Housing sector proposals FY 2018/2019
I am publishing these proposals as a reference point for the new proposals we are drafting in financial year 2019/2020. We are in the process of checking out to what extent we influenced the national budgeting process in 2018/2019. These proposals were presented before the Institute of Economic Affairs (IEA) Kenya for further transmission to the National Treasury. This year (FY 2019/2020) we will focus on access to Water and Sanitation in the Housing Sector. One of the glaring gaps in Kenya’s public participation is lack of feedback mechanism which will be my main ask of our policy makers in 2019/2020. We need to be told which proposals were adopted and which ones were not.
In Kenya, access to adequate housing and sanitation is a Constitutional right as enshrined in Article 43 of the Constitution. Further, housing is a county function but housing policy is a national function as provided for by the 4th Schedule of the Constitution of Kenya 2010.
The rapid population growth has led to overcrowding of available housing facilities hence directing the attention of governments around the globe on social housing as a possible remedy on housing shortage. The aim now is to provide affordable low-cost housing to individuals and families who need them most.
According to the Budget Policy Statement (BPS) 2018, housing is one of the sub-sectors in Kenya which will be receiving increased attention for the period up to 2022 since it is one of “The Big Four” key areas in which President Uhuru Kenyatta’s administration wants to focus on for the next five years. The Jubilee Administration has a vision of delivering 500,000 affordable housing units by 2022. The housing units will be delivered in major urban areas across Kenya.
In addition to delivering decent homes, the sector is expected to create 350,000 jobs. It will seek to provide market for suppliers and manufacturers of construction materials hence promote economic growth in the country.
The government aims at generating 14% of Kenya’s GDP from real estate and construction sector. How? This will happen through rents from residential and commercial buildings in urban and rural parts of Kenya. The manufacturing of construction materials is key towards achieving the goals.
The Jubilee Administration aims at focusing efforts on implementing policy and administrative reforms which will lower the construction costs as well as improve accessibility of affordable mortgages. The government aims at focusing on raising low-cost funds from public and private sectors for investment in large scale housing production.
The table below provides the Kenya national government plans to be implemented towards achieving the goal of 500,000 housing units by 2022. We have reviewed them and provided alternatives to make them better:
|PLAN||NATIONAL GOVERNMENT PLANNED ACTIVITIES||OUR PROPOSALS|
|Land at right Location||Public land use Max 5 km from employment Joint zoning and urban planning with county governments||Instead of thinking about moving housing development projects near to the employment opportunities, the national government should think of developing efficient transport infrastructure which makes it possible for Kenyans to live anywhere but still make it to work in good time. For instance, put in place light railway lines for mass transit of residents in crowded urban areas.|
|Demand driven Master Plan||Target known demand – affordable, type and location No single development ends up as a ghost town||In big urban areas, there is demand, the government should work on employment creation in order to provide constant jobs to ensure sustainable livelihoods for the residents and hence prevent new social housing units from becoming ghost towns.|
|Low construction cost||Government negotiated scale discounts for input materials Development of local construction technology sector Design to value & fast project delivery||Government negotiation for discounted prices is a short-term remedy for housing crisis in Kenya. The national government should consider zero-rating construction materials in order to reduce construction costs.|
|Innovative Developer financing||PPP models e.g. land swap NSSF balance sheet off-plan sales through regulated escrow accounts||The government should focus on improving the ease of doing business in the housing construction business in order to attract private sector partners to enter into the Public Private Partnership (PPP) models.|
|Supportive ecosystem||fast permitting and transfer of titles Fast-track PPP process Delivery units between national and county level||Effective stakeholder engagement: The National Land Commission (NLC) should facilitate the process of titling to pave way for quick implementation of affordable housing. There is need for engagement of all stakeholders starting from the planning stage all through the housing development life-cycle. The National Treasury should allocate resources towards facilitating stakeholder engagement. The major stakeholders are: Counties, intended project beneficiaries, suppliers and manufacturers of construction materials, private construction firms, regulating agencies, communities around the planned project areas among others.|
|Affordable home buyer financing||Line credit Kenya Mortgage Refinancing Company Multi-generational mortgages & extension of background check to cover informal sectorIncentives to First Time Home Buyers||The government should discourage speculation on land through imposing an annual fine on all idle land in urban areas in order to reduce the craze on land speculation because people purchase and hold land with expectations that they will sell at high prices in the future. Land speculation is an enemy of development.|
|Reduction of corporate tax rate||Reduction of corporate tax rate for developers who construct at least 100 units per year||The units to be constructed per year in order to qualify for reduction in tax rates should be reduced to 20 in order to spur economic growth by promoting small and medium size companies which are interested in construction of affordable social housing in Kenya.|
|Financing Models||Establish National Social Housing Development Fund||This is a public fund which will be receiving resources from the Consolidated Fund. In order to be able to provide adequate housing for everyone, the national government should convince all counties to create a similar fund at the sub-national level.|
|Alternative financing strategies||Strengthen National Housing Corporation (NHC) handle resource mobilization and management of tenant purchase schemes|
|Taskforce on Expanding Affordable Housing Finance in Kenya||Establishment of Kenya Mortgage Refinance Company (KMRC).|
Table 1: National government plans on housing. Source: Budget Policy Statement 2018
The Taskforce mentioned in the table above has embarked on the process of establishment of Kenya Mortgage Refinance Company (KMRC) which would be a wholesale financial institution that issues bonds in the local capital markets, and with proceeds extend long term loans to financial institutions secured against mortgages.
To kick off the affordable housing project, the government will develop 8,200 houses in a pilot project in Mavoko. The process for procuring Engineering, Procurement and Construction Contractor for this project is ongoing.
The government will also expand the ongoing initiatives in the housing sector including, the investment in low-cost houses through slum upgrading and informal settlements by providing clean water and sanitation, access roads, schools, health centers and income generating activities.
Review of legislative framework:
- National Construction Authority Act,
- Built Environment Bill
- Other related legislations
Challenges in the Housing Sector
In the past, housing sector in Kenyan has been facing a myriad of challenges such as:
- Poor construction standards in some cases which leads to collapse of residential buildings in major urban areas (Nairobi and Kisii among others).
- Skyrocketing of land prices especially in urban areas makes it expensive for the vulnerable/marginalized people to afford a house in the major urban areas in Kenya.
- High cost of construction materials in major cities such as Nairobi, Kisumu and Mombasa.
- Slow process of land titling discourages investors from investing in the housing sector.
The Big Four – provision of 500,000 housing units by 2022
Proposals geared towards affordable new houses to Kenyans and thereby improve the living conditions for Kenyans. The Jubilee Administration is planning to create 350,000 jobs as a result of construction of 500,000 affordable housing units in Kenya.
The following proposals are worth your consideration:
The national government should properly regulate the construction industry to ensure that the construction workers are paid decently. The workers such as masons, carpenters should be provided with medical, accident insurance for the duration when they offer their services to the construction industry.
National Hospital Insurance Fund (NHIF), accident insurance to take care of falling debris and other work related accidents.
Workers provide very essential services but they are vulnerable since they are ignored when they fall sick.
Conduct reforms in the sector through making sure human resources provide high quality services. For instance Quantity Surveyors and Civil engineers should be well trained and registered.
High Quality services are key for high quality and affordable housing.
The Public Private Partnerships (PPPs) stakeholders should plan for design competitions and then pick the best social housing plan for implementation.
Design competition will promote local ownership hence public participation in the entire social housing development life-cycle. All citizens (students, architectural firms and members of the public) will get a chance to have a say on how social housing should look like. This will bring on board innovative ideas on construction of housing units. The designers can be encouraged to include eco-features such as rainwater Harvesting System, ample natural lighting, wheelchair-friendly building and roof-top solar powered heating systems on the roof-tops.
Instead of thinking about moving housing development projects near to the employment opportunities, the national government should think of developing efficient transport infrastructure which makes it possible for Kenyans to live anywhere but still make it to work in good time. For instance, put in place light railway lins for mass transit of residents in crowded urban areas.
Adequate housing infrastructure depends on many factors such as auxiliary infrastructure such as roads, water, and electricity among others. Lack of these infrastructural facilities will lead to creation of ghost towns.
In big urban areas, there is demand for housing, the government should work on employment creation.
To ensure sustainable livelihoods for the residents and hence prevent new social housing units from becoming ghost towns.
Government negotiation for discounted prices is a short term remedy for housing crisis in Kenya. The national government should consider zero-rating construction materials in order to reduce construction costs.
Cutting taxes on construction materials can be a powerful incentive for many individuals, firms and agencies to engage in development of social housing.
The government should focus on improving the ease of doing business in the housing construction business in order to attract private sector partners to enter into the PPP models.
Major housing corporations which can arrange for housing finance in a Public Private Partnerships (PPPs) model prefer to conduct their business in countries with better terms. Therefore, the national government should create a conducive business environment by providing incentives.
Effective stakeholder engagement: The National Land Commission should facilitate the process of titling to pave way for quick implementation of affordable housing.
There is need for engagement of all stakeholders starting from the planning stage all through the housing development lifecycle. The national treasury should allocate resources towards facilitating stakeholder engagement in the housing sector in a bottom-up approach. The major stakeholders are: Counties, intended project beneficiaries, suppliers and manufacturers of construction materials, private construction firms, regulating agencies, communities around the planned project areas among others.
In addition to Environmental Impact Assessment (EIA), the national government should ensure a thorough, well-thought out Social Impact Assessment (SIA) is undertaken and mitigation measures of identified risks not only put in place but also implemented and monitored regularly.
Proper planning and stakeholder engagement at all stages of the housing projects can help mitigate future losses if any associated with the project.
The units to be constructed per year in order to qualify for reduction in tax rates should be reduced to 20 in order to spur economic growth by promoting small and medium enterprises which are interested in construction of affordable social housing units in Kenya.
Providing reduction in tax rates for firms which are able to construction a minimum of 100 social housing units will led to supporting large construction firms while making it very difficult for the small and medium firms to compete in the market place.
- Nairobi City or the “Green City in the sun” under construction