The Challenges Of Housing Development For The Low-Income Market

Housing development is a critical issue in Kenya, as it directly impacts the quality of life for millions of citizens. Adequate, affordable, and decent housing is essential for fostering a healthy and productive society. However, the current state of housing in Kenya, particularly in urban areas, is characterised by a significant deficit and the proliferation of informal settlements and slums. This article explores the challenges and opportunities in housing development in Kenya, focusing on the government’s initiatives, the role of the private sector, and the impact on communities.

Housing is the provision of shelter, an abode to live in. The shelter should be adequate, affordable, and decent. Adequate in that there are enough good-quality rental and owner-occupied housing units for low-income families. Affordable in that total housing costs are affordable to those who have low incomes. Decent in that it provides a foundation for good physical and mental health, personal development, and fulfilment of life objectives. However, affordable housing is a major problem in Kenya. Informal settlements and slums have continued to grow, and a large percentage of the urban population lives in these areas. The slums are characterised by congested tin-roofed and mud houses. There is also poor infrastructure in the sewerage system, electricity, clean water, and access roads.

The Kenyan government has recognised the housing crisis as a key pillar of sustainable development and has taken several steps to address it. One of the most significant initiatives is the Affordable Housing Program (AHP), launched under the “Big Four” Agenda. The AHP aims to build 500,000 affordable homes across the country within five years, targeting middle to low-income earners. The government has also introduced the Affordable Housing Act, 2024, which includes measures such as the Affordable Housing Levy, tax incentives for homebuyers and developers, and public-private partnerships (PPPs) to accelerate housing development.

Under the Affordable Housing Levy, all formally employed Kenyans are required to contribute 1.5% of their gross monthly salary toward the Affordable Housing Fund. Employers must match the employee’s contribution with an equivalent 1.5% deduction. Contributions must be remitted to the Kenya Revenue Authority (KRA) by the 9th day of the following month. Failure to comply attracts a penalty of 3% of the unpaid amount per month. This levy is intended to provide sustainable funding for affordable housing projects, although it has sparked debate over its impact on salaried workers.

To encourage both homebuyers and real estate investors, the government has introduced tax reliefs and exemptions. Employees contributing to the Affordable Housing Levy are eligible for a tax relief of up to Ksh 9,000 per month or Ksh 108,000 per year. Real estate developers who build affordable housing units are exempt from certain taxes, making construction more attractive and financially viable.

The government is working with private investors through PPPs to accelerate the supply of affordable homes. Under this model, private developers receive incentives such as tax cuts and access to government land to build affordable housing. The government ensures infrastructure development to support new housing projects, and priority for housing allocation is given to contributors to the Affordable Housing Fund.

Despite the ambitious goals of the Affordable Housing Programme, there are notable concerns. A recent survey revealed that the project has failed to meet its targets, casting doubt on its effectiveness. Critics argue that the focus has been on quantity rather than quality, leading to substandard housing units. Additionally, while the initiative aims to provide affordable housing, many Kenyans, especially in rural areas, still find the costs out of reach. Other challenges include high land costs, inadequate infrastructure, limited access to financing, and bureaucratic hurdles.

For residents and investors in regions like Laikipia and Nanyuki, the Affordable Housing Programme presents exciting opportunities. The government is keen on expanding affordable housing beyond Nairobi, with Nanyuki and Laikipia emerging as priority regions due to their rapid growth. Improved roads and government-backed developments will likely increase the value of land and housing in Laikipia, making it a smart investment choice.

The Affordable Housing Act, 2024, marks a bold attempt to solve Kenya’s housing crisis. While the incentives, such as tax relief, subsidised mortgages, and employer contributions, are commendable, challenges remain, particularly in ensuring affordability and quality housing delivery. For those in Laikipia and Nanyuki, this initiative presents both opportunities and risks. As the program unfolds, investors, homebuyers, and developers must stay informed to make the most of these government incentives.

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