The economic significance of housing in developing countries



Shelter, food and clothing are the traditional basic human needs – they are the fundamental elements that one requires for survival and normal mental and physical health. Housing is one of the essential human needs and the constitution guarantees every citizen the right to access adequate housing, and to reasonable standards of sanitation.

It is often said that the Kenyan Constitution is the most progressive document in the world partly because of the provisions in Chapters four and six on the Bill of Rights and Integrity and Leadership respectively. The Constitution in Chapter four under Article 43, sub-article 1 (a) guarantees every Kenyan economic and social rights by stating that, “Every person has the right to accessible and adequate housing, and to reasonable standards of sanitation”.

Housing, especially in most urban centres has been a subject of discussion for far too long yet not so much success has been recorded in terms of provision of adequate housing as provided for in the Constitution. The problem of inadequate and indecent housing has been exacerbated by the increase in rural-urban migration. Fueled by lack of employment opportunities in the rural areas, the youth – who form the largest part of the unemployed in the economy, are making their way into urban centres in search of jobs.  This rural-urban migration has greatly contributed to the problem of dysfunctional urbanization whose salient feature is poor quality of life evidenced by lack of basic human needs.

The lack of these basic needs has been cited as the major reason why most urban centres like Nairobi, Mombasa, Kisumu, Eldoret and Nakuru have witnessed a spike in informal settlements. For instance, in Nairobi, we have Kibera slum – known to be the largest urban slum in Africa. Mombasa has Bangla, Kisumu has Nyalenda and Eldoret has Huruma. These informal settlements have contributed immensely to the poor quality of life for residents largely due to the prevailing squalid conditions and lack of basic social amenities such as toilets.

Even though the problem of lack of housing in most urban centres is attributed to low income levels majorly due to lack of gainful employment, the lack of a comprehensive housing policy is also mentioned as a root cause.

Last year, Prof. Jacob Kaimenyi, the Cabinet Secretary for Lands, Housing and Urban development reported that the country is facing an estimated supply deficit of 250,000 houses every year – caused by the rapid urbanization. Prof. Kaimenyi pointed out that the issues of expansive growth of slums and informal settlements, inaccessibility to land for housing, high cost of finance, existence of rigid building laws and regulations and the deterioration of housing stock due to lack of maintenance framework were to be blamed for the housing shortfall. This has brought into sharp focus the economic significance of housing in developing and/or developed countries. The question many economists and urban planners would want to answer is; what is the role of housing in national development? 

First, it’s argued that housing is a productive, stimulative and a contributor to development in the economy. Specifically, it is said that investment in residential construction has broader implications for national economy because it promotes economic growth by encouraging savings and investment. Secondly, housing has a great bearing on the living standards of the people since it helps in keeping families healthy in order to participate in economic activities that play a key role in growing the national cake – the Gross Domestic Product. Thirdly, housing markets and construction in various economies have served as an engine of growth. This is evidenced by the growth and development that has been witnessed in economies of the Asian tigers, notably Singapore, Hong Kong, South Korea and Taiwan. For us to reap the full benefits of investing in housing in order to generate economic growth, create wealth, employment and income, there is need to develop and implement robust housing policies that will serve as a macro-economic stabilizer and the real engine for economic growth and development in the economy.

I wish you and your loved ones a Merry Christmas and a Prosperous New Year 2018.

The writer is an economist, consultant and commentator on trade and investment