The Affordable Housing Regulations, 2025

The Affordable Housing Regulations, 2025 (Legal Notice no. 114 of 2025) (the Regulations) have been law for a while. The following is a brief overview of the Regulations.

Overview
The Regulations provide the detailed rules for implementing the Affordable Housing Act in Kenya. The Regulations cover the entire lifecycle of affordable housing, from application and eligibility to financing, allocation, ownership transfer, and even dispute resolution. The core principle is income-based categorization, ensuring housing solutions are tailored to different economic segments of the population.
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Part-by-Part Summary & Explanation

Part I: Preliminary

Citation & Interpretation: Sets the title of the regulations and defines key terms.

Key Definitions:

Deposit Assistance: A loan for the deposit and furnishings for those earning below KES 20,000/month. Full repayment is only triggered upon default, sale, or transfer of the unit.

Tenant Purchase Scheme: A rent-to-own arrangement where monthly payments go towards eventually owning the unit.

Gross Income: Total income before expenses, used for eligibility assessment.

Part II: Allocation of Affordable Housing Units

This is the core operational section for individuals.

Eligibility (Reg. 3): Must be a Kenyan citizen, over 18, and not have previously benefited from an affordable housing unit or a rural housing loan.

Application & Allocation (Reg. 4 & 5):

Applications are submitted electronically.

The Board has 90 days to verify documents and assess the applicant's ability to pay.

Successful applicants are allocated a unit based on their income category.

For tenant purchase schemes, the applicant must pay for a group life insurance cover on the outstanding amount.

Deposit (Reg. 7): Set at up to 5% of the unit's purchase price.

Deposit Assistance (Reg. 8): A special loan for those earning under KES 20,000 to help with the deposit. This amount is added to the total loan for the unit.

Changing Units (Reg. 9): Allows for a one-time change of the allocated unit under specific conditions, with provisions for adjusting payments if the new unit is of higher or lower value.

Default (Reg. 10): Outlines a gradual process for handling payment defaults:

1-month default: A 30-day notice to remedy the default.

2-month default: A 2-week ultimatum to pay, apply for a cheaper unit, or restructure the loan.

Failure to comply: Leads to repossession of the unit by the Board.

Rural Housing Loan (Reg. 11): Allows individuals with voluntary savings to apply for a loan (capped at KES 4 million) to build a house in a rural area. Requires substantial documentation, including title deeds, a valuation report, and a bill of quantities.

Part III: Institutional Housing
Allows public institutions (like universities or government ministries) to partner with the Board to develop, renovate, or complete housing for their staff, provided they have the land and a plan for management.

Part IV: Off-Take
"Off-take" refers to the Board purchasing completed housing units from developers.
The Board can enter into financing agreements with various entities (banks, SACCOs, retirement schemes, etc.) to fund these purchases.
Institutions wanting to provide this financing must be creditworthy and tax-compliant.

Part V: Interest Rate (Reg. 17)
Establishes a sliding scale for interest rates based on monthly income:

< KES 20,000: 3% per annum (reducing balance)

KES 20,000 - KES 149,000: 6% per annum (reducing balance)

> KES 149,000: 9% per annum (reducing balance)

Part VI: Transfer of Ownership

Restriction on Sale (Reg. 18): An owner cannot sell the unit without the Board's consent.

Conditions for Consent: The owner must have fully paid for the unit and been in possession for at least 5 years. The sale price must be within the market range, validated by a registered valuer.

Priority Buyers: The unit can only be sold to another person who meets the eligibility criteria for that category of housing.

Part VII: Review and Appeal

Internal Review (Reg. 19): An aggrieved person can ask the Board to review its decision within 14 days, but only on narrow grounds (e.g., discovery of new evidence or a clerical error).

Appeal to High Court (Reg. 20): A person can appeal the Board's decision directly to the High Court.

Part VIII: Miscellaneous

Categorization (Reg. 21): Formalizes the three income-based pools:

Social Housing: Monthly income < KES 20,000

Affordable Housing: KES 20,000 - KES 149,000

Affordable Middle-Class Housing: > KES 149,000

Electronic System (Reg. 22): Mandates a transparent, timestamp-based online application system for fair processing.

Infrastructure (Reg. 23 & 24): Requires the development of comprehensive physical (roads, water, electricity) and social (schools, clinics, police posts) infrastructure in every housing scheme.

Public Participation (Reg. 25): Sets out rules for public consultation before projects begin, including notice periods and publication requirements.

Voluntary Savings (Reg. 29): If a person saves but is never allocated a unit, they can withdraw their savings plus interest, minus administrative costs.

Key Takeaways and Implications
1. Income-Based Targeting: The system is highly structured around income brackets, determining the type of unit, the interest rate, and access to subsidies like deposit assistance.

2. Protection for Low-Income Earners: The 3% interest rate and deposit assistance scheme are significant subsidies aimed at making housing accessible to the lowest income bracket.

3. Restricted Asset: An affordable housing unit is not a freely tradable asset. The 5-year post-payment holding period and the requirement to sell only to other eligible Kenyans prevent speculative investment and ensure the units remain within the affordable housing pool.

4. Comprehensive Development: The regulations envision building complete communities, not just houses, by mandating the development of essential social and physical infrastructure.

5. Transparency Mechanisms: The electronic application system with timestamps and detailed public participation rules are designed to promote fairness and reduce corruption in the allocation process.

6. Default Safety Nets: The default process offers alternatives like downsizing or restructuring before resorting to repossession, providing a degree of protection for purchasers who fall on hard times.

The regulations are available on the following link, i.e., https://1drv.ms/b/c/b77939cfe5764b80/EcGgaaxZk7VEgkwL5T1VsWABoeJ21LJfurj9kDHVwGfzfg?e=C7eHbg

Disclaimer: This is an explanation of the provided regulatory text for informational purposes only. It does not constitute legal advice. For precise legal interpretation and application, please consult the official Gazette notice and seek our legal advice.