- Owning a home is a big deal.
- According to the Kenya Housing Survey 2023-2024, homeownership rates have dropped from 64% in 2013 to 61% in 2024.
- Urban real estate prices in Kenya have skyrocketed in recent years.
- Policymakers and developers must work towards making homeownership more accessible in urban areas .
Owning a home is a big deal. In both past and present societies, it has been a symbol of stability in every sense. A home represents permanence, which is often equated with security. It’s also a strong indicator of financial stability, given that buying or building a home is no small investment. Over the years, we’ve seen new homes springing up, a clear evidence of growth. However, a recent survey by the Kenya National Bureau of Statistics (KNBS) reveals a different trend: homeownership rates in urban areas across Kenya are steadily declining.
According to the Kenya Housing Survey 2023-2024, homeownership rates have dropped from 64% in 2013 to 61% in 2024. On the other hand, rural homeownership rates have remained relatively stable, with over 80% of rural households owning their homes.
While owning a home has traditionally been a key milestone in financial stability, various economic and social factors are making it increasingly difficult for urban residents to achieve this goal. This article explores the primary reasons behind the drop in homeownership rates in Kenya’s urban centres compared to rural areas.
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Table of Contents
- Rising Property Prices in Urban Areas
- Low Mortgage Uptake and High Interest Rates
- Economic Uncertainty and Job Insecurity in Urban Areas
- Changing Lifestyle Preferences
- Limited Affordable Housing Options in Urban Areas
- High Cost of Living in Urban Areas
- Land Scarcity and High Development Costs in Urban Areas
- Conclusion
Rising Property Prices in Urban Areas
Urban real estate prices in Kenya have skyrocketed in recent years, making it challenging for middle-income earners to afford homes. In Nairobi, for example, the average price for a one-bedroom apartment is Ksh 7 million, while a three-bedroom unit can cost upwards of Ksh 15 million. High demand for housing, coupled with limited land availability, has driven property prices beyond the reach of many potential buyers. In contrast, land and housing in rural areas remain significantly cheaper, making homeownership more accessible to rural dwellers.
Low Mortgage Uptake and High Interest Rates
Despite the availability of mortgage financing, uptake remains low due to high interest rates and stringent lending conditions. Mortgage uptake in Kenya is below 1%, with only about 27,000 active mortgage accounts as of 2024. Many potential homeowners find mortgage repayment plans unsustainable and this discourages them from taking on long-term financial commitments. In rural areas, homeownership is more common due to the lower reliance on mortgage financing, as many families build homes incrementally using personal savings. Additionally, many people in rural areas don’t have to worry about buying land, as they often inherit ancestral property.
Economic Uncertainty and Job Insecurity in Urban Areas
Economic instability and the rise of contract-based employment have made it difficult for individuals to commit to long-term investments like homeownership. Kenya’s urban unemployment rate stands at approximately 12.7%, further discouraging mortgage uptake. With job insecurity prevalent in many urban sectors, potential buyers hesitate to take on mortgage commitments, fearing the inability to make consistent payments in the future. In contrast, rural areas have more stable informal economies where families rely on agricultural and self-employment income, reducing dependency on formal employment for housing investments.
Changing Lifestyle Preferences
A shift in lifestyle preferences, especially among younger generations, has contributed to declining homeownership rates in urban areas. Many young professionals prioritize flexibility and mobility over settling in one place. Renting provides the freedom to relocate easily for career opportunities, avoiding the long-term responsibilities of homeownership. In rural areas, however, cultural and generational factors encourage homeownership as families build homes on ancestral land, ensuring long-term stability.
Limited Affordable Housing Options in Urban Areas
Government and private sector efforts to provide affordable housing have not met the growing urban demand. While the Affordable Housing Program aims to construct 250,000 houses annually, the current supply falls short of this target. Many of these projects are either insufficient or do not align with the income levels of most urban residents. In rural areas, homeownership is more achievable due to the lower cost of construction and the availability of family-owned land, eliminating the need for expensive land purchases.
High Cost of Living in Urban Areas
The overall cost of living in urban areas has increased, affecting savings and disposable income. In 2024, inflation in Kenya stands at approximately 6.8%, raising the costs of food, transport, and utilities. This financial strain forces many to prioritize daily expenses over long-term investments like buying a house. Rural areas, in contrast, have a lower cost of living, allowing families to allocate more resources toward homeownership.
Land Scarcity and High Development Costs in Urban Areas
Urban centers face land scarcity, leading to increased land prices and construction costs. In Nairobi, the price of land in prime areas such as Kilimani and Westlands has risen by over 40% in the last five years. Developers pass these costs onto buyers, making property ownership more expensive. Additionally, bureaucratic processes in acquiring land and building permits further delay housing development, limiting supply and pushing prices higher. In rural areas, land is more readily available, and traditional land tenure systems allow families to own and develop land with fewer financial barriers.
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Conclusion
The decline in homeownership rates in Kenya’s urban areas compared to rural areas is driven by a combination of economic, financial, and social factors. While rental housing remains the more viable option for many urban dwellers, rural residents benefit from lower costs, cultural traditions, and more accessible land. Policymakers and developers must work towards making homeownership more accessible in urban areas by addressing mortgage affordability, increasing affordable housing supply, and stabilising economic conditions. Ensuring that urban residents have a fair chance at homeownership will be crucial in promoting long-term economic stability and social equity in Kenya.