Understanding reduced private-sector participation in low-income housing delivery in Nairobi

Abstract

The case of affordable housing in Kenya is particularly acute and as decent housing remains inaccessible to the population, informal settlements and slums continue to grow as does the housing deficit. The situation has been particularly alleviated by the private sector, a major housing supplier in Kenya. However, these developers have dominated the middle and upper segments of the market, with only a small presence in the low-income segment. In light of this, the objectives of this research is to establish the basis of success of private sector developers in delivery of middle and upper segment housing; to analyze the low income housing segment in light of the critical success factors identifies; to identify key hindrances to the private sector for delivery of low-income housing and to establish possible solutions to improve this situation. The research is an exploratory study of a sample of a population, the latter being all private developers who have undertaken residential projects as commercial venture. The sample frame comprised 56 major players and a sample of 14 was selected through simple random sampling. The survey was administered through use of a semi-structured questionnaire. It emerged that major incentives to developers in the middle and upper segments were off-plan sales and strong economic growth as well as new finance structures. While strong economic growth also enhanced the low income market, finance components, that is off-plan sales and new finance structures did not hold as strong incentives in this market. Major disincentives to private developers in low-income market were cost of debt financing and (lack of ) off-plan sales leading to larger scales of investment, current infrastructure development and adherence to the building code. It further emerged that cheaper debt financing availability of end-financing and revision of the building code as possible solutions would increase private participation in low-income housing. The research generates strong implications for financial innovations and reform, policy and reform, infrastructure development, administrative reviews, business and academia. The circularity of the research process has been maintained, achieved and demonstrated in this dissertation.