Public land question in affordable housing

Two questions arise. First; when county governments vest public land to these SPVs, should these transactions be negotiated under Privatisation Act? Even more pertinent: Should these SPVs be allowed to use the title deeds on the land to secure loans from commercial banks?

In hindsight, it seems to me that the lack of clarity over these pertinent questions is why there was so much public confusion during the public furore, which erupted last year over the Jeevanjee Estate Affordable Housing Project in Nairobi.

The widespread misunderstanding and confusion left Nairobi county assembly members chasing their tails; arguing in circles over the whereabouts of the original Jeevanjee land title deed. The fact was that the title document had at that point, long been vested to the SPV co- owned by the developer and the county government by the name Javabu Village Project.

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The argument by county assembly members at that time that public land should not have been used to secure a loan from the National Bank of Kenya could not hold because the title held by the bank was at that time in the name of the SPV.

Here is a bit of background. In 2018, the Nairobi county government reached an agreement with eight companies for the construction of houses in seven city estates, including Jeevanjee (Bachelors) in Ngara.

In July 2019, during the tenure of former Governor Mike Sonko, the county government and Jabavu, jointly established an SPV, with Jabavu holding 80 percent, and Nairobi county government holding 20 percent.

The developers approached National Bank and a loan of Sh1.9 billion was approved for the SPV; secured using the title deed for the Jeevanjee Estate as collateral.

So far, Sh505 million has been disbursed out of the 1.9 billion, with funds being drawdowns based on interim certification from the project architects. The last disbursement had been made on March 15, 2024.

Clearly, a perfectly legal transaction. Yet I still think that the viability of a model of allowing the county governments to use resources of serviced public land to attract private developers to deliver affordable housing remains an open-ended question especially when it comes to the issue of negotiating and structuring the ownership of these SPVs.

I have seen an advisory by the World Bank to an affordable housing project in Naivasha that proposed that SPVs should be structured and established as wholly- owned subsidiaries of counties.

The advisory also suggested that before SPV is established, the land being offered should be valued and leased to the SPV in exchange for preference shares to the county government.

It also suggested that the SPV partner should be a low-income focused reputable institution with real estate portfolio experience in the target market. Clearly, the Nairobi county government needs to rethink and subject the approach it is following to more rigorous debate.

It does not surprise that the affordable housing project by the national government is at least beginning to deliver tangible results, while several projects by Nairobi County are still stuck.

Early this month, the Affordable Housing Board advertised a total of 4,888 affordable housing units for sale across the country. The board has set flexible payment options, including outright cash and monthly payment plans for as low as Sh3,900.

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Thika Town has the highest number of completed houses on sale, while Machakos has the most expensive houses at Sh5.1 million. Some tangible progress, clearly.

I am a believer in the private public participation model. But when it comes to housing, I believe that a well-designed and transparently procured housing project, funded by the taxpayer is the best option for the poor citizens living in Nairobi.

When hundreds of thousands of citizens are priced out of the housing and rental market to the point where they opt to spend their hard-earned savings on building houses on land without title deeds in Obama, Choka, Umoja, and Kariobangi South, isn’t it clear that we have a crisis?

Residents in Eastlands area of Nairobi are facing a double blow: First; existing affordable housing in Jericho, Jerusalem, Kaloleni, Ofafa, Maringo, Makokengeni, Kaloleni and Mbotela will no longer exist. Worse, the new housing coming up under affordable housing will be too expensive for most of them.

In a housing crisis, publicly-owned land should not be gifted to private developers in the hopes of getting a few crumbs of affordable housing.

The writer is the former managing editor at The EastAfrican