Make houses built under Big 4 Agenda eco-friendly

Provision of affordable housing is one of the key pillars of the Government’s Big 4 Agenda. The ever-increasing population means more people will need homes. The unrelenting wave of rural-urban migration, coupled with rising unemployment, underlines the need for enhanced public-private sector partnerships in designing lasting solutions for the housing challenge.

The United Nations Development Programme estimates that globally urban areas occupy 3 percent of land, yet account for 60 to 80 percent of energy consumption and 70 percent of carbon emissions. According to the Institute of Economic Affairs’ Kenya Urban Areas Performance Report 2017, 27 percent of the population in Kenya is concentrated in urban areas. The percentage is projected to double by the year 2050; this trend calls for timely sustainable interventions.

It is thus encouraging that the Government has considered housing as a key development agenda. In the 2019/2020 budget, for instance, the Government has allotted Sh11.4 billion to affordable housing, besides injecting Sh5 billion to the National Housing Development fFund under the Big Four Agenda.

In the scheme, which accommodates low-income households, the Government aims to complete 500,000 units by 2022, in what will be an impressive stride towards enabling Kenya to achieve the Vision 2030 aspiration, as well as, aligning the country to the Sustainable Development Goals (SDGs).

Notably, preventing environmental degradation is among the overriding principles of sustainability emphasised in all the SDGs, making a case for encouraging forward-looking investments in housing. In particular, the SDG on Sustainable Cities and Communities observes that sustainable development cannot be achieved without proper management of buildings and urban spaces.

Previously, most real estate developers were not alive to environmental concerns. This sentiment created a sustainability challenge that policymakers in more developed markets have sought to address. In 2018, researchers at the University College of London established that on average, carbon emissions from air-conditioned offices were 60 percent higher than those from offices with natural or mechanical ventilation. As such, glass-walled architecture which characterises the sky scrapper landscape of many cities instantly become a spectacle – for the wrong reasons.

With United Nation’s Intergovernmental Panel on Climate Change warning that global temperatures could heat up by at least 1.5 degrees between 2030 and 2052, green investments are gaining traction as a plausible counter to extreme weather conditions that continue to condense out of greenhouse emissions.

Policymakers in the UK have already pronounced their views on the ominous rising building-related emissions, mandating that new buildings be net zero carbon by 2030 and existing ones by 2050. Such international regulations are a pointer of impending regulations and policy interventions we should expect in the property sector here in Kenya.

In fact, we already are seeing glimpses of how environmental concerns have derailed real estate investors. The demolitions by the National Environment Management Authority (Nema) last year of buildings that encroached on riparian reserves demonstrated the business case for environmentally and socially-responsible development.

Thankfully, property developers have laid the foundation for more green buildings. We have seen the Green Building Society promote Edge, LEED and other eco-friendly certifications. We have also seen properties including Dunhill Towers, Standard Chartered Headquarters, Garden City and Strathmore University come up. Other property development and management companies, plan to introduce affordable green housing units. These efforts signal a developing pipeline for environmentally-responsible assets.

The Capital Markets Authority(CMA) recently approved a bond that is certified by the Climate Bonds Initiative and is targeting raising capital for the construction of purpose-built student accommodation. We expect other developers to bring green bonds to the market with support of the Green Bonds Program – Kenya.

Indeed, the real estate and property development sector presents numerous opportunities. Amid the growth, schemes are expected to venture into alternative assets classes—given the broadening of the allowable categories. Other examples of emerging asset classes pension funds should look at includes Real Estate Investment Trusts (REITs), a category that was barely considered a few years ago, and now stands at over Sh1 billion.

Our data at the Retirement Benefits Authority show that 20 percent or about Sh200 billion of pensions’ investment falls within the real estate and property development sector. This makes a compelling case for trustees to revise their policies to introduce green mandates to ensure these investments deliver sustainable returns.

By investing in certified green buildings, including eco-friendly affordable housing, pension funds will forge viable investment options that cushion employees in their retirement.

The writer is CEO, Retirement Benefits Authority.