Supply Side Aspects of Residential Housing for Low Income Earners in Kenya

Abstract

The need to have shelter is indispensable to humanity. Access to adequate and decent housing
units decreases with the increase in population, scarcity of fixed assets like land, escalating
house prices and the rising cost of living. The study uses time series data, 1980-2011, drawn
from the Kenya National Bureau of Statistics to determine the factors that would be used to
stimulate the low cost housing market in Kenya. The Instrumental Variable estimation
technique is applied for this study using location specific factors for Mombasa and Nairobi.
Regression results indicate unique results for the two towns. Whereas Nairobi had the lending
rate, the cost of supply, the plinth area, labour and input cost index, inflation and the real
interest rate being important in determining supply Mombasa reported the coefficient, cost of
building a house, commercial bank rate and their lagged values as important factors in
determining supply. At the same time inflation, treasury bill rate and plinth area were
important in explaining supply of residential housing.