article · Asian Journal of Economics and Empirical Research
An analysis of Kenyan housing data between 1980 and 2024 evaluates how public spending influences residential housing supply. Using fully modified ordinary least squares regression alongside vector error correction and ordinary least squares robustness tests, the research reveals that government housing expenditure exerts a significant negative effect on housing supply. Specifically, a one percent rise in public housing spending corresponds to a decrease of approximately 0.8 housing units supplied. These findings indicate that state expenditure in this domain is currently misallocated, which inadvertently harms private residential investment, restricts employment growth, and slows construction activity. To counter these adverse outcomes, shifting toward private sector partnerships offers a viable path forward. Harnessing private funding and expertise to build and maintain properties could lower development costs and improve spending efficiency, creating a balanced, market-driven approach to tackle the ongoing housing shortfall.
Public expenditure is frequently expected to increase housing availability, but ineffective allocation can actively deter private investment and slow down construction. Demonstrating that government spending has reduced housing output highlights the need to re-evaluate national budget allocations. Policymakers and urban planners must understand these dynamics to design balanced housing strategies that combine targeted state support with private sector efficiency to resolve housing shortages.
This macroeconomic policy research does not present a deployable commercial technology or product. However, its findings inform public-private partnership models, housing finance programmes, and procurement strategies for construction firms and real estate developers. Because the work is empirical economic analysis rather than a technological innovation, its application pathway is at a policy and strategic level, requiring governments and private developers to structure joint investment frameworks for residential housing projects.
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The debate over whether government spending on housing aids or impedes residential investment and housing supply remains a significant topic of discussion. This study examines the effects of government housing expenditure on housing supply in Kenya from 1980 to 2024. Utilizing a time series data regression method, the analysis employs a fully modified ordinary least squares (FMOLS) approach, along with robustness tests, to explore the relationship between the relevant variables. The findings indicate that government housing expenditure has a negative and significant impact on housing supply in Kenya. Specifically, a 1% increase in public housing expenditure is associated with a potential reduction of 0.8 housing units supplied. These results suggest that public spending may adversely affect investment in the housing sector, hinder employment, and slow the rate of housing supply. The VECM and OLS robustness tests indicate that public spending harms housing provision, suggesting that government expenditure on housing is not being allocated effectively and should be reassessed. The study recommends that the government should harness private sector expertise and funding to facilitate the construction and maintenance of housing. This approach could potentially lower costs and enhance the efficiency of government expenditure. A balanced strategy that integrates government support with market-driven solutions is essential for addressing the housing crisis in the Kenyan construction sector.
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DOI: 10.20448/ajeer.v13i2.9214
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