How Kenya's informal workers hold the key to unlocking the housing market
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With Kenya's housing shortage estimated at two million units, experts argue alternative underwriting of mortgages can turn informal-sector incomes into effective housing demand.
If population is used as the basis for estimating Kenya's housing demand, the potential market is vast, but once that population is broken down into effective demand it shrinks, and dwindles further when qualified demand becomes the criterion. Kenya's housing shortage is estimated at two million units, and successive governments have not cracked the demand even with the current 1.5 per cent housing levy imposed on workers.
Thierno-Habib Hann, Shelter Afrique Development Bank Group managing director and chief executive, told the Kenya Affordable Housing Conference 2026 in Naivasha that alternative underwriting of mortgages could stimulate effective demand to qualified demand, a strategy used in countries such as India and applied to banks lending to small and medium enterprises once considered unbankable.
Hann said most income earners in Kenya do not have payslips or stable income flows, so banks must customise products to fit customers' income profiles. "We cannot underwrite these people the same way we do for somebody with a pay cheque. And that is where the masses, the chunk of the two million housing deficit, is sitting," he said. MSMEs contribute about 40 per cent of Kenya's gross domestic product.
State Department for Housing and Urban Development Principal Secretary Charles Hinga acknowledged the informal-sector challenge, noting that 85 per cent of jobs being created are informal. From the 2026 Economic Survey by the Kenya National Bureau of Statistics, there are 18.1 million workers in the informal sector compared to 3.5 million in formal employment, a ratio of 83.3 per cent to 16.2 per cent.
Hann presented alternative underwriting as one way the housing sector can access affordable capital, alongside blended finance, green housing finance, capital markets and strategic partnerships. With only 15 per cent of the job market formal, banks issuing mortgages concentrate on that population, leaving the vast majority of the population underserved despite their housing needs.