Collins Kouwuor
22 June 2008
opinion
Nairobi — In Finance Minister Amos Kimunya's budget speech, he said the Landlord and Tenant Bill would be passed to facilitate the availability of affordable housing to the urban poor.
The Landlord and Tenant Bill is a rent and eviction control bill that is set to repeal the existing rent control statutes. The Rent Restriction Act and Landlord and Tenant Act are the current legislations regulating controlled or protected tenancies in residential and commercial properties, respectively.
Currently, residential tenancies of monthly rents of Sh2,500 and below, and commercial properties rented out for five years or less are controlled by the above laws. The Landlord and Tenant Bill proposes to extend rent control to residential units of monthly rents of Sh30,000. Most residential units in Nairobi fall within this rent ceiling such as those in South B, South C and Langata estates.
The celebrated Swedish economist and socialist, Assar Lindbeck, once said, "In many cases, rent control appears to be the most efficient technique presently known to destroy a city - except for bombing". Further, notable scholars are in agreement that ceilings on rent reduce both the quantity and quality of the housing units.
Low rents
Rent control discourages the development of affordable housing as property developers tend to shun constructing new housing units falling within the jurisdiction of the rent and eviction control statutes due to low rents.
Since the rents receivable from these units are low, the property owners are not able to carry out maintenance of the rented housing units, leading to faster deterioration of the existing housing stock and consequent shortage.
The tenants in these units therefore have to stay under deplorable conditions, a fact that is vivid in most housing units provided by local authorities and some parastatals.
Tenants of low rent housing tend to hoard the housing units thereby removing them from circulation and availability in the market. This exacerbates the shortage of such housing units and also creates an uncontrolled market where new tenants are charged rent several times higher than normal market rent.
Urban poor
Rent and eviction control also accelerates gentrification whereby the poor and low income working class are forced out of the controlled housing units by the high income working class.
A classic example of gentrification is what happened with the flats in Nyayo Highrise and Makongeni near Gikomba market in Nairobi.
Rent control, like other price controls, are built around the concept that one particular group, the providers of essential products, is a nefarious clique that must be wrestled into submission by the government.
However, rent control is poor economics which, despite its good intentions, leads to creation of less housing units, reduces their quality, increases rent, deters new housing investments and increases urban blight. It is a disease of the mind that soon becomes a disease of the market.
Resists infection
A country that resists infection by this disease is rewarded with a normal competitive housing market in which housing is available at every price level. A country that succumbs to the disease of rent control is doomed to never-ending house-to-house warfare over an ever diminishing supply of unaffordable housing.
Rent and eviction control legislation will not encourage faster development of affordable housing units to the urban poor but will make housing units unaffordable and inaccessible to the majority of the renting workforce.
Public policy must instead create incentives to the supply side through tax holidays, revision of building codes to encourage use of low cost local building materials and techniques and so on, as this will undoubtedly result in lower rents for the urban poor.
Collins Kouwour is a Land Economist and Chairman of Valuation and Estate Management Chapter of the Institution of Surveyors of Kenya.
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