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MPs back bid to cap rent increases at inflation rate

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Economy

MPs back bid to cap rent increases at inflation rate


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Parliament buildings in Nairobi. FILE PHOTO | NMG

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Summary

  • A Parliamentary committee has backed the government’s push to cap rent increases on commercial and residential premises.
  • The National Assembly committee on Transport, Public Works and Housing approved the Landlord and Tenant Bill of 2021, which now awaits debate and passage by the main House.
  • Rent increases will be capped at the inflation rate of the preceding year and landlords will only be allowed to make further changes to compensate for additional services.

A Parliamentary committee has backed the government’s push to cap rent increases on commercial and residential premises, setting the stage for the passage of the law that seeks to protect tenants from arbitrary changes.

The National Assembly committee on Transport, Public Works and Housing approved the Landlord and Tenant Bill of 2021, which now awaits debate and passage by the main House.

Rent increases will be capped at the inflation rate of the preceding year and landlords will only be allowed to make further changes to compensate for additional services or for upgrading the premises.

“The committee having considered the Landlord and Tenant Bill of 2021, stakeholders’ comments and the above observations recommends the House to pass the Bill,” reads the committee’s report.

Changes to the law will allow building owners to increase rent once a year for residential houses and once in two years for commercial premises, lowering the cost of doing business.

This marks the first attempt by the State to regulate rent in an economy that is based on liberal pricing of goods and services rather than price controls.

Real estate has been one of Kenya’s fastest growing sectors over the past decade, fuelling a sharp increase in land and house prices, although the appreciation has cooled in the last three years.

Rent costs have surged in response to the demand with asking rents in Nairobi growing nearly threefold from 2007, prompting the State’s efforts to cap prices.

The proposed legal changes will also remove the restriction for a tribunal to hear disputes between landlords and tenants for rent that does not exceed Sh2,500 in a bid to protect more tenants.

Landlords and tenants who fail to comply with rulings of the tribunal face a fine of Sh200,000 or one year in jail or both.

If the law is successfully passed, rent will join fuel in the price control regime.

Kenya has preferred to let market forces control the cost of goods and services despite the presence of a law that provides for capping of prices.

In 2011, Kenya passed a law that allowed the return to price controls of essential commodities, two decades after it was abandoned in favour of liberal pricing.



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