Why the government should support affordable rental housing
Posted Wednesday, April 18 2012 at 16:55
When, in 2010, the Central Bank of Kenya and the World Bank released a joint report showing that 92 per cent of Kenya’s urban dwellers could not afford mortgages, former Institution of Surveyors of Kenya (ISK) chairman Reginald Okumu received the news with a sense of triumph.
To him, the truth was finally out. “This is an indictment of the government’s housing policies over the decades. We cannot all be homeowners,” he said.
Since his university days in the 1990s, Mr Okumu has been a staunch advocate of affordable rental housing.
He believes that at any one given time, the vast majority of the population of any nation will always be tenants.
The government, therefore, has a responsibility to come up with policies that encourage the development of rental housing, he says.
His argument became even more poignant last week when the latest Hass Property Index report revealed that many would-be home buyers have resorted to being tenants because high interest rates have put mortgage out of their reach.
According to the survey, which covered the first three months of this year, mortgage applications have virtually disappeared in the low-middle end of the market, a development that has affected the volume of sales, with closures taking far longer and buyers coming through in small numbers.
Matters have been made worse by a slowdown in the production of new housing stock because most developers are reported to have put on hold some construction projects, postponed some phases, or reduced the number of homes they are constructing because of the high cost of loans.
“Against this backdrop,” said HassConsult’s property development director, Farhana Hassanali-Hashmani, “we have seen sharp rises in the asking prices for rentals in the first quarter across all segments of the market.”
At the upper end, she said, near-static rentals have finally seen an upward movement in the past three months by five per cent.
“This was the first significant quarterly rise in that market for over a year,” said Mrs Hassanali-Hashmani, while releasing the survey findings in Nairobi last week.
She said apartments, which only two years ago were in oversupply, had registered the greatest increase in rental rates — a 5.6 per cent increase in the past three months.
This, she said, offered a clear signal of a sustained surge in apartment rents… across all quarters, and cumulatively amounting to rent inflation in this market segment.
“We believe this push for higher rents for apartments is now set to be sustained for some time as landlords seek to improve yields at a time when the supply of new apartments is now slowed and buyers are holding off on home purchases and renting instead,” she said.
But people like Mr Okumu, currently a director at Ark Consultants, a Nairobi-based real estate firm, are concerned that it is the lower-middle and low-income groups that will suffer the most since they can neither afford mortgage nor do they have access to decent affordable rental housing.
“I think we have given rental housing a raw deal in this country. The reality is that the number of people who can own a home is very small.
“Why then don’t we focus more on providing quality affordable rental housing?” asks Mr Okumu, who estimates that 80 per cent of Kenyans are renters.
Most of these, he says, are the low-income and lower-middle income groups.