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How Nairobi's slumlords rake in more cash than Runda, Muthaiga landlords

Slumlords in Nairobi's Mukuru slums earned Sh2.8 billion according to a recent study.

A collage of a slum and an affluent neighbourhoods

Renowned economist and Chairperson of President William Ruto's Council of Economic Advisors, David Ndii, highlighted a striking phenomenon in Nairobi's housing market.

According to Ndii, slum lords in the city are earning significantly higher rental incomes compared to landlords in affluent neighbourhoods, shedding light on the alarming disparities within the housing sector.

Citing a 2019 study, Ndii gave an example of slumlords in Mukuru, a sprawling slum area, who accumulated a staggering Sh2.8 billion in annual rental income from 100,000 households residing on a mere 680 acres of land.

This translates to an astonishing average of Sh340,000 per acre.

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Surprisingly, these slum landlords are earning rental returns comparable to those in exclusive areas such as Muthaiga, Runda and the like, where properties are valued at much higher rates.

A closer examination of the rental yields further illustrates the stark contrast.

Ndii pointed out that rental returns in densely populated informal settlements like Pipeline, Umoja, and Githurai range between 20% and 30%, whereas upmarket regions like Westlands and Kilimani only yield between 5% and 8%.

Despite an urgent need for affordable housing, Ndii highlighted the staggering shortage of 200,000 housing units annually.

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While the commercial market manages to supply only 50,000 units, a meagre 500 of them fall under the category of affordable housing.

This shortage leaves a significant portion of the population struggling to find suitable and affordable accommodation.

He said that a Sh200 million property in Muthaiga or Runda could be equivalent to 250 units in the slum, each generating a rental income of Sh2,500 per month.

Consequently, the total monthly income would amount to an impressive Sh625,000, surpassing the returns of properties in affluent neighbourhoods.

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In comparison, he said that a Sh200 million house developed in an affluent neighbour hood would fetch Sh250,000 per month.

Ndii suggested that the market's failure to address the housing crisis and bridge the gap between affluent suburbs and affordable housing is indicative of systemic issues.

Ndii argued that targeted government interventions and financing mechanisms, such as compulsory savings schemes such as the Housing Levy may offer viable solutions to the housing deficit.

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Drawing inspiration from successful housing programs in other countries like Singapore, Ndii emphasized that public finance, through taxation or savings schemes, can play a crucial role in addressing the housing crisis and ensuring socioeconomic rights.

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