Kenya: Slum housing is big business for Nairobi politicos

The EastAfrican (Kenya),

February 2003

By John Mbaria

In late 2001, Nairobi's Kibera slum experienced a bloody conflict over rents. By the time the police had brought the fighting under control,
15 people had died while many more were injured. The violent confrontation was to later spill over into Ngu Nyumu in Korogocho slums.

The "rent revolt" had an interesting beginning, with the then president Daniel Moi and then minister for energy Raila Odinga, now Minister for Roads and Housing, being accused of being agents provocateur for urging tenants not to pay hiked rents. Politicians, newspaper columnists, commentators and the public criticised the two for making what was then regarded as extremely careless remarks.

But less than two years down the line, new evidence suggests that rents in Nairobi slums are extraordinarily high.

A report of a study of informal settlements says investments made in the city's slums are among the most lucrative in any sector. In the current poorly performing economy, such an investment is probably the only venture where one can recoup the initial investment within a > year.

The "Rapid Economic Appraisal of Rents in Slums and Informal Settlements" study, which is part of the Kenya government and the UN Human Settlement Programme's collaborative attempt to improve the lot of the more than 57 per cent of Nairobi's residents who live in slums, reveals that Kibera is the most profitable housing investment in the city. Here, the cost of putting up a single room is Ksh12,686 ($159) while the average rent per room is Ksh1,300 ($16) per month. This means that an investor is able to recoup and surpass the initial investment in less than a year. Other informal settlements have annual returns ranging from 60 to 80 per cent and payback periods averaging
16 months.

Viewed against the background of the formal property market in Kenya, the report observes; "It would seem quite possible that unauthorised housing is the most lucrative investment in Kenya."

The study found that the slum structures are owned by politicians and civil servants. Much of the squatter land in Kibera has been acquired or allocated by politicians and government employees "with enough influence to ensure that they are not displaced."

Out of a sample of 120 landlords interviewed two years ago, 41 per cent were government officers, 16 per cent were politicians while 42 per cent were absentee owners "who visited Kibera occasionally." Only a handful of the structures belonged to people who lived in the slums. This is unlike the situation in Mathare and Pumwani, where a large number of investors are residents who "lived at a level fairly similar to their tenants and demonstrated a keen interest in maintaining the community and improving it."

Revelations by the study commissioned by UN-Habitat could also inform the current drive by the government, NGOs, civic bodies, church organisations and private citizens involved in the Nairobi Collaborative Slum Upgrading Initiative, which was taken a step further two weeks ago when Habitat executive director Anna Tibaijuka and Mr Odinga signed a memorandum of understanding.

The forces of supply and demand, standard of dwelling, services offered and nature of the neighbourhood do not determine the amount of rent paid for Nairobi's slum dwellings. Slum lords, who are not controlled by legal instruments such as the Rent Restriction Act and the Rent Tribunal, have absolute powers to determine rents. The report observes that if the Rent Restriction Act were to be applied effectively in the city slums, "rents would fall by 70 per cent."

Many tenants in informal settlements cannot afford the high rents and resort to sharing rooms, leading to overcrowding. The report says that as many as six to 10 tenants occupy a single room, giving "the false impression of affordability."

Tenants who are unable to pay have to contend with harassment by agents and members of the provincial administration. In the last regime, members of the Kanu youth wing were often hired by structure owners to enforce payments.

Although rents are high in city slums, the structures are rarely improved, they are congested, have no running water or electricity, have leaking roofs and are put up in areas where pit latrines are inadequate or non-existent. Indeed, many tenants are powerless and have to "take or leave" whatever shelter is offered.

The report terms the continued demand for high rents "exploitative" and observers say this was the real genesis of the violent flare-up that hit Kibera in November 2001.

Structure owners try to justify their high charges, citing the high investment risk involved because of lack of secure tenure as most of the dwellings are constructed on government-owned land, road and railway reserves or privately held but "unoccupied" land. This exposes the investor to the risk of eviction and loss of capital.

The amount of investment and the rents charged are related to the perception of risk of eviction. "Residents of informal settlements live in a state of uncertainty, unsure of the next eviction from the government, the City Council, slumlords, private land owners, structure owners or contracted intermediaries," the report says.

The most critical consideration to the investor is that there is no compensation for evictions and consequent demolitions. But, according to the report, this can be reversed and rents can come down if investors are provided with a measure of security and tenants given legal protection from unnecessary rent increases.

Other considerations for investors are payments to agents and the high transaction costs involved before they are allowed to put up the dwellings. These include payments to local administrators in charge of plot allocation. "Usually, the area chief must receive payment otherwise the construction or improvement will not be sanctioned." In Kibera, Mukuru and Korogocho slums, these payments are Ksh18,000 ($225The report examines the notion of "fair rents," saying this ought to be seen from a wider perspective through the incorporation of the views of all stakeholders. However, it acknowledges that the concept is difficult to determine because "what is fair remains vague in many cases." In Kenya, rent for new premises, as laid out in the Landlord and Tenant Act, is largely determined by rents paid for comparable premises in the neighbourhood. It does not question whether such rents are fair or not.

Overcrowding seems to influence rents in informal settlements in Kenya more than the law or the market, leaving tenants without an option for negotiation.

One of the report's observations is that since its inception, the Nairobi Collaborative Slum Upgrading Initiative has created awareness among both slum investors and tenants of their common plight. They are now seeking to actively participate in the acquisition of secure tenure and the improvement of their living environment.

The rent study is crucial to the recently initiated slum upgrading process in that it highlights critical intervention areas. For one, it identifies services the poor in informal settlements need. "The poor consider affordability of accommodation close to places of work as being paramount." The poor also look for safety, toilets, bathrooms and water.

It also calls for secure tenure in slums and offers the option of having the poor own the land they occupy on a communal basis. It also recommends compensation for slum landlords as an incentive to give up some of their units to help reduce overcrowding and allow in essential services.

The report warns of the implications of upgrading slums, saying this might increase inequalities and lead to opposition by tenants, especially if they believe that rents will end up rising. The investors could also oppose such an initiative if they are required to meet some of the costs.