Middle class housing woes

A "For Sale" sign stands in front of a house. Affordable housing for city’s middle class shrinking rapidly. PHOTO | FILE

What you need to know:

  • A large number of Nairobians  are in danger of being priced out of the city, all thanks to rent increase and high house prices

When Legacy Heights Apartments opens its doors later this month, tenants will  fork out Sh30,000 monthly for a one bedroom. A two bedroom will go for Sh45,000 per month.

The apartments are located in Uthiru, 20 kilometres from Nairobi city centre.

But some Nairobians have complained that the rent is too high.

 “Awesome houses, cheeei but the price is too high (sic), please make it Sh20,000 and Sh25,000 (for one bedroom and two bedroom apartments) respectively,” read  a post by a Facebook user, Mary Mariama.

“Thanks Mary, quality finishing costs a lot, unfortunately. We have to recover by charging a premium,” responded Legacy Heights.

 The managers of Legacy Heights Apartments had posted attractive photos of the newly-built apartments hoping to woo clients on their Facebook page.

By February 27, the post had received 554 likes, 256 comments and 34 shares. Many of those who commented decried the high rent charged. “That house should range at Sh25,000 or less” pointed out Facebook user Calvo Ochy. 

When Mary saw that her pleading was getting her nowhere, she threw in the towel: “Ok, bei ikishuka tag me (if the price goes down, let me know).”

Other Facebook users thought she was funny, but not Legacy Heights Apartments Facebook page administrator, who did not react to her comment.

Uthiru is located 20 kilometres away from the central business district. Interestingly, the longest distance to the township also happens to be the shortest.

It would take you 41 minutes to access Uthiru via the Southern bypass, which is a distance of 24.4 kilometres, but if you opt for Ngong Road, you will be on the road for at least 51 minutes, beating your way out of traffic to cover the 14.9 kilometres to the town. The town is also 21.3 kilometres and 41 minutes away from the city via Waiyaki way, according to Google Maps.

Legacy Heights Apartments complex is located about half a kilometre off Naivasha Road on a dusty feeder road and, it is therefore easy to see why people would shudder at the prospects of paying Sh30,000 a month for rent.

Nakuru-based financial advisor Dalton Walukaya, and also the director of Visalife Financial Services Ltd, told DN2 that for someone to be able to pay comfortably Sh30,000 monthly rent, they would need to earn more than three times that figure.

Flats in Nyayo Estate, Embakasi. PHOTO| FILE| NATION MEDIA GROUP

This works out to about Sh90,000 and above, and it puts the person right into the middle class bracket.

While this example highlights the tight situation renters are finding themselves in when looking for accommodation in the capital, those who opt to buy a home have also found themselves locked out of the market due to high prices.

In Avic Park Apartments on Laikipia Road, Kileleshwa, Nairobi, two to three bedroom apartments are selling between Sh27 million and Sh65 million. The company’s sales manager told DN2 that their target market is largely the middle and upper classes. 

Ruaka houses

A spot check by DN2 on various online listings showed that a three bedroom apartment in Kilimani will cost at least Sh19 million while in Lavington, a similar apartment on a Kings Pride property, listed on a popular local listing website, is going for Sh30 million.

This is just about the price of similar properties in that neighbourhood. On the northern side of the CBD, in Ruaka, a two-bedroom house is ranging at between Sh12 million and Sh17 million, with a three bedroom fetching slightly more than that. 

Cases of property developers coming up with multi-million shilling housing projects, yet said to target the “ever ballooning” middle class, are commonplace.

RAISES A NUMBER OF QUESTIONS

This raises a number of questions: Can an average middle class person afford such a property? What are their average salaries and would they need to take up a mortgage to buy a house? How much mortgage are they entitled to?

If the developer’s assertion that the middle class is ballooning holds water, why is it that there are only less that 30,000 mortgages in a country with over nine million households? Are developers basing their projects on well-done research, facts and figures, or just perception?

According to Kenya National Bureau of Statistics (KNBS), the middle class consists of households which spend Sh24,000 -120, 000 per month.

The upper class comprises of those who spend more than Sh200,000 a month. Another data by KNBS in 2015 said that 64 per cent of the Kenyan workforce earned low wages (between Sh20,000 and Sh49,000).

Global rating agency Moody’s, in its 2016 research provides the most recent data analysis on the middle class in Kenya.

Even though the middle class is growing, Moody’s noted that the growth is regrettably slow.

According to the research, in 2014 only 800,000 people were considered to be in the middle class bracket, with the lower middle class and the proper middle class splitting that figure equally between the two classes.

There was not a single person in the upper middle class category then but the agency projects that by 2030, there will be approximately 100,000 upper middle class persons in Kenya, with figures in the lower and the proper middle class categories shooting up to 1.4 million (or 10 per cent of the population) and 1.1 million (8 per cent) respectively.

ANNUAL INCOME

For most middle class Kenyans, annual income stretches from Sh850,000 to Sh4.2 million, translating to Sh70,833 to Sh350,000 a month.

“We are in a situation where the cost of credit is too high for most Kenyans in terms of how houses are currently priced. So if you say the lower middle class earns between Sh70,000 and Sh80,000 a month, then weigh the cost of housing in addition to the cost of loan, you will find that with earnings of about Sh80,000 a month, you can’t really buy a house even if you were to put the whole salary on mortgage,” says renown Kenyan development economist, researcher and analyst, Anzetse Were.   

Dr Jacqui Kisato, a city resident who falls in the middle class bracket, is one of those who have found themselves between a rock and a hard place while home-searching. 

 “If you look at the mushrooming apartments for sale, it gives an impression that there are a lot of Kenyans joining the middle class every year. Why are these prices skyrocketing? What market forces are pushing these prices exponentially higher every year? What percentage of the middle class can afford to buy these houses?” She poses. 

Although those are salient concerns, you might want to cut the developers some slack for the hike in house prices, Ms Were says.

She notes that as a matter of fact, the major reason house prices have skyrocketed in the recent past is increasing demand for housing.

“Other than construction materials being very expensive and the cost of land in urban areas being very high, there is a large scale demand for housing that is putting pressure on prices,” says Ms Were.

Overall housing demand in Kenya is estimated at 200,000 units annually, yet just 30,000-40,000 units are added to the market each year, according to the Ministry of Land, Housing and Urban Development. This, notwithstanding a backlog of over 2 million house units accumulated over the years.

“As long as that demand for housing is not met consistently and in a sustainable way, you will find that house prices will tend to be high because supply is not matching demand. That also puts pressure on rents,” offers Ms Were.

There is not a single research that aptly describes the median age for middle class people but experts concur that they could range anywhere between late twenties to early forties. This is a group that has in the past received widespread accusations of having misplaced priorities and being spendthrifts; factors experts argued could be detrimental to their home ownership goals.

EDUCATION, HEALTH

But Ms Were dismisses the stereotype, saying: “One thing is for sure, the poor state of public health and education systems means that a lot of Kenyans who are in the middle class bracket use private options which are expensive, but they feel more comfortable with that. Most would rather privatise the education of their children and health care,” she says.

Still, the cost of living in urban areas in Kenya is very high and this too takes a toll on the middle class person’s income.

“If you look at the amount of money people pay on food, transport and electricity; that eats into the income that the middle class has to spend on a daily basis,” says Ms Were.

There is also the issue of lack of a proper social security system by the government, the cash transfer programme for the elderly notwithstanding, a programme Ms Were says the money committed by the government is not enough and therefore, middle class earners find themselves with many financial obligations to foot.

“In some countries if you are unemployed you get some benefits; if you are poor you get food and other benefits. That structure doesn’t exist in the country. So you will find that the middle class are paying for school fees for their relatives. Sometimes they often have people living off them in their homes, who are not their immediate family members. They may also find themselves paying medical bills for friends and acquaintances. Therefore, there are all these costs that the middle class has to take care of because we do not have a government that can afford that social security system. So it eats into their income,” offers Ms Were.

The result? People will tend to build houses upcountry. But from a practical viewpoint in terms of living and working in Nairobi, Mr Walukaya says the reality is most middle class people have no resources to build or own property in urban areas; they are happy to rent.

And that’s partly because of how expensive it is to buy a house and because of all the other financial obligations that they have.

The fact that most of the middle class may not afford some of the properties coming up in the market puts the country in a very precarious position. Any housing intervention, for instance the government’s 500,000 low cost homes, meant for the low income earners, may not necessarily benefit the intended people, but these houses could land in the hands of middle class persons.