EFFECT OF FINANCIAL FACTORS ON AFFORDABILITY OF HOUSING AMONG THE LOW-INCOME HOUSEHOLDS IN NAKURU EAST AND NAKURU WEST SUB-COUNTIES, KENYA
KORIR, STELLA CHERAISI
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Access to adequate and quality housing is considered as a key economic and social right to all humans. Affordable housing is associated with a number of outcomes including; social, health, development, financial and economic benefits. In Kenya, there is a high shortage of housing in the urban areas due to rapid urbanization resulting from natural population growth and the large scale rural-urban migration. Nakuru County being one of the major urban areas in Kenya has been recorded as experiencing housing shortage of 8,000 units per year due to the increased number of investors, entrepreneurs and governmental institutions which have encouraged an increased migration in search for employment in those sectors. The emerging situation has resulted to a concerted effort by the National and County government and other housing stakeholders in an attempt to understand the housing affordability challenges and recommending possible solutions to the challenge. This study analyzed the effect of financial factors on affordability of housing in Nakuru East and Nakuru West SubCounties. The study focused on household‘s home owners and renters in the lower income areas in the two sub counties with a view of understanding how the household income, cost of financing, house price and financial management skills affects housing affordability. The following theories guided the study; Modigliani‘s Life Cycle Theory of Savings and Consumption, Classical theory of Interest rates and the Housing Adjustment Theory. This study adopted a Positivist research philosophy and a cross-sectional descriptive research design. The target population for the study was 392,587 household heads and managers of 80 housing stakeholder institutions in the two sub counties. The study sampled 384 households‘ heads using stratified sampling technique and 12 stakeholders‘ institutions using purposive sampling. Structured questionnaire were constructed and used to collect data from the low-income households while interview schedules were used to collect data from the housing stakeholders. To ensure that the questionnaire helped collect reliable and valid data in the same contextual environment, a pilot study on 38 households who did not participate in the main study representing 10% of the sample size was drawn from Nakuru East and Nakuru West Sub-Counties in Nakuru County. Validity and Reliability tests were done and all items met the required set threshold. The data obtained was analyzed descriptively using frequencies, mean and standard deviation and inferentially using correlation and regression analysis. The study established a positive and statistically significant moderate effect of income of household and financial management skills on affordability of housing. On the other hand, the study revealed negative and statistically significant moderate effect of cost of house financing and house pricing on affordability of housing. The study further showed that household income had the greatest effect on housing affordability, followed by financial management skills, then cost of house financing and the least aspect was house price. The study recommends that Government develops strategies that will lead to increasing incomes to the low-income households through targeted financial funding of business in the informal sector within the locality, introduction of targeted financial literacy skills to the said group and also encouragement of key stakeholders to develop affordable housing loans.