Number of Households who can afford certain mortgages in Kenya

In 2017, there were 1.9 million households in Kenya. This number increases by around 300,000 every year with over half of these households located in urban areas according to an assessment by the Centre for Affordable Housing Finance (CAHF) on the country’s affordable housing market.

The survey sought to establish the number of Kenyan households who could afford formally constructed homes with mortgage financing.

Findings show that only 0.6 per cent of all households can afford a mortgage purchase of over KES 6 million with mortgage payments of KES 105,422 or more while only 3.6 per cent of all households can afford a mortgage of KES 3 million with monthly mortgage payments of KES 52,661 or more.

Most Kenyans, can only afford a land purchase mortgage or incremental building according to the findings.

The affordability problem reflects in home purchase as well as rentals. According to estimates by the Kenya National Bureau of Statistics (KNBS), 53 percent of urban renters pay less than KES 2,000 per month (US$19) in rental, 26 percent between KES 2,000 and KES 4,000 (US$19 to US$38), 16 percent between KES 4,000 and KES 10,000 and only 5.5 percent above KES 10,000.

A key barrier to the production of affordable housing based on the research is the limited supply of affordable land for development as a result of the somewhat disorganized systems of land tenure, titling and release, and land speculation.

The generally high cost of accommodation products is also a barrier. In addition, the country’s lack of proper spatial planning and land use management systems add to challenges in land release.

On financing, CAHF found that financing models applied by formal institutions in Kenya are limited in scope and scale and exclude the majority of low and middle-income households from access to housing finance.

In their opinion ‘the recently imposed cap on interest rates may have adversely affected one of Africa’s most encouraging affordable housing markets by limiting the spread available on housing finance and thereby making lower-risk government bonds a more attractive investment option.’

While most new developments target the KES 4 million (US$40 000) plus market, this excludes over 90 percent of households from the formal housing market (assuming prevailing mortgage terms).

The study suggests that, the definition of Kenya’s “affordable housing market” must be expanded to include much more affordable housing options at a price points below KES 2 million (US$20,000). The study was sponsored by the World Bank.

Read; NHC records low loan numbers amidst affordable housing agenda