The rapid rise of short-term rentals in Nairobi has pushed up rents by 10 per cent, leaving long-term tenants struggling to secure housing, a new market report has shown.
According to findings by global property consultancy Knight Frank, about 15 per cent of houses in mid and high-end neighbourhoods have been converted into short-let units, intensifying competition for available homes.
“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 residents are now competing with this new demand,” the report stated.
The surge in Airbnb-style accommodation is not only affecting residents but also reshaping the city’s wider housing and hospitality sectors.
The platform, which allows property owners to lease entire homes or spare rooms, has disrupted traditional renting while drawing clients away from mid-sized hotels.
Beyond accommodation, Airbnb is broadening its services to include chef-prepared meals, spa treatments, hairdressing and personal training.
In May, it rolled out a major redesign to support these add-ons, which chief executive Brian Chesky projected could earn more than Sh129 billion in the next three to five years.
Nairobi’s hotels have begun to feel the pinch. A Central Bank of Kenya (CBK) survey conducted last November revealed that business and leisure travellers are increasingly opting for cheaper Airbnb-style stays.
“Respondents cited that forward bookings are being hindered by weak consumer purchasing power, ongoing rains, year-end business slowdown, inflated costs at the hotel due to commissions charged on online bookings, and increased competition from Airbnbs,” CBK reported.
Analysts say these trends point to a structural shift, where the accommodation market is being reshaped by the growing dominance of short-term rentals.
Rising rents, reduced long-term housing stock, and shrinking hotel clientele underline how home-sharing is influencing both housing and hospitality.
Even so, Nairobi’s high-end residential sector has maintained resilience.
The Knight Frank report notes that the prime housing market posted steady growth in the first half of 2025, with the sales price index rising 5.63 per cent year-on-year to June, only slightly lower than the 6.58 per cent recorded in 2024.
Rents in this category grew 7.96 per cent, closely matching the 7.98 per cent increase registered in the same period of 2024.
“The market continues to benefit from constrained supply, as developers increasingly focus on high-density, low- and middle-income segments. This scarcity has helped sustain price resilience for prime properties, despite broader economic challenges,” the report noted.
At the same time, policy changes such as the Finance Act 2025, which scrapped preferential tax reliefs for expatriates, are expected to create some affordability pressures. However, units vacated by affected tenants have quickly found new occupants, signalling strong demand and market absorption.
Construction activity also picked up in early 2025. Approved building plans for the first four months reached Sh70 billion in value, up more than Sh10 billion compared to the same period last year.
Residential developments accounted for Sh54.2 billion, or 77 per cent of the total.
Lending to the private sector also showed improvement, with bank credit expanding 2.0 per cent in May after months of contraction, supported by lower average interest rates that eased to 15.28 per cent in June from 16.89 per cent in December 2024.
Looking ahead, demand for premium homes is set to rise further with the expected establishment of three new UN headquarters in Nairobi by late 2026.
The anticipated influx of expatriates is likely to fuel demand in top estates such as Muthaiga, Karen, Kitisuru, Loresho, Spring Valley and Lavington, which continue to command strong valuations thanks to exclusivity, controlled development, security, and direct access to the Expressway.
However, Knight Frank points out that stringent zoning rules limit fresh supply in these areas, keeping them restricted to single-family homes.
With only 3.53 per cent of Nairobi households classified as upper income, the prime market remains relatively small.
Developers, faced with high construction costs and a decade of limited new prime projects, are increasingly turning to the middle-class market, which accounts for 25.58 per cent of households, through apartment complexes in serviced urban neighbourhoods.
