Assessing Kenya's Affordable Housing Market

Part of CAHF’s Housing and the Economy project, this study deepens our understanding of how the construction value chain impacts the affordable housing market in Kenya, and how this in turn impacts the Kenyan economy and its growth prospects. This enables the development and implementation of strategies to stimulate the housing sector in Kenya and assists in identifying potential areas of investment that can either fill existing gaps within the housing construction value chain or assist in reducing the costs of building materials and supporting services in ways that make housing more affordable and accessible to a larger proportion of the Kenyan population.

CAHF’s Housing Economic Value Chain (HEVC) framework has been used to quantify the direct impact of housing construction and housing rental on the gross domestic product (GDP) of Kenya. This analysis quantifies intermediate inputs into housing construction and housing rental from ‘upstream’ primary, secondary and tertiary economic sectors. Based on available statistics, the value of housing construction in 2016 was KES272 billion (US$2.6 billion). The estimated value chain for housing rental in Kenya in 2016 reflects total domestic production of housing rental and associated services of KES85.1 billion (US$838 million). When compared with housing rental markets in some other countries (most notably South Africa and Nigeria), the rental market in Kenya is substantially smaller in scale and has more limited linkages to other sectors of the economy.

In order to quantify the costs and composition of costs of housing in Kenya, CAHF’s Housing Cost Benchmarking methodology has been applied to ascertain detailed cost breakdowns of three benchmarked housing products in Kenya. The analysis finds that over half of formal housing costs are not construction-related but linked to other parts of the housing construction value chain with land and titling, bulk and internal infrastructure provision being significant cost drivers over and above the high skilled labour costs and very high costs of manufactured building materials inputs. Affordable housing strategies and projects must include and proactively develop the capacities of large, medium and small local developers and contractors, as well as the accommodation production capacity of households and small-scale landlords.

The report serves to make the argument that a stronger and larger localised manufacturing sector supporting the development of more, affordable housing creates a virtuous cycle of affordable home production, manufacturing growth, employment creation and economic prosperity. Overall, Kenya has experienced declining global competitiveness in building materials over the past five years, with relatively few product categories gaining global market share. If the affordable housing element of the Kenyan government’s ‘Big Four’ programme is to optimally stimulate the Kenyan economy, it is essential that intermediate industries supplying affordable housing and other construction sectors are also developed. An affordable housing sector that consistently creates value within Kenya’s economy must take a long-term, systemic view of scaling up housing production and not a short-term programme approach.