Where Do Slum Dwellers Fall in Mortgage Debate?

Francis Ayieko

29 June 2011

Nairobi — There seems to be some good news coming from the government for aspiring home owners, especially low-income earners.

During the launch of the Kenya Informal Settlements Improvement Project on Monday this week in Nairobi, Housing minister Soita Shitanda said the project would develop strategies to improve access to financing of affordable housing and mortgages.

“We will examine current financing available to end-users in lower income groups to access housing, and to developers for increasing the supply of affordable housing for both ownership and rental purposes,” said Mr Shitanda.

The new project, a joint initiative between the Housing and Lands ministries, aims at improving the living conditions of slum dwellers mainly by providing infrastructure and ensuring security of land tenure in those neighbourhoods.

It also has a component that puts emphasis on prevention of slum development.

This is designed to support planning and development of options that facilitate delivery of infrastructure services, land, and affordable housing for future urban growth.

It was also heartening to see that the government is awake to some important urban realities and how they contribute to housing shortage.

For instance, Mr Shitanda pointed out that rapid urbanisation and inadequate capacity to cope with the housing needs of people in urban areas have contributed to the development of informal settlements.

Indeed, urban transition is well underway in Kenya. In 2009, 32 per cent of the Kenyan population was residing in urban areas and the total urban population was estimated to be 13 million people. Kenya’s five largest cities — Nairobi, Mombasa, Kisumu, Nakuru and Eldoret — account for about 34 per cent of the urban population.

It is estimated that urban areas will account for 54 per cent of the population by 2030. “The upgrading of informal settlements by providing infrastructure and enhancing tenure security is high on our agenda,” Mr Shitanda announced, noting that there was a need to create roads in informal settlements so that services such as fire brigades and ambulances can have free access.

We would really want to believe that the government means business here, because there is no doubt that it is capable of coming up with mechanisms to make affordable housing both available and accessible to most Kenyans.

However, we should keep our optimism in check, especially when it comes to access of decent housing by low-income earners as well as slum dwellers. As things stand now, it will take a long time for this category of people to access (formal) mortgages.

Granted, when the Kenya Informal Settlements Improvement Project is fully implemented after five years in the 15 major municipalities targeted, many residents will have titles to the land they have been living on.

But what kind of mortgage can they afford? (Secure tenure does not necessarily make housing affordable as it does not increase one’s earnings.)

Put another way, is formal mortgage the right housing finance option for slum dwellers? Could there be a better way to help this group access home loans? What should be the main considerations?

Perhaps it would do us good to remind ourselves about some hard truths and realities about slums. Many Kenyans come to the city in search of a well-paying job.

With slow economic growth, the formal employment sector does not have the capacity to absorb the range and scale of jobs required to match the rate of urbanisation.

This has, inevitably, led to the growth of the informal sector in Kenya. Some informal sector jobs pay well.

However, the common thread linking most such jobs is that the income is low and irregular. This is what has made many people end up living in slums, where rents are “affordable”.

This has been compounded by the fact that the national and local governments have not risen to the occasion in terms of provision of basic urban services, including housing, to match the increased demand.

The private sector has, therefore, taken over the role of providing housing, but it largely caters for the upper-middle and upper income households.

This has led to the proliferation of slums and other informal settlements that cater for poor urban dwellers.

With meagre (and often irregular) earnings, most low-income urban households find that their quest for decent and affordable housing continues to be an elusive dream.

Micro-finance institutions have over the years supported the lower-end market with micro-credit for business enterprises, and in the last decade have embraced development of products aimed at supporting housing finance.

This has evolved from recognition that most micro-business loans have been used for housing-related activities.

But, most important, micro-finance institutions seem to understand a vital secret that has eluded the government over the decades: That low-income households build their homes incrementally over extended periods of time.

This calls for a housing finance system that accommodates urban poor livelihood strategies and the need to address other constraints that contribute to poor living conditions in urban centres.

AllAfrica – All the Time