How feasible is the Housing component of Kenya’s Big Four Agenda?

How feasible is the Housing component of Kenya’s Big Four Agenda?

Does the Government of Kenya have the capacity to deliver on the Housing Component of the Big Four Agenda?

The Big Four Agenda was announced to the nation by president Uhuru Kenyatta during his Jamhuri Day Speech on December 12, 2017. The four components of this agenda include growing the contribution of manufacturing to the country’s Gross Domestic Product (GDP) to 15%, delivering 1 million affordable and social housing units; ensuring food security, and achieving Universal Healthcare Coverage (UHC) by 2022.

In his keynote address during the 5th Annual Devolution Conference in April 2018, president Kenyatta urged county governments to realign their development plans to contribute towards the achievement of the Agenda, including the provision of affordable and social housing.

While the Budget Policy Statement for 2018/19 directed all government ministries, departments and agencies to realign their spending and investments towards the achievement of the Big Four Agenda Plan, the resources required to deliver on the agenda have not been computed and spread over the five years up to 2022, raising doubts over how much is needed, and whether such a plan is actually feasible.

Therefore the question is, can the national and county governments deliver 1 million housing units by 2022 as envisioned in the Big Four Agenda?

In this article, we will review Kenya’s housing finance policies to find out to what extent they promote or constrain access to adequate housing as promised in the Big Four Agenda. Will the government deliver 1 million housing Units (out of which 800,000 will be affordable housing and 200,000 units will be social housing) by 2022?

According to James Macharia, the CS for Transport and Infrastructure, Ksh. 2.6 trillion is required in order to provide 1 million housing units as promised under the Big Four Agenda. This is the equivalent of Kenya’s entire budget for 2017/18, and is more than the expected cost of the Kenya section of the Lamu Port South Sudan-Ethiopia Transport (LAPSSET) corridor, estimated at 2.4 trillion shillings by the Vision 2030 secretariat.

In the Big Four — Immediate Priorities and Actions: Specific priorities for the new term the national government intends to raise 10% or KES 260 billion of the total funding from the state budget, with 30% (or KES 780 billion) expected to come from the National Social Security Fund (NSSF) and 60% or KES 1.56 trillion will be raised by the private sector.

PesaCheck has looked into this issue and finds that it will be difficult, if not impossible for the national government to meet its targets for housing as part of the Big Four Agenda for the following reasons:

To put the 10% government share of the Ksh. 2.6 trillion in perspective, raising KSh 260 billion will require a minimum of Ksh 65 billion annually from the total national budget in order to provide 1 million housing units over the four years from 2018 to 2022.

However, the national government has only allocated Ksh. 8 billion for the Urban Development and Human Settlement programme 2018/2019, and the counties are set to spend KES 7.2 billion on housing, amounting to KES 15.2 billion in total for the two levels of government, leaving a housing budget gap of KES 49.8 billion.

The table below summarizes the national and county government efforts towards the provision of affordable and social housing (all figures are in KES (billions):

Allocations to the Housing sector by the national and county governments

The above table shows that over the last three years from FY 2016/2017 to 2018/2019, Kenya’s national government has spent a total of Ksh. 18.4 billion while the counties have spent Ksh. 19.3 billion on housing for a total of Ksh. 37.7 billion, far short of the KES 195 billion of the KES 260 billion total that it should have raised by now.

There is also the matter of land for the planned housing projects. Social and affordable housing will cover 7,000 acres of land spread across 5 major urban areas in Kenya — 800 acres in Nakuru, 1,200 acres in Mombasa, 3,000 acres in Nairobi, 1,000 acres in Kisumu, and 800 acres in Eldoret.

Scarcity and the resulting high cost of land will be a challenge in these areas, particularly in Nairobi, with the Cytonn Nairobi Metropolitan Area Land Report 2018 noting that land prices in 18 suburbs and 11 Satellite Towns in the Nairobi Metropolitan Area have increased by as much as 19.4% per year between 2011 and 2016.

Additionally, the option of using resources raised by the private sector is feasible, but setting up a Public Private Partnership (PPP) initiative takes quite a long time, in some cases years, to have such a plan up and running. Off-plan sales and pre-selling the housing units before construction is completed is cash-intensive, meaning that those likely to benefit are financially well-off individuals who could have afforded these housing units anyway, and are not the target for affordable and social housing.

A report on the State of Housing in Kenya by the Economic and Social Rights Center concludes that the current public private partnership framework is too cumbersome to allow for collaboration between government and private corporations. If the legal framework for PPPs is not revised, the state will not be able to raise the 60% financing as envisioned in its plan.

One of the strategies to reduce the cost of providing housing in Kenya will be through taxing idle land. The author of the state of housing report, Professor Alfred Omenya of Eco-Build Africa, argues that this approach may fail because it will have a negative impact on speculators on land who dominate in senior government positions. This is a real hurdle on plans to deliver housing units to Kenyans.

Another potential hurdle is the inaction on the part of county governments that would otherwise implement the plan. While housing is a county government function according to the 4th Schedule of Constitution of Kenya 2010, majority of the counties have not made serious budgetary commitment towards provision of social and affordable housing. However, a number of counties such as Nairobi and Mombasa have identified undeveloped sites for construction of social housing and made some progress towards initiating these projects.

In conclusion, the housing pillar of the Big Four Agenda needs a well thought out plan for delivery of affordable housing given the challenges we have enumerated above.

Whatever strategy is put in place needs to include low-cost social housing, given that the poor are also entitled to adequate housing in accordance with Article 43 the Constitution of Kenya.

Raising the required funding will need collaboration between the national and county governments and the private sector in order to fully realize the goal of one million housing units by 2022, and accomplishing this goal will need sustainable funding models, along with input from multiple stakeholders and extensive planning as well.

Article by: Geoffrey Kerosi is an economist and writer with an interest in public finance, human rights and public policy in Kenya. He is based in Nairobi City, Kenya.