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26 February, 2024
Press Release

Housing is guaranteed as an Economic and Social right by the Constitution of Kenya 2010, as outlined in section 43(1)(b) - “every individual has the right to accessible and adequate housing, as well as to reasonable standards of sanitation”. Therefore, the government has a responsibility to provide adequate housing to its citizens and is obligated to implement policies and initiatives aimed at addressing housing needs as well as the living standards across the country. World Bank data shows that Kenya’s population and urbanization growth rates are at 1.9% and 3.7% respectively, above global averages of 0.8% and 1.5%, as of 2022. With a rapidly growing population and an increasing middle class, demand for housing is set to increase. In response to the escalating demand, the government has implemented a variety of strategies through various agencies, including the introduction of several housing initiatives geared towards tackling the housing shortage in the country. Given this context, it becomes imperative to analyze the diverse agencies and initiatives geared towards addressing the pressing need in Kenya. In our topical this week, we discuss in depth various agencies involved in the implementation of the government’s agenda and their interrelationship, their formations and histories, mandates, challenges, existing gaps in Kenya’s affordable agencies and propose solutions. The agencies and initiatives covered in this report are National Housing Corporation (NHC), Kenya Mortgage Refinance Company (KMRC), Capital Markets Authority (CMA), Affordable Housing Bill 2023, State Department of Housing and Urban Development, and, Kenya Revenue Authority (KRA).

Existing Housing Agency Gaps in Kenya

The National Housing Corporation's (NHC) mandate covers approximately 15 diverse areas, including property development, management, research, and financing. However, the core mandate remains ambiguous. Although the mandate appears to emphasize lending upon initial review, the actual focus appears to be predominantly on construction activities. This discrepancy highlights a notable gap in clarifying NHC's primary mission and priorities. In addition, there is existence of overlapping research mandates between the National Housing Corporation (NHC) and the State Department of Housing and Urban Development which indicates a potential inefficiency and duplication of efforts within the government's housing sector. This overlap suggests a need for better coordination and collaboration between the NHC and the State Department of Housing and Urban Development to streamline research efforts thus avoiding duplication.

In addition, Audit findings on the National Housing Corporation (NHC), as reported by the Office of the Auditor General, highlighted a concerning gap. The audit revealed a lack of a comprehensive inventory list of houses signed by the Accounting Officers of both transferring and receiving entities. The failure to maintain such a detailed inventory list indicates a significant lapse in accountability within the NHC. Moreover, the National Housing Corporation (NHC) has faced considerable negative publicity due to incidents involving senior executives such as the managing director, finance director, and company secretary. These cases point to a history of mismanagement within the organization. Consequently, the reputation of the NHC has been significantly tarnished, leading to widespread concerns regarding its governance and ethical standards.

Only in February 2024 did KMRC revise its loan size limit, raising it to Kshs 10.5 mn nationwide. This delay in adjusting loan size limits had notable consequences. The previously low qualifying amounts meant that a considerable number of loans did not meet KMRC's criteria for refinancing. As a result, many potential borrowers were excluded from accessing KMRC-backed mortgages, leading to lower absorption rates for these products.

Based on the challenges outlined above regarding Real Estate Investment Trusts (REITs), several gaps become apparent:

  1. The very high minimum capital requirement for trustees at Kshs 100.0 mn discourages greater participation. As a result, there is limited number of four trustees currently operating in Kenya,
  1. Presently, only trusts are permitted to establish REITs as compared to other countries which have a wider scope of eligible entities that can form REITs,
  1. There is rigidity in the way REITs in Kenya have been structured. As compared to other countries which have hybrid REITs, in Kenya REITs are either the traditional Income or Development REITs,
  1. The high minimum investment threshold of Kshs 5.0 mn restricts access to REITs to a limited range of investors and excludes retail investors, and,
  1. The present regulations mandates REITs to go public immediately upon establishment. Countries like Belgium and United States offer flexibility in listing for REITs allowing REITs the choice to go public or remain private.

From the above discussions its evident that there is existing gaps in the Affordable Housing Bill 2023 which include;

  1. There is a no clear roadmap presented detailing how the government will ensure compliance of individuals operating in the informal sectors with regards to the Housing Levy,
  2. There is a lack of clarity concerning the eligibility criteria which will be used in the process of allocating affordable housing units to ensure fairness, equity and the direction of resources to individuals with more pressing housing needs,
  3. The 3.0% penalty imposed in case of non-compliance is too punitive and may be unfair,
  4. The bill has failed to provide a comprehensive list detailing all approved agencies responsible for receiving formal applications, and,
  5. Ambiguity surrounding the definition of what qualifies as Affordable Housing under and for purposes of the bill.

The State Department of Housing and Urban Development faces a need for a robust mechanism to evaluate its policy management processes. Additionally, there is need to re-evaluate its mandate in order avoid overlap with other Affordable Housing Agencies such as National Housing Corporation.

Kenya Revenue Authority (KRA) offers incentives to developers and grant tax exemptions on primary construction materials for approved projects under the Affordable Housing Program (AHP) only. There is thus need for KRA to assess ways to offer additional incentives within the larger housing sector, including considerations such as tax exemptions on all primary construction materials and incentives aimed at fostering sustainable housing practice beyond just the AHP.

Recommendations to Key Government Initiatives and Agencies

a) Kenya Mortgage Refinance Company (KMRC)

  • In order to enhance funding opportunities and boost investor confidence KMRC should consider being listed in Nairobi Stock Exchange (NSE). Being listed not only aids in boosting capital by raising funds from the broader public but also instils confidence among investors as financial information becomes publicly accessible and listed companies are perceived to be subject to stricter regulation and oversight.

  • Additionally, once listed, KMRC can diversify its funding sources by issuing more bonds with both longer and shorter tenors. Longer term bonds can provide a stable and predictable source of funding for KMRC over the long term whereas, short-term bonds can be used to meet immediate financing needs, as they can be issued and redeemed quickly. Currently, KMRC only one 7-year tenor MTN issued under its inaugural bond program.

  • Moreover, KMRC should work towards further developing its legal and regulatory framework to accommodate financing of rental development. As it is, KMRC has failed to accommodate financing of rental development in its mandate despite its significant role in achieving affordable housing despite a majority of urban dwellers being renters. According to Center for Affordable Housing Finance Africa (CAHF), 22.0% of individuals in urban areas are home-owners, with the majority of the population, 78.0% being property renters. Incorporating financing of rental development into

  • KMRC's mandate could play a crucial role in achieving the affordable housing agenda in Kenya by increasing the supply of affordable rental housing, thereby improving living standards.

  • Lastly, KMRC board and management can enhance transparency by addressing concerns raised by numerous market participants regarding the viability of long-term lending model and the sustainability of the 5.0% lending model.

b)  National Housing Corporation (NHC)

  • National Housing Corporation can enhance financial sustainability by exploring diverse funding sources beyond government allocations. This includes leveraging partnerships with private investors, accessing capital markets, and exploring innovative financing mechanisms like public- private partnerships.

  • NHC should also put more focus on project management capabilities in order to ensure successful execution and delivery of initiative in NHC. This involves adopting best practices in project planning, execution, monitoring, and evaluation, as well as implementing robust project governance structures and performance metrics.

  • Furthermore, NHC should invest in enhancing oversight and governance. Establishing strong governance frameworks and oversight mechanisms is crucial for improving transparency, accountability, and integrity within the NHC. This requires updating internal policies and procedures to prevent fraudulent behaviour, strengthening internal controls, and promoting a culture of compliance and ethical behaviour.

c)  Real Estate Investments Trusts (REITs) Market

  • The Capital Markets Authority (CMA) should streamline the approval process for REITs in Kenya. Bringing together the approval process under a single agency would remove the need to navigate through two separate agencies for REITs approval. This consolidation would simplify the process, leading to increased efficiency, lowered costs, and improved transparency and accountability.

  • Second, Kenya ought to contemplate eliminating minimum capital requirements for Real Estate Investment Trusts (REITs), mirroring the strategy employed in the United States. By removing this obstacle, it would stimulate increased involvement in the REIT market, reducing entry hurdles for investors and facilitating the formation of REITs. Consequently, this would promote market expansion and innovation.

  • We also note that the present minimum capital required for Trustee is quite substantial, standing at Kshs 100.0 mn, a threshold that has only been achieved by four banks. A lessor amount of around Kshs 15.0 mn would attract a large number of Trustees.

  • Additionally, Capital Markets Authority (CMA) should consider easing the process of forming a REIT. Currently listing a REIT can take as long as two years.

  • Lastly, Kenya should borrow a leaf from developed countries such as Belgium and the United States and encourage different legal entities to pursue REIT formation. We can start by, broadening the scope of acceptable structures beyond conventional trust-based models, by allowing and encouraging corporations or limited liability companies. Through this, Kenya can cater to a variety of investor preferences and simplify entry into the REIT market. For instance, in the US, REITs can be structured as corporations, trusts, or associations, providing versatility in organizational structures.

d)  Affordable Housing Bill 2023

  • When considering how individuals from the informal sector will be included to ensure compliance with the levy, it's vital for the government to offer a concise explanation of its strategies for ensuring maximum compliance. The absence of clear articulation has led to speculation and uncertainty, highlighting the importance of clarity in this regard,
  • The government can also consider other housing development concepts adopted by other countries such as the United Kingdom and Zimbabwe where these ggovernments are increasingly advocating for self-build initiatives by offering citizens serviced plots with essential infrastructure (such as roads, footpaths, drainage) and utilities (including water and electricity) either at a subsidized cost or free of charge. This approach encourages citizens to engage in self-build projects while ensuring that necessary amenities are readily available,

  • The government should consider lower the 3.0% penalty in cases of non-compliance, considering that businesses are fighting against tough economic times. Reducing it would achieve a middle ground between ensuring adherence and acknowledging the economic challenges confronting employers, thereby promoting a fairer approach during difficult periods,

  • The absence of clear specifications regarding the designated agencies for formal application submissions introduces ambiguity. This lack of clarity might present difficulties for potential applicants, who may struggle to determine the precise entities tasked with processing their submissions. Clearly defining the list of designated agencies is essential to establish a transparent and accessible application procedure, thus fostering fairness and inclusivity in affordable housing distribution.

  • Finally, the government ought to avoid directly involving itself in unit construction to minimize the risk of citizen losses and financial liabilities associated with government-led projects, while also ensuring prompt project completion.

e)  State Department of Housing and Urban Development

  • The State Department should promote continuous development of policies and procedures is crucial for fostering widespread home ownership. By regularly evaluating market trends, socioeconomic factors, and housing needs, they can tailor initiatives to incentivize and facilitate home purchases.

  • Either, continuous evaluation of policies and mandates by the State Department is essential to prevent fragmentation and overlap in mandates. By regularly assessing the effectiveness and relevance of existing policies, they can streamline operations, optimize resource allocation, and enhance coordination among different agencies or departments.

f)  Kenya Revenue Authority

  • The Kenya Revenue Authority (KRA) ought to extend additional incentives to foster increased housing activities, encompassing incentives for various types of housing investments, notably sustainable housing projects, among other initiatives


In conclusion, the aforementioned recommendations hold significant potential in enhancing the housing band thus increasing the effectiveness of affordable housing agencies and initiatives nationwide. It's crucial to acknowledge, however, that these recommendations complement rather than overshadow the ongoing governmental efforts to tackle the housing shortage. Despite progress, there remains a substantial gap within the housing sector that demands joint efforts from all stakeholders. Learning from successful housing delivery models in other nations is important. Moreover, a thorough re-evaluation of housing agencies is necessary to streamline mandates and minimize fragmentation of responsibilities. These measures are vital steps toward realizing the nation's housing agenda.

To read the entire report, click here.