Trump’s aid cuts hit Nairobi upmarket home landlords

Knight Frank, a multinational estate agent, and Hass Consult —a property agency which compiles Kenya’s property index— have reported a dip in rental markets in the leafy neighbourhoods of Nairobi such as Runda, Muthaiga, Kitisuru and Lavington.

This is the result of hundreds of expatriate aid workers, either directly or indirectly employed by USAid, being uncertain about pay following the funding hitch, as some leave the country.

Local staff working on US-funded projects are also deserting costly rental properties and heading elsewhere as firms push for relief, including waiver or deferral of office rent.

In 2023, the last year for which official data is complete, Kenya received $850m (Sh110 billion) in US aid, backing more than 230 projects to varying degrees.

Projects in higher education, health, hospitality training for orphans, drought mitigation and water sanitation are all at stake.

Besides homes, vacancies are emerging in office real estate as companies scale or shut down operations, given USAid funding also anchors private investment in healthcare to small businesses in the start-up space.

Knight Frank says the hit on the residential segment is less acute when compared to commercial, but expects the impact of the job losses among the high-income earners to impact luxury homes after a lag.

“We have firms that are directly financed by USAid and the likes, but you also have a lot of downstream organisations, most of which are local, but some are also international, supporting functions that you may not necessarily think about,” Knight Frank Managing Director Mark Dunford said in an interview.

“We are seeing a lot of the firms asking for rent relief, we have also seen them ask for a reduction in office space as they also lay off staff.”

The US funding hitch underlines the extent to which healthcare and parts of the economy of Kenya, which has emerged as a regional hub for international aid efforts with a huge NGOs sector, have been propped up by American largesse.

Hass Consult says asking prices for rent in leafy neighbourhoods of Nairobi cooled off in the first three months of the year to March, highlighting concerns over tenant exits after the US aid cuts.

Muthaiga and Nyari saw the sharpest decline in rent asking prices in the first quarter at 4.9 percent and 4.7 percent, respectively, while Kilimani saw a drag of 4.6 percent.

Other suburbs to witness drops in the quarter were Gigiri, Loresho, Ridgeways, Runda and Westlands.

“Locally, in the pricier city suburbs, the fall in asking prices revealed concerns about a fall in demand after the US cut off funding for its USAid programme and its affiliated programmes in Kenya,” said Sakina Hassanali, the Co-CEO at Hass Consult, about the quarter one performance.

“This action has led to mass layoffs, which affect the target market for the higher-end rental segment.”

In Nairobi, luxury homes and upscale living are often found in neighbourhoods like Runda, Muthaiga, Gigiri, Lavington, Kitisuru and Karen Estates, with Gigiri being a popular choice for diplomats and expatriates.

Rental listings on Knight Frank show that a five-bedroom house in Runda fit for a diplomat attracts a monthly price of Sh838,563.89 while a six-bedroom house in Loresho Ridge has a monthly price of Sh500,000.

A five-bedroom listing in Karen by realtor Pam Golding has an asking rent of Sh650,000 per month, while a six-bedroom house in Kitisuru attracts a rental charge of Sh517,440 or $4,000.

The opening up of vacancies in offices is expected to exacerbate the oversupply of workspaces, which has been running in recent years since the Covid pandemic.

The impact of layoffs on the purchase of prime real estate is expected to be mild to moderate as most buyers in Kenya remain locals and the diaspora community.

After occupying the White House on January 20, President Trump ordered a sweeping review of almost all US foreign aid and tasked billionaire Elon Musk with scaling down the agency.

A recent assessment on the impact of stop work orders on the US President’s Emergency Plan of Aids Relief (Pepfar), a programme that seeks to reduce the spread of HIV and Aids in more than 50 countries, revealed that more than 35,000 employees in Kenya could be affected by the aid suspension.

In January, more than 2,000 employees of the US-funded Academic Model Providing Access to Healthcare (Ampath)-Uzima Project in Kenya were sent on unpaid leave.

Chris Ismail, a property development executive at Hass Consult, expects the fallout from the US-linked layoffs in the prime residential real estate market to result in a correction of asking prices.

Mr Ismail admits that landlords usually have a higher asking price for expatriate workers, a figure considerably above the market rate.
“Rental prices will likely stagnate and correct towards the market rate. If landlords were asking for Sh120,000 from an expatriate, they may now go down to Sh100,000, reflecting a correction to where the prices ought to be,” he said.

“Most of the time, landlords will raise asking prices for expatriate workers. Kenyan clients will likely negotiate these prices down, we do expect a significant but not a sharp correction.”

Mr Dunford, however, sees an upside to the cool-off in prime real estate as he sees price benefits for buyers and tenants.

“There could be a silver lining in the correction of pricing. We could see residential prices fall, it’s not good for the landlord, but it's great for consumers,” he said.

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