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Rising rents hit Nairobi’s middle class hardest

Rising rent and electricity prices hurt Nairobi’s middle class most last month when it emerged as the only income cluster to record an increase in inflation.

Data from the Kenya National Bureau of Statistics (KNBS) shows inflation among the city’s wealthy and low-income earners dropped in tandem with a fall in the national cost of living measure.

Inflation for the city’s middle-income earners rose by 0.37 percentage points to 3.76 per cent last month, while that for wealthy households eased to 1.86 per cent, from 1.9 per cent a month earlier.

Overall, Kenya’s inflation eased to 6.87 per cent last month from 7.08 per cent in April helped by falling food prices following increased supplies.

The differences in the inflation levels among income segments is linked to their different consumption patterns, with the rich spending most of their income on utilities and transport while food takes the largest share of the poor’s budget.

The KNBS attributed the rise in inflation for the middle class to higher electricity prices, house rent and other utilities which account for the largest share of their monthly budgets at 23.6 per cent.

Housing and utilities on average account for 19.8 per cent of Nairobi’s rich families’ budgets, the poor spend 18.2 per cent while homes outside the city spend 17.4 per cent.

“Housing, water, electricity, gas and other fuels’ index increased by 1.30 per cent mainly due to the observed cost increases in respect of house rents, electricity, kerosene, charcoal and other utilities,” said KNBS director-general Zachary Mwangi in a statement.

A recent survey by property consultant firm Hass Property indicated that home prices in Nairobi remained little changed while rents maintained an upward trend.

Electricity prices also rose last month for the second time in nine months. This was attributed to the weak shillings which put pressure on the forex adjustment surcharge that is included in monthly bills.

Homes that consumed 200 kilowatt-hours (kWh), mostly middle class, paid Sh58 more at Sh3,453 last month.

Though food prices have dropped, the cut has not been sufficient to offset other expenses such as housing and electricity costs.

The energy regulator raised fuel pump prices last month, further hurting the middle class which spend 12.4 per cent of their income on transport.

The KNBS defines low-income earners as those spending less than Sh23,670 monthly, middle class (between Sh23,671 and Sh120,000) and upper income as households with expenses in excess of Sh120,000.

The city’s middle class spends about 22 per cent of their income on food.