How Co-operative Model Can Solve Kenya’s Housing Crisis

Chief Executive Officers and Directors within Kenya’s co-operatives sector insist that this industry is the best-suited route to ensure Kenya achieves its affordable housing plan.

“The co-operative society movement system is the best way to win the public into affordable housing projects voluntarily. It has decades-long structures and is society-owned; it is easy to manage the traceability element,” said Samwel Maina, Chairman of the Urithi Housing Co-operative Society Board of Directors.

He suggests that the government establish an affordable housing revolving fund that could be distributed to co-operative societies similar to the Higher Education Loan Board HELB.

Urithi Housing Co-operative Society, which has 30,000 members and has completed 16 housing projects, mainly comprises members who do not have pay slips but contribute and move together as a family towards homeownership.

Maina suggests that the government can easily achieve the housing agenda by investing in over 25,000 co-operative societies with at least 15 million members.

“We have seen what producers’ co-operative societies delivered for the agricultural sector. The Co-operative Societies Act just needs to be amended to, for instance, allow deposit-taking co-operatives to invest more in real estate,” said Maina.

• Government can channel cash collected from cess to construct infrastructure that will support housing
• Data from Africa Housing Yearbook 2023 shows that Kenya’s demand for new housing units stands at 250,000 units per year. The market can only supply 50,000 units, leaving an annual deficit of 200,000 units.
• Only 2% of the available housing units go to low-income groups, who are most underserved.

Prof Isaac Nyamongo, Deputy Vice-Chancellor of the Co-operative University of Kenya, opines that the government need not reinvent the wheel. “Renewed thinking should inject housing solutions targeting those at the bottom of the pyramid where the housing shortage is felt most. Co-operatives have structures to offer the enabler function convincingly within the affordable housing pillar,” he writes in a commentary piece.

Prof Nyamongo states that by actualizing the sixth co-operative principle, cooperation among co-operatives, and with the support of apex unions in the sector, co-operatives stand to play a bigger role in providing affordable housing.

According to Mr Francis Kamande, National Union for Housing Co-operatives (NACHU) Chairman, Housing Co-operatives own vast pieces of land. These assets can be unlocked through partnerships with the government and other stakeholders, providing finance and purchase of housing units through a mortgage model or a tenant purchase scheme. Housing co-ops can aggregate demand for housing from their members, while NACHU can lobby for pro-affordable housing policies and plans.

• Housing is a basic need and, therefore, a duty for any government to ensure that its citizens have decent housing. Owning property also provides one with an asset that shields one from any economic shocks.
• Homeownership promotes economic equality. It has been argued that homeowners, on average, earn higher incomes and have higher savings than renters. A Home is an investment with proven immeasurable benefits.
• homeownership has traditionally been the foundation of the average Kenyan’s growth in net worth.

With about 11 Saccos partnering with Kenya Mortgage Refinance Company (KMRC), many Sacco members are achieving their dreams of having decent homes, which previously were out of their reach. Expensive mortgage facilities locked out many.

A sectoral lending report by the Sacco Societies Regulatory Authority (SASRA indicated that the Land and Housing sector received the largest lending from Savings and Credit Co-operative Societies (Saccos) in 2022, at 33.24% of total loans.

This signifies a sharp growth in loans spent on land and housing in 2022 compared to 26.9% in 2021, highlighting the co-operative movement’s role in enabling affordable homeownership countrywide. The latest percentage means Saccos disbursed over Ksh227 billion to support members in owning land and building decent homes last year.

Affordable housing has been a cornerstone of the government’s agenda, with the new Financial Act 2023 making it mandatory for Kenyans to contribute 1.5% of their salaries tax towards financing the construction of houses in counties. However, to succeed, collaborative efforts between government, communities, and the private sector are required, which necessarily demands a new conversation that brings the intended beneficiaries into the boardroom.

The co-operative movement, one of Kenya’s oldest but most enduring business forms, plays a big role in enabling homeownership.

As community-entrenched businesses, co-operatives are catalysts that can revolutionize the housing sector through community-oriented, market-based solutions. Co-operatives help members achieve greater prosperity directly—through access to credit and higher earnings—and indirectly by facilitating financial education, mentorship, and training.

Various studies show members attest that their co-operatives help them make better home and business decisions. A World Bank report last year noted that co-operatives provide 80% of housing needs in the country, making owning a house cheaper for the middle and low-income class.

Unique concept of co-operative housing model

Co-operative housing, also known as co-housing, is a unique concept that offers an alternative way of living and owning property.

Unlike traditional housing models, co-operative housing emphasizes community, shared responsibilities, and affordability.

• One of the defining characteristics of co-operative housing is that its residents own and manage it collectively. Instead of individual ownership, residents become members of a co-operative, which typically takes the form of a co-operative corporation or association. This co-operative entity owns the property and is responsible for its maintenance, management, and administration. 

• Co-operative housing provides an affordable housing solution for individuals and families who may otherwise struggle to purchase a home in the current real estate market. By pooling financial resources and sharing expenses, co-operative members can enjoy the benefits of homeownership at a fraction of the cost. This affordability is achieved through various mechanisms, such as shared mortgage payments, reduced maintenance costs, and bulk purchasing power.
• A key aspect of co-operative housing is the principle of democratic decision-making. Each member has an equal say in the management and operation of the co-operative, typically through a voting system. This ensures that all voices are heard and that decisions align with the community’s collective interests. The democratic nature of co-operative housing fosters a sense of belonging and empowers residents to actively participate in shaping their living environment. 

• Housing co-operatives provide lower-cost housing, which shares costs and risks across members. In Kenya, housing co-operatives are a solution that also provides opportunities for members to slowly save and collectively purchase a large plot, which is cheaper and easier to procure than small lots and bulk purchase construction materials. 

• Housing co-operatives in Kenya can also provide income-generating opportunities such as a co-operative store, rental units, or solar panels, which help to offset costs for everyone.

Over the last five years, Global Communities has re-engaged in the housing co-operative sector through the Co-operative Leadership, Engagement, Advocacy, and Research (CLEAR) program funded by the U.S. Agency for International Development. The CLEAR program supports housing co-operatives by coaching them through developing business plans, implementing strong financial practices, and training on membership and governance.

Technical support from Global Communities helps ensure that the co-operatives can provide for their members and have sustainable solutions for long-term operational success.

Today, Global Communities is working with housing co-operatives in Kenya through the CLEAR program, which started in 2018.

• Housing co-operatives strengthen household livelihoods by creating more affordable housing, protecting property rights and providing security of tenure. Members, and often the wider community, also benefit from collective access to basic services like water and sanitation, which are important to health and livelihoods.
• The co-operative often procures such utilities at a cheaper rate than individual owners. In some cases, housing co-operatives provide members an opportunity to own land to live and grow their own food, which would be impossible in rental units located in urban centers.
• Kenyan Housing Co-operative partners also collectively purchase building materials and construction services, leading to a more economical and environmentally friendly construction process. The housing co-operative may also provide some financial services, including small loan interest loans.

 

The co-operative society movement system is the best way to win the public into affordable housing projects voluntarily. It has decades-long structures and is society-owned; it is easy to manage the traceability element

– Samwel Maina, Chairman, Urithi Housing.