Assessing the viability of the rent-to own housing model as a strategy for affordable housing in Kampala.

Abstract

Uganda faces a severe urban housing deficit of approximately 2.4 million units, with Kampala's low- and middle-income households disproportionately excluded from formal homeownership due to prohibitive mortgage rates of between 16.5% and 19% and a largely informal workforce. This study assessed the viability of the rent-to-own (RTO) housing model as a strategy for affordable housing in Kampala, guided by three objectives: to determine the institutional, legal, and policy factors influencing RTO adoption; to examine its affordability for low- and middle-income households; and to assess the financial and operational feasibility of implementing RTO in Kampala. A mixed-methods case study design was employed, combining qualitative document reviews and semi-structured interviews with quantitative household surveys and financial feasibility analysis. Data was drawn from 97 respondents, comprising 94 tenants, 2 property managers, and 2 housing experts at Swan Residence Kireka in the Greater Kampala Metropolitan Area. The findings revealed three interlocking systemic failures hindering RTO adoption: institutional fragmentation between KCCA, MLHUD, and local governments; a complete legal vacuum, as Uganda's housing laws contain no provisions for RTO contracts, equity protection, or progressive title transfer; and a long-standing failure to take any action, with the Draft Housing Policy having remained pending since 2005. On affordability, RTO payments were found to consume between 67% and 84% of household income across all income groups, far exceeding the internationally accepted 30% benchmark, with only 5.9% of sampled households able to afford current market-based RTO offerings. Financially, the model is viable for equity-financed developers, generating a 14.7% return on investment and a positive net present value at a 10% discount rate, but becomes unviable under commercial debt at Uganda's prevailing interest rates of 17% and above. The study concludes that RTO holds significant promise as an inclusive homeownership pathway, but its scalability requires simultaneous reforms across institutional, legal, and policy dimensions, including enactment of a standalone RTO Housing Act and development of blended finance mechanisms to make homeownership genuinely accessible for low- and middle-income households in Kampala.