Planning is all it takes to provide housing for all

The Kenyan government’s aim of building 500,000 affordable homes in five years, if successful, could jumpstart a lagging real estate sector.

It would also place public-private partnership (PPP) at the centre of economic life for one of Africa’s most rapidly urbanising countries, Kfir Rusin, the managing director of  the East Africa Property Investment (EAPI) Summit told DN2.

He was speaking ahead of this year’s two-day EAPI conference, which  will be held on April 24 and 25 in Nairobi. The event’s focus this year, is  developing a strategy for realising the government’s goal, and will bring together property stakeholders from the region to to learn, network and most importantly, conclude deals. 

“We’re bringing private and public-sector stakeholders together under one roof at EAPI 2018, and we believe we will develop the roadmap to making affordable housing a reality,” said Rusin.

President Kenyatta’s announcement, in November 2017  energised a lacklustre real estate market, still recovering from its worst performance in six years.

But the Chairman of the Kenya Property Developers Association, Mr Mucai Kunyiha, argues  that a lot of work must be done first.

“Our members are keen to unlock the key obstacles that have hindered progress in the sector in the past, including proper planning by local authorities, provision of adequate infrastructure, and a complete overhaul of the  land registries, whose ability to deal with the existing volumes of transactions is already strained,” said Kunyiha. 

But the demand for affordable housing is one of the most significant opportunities for PPPs in Africa, with Kenya having the opportunity to create a workable model for the continent to adopt.

Ms Kecia Rust, the executive director of the Centre for Affordable Housing Finance in Africa (CAFH), an independent think- tank working to support and grow housing markets in Africa for increased affordability, argues that there is a huge opportunity for affordable housing and could lead to the creation of 1.3 million jobs across the continent and $400 billion in direct economic activity. Kenya, she argues, is one of the markets that could lead the way by creating a workable PPP model. However, certain fundamental issues must be addressed.

THE REAL CHALLENGE

“The real challenge is the housing value chain, and if we look at the first step, land, how do we get access? We have to look at the municipalities and ask who administers it and address infrastructure requirements and needs first.” 

Ms Rust says the State has a crucial role to play in making it attractive for developers to invest in housing by providing incentives and financing for infrastructure. One solution, she says, is to split funding between housing and infrastructure, where the State could issue say, a 100-year bond to fund bulk infrastructural projects such as roads and water connectivity. This strategy would reduce development costs and make affordable housing projects more attractive for developers. 

The lack of bulk supporting infrastructure such as feeder roads, water, electricity and sewerage systems has been the reason most developers have shunned budget homes and concentrating on the higher-end consumers.

They have, however, been able to put up just about 35,000, mostly unaffordable homes per year, against an annual demand of 200,000 units.

This means the lower and middle ends of the market continues to be underserved.

“The majority of the middle and lower working-class households simply can’t get a foot in the door,” said Rust.

Therefore, reducing costs and providing finance for aspiring homeowners  is critical in a market facing such an acute shortage.

Prices have risen dramatically in Nairobi since 2010, with a ten-fold increase in price from Sh400,000 to Sh4 million for the most inexpensive home, according to EAPI data. Yet mortgage uptake remains low, with only 25,000 homes  bought through them.

While the government remains tight-lipped about its definition of   an “affordable home”,  Mr Kunyai defines it as a building costing up to Sh4 million to buy, and targeting households that earn between Sh40,000 and Sh100,000 per month.

Meanhwhile, Barclays Kenya Head of Strategy, Mr Moses Muthui, said: “We’re looking forward to affordable housing and how we can work together with the government and the private sector in order to participate in the government’s housing agenda under the ‘Big Four’.”

Addressing the housing shortage will provide an economic stimulus that is bound to create jobs as well as  investment, which is likely to spill over into the regional economy.

And while PPPs are not new in large infrastructural development globally, the scale, social focus and timeline of the projects will lead to increased attention by investors, developers and public-sector stakeholders across the continent.

At the EAPI Summit this year, a core theme for stakeholders will be the State’s ambitious housing project. While public housing has been used as an electoral campaign pledge around  the world, the distinction, property insiders note, is that the Kenya government is extending its hand in partnership through creating favourable tax incentives, providing land, and investing a considerable portion of its GDP into industrial construction plants to reduce capital expenditure by developers.