Support for collaboration in driving an affordable housing agenda in Kenya

 

 

 

 

A joint strategy for the FSD Network in Kenya, encompassing FSD Kenya, FSD Africa and FSD Africa Investments (FSDAi), was developed with the support of CAHF, and in October 2020, FSDAi ‘s Investment Committee agreed on a three-year grant programme to support the implementation of FSD Kenya’s Affordable Housing Project. In this blog, Seeta Shah (Senior Housing Specialist at FSD Kenya) provides insights into the Affordable Housing Strategy, presented at a webinar on 4 February 2021. This is a re-post of a blog on FSD Kenya’s website. Follow the links to view the Background to affordable housing strategy for the FSD network in Kenya, FSD Affordable Housing strategy – Rationale for an affordable housing working group for Kenya, and Webinar recording of the Affordable Housing Working Group Launch. 

The FSD Network came together with colleagues from across the affordable housing sector in Kenya, to discuss opportunities for collaboration in supporting Kenya’s affordable housing agenda.  The webinar, hosted by FSD Kenya on Thursday 4th February 2021, included 115 stakeholders from government, other development finance institutions (DFIs), Banks, savings and credit cooperative societies (SACCOs), large and small developers, building industry service providers and research organisations – who actively engaged during the full two-hour session.

The FSD Network received funding from the Foreign, Commonwealth and Development Office (FCDO) to support the affordable housing sector across several African countries in 2020. A joint strategy for the Network in Kenya (encompassing FSD Kenya, FSD Africa and FSD Africa Investments) was developed with the support of the Centre of Affordable Housing Finance in Africa (CAHF). The strategy was developed using the Housing Value Chain framework – and critically evaluated the failures experienced at each component from land, title, infrastructure, construction, offtake, maintenance, and social and economic infrastructure for four housing typologies namely: incremental housing, informal settlements, small landlord and formal housing – which are generic to most of Africa.

The research behind the Strategy, which comprised primary research, desktop synthesis and interviews, is available here. While the Kenyan housing landscape offers a breadth of opportunities, the potential for scale is not being realised.  The success of the ”housing unit delivery” is often less than expected, and while important, finance is often not the key limiting factor.  There is a recognition from all stakeholders that more attention needs to be given to the length and complexity of the entire housing value chain, and how finance, on the ground skills and regulatory frameworks need to be brought even closer together at every single component of each value chain, to enable the broader market transformation that is desired.

Kenya’s housing deficit is nine million units over the next 20 years. Even with extremely conservative delivery costs of between $5,000 to $10,000 (between KSh 500,000 to Ksh 1,000,000) per housing unit, there is a cumulative investment need of $45 – 90 billion (Ksh 4.5 – 9 trillion).  This is clearly beyond the capacity of any investor or group of investors, validating the need for a collaborative, action-learning approach that takes the lessons of particular investments and applies them broadly across the market.  Kenya is clearly seen by investors as ripe for market transformation given to depth and capacity of the supply chains, regulatory framework and financial markets.  Agreeing on a collaborative approach will leverage these assets together with the collective force of the capital, to meet the enormous funding requirement.

The FSD Network has therefore agreed on three principles for its Affordable Housing Strategy:

  1. To use our investment as an opportunity for action in learning, and share our findings to leverage our collective capacity;
  2. To promote an open source culture which promotes information sharing so that stakeholders leverage their existing resources with the experiences of others, and
  • To work across the spectrum of housing sub-markets, and explicitly promote both homeownership and rental tenures and hybrid rent to own structures.

Two broad investment strategies have been defined for implementation by the Network entities.

The first is investment in incremental and informal settlement housing, through delivering two small pilots to harness the power of technology and innovation to drive the delivery cost down, and use the findings to structure financial products to support better delivery and offtake.

The second, is an investment into an institutional offtaker of formal housing to stimulate supply and demand with a key focus on integrating green and long-term building resilience and management frameworks, and allow an exit to local institutional capital markets.

Each Network entity is designing several interventions to support these efforts along the housing delivery value chain, including supporting the digitization of national land information systems; designing appropriate demand and supply side financing products, and promoting the adoption of green and long term resilient building and management practices within housing.

The purpose of the wide Stakeholder meeting was premised on the need to bring together the providers and users of capital, and form an investment alliance that can support the objectives of each investment beyond what the immediate players in that investment can achieve.

It seems imperative that by working together and sharing our experiences and data, and adopting an open source culture similar to the tech and pharma sectors, the Affordable Housing sector could provide the pipeline and justification to bring in long term, patient blended finance products and particularly bring in local capital, and reduce the risk with deep regulatory and market development and investment support.  FSD Kenya is happy to help to convene the players and provide a neutral and nimble coordination role. The key immediate next steps are to continue to work with all stakeholders to ensure the concept of Open Source is helpful to each entity – particularly the entity sharing data, in support of market health and competitiveness.

Background to affordable housing strategy for the FSD network in kenya FSD Affordable Housing strategy – Rationale for an affordable housing working group for Kenya Webinar recording of the Affordable Housing Working Group Launch

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