Housing Costs and Financial Health of Housing Development Institutions in Nairobi Metropolitan Area, Kenya
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Date
2025-09
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Kenyatta University
Abstract
Housing development institutions play a critical role in Kenya’s economic development by contributing significantly to the gross domestic product and addressing the nation’s housing needs. For these institutions to remain sustainable, their financial health is essential. This study examined the effect of housing costs on the financial health of housing development institutions in the Nairobi Metropolitan Area, Kenya, with a particular focus on construction costs, operating costs, and financing costs. The study was anchored on the housing adjustment theory, urban economics theory, the positive theory of housing, and the Marxist theory of housing, which collectively provided insights into how housing costs interact with institutional behavior, market dynamics, and socio-economic structures. The target population consisted of 53 housing development institutions registered with the Kenya Property Developers Association, from which 16 were purposively selected. Secondary data were collected using a Data Collection Sheet from the institutions’ published financial statements covering the period 2016–2023. Financial ratios were employed to measure construction costs, operating costs, financing costs, and financial health, while descriptive statistics and panel data regression analysis, specifically the fixed effects model, were used to analyze the data with the aid of SPSS version 26. The findings revealed that construction costs (β = 0.018; p = 0.000), operating costs (β = 0.692; p = 0.000), and financing costs (β = 0.747; p = 0.000) all had a positive and significant effect on the financial health of housing development institutions. The study concludes that effective project planning, prudent cost management, and securing affordable financing are crucial for the long-term sustainability of these institutions. It further recommends that housing development institutions strengthen internal cost-control mechanisms, optimize resource allocation, and diversify financing sources by exploring partnerships, capital markets, and public-private collaborations. In addition, institutions should invest in innovative construction technologies and sustainable building materials to reduce long-term costs, improve operational efficiency through digitalization and capacity building, and enhance risk management strategies to mitigate financing and market risks. Moreover, transparent governance structures and accountability mechanisms should be established to attract investors and build stakeholder confidence. Finally, aligning housing development with government affordable housing programs and urban planning frameworks, while fostering research and data-driven decision-making, will position housing institutions for greater resilience, policy support, and sustainable financial health.
Description
A Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, September 2025.
Supervisor
1. Dr. Margaret Kosgei