Kenya eyes SA model for affordable housing


A house that costs Sh2.5 million to build in Kenya will probably cost Sh600,000 in South Africa. Photo/FREDRICK ONYANGO

South Africa’s housing subsidies and a policy that encourages use of cheaper but more durable materials have been proposed as some of the interventions needed to lower construction costs and check a housing crisis that is deepening as more people flock to cities in search of jobs.

Kenya is facing a serious shortage of houses especially in towns where the high cost of land and high interest rates on mortgage have blocked people earning below Sh120,000 net monthly salary from owning houses, said the Central Bank of Kenya.

Property owners have taken advantage of this shortage to raise rental prices as government adopts a tortoise-paced response to an inclusive property market.

“A house that costs Sh2.5 million to build in Kenya will probably cost Sh600,000 to put up in South Africa,” said Mr Alfred Omenya of the Department of Architecture and Building Science at the University of Nairobi, who has also worked for the government of South Africa.

South Africa gives what is known as the Housing Subsidy Scheme — a set of six different funding options for those who are eligible and who earn Sh35,000 or less per month.

The amount of subsidies depends on provincial or municipal government, based on what it can afford to give.

Those earning up to Sh35,000 get the full subsidy, those earning up to Sh70,000 receive a government credit guarantee of 50 per cent required for mortgages essentially because banks shy away from lending to such groups.

In contrast, the average income levels for employed people in Kenya are between Sh15,000 and Sh20,000 based on statistical abstract of 2007 yet they do not receive any form of housing subsidies.

This means that apart from the population living under the poverty line, an average income earner cannot afford to buy a house from the market considering that if one was to buy a house on mortgage of Sh1.5 million repayable in 15 years at an interest rate of 15 per cent, the monthly repayment rate would be about Sh21,000.

“This is why the private sector has for many years tended to concentrate on developing housing mainly for the upper middle and high income segments,” said Bishop Magaret Wanjiru, the assistant Minister for Housing.

“This has resulted in middle income earners moving into areas that were meant for the low income earners, pushing the latter to slums and informal settlements.”

The Kenya Integrated Housing Budget Survey of 2005/06 showed that only 4.2 per cent of Kenyan households are able to borrow money to buy or build a house.

Mr Geoffrey Alemba of the County Developers said property developers have also taken advantage of Kenyans’ poor knowledge on housing issues to fleece consumers.

“I think developers have been selfish because they cannot even substitute for materials that are cheaper but deliver same quality of houses.”

He said the Government should create awareness on use of alternative construction materials that can deliver cheaper housing.

“The challenge is that the developers are part of government and cannot do what will jeopardise their income,” he said.

For example, a company known as Riflo Hardware vends what it calls suspended floor and roof, which saves the home builder almost 40 per cent of the costs of normal slamp and roofing, yet the technology, is not in wide use, because people do not know about it.

In Kenya, the cost of building materials is estimated to account for approximately 40 per cent of the construction costs.

Since 2007, costs of building materials have increased by as much as 70 per cent resulting in increased cost of construction, said the Ministry of Housing.

“In South Africa, the government looks at how construction materials are used and not what materials are used which encourages innovation,” said Mr Omenya. “People innovate stronger, lighter and cooler or warmer materials because they are not restricted on what to use.”

Since 1995, the government has delivered 3 million units of houses because of what is seen as “massive government involvement in enabling the private sector to participate in housing easily”.

The South Africa model is such that the central, provincial, and local governments are all involved in providing housing.

The government provides housing as a constitutional right for those who cannot afford to buy or build.

It also subsidies mortgages to help those who cannot afford housing in an open market to access financing at cheaper interest rates based on their monthly income.

But government investment in the housing sector in Kenya is dismally low.

Data shows that between 2009 and 2012, the State plans to spend Sh4.5 billion on housing.

The State’s own data shows that this amount of money can only help develop 3,000 housing units assuming a cost of Sh1.5 million per unit without including the cost of related infrastructure.

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