A spike in demand for short-stay rentals such as Airbnb has triggered a 10 percent rise in rental prices in Nairobi’s middle- and high-income estates, piling pressure on tenants already struggling with stagnant earnings and a higher cost of living.

The shift, which has seen around 15 percent of housing units in these estates converted to Airbnbs, has disrupted the long-term rental market and added competition for available housing, according to a new report by Knight Frank, a global real estate consultancy.

“About 15 percent of Nairobi’s housing units have shifted to short-term rentals, driving a 10 percent rent increase over two years as the city’s residents are now competing with this new demand,” the report noted.

The rise in short-term rentals is fuelling investor appetite but hurting tenants whose salaries have not kept up with inflation, now in its fifth year of eroding workers’ purchasing power and living standards.

Knight Frank says the conversion to Airbnbs is attracting landlords who see better returns from short-stay tenants, despite the risk of lower occupancy at times. “There are landlords who believe they can get higher rent return from the short-term stay than long-term occupancy and are willing to take the risk of the house being empty for some periods; so it’s dependent on the landlord’s risk appetite,” said Knight Frank’s chief executive, Mark Dunford, in an interview with the Business Daily.

The trend is no longer confined to the capital. Other towns such as Nakuru, Mombasa and Kisumu are also seeing a similar surge, driven by both local and international tourism. In Nakuru, for instance, short-term rental operators are reporting even steeper rent increases. One operator cited a rise in rent at Runana Apartments, where two-bedroom units that previously went for Sh30,000 are now leasing at Sh37,000—marking a 23 percent jump within a year. The 40 units in the complex are now fully used for short stays, with a nightly rate of about Sh6,000.

“The rise continued last year,” the Knight Frank report said, though it did not provide updated rental figures beyond 2023. It noted the continued demand had further tightened the market for city residents. “Policymakers face a delicate task: harnessing the economic benefits of short-term rentals without deepening the housing crisis.”

The boom in Airbnb and similar platforms is not unique to Kenya. African cities such as Cape Town and Lagos are also experiencing rapid growth in short-stay rentals, sparking concerns about affordability and access to long-term housing.

Meanwhile, Kenyan workers are grappling with shrinking real incomes.

The Kenya National Bureau of Statistics (KNBS) reported that inflation-adjusted wages fell by 0.3 percent last year, continuing a five-year trend of wage erosion.

In 2023 alone, real wages dropped by 4.1 percent, and the average monthly income fell from Sh62,256 in 2020 to Sh55,451 in 2024—a net decline of Sh6,805.

The drop in earnings comes as the country’s economy faces challenges from floods that affected crop output, expensive loans, and disruptions caused by protests over the Finance Bill.

Despite the returns from short-term rentals, the long-term viability of Airbnb is not guaranteed. Airbtics, a data firm that tracks short-term rental performance, revealed that a typical listing in Nairobi was occupied for 168 nights over the past year, translating to a median occupancy rate of 46 percent.

“A 46 percent 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 warned.

Mark Dunford added that the growth in Airbnb-style units could slow down as families become uneasy about sharing residential spaces with transient guests.