State vs private sector: Who should drive affordable housing agenda?

For the last 25 years, successive governments have made the provision of affordable housing a key cog in their manifestos, buoyed by grim housing statistics.

At 21.3 per cent, Kenya is among African countries with the lowest home ownership among urban dwellers, while the country has had an annual housing deficit of 200,000 units. On the other hand, developers can only offload 50,000 units to the market. 

However, the country lacks a clear roadmap for reducing the deficit. For example, the late President Mwai Kibaki came up with the Kenya Slum Upgrading Programme (KENSUP) in partnership with UN-HABITAT, which delivered 900 units in Nairobi’s Kibera slums.

The programme lost steam during Uhuru Kenyatta’s tenure. His Big Four Agenda developed 500,000 houses, but it yielded few completed units.

The Uhuru government stated at the time that developers had serious limitations on the number of units they could build, as there were no uptake guarantees, while the few mortgages available were too costly due to high interest rates. Kenya, with a population of over 50 million, has a mortgage portfolio of less than 30,000 loan accounts, making home ownership a pipe dream for many.

“Available lower-income housing is not adequate and does not promote the quality of life that we want, as evidenced by the fact that 6.4 million Kenyans were living in slums, representing about 56 per cent of the country’s urban population,” said the Housing Ministry in 2019.

Enter the Affordable Housing Programme (AHP), which aims to construct one million housing units by 2027, or approximately 600 completed units daily.

Public land bank

The ambitious drive by the current regime to deliver an average of 200 units in every constituency in Kenya is backed by a public land bank and an unpopular housing levy.

In its two-year scorecard, President William Ruto’s Kenya Kwanza administration said the number of housing units launched increased from 8,872 in 2022 to 103,000 in 2024, with the government pointing out that only 1,200 units had been completed by the end of last year.

While the affordable housing project has strong proponents and naysayers in equal measure, opinion remains divided on whether the State should spearhead the construction or let the private sector drive the agenda. In his regular tours around the country, President Ruto has made the launching of affordable housing projects his main agenda.

In a tour of Mathare, Nairobi, last month, Dr Ruto said the programme would go on despite spirited opposition from some politicians.

“Sometimes you fail to understand why some leaders are opposed to a project that has employed many young people and also enables them to own decent homes,” he said. 

Daniel Ojijo, the managing director of Villa Care Kenya, says since housing is a basic human right and one of the core Millennium Development Goals (MDGs), the State should play a prominent role in spearheading the construction of affordable housing.

“The State is best positioned to ensure equitable access by directly facilitating or coordinating such developments,” says Ojijo. “Government agencies can plan at scale, access public land, regulate building standards, and ensure that low-income earners are not locked out of the housing market.”

Ojijo says by prioritising housing, the government is not only solving a shelter crisis but also “creating jobs, stimulating the construction sector, and uplifting lives through the multiplier effect,” terming the programme a “noble dream and a lasting national legacy.” 

While stating the need for affordable housing, Francis Gichuhi, a Nairobi architect, says that despite the good intentions, the government is not the best agency for the development of affordable houses.

Instead, he says the State should have made construction cheaper through mechanisms and policies, including the taxation of idle land to discourage hoarding speculation and make it easily accessible to developers while zero rating construction materials.

“It is better to give incentives to the private sector because the design of our constitution is capitalistic. It gives Kenyans all the responsibility to feed and house themselves, unlike socialist constitutions such as China’s, where the government has the role to feed and house citizens,” says Ojijo, citing Singapore, Ethiopia, and Brazil as countries that have made remarkable strides in social housing.

Mwenda Thuranira, the chief executive of MySpace Properties, says the government should facilitate economic growth instead of “directly engaging in business,” housing not being an exception.  He says the government’s strategic interventions, coupled with the efficiency and innovation of private developers, should result in the development of affordable units. 

“Rather than positioning itself as the primary developer, the Kenyan government should focus on creating an enabling environment for private developers to build more affordable housing,” he wrote in an opinion piece recently.

“This would yield far better results than the current model, which is struggling to meet its own ambitious targets.” 

Ojijo, who is also in favour of giving incentives to the private sector, says these should include tax holidays or exemptions on construction materials and income from affordable housing projects, access to public land for development through long-term leases or joint ventures, and infrastructure support such as roads, sewer lines, and electricity.

Regulatory processes

In addition, he says the State should streamline and fast-track development approvals and regulatory processes and provide access to low-interest construction financing or state guarantees.

“There should also be offtake agreements where the government commits to purchasing a certain number of units put up by the private sector. These incentives reduce development costs, making it viable for private developers to offer units at affordable rates while still maintaining profitability,” he says.

However, Ojijo says this approach only works well under a proper regulatory framework led by the government and where the latter maintains oversight and policy direction while enabling private developers to deliver houses more cost-effectively.

“While the private sector brings innovation, efficiency, and financial resources to the table, such synergy is not a replacement of State efforts but an assurance that the vision of affordable, decent housing for all is realised faster and more sustainably,” says Ojijo.

While there is no doubt that the country has a housing deficit, the jury is still out on whether the government made the right call to spearhead the construction or if the private sector should have been fully incentivised to do the job.