How the housing agenda grows Kenyan economy through SMEs

Affordable housing project located at Mukuru in Nairobi that was inspected by president William Ruto on October 03, 2022. [Denish Ochieng, Standard]

The National Development Plan in the Vision 2030 Strategy targets provision of 200,000 housing units annually for all income levels. With only 50,000 new housing units supplied every year, Kenya faces a shortage of about two million housing units.

Most housing units are by the private sector with 80 per cent targeting the high-end market and only two per cent for the middle-income populations. Three-quarters of the young population is estimated at 45 million, under 35 years. Coupled with rapid urbanisation, at an annual rate of 4.3 per cent in 2021, it has put pressure on the need for housing, infrastructure, and related amenities with 61 per cent of urban households living in slums.

This deficit is rising due to constraints on both the demand and supply side worsened by an urbanisation rate of 4.4 per cent, equivalent to 0.5 million new city dwellers every year. The Kenya Kwanza government has therefore made the Affordable Housing Programme (AHP) the centrepiece of all efforts geared to providing decent, safe, and affordable housing.

The State Department of Housing and Urban Development and its implementing agencies have overseen several projects such as Pangani, Nakuru Bondeni, Moke Gardens and Buxton. These projects were done in collaboration with county governments and private sector.

AHP is not just about four walls and a roof, it is about job creation. From jua kali artisans fabricating doors and windows, to mama mandazi na chai, the construction site is a job and wealth creation facility like no other. The economic impact of the programme is expected to raise the GDP from 7 per cent to 14 per cent. It is envisaged that every Sh100 invested into the sector will add between Sh150 and Sh300 into the economy.

The nature of housing and construction that the AHP will be engaged in will require necessary frameworks providing sufficient exploration of value add-ons in the manufacturing and financing sectors. Resolving existing huddles in these sectors would create an environment for development, completion, and occupation of housing projects nationwide.

Key steps have been taken to reduce construction costs including exemption of VAT on importation and local purchase of goods for the construction of houses under the affordable housing scheme. Developers will also pay a lower corporate tax of 15 per cent for construction of above 100 units. We, therefore, expect heightened construction activity that would spur the Jua kali sector. The government's housing agenda has helped in formalising the informal sector to create capacity for partnerships and expansion. Ring fencing strategies have been established to ensure that the Jua kali sector is able to supply inputs to the affordable housing program.

One such instance is corporatisation of Ngong road, Kamukunji and Kariobangi Jua Kali associations to form NgoKamKa. As a result, the newly formed corporation amassed a unified membership of 10,000 members. This allowed the Jua kali associations to supply essential building materials and tools. These tools include steel wheelbarrows, trowels, chisels, hammers, rakes, pangas, marking pegs, box gutters, and assorted nails among other essential materials.

Alongside housing projects, access to social amenities, convenient commutes and services close to residential areas is highly considered in the programme - it will improve quality of life and create sustainable communities. Developments should have schools, hospitals, playgrounds, markets, and transport corridors close to where people will live. These amenities create high demand for materials and tools to be used in the construction process. The Jua Kali sector has been linked to MSMEs as suppliers of these much-needed construction inputs such as industrial building supplies, doors, and windows. The Jua kali sector and MSMEs have been integrated with TVET institutions across 28 counties. 149 of these institutions can help automate and mechanise Jua kali-related trades. These efforts broaden the informal sector's capacity to participate in the affordable housing programme.