Cost of being a slum dweller in Nairobi: Living under dismal conditions but still paying a housing rent premium

Abstract

Abstract The UN notes that the current global slum population of nearly one billion not only reflects “a rather unacceptable contemporary reality, but one whose numbers are continuously swelling.” Not surprisingly, its latest global development priorities, announced through its Sustainable Development Goals agenda in 2015, emphasize addressing the slum challenge in developing countries as a major goal. Our study focuses on gaining an in-depth understanding of the nature and extent of such slum challenge faced by Nairobi. Specifically, using data from a recent (2012–13) statistically representative survey, we conduct a systematic empirical analysis of the rental housing market conditions faced by households living in slum versus formal areas of Nairobi. Our analysis findings establish relevant benchmarking for key policy relevant measures against which to evaluate the efficacy of new policy initiatives. Taken together, our findings show that the households in Nairobi’s slum areas, compared to their counterparts in formal areas, are currently facing a substantial double jeopardy. On one hand, they face significant disparity gaps – about 24 percentage points in less coverage – across a myriad of housing and living condition indicators. For some basic services like water, toilet and public sewage disposal, the gaps are as high as 40–50 percentage points. On the other hand, we were able to quantify for the first time the extent of rent premium – about 16 percent – that Nairobi’s slum tenants are paying relative to their formal area counterparts, after adjusting for housing quality conditions. While our study’s primary goal was on demonstrating the presence and the extent of the double jeopardy, it also sheds important insights from normative policy perspectives. A novel insight here is that although formal tenure agreements are rare in Nairobi’s slums, the tenants do pay a rent premium of about 18 percent if they possess such agreements.