Effects of Supply Side Institutional Roles on Housing Affordability among the Low Income Earners in Kenya

Abstract

Kenya has recognized the right to housing in the new constitution, stating that every person has the right to “accessible and adequate housing and reasonable standard of sanitation”. However, the country has an annual deficit of 156,000 housing units of which a deficit of 124,800 housing units is on the low income housing market segment. The country has a total deficit of 2,000,000 housing units of which a large proportion of the deficit is in the low income housing market segment. Due to this shortage of housing, Kenya is facing an increasing growth of informal settlements in her urban centers. Of the country’s total population that lives in urban areas, a large proportion is confined in informal settlements. The country’s annual informal settlements growth rate is one of the highest in the world and it is likely to double in the next 30 years if positive intervention measures are not put in place. The housing problem in Kenya for the low income earner is twofold. First, the houses built are too expensive for their affordability and two, the mortgage payment rates are too high for their affordability. The high mortgage rates are negatively affecting both the home buyers and rental property buyers. High mortgage rates cause the land lords to increase the rents so as to offset the high mortgage repayments. This causes the ones who cannot afford the high rents to turn to informal settlements for their housing needs. This research was intended to assist the stakeholders of the housing industry in Kenya to identify ways of increasing housing affordability among low income earners. Various studies have been done focusing on demand factors which influence housing affordability among the low income earners in Kenya. This study therefore sought to analyze the effects of supply side institutional roles on housing affordability among the low income earners in Kenya. The study therefore pursued the following specific objectives; To analyze the effects of the role of the National Government housing policy on housing affordability among the low income earners in Kenya; To assess the effects of the role of the county government housing policy on housing affordability among the low income earners in Kenya; To evaluate the effects of the role of the mortgage distribution channels on housing affordability among the low income earners in Kenya and to assess the effects of the role of the property developers on housing affordability among the low income earners in Kenya. Analytical research design was used in the study. The target population was 300.The sample size was 168.Stratified random sampling method was used. Primary data was used and questionnaires were used to collect the data. The questionnaires were pretested before launching the main study. Drop and pick method was used. The data was processed using various processes which included; validation, sorting, summarization and aggregation. The data collected was analyzed using inferential statistics and descriptive statistics using the IBM SPSS Statistics 20.0.1(March, 2012).The descriptive statistics that were used was the frequencies and mean. The inferential statistics involved the use of Pearson’s correlation and regression analysis. The study established that there exists a significant positive relationship between the independent variables namely; effects of the role of the National Government housing policy, effects of the role of the mortgage distribution channels, effects of the role of the property developers and the dependent variable, housing affordability among the low income earners in Kenya. The study established that the effects of the role of the County Governments housing policy was not significant in influencing housing affordability among the low income earners in Kenya. The study established that the independent variable with the highest predictive power over housing affordability among the low income earners in Kenya was the effects of the role of the National Government. The study recommends participation of all stakeholders in the formulation, review, repeal and amendment of the existing legal framework governing operations of the housing sector and tax rebates as well as incentives to motivate developers leading to increased investment in low income housing. The results indicated that the activities put in place by the County Governments in the implementation of housing policy do not influence housing affordability among low income earners in Kenya. It is also recommended that the property developers should increase their capacity to deliver housing units in larger quantities as this would enable them enjoy economies of scale. They should use technology that is available locally to drive supply of housing stocks in a sustainable way. They should eliminate the use of deposits as their major source of funds.