2. HOUSING VALUE CHAIN

Kenya's legal and policy framework intersects with each link in the housing value chain. Simplified, it can be reviewed in four components: land, planning, construction, and finance.

The Housing Value chain is long and requires coordination and the investment of capital at each link. The components of the value chain comprise land assembly and acquisition; the land requires effective title and registration, infrastructure for services is required, thereafter construction occurs, and the housing units are transferred to offtake (either for sale or rental). The completed housing stock requires ongoing maintenance and the whole value chain needs to function in a coherent social and economic infrastructure fabric and delivered in line with approved spatial plans for that location. Altogether, this is called the built environment.

Each link in the chain incurs costs. This creates a financial moment when capital is required. Capital can be injected from various public sources (funded from the tax base or sovereign loans/grants from development finance institutions) and private sources (bank financing, capital, pension funds, equity funds, and impact funds). Different forms of capital have different return expectations, and not all of them are financial. Commercial capital requires a return commensurate with its risk – a risk that is created or resolved by the policy and regulatory framework. While the state seeks to support affordable housing, it can do this through the direct provision of capital, in the form of subsidies, insurance or guarantee products, or indirectly through the creation of an enabling environment for both investment and housing delivery. For this reason, the policy, legal and institutional framework for affordable housing and how it functions has a profound impact on the resources available to finance affordable housing delivery.

This is visually illustrated in Figure 2 below.

Figure: CAHF's Housing Delivery and Housing Financing Value Chains

Multiple links together comprise the housing delivery value chain. These can be summarized together as four components of housing delivery:

· Land assembly, land acquisition, title and registration of land tenure

· Physical planning

· Construction and maintenance

· Financing (investment, rental, taxation)