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Kenya's ambitious goal to deliver 200,000 affordable housing units annually is facing significant headwinds, with experts and recent data indicating that high construction costs and a substantial housing deficit are making the target increasingly difficult to achieve.
Kenya's vision of providing accessible and affordable housing for its citizens is confronting a harsh reality, as the government's ambitious targets are challenged by escalating construction costs and a persistent housing deficit. While the government aims to construct 200,000 units annually to bridge a national shortage estimated at over 2 million units, recent figures suggest a significant shortfall in delivery.
The State Department for Housing and Urban Development (SDHUD) and the National Housing Corporation (NHC) completed 3,521 residential buildings in 2023, a notable increase from 1,390 units in 2022. However, the number of completed units under the Affordable Housing Programme (AHP) actually decreased by 50.7% in 2024, with only 1,655 units completed compared to 3,357 in 2023. This slowdown casts doubt on the feasibility of meeting the annual 200,000-unit target by 2027.
The pursuit of adequate housing has been a long-standing priority in Kenya, enshrined in Article 43(1)(b) of the Constitution, which guarantees every person the right to accessible and adequate housing. Kenya's Vision 2030 also identifies housing as a crucial area for development. Previous administrations have launched initiatives, including former President Uhuru Kenyatta's 'Big Four Agenda' in 2017, which aimed to deliver 500,000 units by December 2022. However, this target fell significantly short, with less than 3,000 units delivered through projects like Pangani and Park Road.
President William Ruto's administration has re-energized the AHP, integrating it as a foundational pillar of the Bottom-Up Economic Transformation Agenda (BETA). The current government's goal is to deliver one million affordable homes over five years, translating to 200,000 units annually. To finance this, the Affordable Housing Act 2024, enacted in March 2024, mandates a 1.5% housing levy on employees' gross monthly salaries, matched by employers.
The Affordable Housing Act 2024 establishes the Affordable Housing Fund, providing a legal framework and funding for the design, development, and maintenance of affordable housing and associated infrastructure. The National Housing Corporation (NHC), a statutory body under Cap. 117 of the Laws of Kenya, plays a principal role in implementing the government's housing policy, including developing decent and affordable housing and mobilizing capital.
Despite these frameworks, challenges persist. The delivery of housing is often the responsibility of county governments, which may lack adequate resources. Furthermore, frequent and unpredictable changes in Kenya's tax policies, such as the Export and Investment Promotion Levy on imported construction materials like steel, have contributed to increased building costs.
Industry stakeholders, including construction experts and manufacturers, largely attribute the rising costs to high fuel prices, which impact production and transportation, and currency devaluation. Daniel Kamweru, founder of Point to Point Construction, noted a KES 70 increase in diesel prices since 2021, affecting electricity and transport costs. James Wambai, a timber and metal supplier, highlighted the burden of high taxes, including a 52% tax on petrol or diesel, customs duty, income tax, and cess, which are ultimately passed on to consumers.
Prospective homeowners register on the Boma Yangu portal, a government initiative, to select housing preferences and make savings. As of April 2025, a recent release of 5,000 units attracted over 500,000 applicants, underscoring the immense demand.
The average cost of building a home in Kenya ranges from KES 48,750 to KES 122,860 per square metre, according to a survey by the Integrum Construction Consortium between October 2023 and April 2024. This represents a 45% increase in construction costs since 2021. Factors contributing to this include volatile raw material prices, inadequate infrastructure, and a shortage of skilled labor. The Architectural Association of Kenya (AAK) reported that the cost of building per square metre rose from between KES 34,650 and KES 77,500 at the start of 2023 to between KES 41,600 and KES 100,800 by year-end, a 20-30% increase.
The escalating construction costs directly impact the affordability of homes, making it challenging for low and middle-income households to access decent housing. The average cost of home loans under the AHP increased by approximately one-third in the 12 months leading to September 2023, reaching KES 3.96 million, up from KES 2.98 million in the previous year. This surge is attributed to elevated inflation and a depreciating shilling. The low homeownership rate in urban areas, at around 21.3%, further highlights the severity of the issue.
The persistent housing deficit contributes to the proliferation of informal settlements, where an estimated 6.4 million urban Kenyans reside. In Nairobi, approximately 60% of residents live in slums. These settlements often lack basic services and expose residents to health risks.
A proposal in the Finance Bill 2025 to remove VAT exemptions on building materials could further exacerbate construction costs, potentially slowing down housing delivery. Legal disputes have also delayed occupancy timelines for some AHP projects, shifting initial move-in targets. While public-private partnerships are central to the initiative, some projects have faced resistance from local communities due to concerns over displacement and inadequate compensation.
The government aims to achieve its target of one million housing units by 2027. To address the challenges, the government is encouraging private sector participation through tax incentives and simplified regulatory processes. Innovations such as low-cost construction technologies and rent-to-own financing models are also being explored.
Observers will be keenly watching the government's strategies to mitigate rising construction costs, particularly in light of proposed tax changes. The effectiveness of public-private partnerships and the resolution of community concerns will be crucial for the timely delivery of affordable housing units. The uptake of innovative construction technologies and alternative financing models will also be key indicators of progress.
