Low-cost housing programme can be achieved with less politicking

A worker at affordable housing units under construction at Pangani Redevelopment Site

A worker at affordable housing units under construction at Pangani Redevelopment Site in this photo taken on January 21, 2022. Out of the eight estates that were to be developed, only two have been developed. They include Pangani and Jeevanjee.

Photo credit: File | Nation Media Group

Ever since the Kenya Kwanza government mooted the idea of low-cost housing for poor Kenyans, there has been back-and-forth political sparring with the opposition Azimio on it. Interestingly, both sides of the political divide have low-cost housing at the core of their manifestos.

The idea of a housing scheme and who should benefit from it is not in contention.  The contentious issue for the opposition and its supporters is that the proposed three per cent deduction from civil servants’ salaries is compulsory, thus a human rights violation.

 The naysayers argue that it contravenes the constitutional provision on public participation. But the Constitution lists housing as a human right. So, it is just a question of reconciling the proposals and constitutional provisions to arrive at a strategy that delivers houses in a fit-for-purpose and lawful way.

I don’t think Kenyans can fail to navigate this process if they put aside their partisan parochial political interests. Either side sees affordable housing as a huge political milestone that should not be shared with rivals. While Kenya Kwanza is keen to deliver on their election pledges, Azimio views such success as undermining them in the 2027 polls.

The problem of decent housing is urgent and more apparent in urban areas, where the bulk of residents live in informal settlements. In Nairobi, over 60 per cent of the population lives in the major informal settlements of Kibera, Mathare, Kawangware, Kangemi, Soweto, Ngomongo, Mukuru and others. Another huge percentage of Nairobi residents live in semi-formal settlements in Mathare North, Kariobangi, Kayole, Dandora, Huruma, Ngei and elsewhere, making the capital a sprawling rural city. The same can be said of Mombasa, Kisumu, Nakuru and Eldoret, where rural life pervades most dwellings.

The colonial government put up low-cost housing for the ‘natives’ in major cities. In Nairobi, they include Kaloleni, Mbotela, Makadara, Shauri Moyo, Bahati, Jerusalem, Jericho and Uhuru, managed by the Nairobi City Council. Besides, the Kenya Railways Corporation had Makongeni, Muthurwa and Landi Mawe estates for its junior employees.

Tenant purchase

The distinguishing feature of these estates was that they remained the property of the government. That means there was neither intention nor arrangements for tenant purchase. Later, the government, with funding from development partners, established a number of housing estates in Nairobi—including Umoja, Buru Buru, Kimathi, Donholm and Harambee—to accommodate the bulging lower middle-class urban dwellers.

The National Housing Corporation and other government agencies built housing units to respond to the increasing urban populations. So did the private sector. Unfortunately, the speed of urbanisation has far outmarched the rate of new housing units, resulting in unprecedented sprouting of slums.

There is also affordability, the major culprits being cost of capital and land. Nairobi suffers the twin problem of land being held for speculation by a few wealthy politically connected individuals and their scions and the prohibitive interest rates on mortgages. Similar realities are reported in the major towns.

Most Kenyans cannot afford a mortgage; so, they either pay house rent or put up shanties on government lands, hence the phenomenon of slums in most open spaces in and around major cities. The eyesore poses policy nightmares for the government.

This is the context of the government’s push for decent affordable housing. But rather than seek practical ways of delivering on this noble initiative, the typical Kenyan politician tries to score political capital against their opponents.

The opposition doesn’t seem ready to provide an implementable alternative thinking to the government’s proposal. Instead, they are bent on faulting its every move. Azimio is opposed to the salary deduction to create a housing fund for the poor, saying it is not only unconstitutional but is also subject to abuse by state functionaries.

Not unique to Kenya

Providing decent affordable housing is not unique to Kenya. Many African countries, including Namibia and Botswana, have. So, Kenya need not try to reinvent the wheel. The government simply needs to benchmark with countries that have done it successfully, weigh the options available and pick the most contextually viable one for implementation. And many options are available for it.

First, it can use budgetary provisions. If it put aside, say, Sh30 billion in a financial year for a start, it could achieve a huge milestone without the political noises that threaten to derail the plan. If a low-cost decent urban house costs Sh1 million, the provision is enough to deliver 30,000 houses. With these built, and given an average size of household of five, there will be 150,000 Kenyans housed.

Starting with urban areas will see hundreds of thousands of monthly house rent payers convert it to tenant-purchase payments and own the houses. The debt is transferrable to a heir in the event of loss of income or demise.

With 30,000 households, each paying Sh3,000 monthly, that is Sh90 million per month or Sh1.08 billion a year, enough to build another1,000 houses. The number of houses will keep increasing with time. At the same time, the government will keep making budgetary provisions and build more.

Secondly, the government can go for a public-private partnership, whereby private investors complement government efforts in building houses to be sold to citizens through a tenant-purchase framework. The investors can take hold of an agreed number of units that they can sell at market prices to recover their investments while the rest are sold to deserving Kenyans at cost. Once the profit element is removed from the prices, the houses will be more affordable.

Raise housing allowance

Thirdly, raise housing allowance (not basic salary) for government employees by an amount equivalent to three per cent of basic salary and direct it to the housing fund. The reason the basic salary should not be changed in this arrangement is that it would have implications for pension calculations.

 The basic salary is considered as pensionable salary in calculating terminal benefits. If it is increased, the amount that both the employee and employer must contribute towards pension would increase. This would create unprecedented current and future cost implications for the employer, especially in situations of defined benefits pension schemes.

Fourth, leave the salaries as they are and designate a portion as tax-free for purposes of contribution to the housing fund. That amount should be synchronised with that to be contributed towards the housing scheme such that the reduced taxation fully compensates for the contribution and the taxpayer (contributor) ends up in the same net income position as before the deduction. Of course, that would necessitate an amendment to the PAYE law to accommodate the arrangement.

Lastly, the state can explore international support for an urban slum upgrade project and, if it succeeds, roll it out countrywide. But the Kibera slums upgrade started many years ago but stalled for unclear reasons.

Prof Ongore teaches at the School of Business and Management Studies, the Technical University of Kenya. [email protected].