Journal of Economics and Sustainable Development www.iiste.org ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online) Vol.7, No.4, 2016 1 Is Housing Gap a Consequence of Willingness and/or Eligibility to Mortgage Financing by Respondents in Uasin Gishu, Kenya? Richard Kiplangat Siele 1* Dr. Vincent Ngeno 2 Wilson Kibet Tuigong 3 1. PhD Student in Economics, Department of Economics, Moi University, Kenya 2. Department of Agriculture Economics & Resource Management, Moi University, Kenya 3. PhD Student in Economics, Department of Economics, Moi University, Kenya Abstract Despite significance of mortgage financing, previous research indicated that at best only 3% of households in urban areas in Kenya were eligible for mortgage financing. The study sought to establish the role of socio- economic factors (income level, rental income and education level) on willingness or/and eligibility to mortgage financing. The study adopted explanatory research design. Target population was obtained in the records of all the 16 financial institutions licensed by Central Bank of Kenya offering mortgages in Uasin Gishu County. Purposive and convenience sampling was used in picking the 16 Financial Institutions and 749 respondents respectively. Structured questionnaires and a Double Hurdle Model were employed. Income level and rental income positively and negatively influenced willingness to participate in mortgage financing respectively. Income level and rental income significantly and positively influenced eligibility. The findings are important to the Uasin Gishu Government, financial institutions and other stakeholders in making appropriate policies. Keywords: Mortgage financing, willingness, eligibility, double hurdle model, Uasin Gishu, Kenya 1.0 Introduction The nature of housing in Kenya represents major investment requiring substantial capital outlay (Nabutola, 2004). In the majority of housing projects, the developer whether as a corporate or an individual has to borrow and hence the need for mortgage financing (Nabutola, 2004). According to Jared and David (2014) over 70 % of Kenyans financed construction and acquisition of their homes through personal savings, only 28 % of Kenyans financed homes and acquisition using bank loans, out of which only 6 % prefer mortgage financing. It is virtually every Kenyan’s dream to own a home. But the reality is that very few of them were likely to be able to save enough to pay for one in cash. Yamada (1999) observed that the smaller the income, the higher the proportion apportioned to rent payment and in Edwardian Britain, a third of income of the poor was expended on rent payment (Englander 1983). FinMark (2004) indicated that most existing commercially available mortgage products in Botswana required borrowers to have a minimum salary of US Dollars 650 and in some cases US Dollars 780 and consequently concluded that many of those employed in the formal sector did not qualify for conventional housing finance. According to Russo et al., 1986 noted that formal education may be important predictor of how loan applicants search for and obtain mortgages. Russo et al., 1986 also found that consumers engaged in three activities when searching for a product or service in collection, computation, and comprehension. The last activity was dependent on the consumer’s ability to process information, relative to other information, and used the information to make a decision. Kenya has a large housing shortfall which is growing every year and is increasingly prevalent in urban areas. The current annual housing deficit is estimated at 156,000 units against current levels of construction of 50,000 per annum based on the population growth and urban migration taking place. The deficit is largely filled by the growth in slum dwellings and continued self-construction of poor quality traditional housing. Mortgages have a big role to play in filling this gap (World Bank, 2011). According to Ministry of Housing in Kenya (2011) 27,000 housing units are required annually in the Uasin Gishu County but only an estimated 4,500 units were being produced annually. Do socio-economic factors, that is, income level, rental income and education level influence willingness and eligibility to mortgage financing in Uasin Gishu County? Is willingness and eligibility decisions to mortgage financing by respondents are joint decisions or not in Uasin Gishu County? It is therefore critical to examine the soc-economic factors in order to establish their influence on willingness and eligibility to mortgage financing. This is with a view of bridging the disparity between the current production of housing units and the demand for the housing units in the County. 2.0 Data and Methodology The population of the clients in the financial institutions offering mortgage financing were 807,687. Krejcie and Morgan (1970) formulae was used to obtain 749 being the sample size of the walk-in customers. In this study, Double-Hurdle Model is used to analyze the respondent’s mortgage financing. The Double-Hurdle Model, originally formulated by Cragg (1971), assumes that households must make two