Determinants of investment for affordable urban housing in Kenya, (in the period; 1982-2009)
This paper empirically investigates the determinants of investments in affordable urban housing in Kenya from 1982 to 2009.The supply of housing units and the demand for the same have consistently failed to show an equilibrium behavior overtime .This has resulted to shortages in the expected annual production of houses to ensure that all Kenyan households are decently and adequately provided with one of humanity's basic need, a house. Manifestations of the shortages are clearly evident in the exponential growth of slum and squatter settlements. This has serious consequences on the environment and the social fabric of the society. The current policy framework has not addressed the housing shortage. The study adopts the theoretical framework of neoclassical investment model developed by Jorgenson (1963) and applied in several investment studies. A linear investment function was developed and multiple regression conducted using the ordinary least squares method(OLS). The independent variables included urban population , gross public investments, gross domestic savings, inflation rates, lending rates, credit allocation to the housing sector, unemployment rates, gross housing investments in units lagged three years , gross capital stock of houses in the country lagged one year and a dummy variable representing political uncertainty in the country at every electioneering period after 5 years. The dependent variable was gross housing investments in units. The data used is secondary and was obtained from official publications of government agencies and international bodies. The regression results after first difference, using the OLS methodology, showed that gross public investments, gross domestic savings, inflation rates, lending rates, credit allocation to the housing sector, gross housing investment lagged three years, gross capital stock of urban houses in the country lagged one year and political uncertainty were all statistically significant at 5 per cent. The urban population and unemployment rate were statistically insignificant. These variables explained seventy four per cent of the variations in gross housing investments in units in the country. The lending cates and unemployment rates negatively influence gross housing investments in the country. The conclusion was that the independent variables highlighted above are key determinants necessary to guide housing investments decisions in Kenya so as to achieve affordable urban housing as a policy approach of the government.