How to reduce costs of owning a house in urban Kenya today

Affordable housing is provided for in the Constitution, which says it should be accessible, adequate and have reasonable standards of sanitation.

However, the costs of owning a home or a house are still beyond the reach of a bigger percentage of Kenyans and can be drastically reduced. They are determined by the cost of construction, land, and mortgage interest rates.

The government has been constructing houses for purchase at prices below market rates. This has increased supply at affordable prices to a majority of middle class people and those doing small-scale businesses.

If the government continues on this path, it will reduce demand for houses and, therefore, prices.

President William Ruto's administration says it will ensure a majority of Kenyans are empowered to own houses in urban centres. It can create mortgage bonds so that citizens raise money for buying or developing houses at affordable rates.

Transport systems also play a role in reducing the cost of owning a house in towns. Access to transportation makes those living in far-flung areas accessible.

The perennial housing problem in different parts of the country is a cause to worry everybody, including policy makers and implementers.

The World Bank Kenya Economic Update says demand and supply have been worsened by the fact that five percent or 500,000 Kenyans move to urban centres in search of jobs annually.

The Kenya Mortgage Refinance Company (KMRC) has been established to work with banking sector and saccos to provide affordable mortgage finance.

It is to extend the duration of housing loans from the seven years to 20. The KMRC is helping to drive interest rates to a single digit, but the Government should be more innovative in exploring workable ways to encourage private firms to build cheap houses.

It should develop technologies to bring down the cost of constructions, the cost of land. Land value should be considered as an alternative to addressing the high cost of buying a house. The Government should give out under-used lands to private developers to construct affordable houses.

The Ruto administration says affordable housing will be achieved by 2025. Affordable houses range from Sh800,000 to Sh3 million.

Kenya's first medium-term goal of 2009/2012 of Vision 2030 strategy had a target of increasing housing production from 35,000 to 200,000 annually. It is believed that 75 percent of people in formal employment earn Sh50,000 and below.

So, a 20-year mortgage at 13.5 percent interest rates should be reduced to five percent. Owning a house in Kenya should be a reality even to low income earners. For a house which costs between Sh3 million to Sh5 million is a better deal for both middle and low income earners whose pursuit to own homes has been blocked by high property costs.

This is what is called the missing middle; people who can afford to buy a house but are not being offered one because the Government is supposed to take care of social housing.

The writer is an economist with interests in real estate.