The Kenyan government's affordable housing programme is facing a significant funding challenge, with a substantial shortfall in revenue generated from sales of completed units. According to the State Department for Housing and Urban Development, the Affordable Housing Board collected Sh212.342 million from sold units in the year to June, against a Sh15.25 billion target. This represents only 1.4 percent of the projected revenue, raising concerns about the State's plans to fund new projects using proceeds from completed houses.
The government's rent-to-own model, which allows tenants to occupy a home and build equity through monthly payments, has contributed to the weak cash collections. The State Department for Housing and Urban Development reported that most units were sold on the Tenant Purchase Scheme (TPS) as opposed to the projected cash sales. While occupancy of completed affordable housing reached 94 percent, beating the government's 90 percent target, the immediate challenge is to turn demand into cash to recycle into construction.
The government had completed and handed over 1,836 affordable houses by June, while another 1,380 units were substantially complete at 98 percent. A further 103,251 units were under construction, although they were only 35 percent complete on average, while another 65,649 units were still under procurement. The State's plans to increase spending on State-backed housing from the year starting July 2027, with sales proceeds expected to become an increasingly important source of funding, may be impacted by the current revenue shortfall.
President William Ruto's administration has budgeted for a dramatic expansion of spending on State-backed housing, with affordable housing alone projected to account for Sh201.1 billion in the year starting July 2027. This represents a significant increase from the Sh50.7 billion allocation projected for the current year. The planned jump in spending is based partly on expectations that completed houses will begin generating enough revenue to support fresh construction.
Housing Principal Secretary Charles Hinga said the government's projections were based on higher receipts from both housing sales and the levy. However, the latest revenue figures show the scale of the task facing the programme if housing sales are to become a major financing stream. The government had expected Sh15.25 billion in sales during 2025/26 but collected only Sh212.342 million.
The underperformance in revenue collections from the houses means the project faces a potential mismatch between the timing of expenditure and revenue. The Housing department seeks to build thousands of units today while relying on future payments from households to replenish funds. This is critical given the scale of construction still required, with only 1,836 units completed and handed over by the end of June against a 217,654-unit target.
The department attributed the annual construction target miss to delays in the procurement process, with overall progress reaching 22.8 percent against a 30 percent target. The government will need to address the funding challenge and accelerate revenue generation to achieve its affordable housing goals and meet the growing demand for housing in Kenya.
Key points
- The Kenyan government's affordable housing programme faces a Sh15.04 billion shortfall in revenue target.
- The rent-to-own model has contributed to weak cash collections, with most units sold on the Tenant Purchase Scheme.
- The government plans to increase spending on State-backed housing, with affordable housing projected to account for Sh201.1 billion in the 2027/28 fiscal year.
