Four Things That Will Define the Next Decade

1. The conventional financing model has hit its ceiling

The financing instruments Kenya has relied on for urban infrastructure are running out of headroom.

Sovereign debt is near its constitutional and prudential limits. The cost of borrowing has risen sharply over the last three years. County borrowing remains largely untested, with a small number of counties having issued debt and most relying on the equitable share. Donor concessional finance, while still meaningful, is concentrated and slow to disburse. User fees alone cannot fund metropolitan scale infrastructure. Transit, drainage, water, and affordable housing have weak direct revenue streams.

The implication is direct. Closing the urban infrastructure gap requires capital that is not in the budget, is not sovereign debt, and is not donor money. The only place that capital exists at scale is in private balance sheets and in the value created when public investment lifts land prices. PPPs reach the first. LVC reaches the second. Neither is optional.

2. Land Value Capture is the most underused fiscal instrument in Kenya

The economic case for LVC is simple. When a public road, transit line, water main, or sewer is built, the land within its catchment becomes more valuable. The owners of that land receive a windfall they did nothing to earn. Other cities have long captured a portion of that uplift and recycled it into more infrastructure. Bogotá's contribución por valorización financed a substantial share of road investment over decades. Hong Kong and Tokyo built rail systems financed in part by the development rights along the corridor. São Paulo monetised development potential through CEPACs. Hyderabad used tax increment financing to fund the outer ring road.

Kenya does the opposite. Public investment lifts land values. The lift accrues entirely to private owners. The public balance sheet absorbs the full investment cost and recoups nothing of the value its own spending created. This is the most expensive policy choice in Kenyan urban finance, and it is being made by default rather than by design.

The instruments available are familiar. Betterment levies on properties in defined catchment areas. Development charges tied to formal valuation. Land readjustment and pooling in greenfield development. Sale of additional development rights through transparent mechanisms. Tax increment financing for designated improvement districts. Each requires institutional capacity to value land credibly, define catchment areas defensibly, and collect levies consistently. That capacity has been the missing variable.

Building that capacity is not a five year project. It is a deliberate operational programme that has to run across the National Treasury, the Ministry of Lands, the National Land Commission, the Council of Governors, and the relevant county departments. It is doable. It has not been done.

3. PPPs need a thicker pipeline, not a different framework

The conversation about PPPs in Kenya has cycled through framework reform for over a decade. The PPP Act, 2013, the PPP Regulations of 2014, the amendments, the 2021 Act, the supporting regulations. The framework now is fit for purpose. The challenge has moved to the pipeline.

Few projects are reaching the structuring stage in any given year. The constraints are concrete. Project preparation budgets are thin and depend heavily on donor support, which is selective. Revenue models for urban transit, drainage, and water lack the contractual and tariff certainty that bankability requires. Counties, which the PPP Act now explicitly covers, often lack in house capacity to identify, prepare, and structure projects. Political risk pricing on Kenyan transactions is higher than the underlying fundamentals warrant.

Each of these is addressable. The National Infrastructure Fund Bill, 2026, when enacted, creates a dedicated preparation capability and formalises Government Support Measures. The Office of the Auditor General and the Treasury are tightening fiscal disclosure on contingent liabilities. Concessional capital providers continue to offer first loss and guarantee instruments. What is missing is sustained operational focus on building a deeper pipeline rather than rotating through legal reform.

4. LVC and PPPs work better together than either does alone

This is the point that gets lost in policy discussion. LVC and PPPs are usually debated as separate instruments. The serious markets use them as one system.

In a transit PPP, the private partner builds and operates the line. Fare revenue alone does not cover capital cost in most cities. LVC, applied through betterment levies or development right monetisation in the corridor, closes the revenue gap and makes the transaction bankable. In an affordable housing PPP, the private partner builds the units. Land contributed by the public sector at appropriate valuation, with development rights structured to capture future uplift, becomes part of the financing structure rather than a hidden subsidy. In urban regeneration, land readjustment provides the financing mechanism. PPP delivery provides the build out.

Used together, LVC monetises the value the public creates. PPPs deliver the infrastructure that creates the value. The two are designed for each other. Used separately, both underperform. Used as a system, they unlock projects that neither could close alone.

Kenya has yet to structure a single major urban transaction in which LVC is an integral revenue stream rather than an afterthought. That is the shift the next decade requires.