Workers to fork out Sh118b to fund Uhuru's housing dream

A housing project targeting low income earners: President Kenyatta's affordable housing project will cost nearly Sh750 billion. [File, Standard]

Workers will raise Sh118 billion to fund President Uhuru Kenyatta’s affordable housing plan in five years.

Projections contained in confidential Government documents have shown the detailed collections in the levy to which employers are also expected to contribute.

Affordable housing is one of the Big Four development pillars for the President’s legacy, alongside food security, universal healthcare and manufacturing.

Qualifying criteria

A worker earning a salary of Sh100,000, for instance, will pay Sh500 a month, and the amount will be matched by the employer.

Among the biggest concerns about the levy, however, is the qualifying criteria for the home buyers, given that the biggest contributors are not the targeted beneficiaries.

Only people earning Sh99,999 and below a month qualify for the Government-sponsored mortgage scheme.

It is likely that the legality of the discriminatory criteria on who qualifies will be challenged given precedence relating to new proposals.

National Treasury Cabinet Secretary Henry Rotich has proposed the effective date for the levy as October 1, pending the approval of the Finance Bill by the National Assembly.

Housing Principal Secretary Charles Hinga gave the revenue projections at a roundtable meeting with the private sector in a presentation that also indicated the starting prices for a studio apartment at Sh600,000.

The price of three-bedroom apartments has been capped at Sh3 million.

“These projects are intended to build investor confidence and create momentum for the programme,” Mr Hinga said, giving the timelines as being at “advanced stages of master planning”.

The first project will be undertaken at Nairobi’s Park Road, where 1,640 homes will be constructed.

This is the first time the scale of the new tax has been made public. The project will require nearly Sh750 billion.

The proposed tax, which has encountered stiff opposition from employers, is to be channelled into a new corporation that will buy the homes built by private developers.

Other than the contributions, the National Housing Development Fund will also borrow money from other lenders, including commercial banks.

Ordinary Kenyans will purchase the homes through mortgage provided by the State-owned financier, Kenya Mortgage Refinancing Company.

The World Bank has provided seed capital worth Sh16 billion to the mortgage provider whose lending operations are also expected to start within the year.

Employers have resisted the proposed housing levy, saying it would lead to erosion of workers’ salaries.

It is, however, clear that their interest in the objection is the amount they will be required to contribute on behalf of the employees, which will amount to billions every year.

A breakdown of the projected contributions shows that the Government expects to start at Sh18 billion in the current financial year before steadily growing the collections to Sh28 billion in 2022.

Pension scheme

Most of the homes are to be built in Machakos County around Athi River, where there are large tracts of land owned by the public pension scheme and Portland Cement Company.

On the two parcels, the Government expects to build 100,000 homes. Another 20,000 units will be built in Makongeni estate along the city’s Jogoo Road.