Partnering to solve Kenya’s housing crisis
Urban Kenyans are excluded from a housing market that works primarily for the wealthy. Social entrepreneur Irfan Keshavjee partnered with an architecture firm to change that.
This is the second article in a series on social and business co-creation. We’re looking at several entrepreneurs across Africa who are successfully partnering with the private sector to increase their impact. Read Ashoka’s report here.
When Irfan Keshavjee’s family migrated to Kenya from South Africa in the 1950s to escape the rising apartheid regime, they discovered that rampant inequality also dwelled in their new home.
Sixty percent of Nairobi’s urban population lived in slums. Irfan remembers meeting a taxi driver who was thrown out of his home for being unable to pay rent because of a medical bill, and a security guard living in a room the size of a bed with his wife and four children.
Nairobi has long been one of the most expensive cities in Africa for housing. From 2007 to 2015, land prices jumped by 535 percent. Most residents live in unplanned and unserviced neighborhoods, while new property developments focus on upper-class housing. Each year, just two percent of newly built homes target low-income earners (making between USD 147 and 491 per month).
Irfan decided to channel his family’s entrepreneurial spirit towards a solution, laying the foundation to build a new kind of real estate development firm.
An unexpected encounter
Irfan wanted to create a firm that would build only low-cost affordable housing for hardworking families — like the taxi driver and the security guard — who had been excluded from home ownership and forced into poor living conditions. But at the time, his team no money or land — just an idea.
In a chance meeting at a bar, the co-founders met their future partners: Lexicon + ion, a Kenyan architectural, design, landscaping, planning, and urban strategies firm known for putting creativity at the center of its business model.
The groups hit it off, both agreeing that the government wasn’t going to step in to solve the housing crisis. Kenyans needed change in the private sector, as 90 percent of Kenyans couldn’t afford the cheapest house on the market (which was around USD 50,000).
Inspired to create a more inclusive housing-development model, Lexicon + ion committed its architecture and planning services for free to support Karibu Homes’ mission of creating more affordable housing for Kenyans left out of the market. Once Karibu Homes received funding, they would appoint the firm, along with the consulting company Tandem & Stark, as the architects and quality surveyors.
The partnership seemed like just the right match.
“We were incredibly lucky to find architects and master planners who had a deep understanding of how to create a sense of community,” Irfan said.
A pioneering partnership
Together, Karibu Homes and Lexicon + ion are creating mass-market, affordable housing for lower-income Kenyans in satellite towns. In satellite towns, land and property are cheaper than in urban centers, and residents can still access existing transportation to work in Nairobi.
Karibu Homes began searching for funding through impact investors, but with no success. Eventually, it secured USD2 million from a property developer in the U.K and a large commercial development company in India. After purchasing land, Karibu Homes received an additional $1 million from US-based investors. With each investment, the firm worked to strengthen the credibility of its housing strategy.
After two-and-a-half years of planning, iterating, and financing, Karibu Homes’ first development, Riverview in Athi River, showed the makings of a successful business model and generated return on investment. It received multiple awards: Best Housing Development in sub-Saharan Africa at the 2017 Africa Property Investment Awards, and the London Stock Exchange’s award as a “Business to Inspire Africa.”
The project built 573 affordable homes, 70 percent of which are owner occupied. They’re serving residents who make an average monthly salary of USD1500, and 15 percent of sales have gone to people learning less than USD500 per month.
Impressed by the success of Karibu Homes’ business model, a commercial investor funded the company’s second development.
As Karibu Homes expands, Lexicon + ion and Tandem & Stark have stayed on as strategic business partners to help the company bring affordable housing to more and more Kenyans. The model builds on the Kenyan government’s recent push for more affordable housing, which was named one of the key pillars of Kenya’s Big 4 strategy.
Co-creating solutions
Irfan’s idea solves both a social challenge and a business challenge. It’s providing more Kenyans with affordable housing, while incentivizing more developers to enter the market.
Both partners played an important role to support the other. Lexicon + ion gave Karibu Homes the chance to design and experiment to find a viable model. The architecture firm, in exchange, can enter this new affordable-housing market without developing the model themselves.
Today, Karibu Homes still has 500+ homes to build in its Athi River development while it breaks ground on 1,300 new homes in a gated community at Amana Hills in northeast Nairobi. Lexicon + ion is still the primary consultant for Karibu Homes as they scale the model.
The future of affordable housing
By addressing systemic issues, Karibu Homes will help to spread this affordable housing model across the country. As a member of the Kenya Property Developers Association, they’re working to subsidize developers through tax incentives so developers can safely accept smaller margins on affordable-housing sales.
They’re also working with the World Bank and private-sector institutions to design alternatives to mortgages that would be more accessible to low-income Kenyans, such as rent-to-own structures.
Together, the two organizations are transforming Kenya’s housing market to serve more than the upper class — and showing what can happen when two organizations join forces to innovate for the greater good.
This article is adapted from a report prepared for Ashoka by Stephanie Schmidt, Jess Mills, and Lynsey Farrell.
