8.3 Financial regulation of rental markets
In this section, we analyze how residential rental markets in Kenya are regulated and the implications thereof.
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In this section, we analyze how residential rental markets in Kenya are regulated and the implications thereof.
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STATUS / ISSUE
RECOMMENDATION
The 1938 and 1959 acts are outdated and in need of reform. There was a Landlord and Tenant Bill 2021 seeking to repeal and replace these laws.
Update the said laws through amendment or total review. For those under review, fast-track the process. Furthermore, and importantly, reintroduce the Landlord and Tenant Bill 2021 in the 13th parliament.
In the main, the laws seek to control the rents payable by tenants thereby placing restrictions on freedom of contracting between landlords and tenants. While this may be in the public interest, it may constrain housing supply for this segment of the population. Rent controls may also serve implicit subsidies randomly rather than to deserving tenants.
· Rethink the overall theme of rent control as a regulatory tool.
Other specific recommendations on the are:
· Supporting the creation of positive credit histories for tenants who pay their rent diligently to enable them to access credit for their economic empowerment.
· Providing a modest flat tax of say, 3%, on gross rents for units rented for less than KShs. 15,000 per month gross. This figure can be indexed and the flat tax made applicable no matter the size landlord’s portfolio in this income bracket– only then will institutions be incentivized to invest and develop massive housing units needed to cater for those living in informal settlements.
· Strictly specify timelines for determination (reduce from current 3 months with possible extension to a flat 45 days with predefined days for each step);
· Integrate digital platforms to log and track dispute resolutions and the determined market rents (which would become an invaluable market-making mechanism),
· Promote equitable risk-sharing mechanisms by tying the period before the landlord can evict the tenant to be tied to a deposit held by the landlord and reduce the period for which the landlord must safeguard tenant goods and housing units in case of death or abandonment by the tenant.
· Ensure the rent ceiling to which units will be applicable is determined with public consultation and reviewed every 5 years.