In a significant policy shift, Kenyan President William Ruto has revealed plans to construct 250,000 low-cost homes annually under his housing program. These homes will be divided into social, affordable, and market categories.
Under the guidance of President Ruto and the State Department for Housing and Urban Development, these low-cost housing developments will offer a range of options:
Social Housing: Designed for slum dwellers, these units include one, two, and three-room houses, prioritizing the most vulnerable.
Affordable Housing: This category comprises studio apartments (bedsitters), two-bedroom, and three-bedroom apartments, catering to the middle-income population.
Market-Driven Developments: Targeting those seeking market-rate housing, this category features two and three-bedroom houses.
The policy document, titled “Achieving the Housing Agenda,” allocates half of the housing units to affordable housing, with 30 percent going to market-rate apartments and the remaining 20 percent to social housing.
Affordability and Financing
The pricing structure for these units is as follows:
Social Housing Units: Priced at Sh42,000 per square meter.
Affordable Housing Apartments: Priced at Sh48,000 per square meter.
Market-Rate Houses: Priced at Sh72,000 per square meter.
These units will be sold under a tenant purchase scheme (TPS). The prices are determined by estimated construction costs, including a 20 percent financing cost and markups based on the housing category. Markups are set at 9.4 percent for social housing units, 14.3 percent for affordable apartments, and 20 percent for market-rate housing.
For example, a 20 square meter room costs Sh840,000. Buyers need to pay a 10 percent deposit and make monthly payments of Sh3,200 over 30 years. While costs may be higher than previous programs, the new homes offer more flexible financing options.
Wider Access and Taxation
The program promotes inclusivity, with all employees, whether on permanent, pensionable terms, or contract-based engagements, contributing to the Affordable Housing Fund. Despite initial objections from employers and civil society groups, Parliament enacted this housing fund through the Finance Act 2023. The fund operates as gross-on-gross taxation on workers’ income, leading to revenue projections of Sh63.2 billion in the current financial year, rising to Sh70 billion in 2024/25 and Sh78 billion in 2025/26.
This housing initiative forms a central part of President Ruto’s job creation agenda and represents a significant shift from the previous administration’s Affordable Housing Program (AHP). President Ruto’s government has redefined categories and added new housing options, aiming to provide affordable, flexible, and sustainable homeownership opportunities for a broader range of Kenyan citizens.
Photo (Stephen Kamau)
By: Montel Kamau
Serrari Financial Analyst
16th October, 2023
