NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Building quality affordable housing is not easy. It takes knowledge, creativity, and perseverance. One needs all the tools they can get.

That is why we wrote The ABCs of Affordable Housing in Kenya. We hope this report will serve as a resource to practitioners and investors who are looking to enter the affordable housing sector in Kenya or elsewhere. Its pages contain a handful of challenges practitioners are bound to encounter and strategies to address them. Some of these strategies are specific to Kenya, but the vast majority can be drawn across geographic boundaries.

Our primary reason for releasing this report is to encourage more entrepreneurs and investors to enter the affordable housing sector in Kenya and provide them with some tools to succeed. At Acumen Fund, we invest in six sectors: health, water, agriculture, energy, education, and housing. Housing is on the list because, despite the challenges, we believe that the impact of providing a home is undisputed and the need for patient capital clear. If we are trying to improve the lives of the poor, we cannot ignore housing, especially as the cities where we work expand so rapidly.

Ten years of investing in housing enterprises has taught us a lot about what works and does not work.The ABCs of Affordable Housing attempts to impart that knowledge to you. In addition to going through specific challenges and their solutions, the report lists six overarching components of success for any company looking to build affordable housing in Kenya. These are perhaps the most important takeaways—they are the themes that weave through the report.

They are:

• Be creative–Affordable housing does not happen by simply downsizing a model targeted at middle-income populations. It requires creativity and deep understandings of the target market’s preferences and where there is room to maneuver on costs.

• Be willing to take risks in order to maintain the social impact, even when it means saying no to potential revenue–It is one thing to build a home for a poor family. It is another to take the steps to ensure it actually reaches the poor. Sometimes this means denying potential customers because they do not meet the target criteria, and in a competitive business environment, this takes guts.

• Develop relationships with institutions, but keep them clean–Players in the housing sector deal with large bureaucratic institutions such as banks and governments whether they like it or not. It is in your interest to develop a friendly and trusting relationship with local officials and banks, while maintaining high standards against corruption.

• Recognize the cultural context—If you are entering the housing market in Kenya having worked in the sector elsewhere, take the time to learn about the cultural context. Low-income Kenyans may aspire to own different types of homes than the low-income population with whom you worked in the past. Understanding this may bring light to new challenges or open up new worlds of possibility that did not exist in your previous context.

• Housing isn’t just the physical infrastructure, it’s also community infrastructure—A healthy and vibrant community is much more than just houses. It includes schools, clinics, places of worship, parks, and perhaps most importantly, a sense of ownership that is shared by the residents. It is essential for developers to think holistically, and include the physical spaces and social mechanisms that will foster a sense of community. This will determine the sustainability of the project and keep it from devolving into a slum or a ghost town.

• Build in plenty of leeway into your model—No matter how much research and planning you do, expect the unexpected. There will be plenty of delays, roadblocks, and unforeseen challenges. If you have the leeway to absorb these, they will not pull you under.

Whether you are a developer, investor, or social entrepreneur, we hope you find this to be a useful tool. It should be used as a guide, not a blueprint. Unfortunately, there are no clear blueprints for affordable housing. But our hope is that The ABCs of Affordable Housing will help sow the seeds for new and innovative strategies that will lead to lower-cost, higher quality homes for the poor.

(Click here or on the report cover to download the entire report).