| dc.description.abstract | The study aims to evaluate Kenya's National Housing Corporation (NHC), the public
enterprise responsible for implementing the government's housing policy. The primary objective
of the NHC is to finance and develop housing that is affordable by lower-income groups. An
assessment is made of the extent to which this organization meets both the immediate housing
Objectives set for it and the more general objectives of economic efficiency and equity. On the
one hand, a comparative evaluation is conducted, with a view to assessing the NHC's productive
efficiency relative to private developers. On the other hand, a direct evaluation is carried out in
order to establish the Corporation's effectiveness in meeting its specified objectives. More
specifically, effectiveness is measured mainly in terms of the number of dwellings produced
relative to development plan targets; dwelling costs relative to household earnings, and the ability
of the NHC financially to break even subject to transferring subsidies to beneficiaries.
An eclectic analytic framework is employed informed by the traditional economic theory of
the firm, and by managerial and behavioural models. Prominent in this regard are the principalagent
and property rights theories. A number of hypotheses are tested. The first, based on the
principal-agent model, is that the NHC's actual goals will diverge from the formal goals set for it.
The second hypothesis is that the Corporation management exercises managerial discretion via
expense preference. The third is that arising from the greater attenuation of property rights in
public enterprises, the NHC is less productively efficient than private developers. Fourth, it is
hypothesized that the housing prices and rents charged by the Corporation are allocatively
inefficient. The final hypothesis is that there is neither vertical nor horizontal equity in the
subsidies that underlie NHC financed housing.
Taken together, our findings suggest that the Corporation is a viable organization that meets its
main objectives. However, its actual housing programme has shifted away from lower-income
housing and overall dwelling output has been lower than planned. With regard to productive
efficiency, there seem to be no systematic evidence that the NHC is less cost efficient than
private developers. Even so, some cases of substantial productive inefficiency are identified. An
investigation of allocative efficiency shows that the rate of return on NHC dwellings is
significantly lower than a benchmark return set by the Treasury, suggesting that unless the
implied subsidies could be justified socially, NHC prices and rents are allocatively inefficient.
Finally, an enquiry into equity indicates that the distribution of subsidies is regressive at higher
income levels and that such subsidies are not tenure-neutral. | en |
