Report: Short-term rentals shift housing business in Nairobi, deny big landlords money

New data shows that one in every seven homes in Nairobi’s middle and high-end estates has been turned into a short-term rental, pushing long-term tenants into deeper financial strain.

The report by real estate consultancy Knight Frank unveiled last week shows that the quiet shift in the city's housing market is piling fresh pressure on tenants already stretched by high living costs and stagnant incomes.

At least 15 per cent of homes in key neighbourhoods in the city have been converted into short-term rentals.

Renters now find themselves competing with tourists and short-stay guests for a shrinking pool of affordable housing.

“About 15 per cent of Nairobi’s housing units have shifted to short-term rentals, driving a 10 per cent rent increase over two years as the city’s residents are now competing with this new demand,” Knight Frank states in its latest market review.

Once seen as a convenient option for travelers, short-term rentals are evolving into a full-fledged hospitality alternative. Globally, the facilities now offer curated extras like chef-cooked meals and personal wellness services.

But while the rise of these rentals has been a boon for landlords and entrepreneurs, the consequences are biting into everyday lives in Nairobi—and increasingly, across Kenya.

Knight Frank notes that the boom is no longer confined to the capital. Towns like Nakuru, Mombasa, and Kisumu are seeing a similar trend, fuelled by domestic and international tourism.

A short-term rental operator in Nakuru reported that rent in Runana Apartments rose from Sh30,000 to Sh37,000 within a year.

All 40 units in the complex have since been converted into short-stay accommodations, with nightly charges averaging Sh6,000.

This pivot to short-term rentals is pricing out long-term tenants, who are being edged out of central locations and quality housing. For many, the strain is now unsustainable.

The Kenya National Bureau of Statistics paints a bleak picture: real wages have fallen for five consecutive years. In 2024 alone, inflation-adjusted earnings dropped by 4.1 per cent. The average monthly income has slid from Sh62,256 in 2020 to Sh55,451—an erosion of over Sh6,800 in just four years.

Wage stagnation comes at a time Kenyans are grappling with broader economic woes, including flood damage, soaring interest rates, and recurring political protests.

These disruptions have throttled economic activity, undermined job security, and slowed growth.

Knight Frank’s report warns that the rapid transformation of long-term rentals into short-stay units poses a growing policy challenge.

“Policymakers face a delicate task: harnessing the economic benefits of short-term rentals without deepening the housing crisis,” the firm notes.

While the short-let market continues to lure investors, some analysts caution that the bubble may not last. Data from Airbtics, a company that tracks global Airbnb trends, shows that Nairobi’s average unit was booked for just 168 nights in the past year—about 46 per cent occupancy.

“A 46 per cent median occupancy rate is considered a risky market to do an Airbnb. A few hosts are making a good income, but you may struggle to get year-round bookings,” Airbtics reports.

This raises questions about the long-term sustainability of the boom. Already, some residents are beginning to feel uneasy about living next door to constantly changing guests.

Dunford, a local housing analyst, believes this discomfort could put the brakes on further conversions. “The pace of converting homes to Airbnbs is likely to slow down as families become more uncomfortable living in neighbourhoods with frequent guest turnover,” he says.

Instant Analysis

Short-term rentals offer profits to landlords but price out tenants, worsening housing insecurity. Without policy intervention, decent urban housing will remain out of reach for many.