ABSTRACT

Affordable housing is a universal challenge for cities in both developing and developed economies. In the global scene, an estimated 330 million urban households face a shortage of decent housing. In Kenya, the housing deficit is estimated to be 1.85 million units. To alleviate this problem, Kenya’s Affordable Housing Programme (AHP) was launched in December 2017. The State Department for Housing and Urban Development (SDHUD) was tasked with program. However, the phase one of 228 Affordable Housing Programme (AHP) is complete and has suffered a time overrun of sixteen days. Additionally, the second phase scheduled to be complete by July2020 is yet to be completed. Therefore project shows indicators of poor project delivery due to minimal adoption of project risks management strategies. This research project therefore sought to find out the influence of risk management strategies on delivery of urban housing project in Kenya. The objectives of this study were: to examine the influence of risk avoidance, risk control, risk retention and risk transfer strategies on the delivery of this project. The research design was exploratory descriptive survey. The target population for this study was87 upper and middle level managers working at the Department. The study used stratified and simple random sampling techniqueand Yamane’s formulae to arrive at a sample size of 72 respondents. The study used semi-structured questionnaires to collect data. The findings were presented in form of tables. A pilot study was conducted to test validity and reliability of the research instruments. Content validity was used as validity test and cronbanch’s alpha coefficient used to establish the reliability of each section of the questionnaire. The data collected was analyzed using descriptive statistics including mean, percentages and frequencies and inferential statistics that is multiple regression models. The findings indicated that risk avoidance (β = 0.172; p< 0.05), risk control(β =0.456; p< 0.05), risk transfer(β = 0.207; p< 0.05), and risk retention(β =0.175; p< 0.05) were significant factors that delivery of urban housing project in Kenya. The study concluded that there is a significant positive relationship between risk avoidance strategy, risk control strategy, risk retention strategy and risk transfer strategy and delivery of urban housing project in Kenya. The study recommended thatthe department ensure that the ongoing and future projects have a re-insurance contract and that the department further increase the adoption of risk avoidance, risk control and risk retention strategy in order to ensure project delivery and finally it should put more effort in improving adoption of risk transfer strategies

CHAPTER ONE INTRODUCTION

            Background of the Study

A report released by McKinsey Global Institute (MGI) (2015) observes that affordable housing is a universal challenge for cities in both developing and developed economies. The report states that 330 million urban households in the global scene today face a shortage of either decent housing or are financially strained by housing costs that they relinquish other basic needs such as food, health care and education for their children. Among our key findings of the report indicate that: an estimate of 330 million urban households around the world live in substandard housing or are financially stretched by housing costs. The report indicate further that some 200 million households in the developing world live in slums and in the developed countries such as United States, the European Union, Japan and Australia, more than 60 million households are financially stretched by housing costs; based on current trends in urban migration and income growth, it is estimated that by 2025, about 440 million urban households around the world would occupy crowded, inadequate, and unsafe housing or will be financially stretched. In addition, the housing affordability gap is equivalent to $650 billion per year, or 1 percent of global GDP. In some of the least affordable cities, the gap exceeds 10 percent of local Gross Domestic Product (GDP) (MGI, 2015).

The report further advises that to replace today’s substandard housing, additional units needed by 2025 would require an investment of $9 trillion to $11 trillion for construction; with land, the total cost could be $16 trillion. Of this, $1 trillion to $3 trillion may have to come from public funding. The report identifies four ways to reduce the cost of delivering affordable housing by 20 to 50 percent that are; to unlock land at the right location (the most important lever), reduce construction costs through value engineering and industrial approaches, increase operations and maintenance efficiency, and reduce financing costs for buyers and developers. These largely market-based measures can benefit households in all income groups and, with some cross subsidies, can reduce costs sufficiently to make housing affordable (at 30 percent of income) for households earning 50 to 80 percent of area median income (Aduma&Kimutai, 2018).

In the local context, Kenya’s Affordable Housing Programme (AHP) was launched in December 2017 as one of the national government’s four pillars of growth, in the Big Four Plan. The AHP promises to deliver 500,000 affordable homes over a five year period and involves a number of incentives and supports to enable the delivery of affordable housing in Kenya (GoK, 2019). The AHP is the responsibility of the State Department of Housing and Urban Infrastructure Development within the Ministry of Transport, Infrastructure, Housing and Urban Development. The housing deficit is estimated to be 1.85 million units and the government projects that it will need to facilitate the provision of 200,000 units a year to progressively cater for the shortfall and house new entrants into urban areas. The AHP has an ambitious target of delivering 500,000 houses within five years (GoK, 2019).

As part of Vision 2030, Kenya has been undertaking large-scale infrastructure developments, such as stepping up programs to address the housing supply deficit and to improve urban settlements through programs such as the Kenya Slum Upgrading Programme (KENSUP) and Kenya Informal Settlement Improvement Programme (KISIP) (Wenanga, 2019). While these are positive, encouraging developments, there is more to be done to fulfil the right to adequate housing. As part of this vision, the State Department for Housing and Urban Development (SDHUD) has been mandated to deliver the Affordable Housing Programme (AHP) and will manage the delivery throughout the project lifecycle. The Government of Kenya will act as the key facilitator and will provide state owned land for free or at a low cost and develop or subsidize bulk infrastructure for identified sites that will be part of the Affordable Housing Program (Wenanga, 2019).

The Kenya’s Affordable Housing Programme (AHP) has identified the following risks to the project: site risk, design, construction and commissioning risk, financial risk, regulatory risk, force majeure risk, right of way and land acquisition risk, inflation risk and foreign exchange risk, insolvency risk, subcontractor risk and interface (Wenanga, 2019).Koirala (2015) states that risks in housing and real estate in construction projects are the chances of occurrences of events which affect the objectives of the project life cycle. Furthermore, risk can be defined as a scenariowhere there is a possibility of an adverse deviation from the expected outcome resulting from uncertainty (Koirala, 2015). Therefore, this study sought to find out influence of risk management strategies

on delivery of urban housing project in Kenya. A case of affordable housing project in Nairobi County.

                  Delivery of the Urban Housing Project

Urban populations are growing at a rate much faster than can be absorbed and managed, causing demands on services and infrastructure that massively outstrip supply. In many emerging market cities, this leaves the majority of residents with few options but to live in slums. Increasing access to high quality affordable housing has a profound impact, both for the individual and society at large (Van Noppen, 2016). Yet, housing is a challenging and capital-intensive sector characterized by delays and regulatory difficulties, and as a result, it rarely gains the limelight for impact investors and social entrepreneurs. Twenty-two percent of Kenyans live in cities, and the urban population is growing at a rate of 4.2 percent every year (World Fact book, 2010). With this level of growth, Nairobi requires at least 120,000 new housing units annually to meet demand, yet only 35,000 homes are built, leaving the housing deficit growing by 85,000 units per year. As a result of this mismatched supply and demand, housing prices have increased 100 percent since 2004(Hass Consult Property Index, 2011). This pushes lower income residents out of the formal housing market and into the slums (Van Noppen, 2016).

It is against this challenge that the Government of Kenya (GoK) through the State Department for Housing and Urban Development (SDHUD) has been mandated to deliver the Affordable Housing Programme (AHP) by managing the delivery throughout the project lifecycle. Within a period between 2017 –2022, the programme targets a delivery of 500,000 affordable housing units all over Kenya (RoK, 2018). Construction of the projects under the Affordable Housing Programme is being undertaken by the developer, private investor or contractor and supervised by the Programme Management Consultant (PMC) on behalf of the SDHUD.

Programme Management Consultant (PMC) are tasked with monitoring activities on site and report progress on cost, time and quality of the project, as well as escalating risks and performance issues to SDHUD. The housing project has put in place effective project controls to increase the certainty of outcome and identify areas of underperformance early to allow for effective mitigation measures to be implemented. The key areas of project controls covers planning and scheduling;

cost estimating; cost control; progress and performance measurement; and document control and management. The PMC implements and monitors the project controls requirements of the SDHUD that each developer, private investor or contractor agrees to adhere to as part of the procurement process. The SDHUD develops a standardized Work Breakdown Structure (WBS) that facilitates consistent reporting and capturing of schedule activities and associated Earned Value Analysis (EVA). All schedules are cost and resource loaded by the contractor and monitored by the PMC (RoK, 2018).

Kishk and Ukaga (2016) states that the degree of risk management process undertaken during the project lifecycle impacts directly on the project success. Failure to manage construction risks in a systematic way makes the project suffer in cost overruns, delayed completion, non-completion or may fail to meet the quality specifications and the benefits they were intended for. Management of construction projects involves a great deal of managing risks. Managing risks involves: planning, identifying, analyzing, developing risk response strategies, monitoring and control. Project team members particularly clients, consultants and contractors should eliminate /mitigate delays when playing their respective roles. Risk response is the strategic option focusing on actions to reduce project risk and enhancing project profitability. Many researches and agencies have defined risk response in different ways with ultimate objective of project profitability (Kaur and Singh, 2018).