According to the recently concluded population census, approximately 10 million Kenyans live in slums. Only 10% of Kenyans living in urban areas own their homes, while the majority live in informal settlements.
It is therefore noteworthy that in an effort to provide a solution to the endemic housing problem in the country, the government has proposed in its 2020 draft Budget Policy Statement, to contribute public land - at no cost, towards affordable housing. The government anticipates that this will breathe life to the affordable housing program, which forms part of the Big Four Agenda.
It goes without saying that the high cost of land in Kenya has played a big role in driving the cost of housing beyond the reach of the average Kenyan, thereby making home ownership a pipe dream for most. The question is therefore whether, with only 2 years left to the 2020 target of providing 500,000 affordable houses, the provision of land at no cost by the government will signal a turning point for the housing industry.
Given the emotive nature of land in Kenya and its ability to make or break development projects, it is imperative for would be investors to familiarize themselves with the complexities of allocation of public land. Seeing as the intention is for the government to allocate the land at no cost, there will likely be great scrutiny of such transactions to ensure that they are conducted above board. The government and potential investors will therefore need to carefully manage the process of land allocation so as to ensure that it is devoid of challenges that may adversely affect the proposed affordable housing projects.
To begin with, Kenya does not have a database of public land which investors can use as a reference point in determining where to channel their affordable housing investments. A database of public land would have provided guidance on the status of availability of public land across the country and the details of such land including its location, size and whether there are any restrictions on its use. While the National Land Commission is required to keep a database of all public land belonging to both National and County government entities, it does not currently maintain such a database, ostensibly due to lack of records. Investors should therefore prepare adequately for due diligence on all land allocated to them for the affordable housing program as the burden will lie on them to ensure that such land is ‘fit for purpose’.
It is also important to note that except for allocation for purposes of settlement schemes for displaced persons and squatters, the prescribed process for allocation of public land does not appear to envisage allocation for free as proposed by the government. The process of allocating public land would typically entail public auction to the highest bidder, public tender, requests for proposals or exchange of equal value. This therefore means that some adjustments to the legal framework may be required so as to allow for the allocation of public land for free, as is currently envisaged by the government.
The net effect of allocating public land for purposes of constructing affordable houses to be owned by Kenyans, is that such land will ultimately become private land. This leads us to an important issue for government and investors to consider, namely, the legal requirements for conversion of public land to private land. The law requires approval of the National Assembly or the respective County Assembly (as the case may be) to be obtained for any substantial transaction involving the conversion of public land to private land. The question then becomes, whether such allocation will be deemed to constitute a ‘substantial’ transaction. If so, there shall be need to seek approval of the National or County Assemblies, as required.
Of utmost importance will be public participation, community engagement and the need to obtain what is now commonly referred to as a ‘social licence’ if the program is to avoid running into headwinds. The constitution stipulates that public land held by the National government is held in trust for the people of Kenya, while that held by County governments is held in trust for the residents of the respective counties. On this basis, it will be necessary for both levels of government to obtain a ‘social licence’ from the people on whose behalf the public land is held, as part of the land allocation process.
In a nut shell, the government’s proposal to allocate public land for free towards the affordable housing program is noble and could go a long way towards making affordable housing a reality. As part of the process however, government should take time upfront to ensure that the actual allocation process is open, clear, transparent, involves the public and follows the prescribed procedure.
The article was also featured in the Business Daily published on Thursday 5th March 2020 and can be accessed here.