Landlords snub rent relief as third of workers default

Majority of landlords have snubbed State calls to reduce rent for workers hit by the effects of Coronavirus, which saw a third of households fail to pay their April rent, the Treasury revealed yesterday.

A national survey conducted by the Kenya National Bureau of Statistics (KNBS) on the impact of the disease on households has revealed that only 8.5 percent of landlords had offered rent reliefs in April. The survey, conducted between May 7 and 9, revealed that 30.5 percent of the tenants interviewed were unable to pay rent in April. About 21.5 percent of those who defaulted said they had always met their obligations on time, highlighting the impact of restrictions to curb the global Covid-19 pandemic on workers’ incomes.

This is the first full month data on workers’ earnings and consumption patterns after Kenya imposed a nationwide dusk-to-dawn curfew on March 27 and restricted movement in and out of four counties that hard recorded the highest number of infections, including Nairobi.

“The main reason for households’ inability to pay rent for the month of April was the reduced earnings,” said Treasury Secretary Ukur Yatani during a media briefing on Tuesday.

“From the survey, only eight percent of the respondents received rent waivers or relief in April, meaning that majority of landlords did not heed calls to reduce rent.”

President Uhuru Kenyatta had last month called on property owners to share the coronavirus-driven economic burden by reducing rental charges or agreeing to deferred payments.

More than half or 52.8 percent of those who defaulted on rent cited reduced incomes while 22.4 percent said they had been placed on unpaid leave.

MPs are currently debating the Pandemic Response and Management Bill, 2020, that provides for rent deferrals during the period of the coronavirus pandemic, which has infected 963 persons in Kenya and killed 50.

Of those infected, 358 have recovered.

Under the Bill, tenants are allowed to write a notice seeking a freeze on rent payment for later settlement once the effects of the restrictions ease.

The government closed bars and schools to slow down the spread of the virus after Kenya reported its first coronavirus case on March 12.

The impact of social distancing and closure of businesses like bars and restaurants has impacted on consumer spending, setting the stage for job cuts and unpaid leave for workers.

The survey found that 41.7 percent of workers paid rent on time while 19.8 percent paid a share of the rental charge.

“We will, however, conduct six more surveys up to the end of July to help us understand more of the struggles we are facing,” said Mr Yatani.

The Treasury has passed a series of tax cuts aimed at cushioning individuals and companies from the impact of the coronavirus.

The rent defaults emerged in a period when office and homes lease costs eased in the first three months of the year with effects of the pandemic expected to further hurt the property market on reduced demand.

HassConsult, which conducts a quarterly property pricing index in Kenya, said that rents had dropped 0.7 percent in the three months to March, compared to a growth of 8.7 percent in a similar quarter last year.

It linked the fall, the first since it started tracking prices more than a decade ago, to an oversupply of homes amid reduced demand.

The consultancy firm expects deeper cuts in rents in the current quarter ending in June as the effects of coronavirus push tenants to pressure landlords to cut or defer home and office leasing costs.

Some companies, especially in the hospitality industry, have sought to suspend rent payment in their race to protect their liquidity amid a sales collapse after the State imposed tight lockdowns on public life to slow down the pandemic.

“Investors showed reduced appetite for land on speculation that there is room for further price drops due to the Covid-19 pandemic. The pandemic has caused an economic slowdown, which could potentially further see adverse activity in the sector,” said Sakina Hassanali, head of property development consulting and research, at HassConsult.

“Apartments in Kitengela reported a 10.4 percent drop in rental prices, Mlolongo (-7.8 percent), Syokimau (-3.5) and Kiambu reported a three percent drop,” she said.

Rents in high-end estates like Kitisuru, Loresho and Spring Valley—which attract premium rates–dropped 7.7 percent, 7.3 percent and 6.5 percent respectively.

Housing has been one of Kenya’s fastest growing sectors over the last decade, fuelled by a growing middle class, with returns from real estate outpacing equities and government securities.