast enough on financing it.

Mathira MP Rigathi Gachagua said the Treasury is not sure if it will manage to balance the 2020-21 fiscal estimates. The Treasury allocated Sh10.5 billion to housing in the 2019-20 budget, and Sh8 billion in the previous 2018-19 budget.

Counties, according to Budget estimates, have spent Sh38 billion so far on the sector - a figure that still dashes hopes of realising one million housing units by 2022.

Analysts said only one per cent of the housing agenda has been met so far.

Data from the Treasury shows that over the last three years - from 2016-17 to 2018-2019 - the government has spent Sh18.4 billion on the sector, while counties have spent Sh19.3 billion for a total of Sh37.7 billion. The housing agenda required Sh260 billion.

Land for the planned projects remains another key challenge in the affordable housing scheme that will cover 7,000 acres of land spread across five major urban areas.

They include 800 acres in Nakuru, 1,200 acres in Mombasa, 3,000 acres in Nairobi, 1,000 acres in Kisumu and 800 acres in Eldoret.

The biggest hurdles have been scarcity and high costs of land, especially in major towns.

Land prices have been reported to climb up as high as 200 per cent in the past 10 years, handicapping private developers interested in partnering with the State on housing.

Analysts have also cited the “cumbersome” public-private partnership framework that inhibits effective and rewarding collaboration between government and private corporations.

PesaCheck, which deals with public finance, argues that the State will not be able to achieve the envisioned housing plan due to economic pressure from the pandemic.

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