UK Climate Investments (UKCI), the British Government’s International Climate Finance flagship program, has committed KShs 4.4 billion (£30 million).
The UK will channel this £35 million (KSh 5.2 billion) investment into a new 10-year locally managed fund, which at full size will deliver approximately 10,000 new green housing units, which are affordable homes to many low-income families in Kenya.
According to Jane Marriott, UK High Commissioner to Kenya, the 10,000 new green housing units will help bridge the housing shortage and provide lasting green jobs.
10,000 units target
The Kenyan green affordable housing venture has now received 100% of its targeted £61 million (KShs 9 billion) investor backing for the first close, enabling this locally managed fund to become operational as early as July 2021.
The Fund aims to deliver up to 10,000 units using advanced green technologies.
These green housing units will cost an average of £30,500 (KShs 4.5 million), while rentals will range between £100 (KSh 15,000) and £350 (Kshs 50,000) per month.
Available data shows that despite massive demand for low-cost housing in Kenya, developers can only supply 50,000 units against a target of 250,000 units thus Kenya has been hit by high housing prices and the continued mushrooming of informal settlements.
Approximately 40% of the population in Kenya live below the international poverty line and lack access to decent housing, especially in urban areas.
This development of green affordable housing will focus on increased availability to the low to middle-income population (whose family income is below US$1500 a month).
Efforts to develop low-carbon houses in Kenya fits into the country’s energy transition that is already gathering pace with Kenya being considered a clean energy market in the region, with renewables accounting for 60% of its power generation as of 2019.
“A lack of consistent and reliable data to scope and evaluate the affordable housing market critically challenges delivery at scale”Kecia Rust – Executive Director, CAHF
Through the delivery of this project, UKCI will help embed international green standards in the Kenyan housing market.
The investment will also support building a new green asset class for local investors, readying Kenyan institutional capital to further invest in the sector.
The FSDAi investment will specifically support the build-out of Open Access, a housing market intelligence portal led by the Centre for Affordable Housing Finance in Africa (CAHF), with support from FSD Kenya and Reall.
This is designed to provide housing finance investors with the data they need to make investment decisions. Open Access will collect the data from these investments to create market intelligence for housing finance investors, developers and policymakers.
Open Access will also use this intelligence to identify and resolve supply chain blockages and reduce barriers to entry for smaller-scale players into the green housing space.
Kecia Rust, Executive Director, CAHF, said: “A lack of consistent and reliable data to scope and evaluate the affordable housing market critically challenges delivery at scale.”
Housing delivery and its financing take place along a value chain encumbered by multiple blockages and market failures.
Our Open Access initiative will work with investors and developers to collect data which will then be packaged as reliable intelligence on the housing market, to guide the stakeholders towards best actions for sealing the existing housing gaps.”
UKCI and FSDAi’s investments in the locally managed fund will demonstrate that affordable housing, particularly rental housing requiring long-term management, is a viable asset class for private real estate developers and investors.
The investments will stimulate the flow of much-needed long-term and domestic investment into this crucial development area while creating jobs in the construction and property sectors, generating profits for African businesses.
“With Kenya’s urban populations increasing by more than 4% in the last five years, our investment in green housing is meeting this need and will benefit thousands of Kenyans currently without affordable housing,” said Abel
Anne-Marie Chidzero, Chief Investment Officer of FSD Africa Investments, said: “We are pleased to be supporting access to affordable urban housing, which is a key pillar of Kenya’s development agenda. The fund and our support for the Open Access platform will address some of the critical factors that prevent financial markets from playing a bigger role in affordable housing in Kenya.”