Can new housing fund create 25,000 jobs?

Real Estate
By Graham Kajilwa | Jun 08, 2023
An affordable housing project at Mukuru in Nairobi. [Denish Ochieng, Standard]

Available data seems to counter the government’s selling point of the contentious Sh2,500 housing levy as an avenue for employment creation.

Of all the sectors that contribute to the economy, real estate and construction, do not provide as many jobs when compared to some sectors.

According to the latest data from the Kenya National Bureau of Statistics (KNBS) Economic Survey 2023, real estate or construction does not feature among the top three leading wage employment creators of 2022.

“In 2022, the leading industries providing wage employment in the private sector were manufacturing, agriculture, forestry and fishing, and wholesale and retail trade and repair of motor vehicles,” the Economic Survey Report says.

These sectors contributed 15.9, 14.4, and 12.8 per cent respectively of the total private sector employment.

According to the report, the number of wage employees increased from 2,906,100 to 3,015,400 in modern establishments.

In the informal sector, this figure went up to 15,964,700 from 15,261,800.

In the modern sector, the highest wage employment growth was recorded in the accommodation and food services activities at 23 per cent followed by administrative and support services at 10.3 per cent and water supply (sewage, waste management, and remediation) at 8.8 per cent.

The two sectors associated with housing namely construction and real estate activities recorded a growth of 2.3 and 4.9 per cent respectively.

Data shows, in 2022, construction created 4,900 new jobs while real estate activities added 300 for the private sector.

This performance was also witnessed in the public sector which ranked the same industries where the highest growth was recorded in the transport and storage activities at 12.6 per cent. Construction grew by 3.3 per cent.

There were no figures for real estate activities in the public sector.

“I need 25,000 youth to benefit from the housing plan. I am talking about the engineers, architects, surveyors, electricians, masons, and carpenters,” said President William Ruto a week ago as he touted the idea as noble for the creation of employment.

His housing plan, he said, is to kill two birds with one stone - create jobs while providing housing.

Wage employment

“I have said, those who have a payslip, to contribute a small portion so that you who does not have can also benefit,” he insisted.

But when available data is put against the 25,000 jobs the government seeks to create by levying a maximum of Sh2,500 from every employee with a matching contribution from the employer, it raises the question if the state is looking into the right industry.

For example, having seen the numbers of jobs created in 2022 from real estate activities and construction, the same report positions manufacturing, information and communication, and education and accommodation and food services industries as the most suitable to give the government the said 25,000 jobs.

Manufacturing, in the private sector, increased wage employment by 16,100 in 2022 to grow to 329,600.

Accommodation and food services went up by 14,200 to 75,900 while education increased by 16,700.

Information and communication increased by 8,400.

Numbers from the same industries in the public sector have minimal to almost no change.

Even when these numbers are transposed to the informal sector, manufacturing still leads with more potential to create jobs compared to real estate activities and construction industries.

In 2022, manufacturing created 113,900 more jobs compared to 3,700 in the construction industry.

Subsidised mortgage

However, of the listed activities, wholesale and retail trade, hotels and restaurants have the biggest potential with 206,400 new jobs in 2022. At least 9.3 million persons were informally engaged in 2022 in this sector.

The plans by the government are to deduct individuals in the formal sector, who are about three million, various amounts not exceeding sh2,500 with a matching contribution from the employer with the hope of raising sh9 billion every month.

The Sh9 billion will then be used to attract investors to put up housing units across the country, who then will be paid, and Kenyans allocated houses by one depositing at least 12.5 per cent of the subsidised mortgage amount.

The savings made from the deductions is expected to be a down payment for the house. For those who do not want a house, there are modalities to withdraw the cash in phases between seven to 14 years, or bequeath it to a next of kin or send it to your pension scheme.

There is a lot that is yet to be known about the potential the real estate sector can have for the economy. And this explains why there are no figures for real estate activities for wage employment in the public sector in the KNBS Economic Survey Report.

A report by the Architectural Association of Kenya (AAK), however, attempts to paint a picture of the structure of jobs in the built environment.

The AAK Salary Survey Report 2022, which surveyed 212 firm members with 65 valid responses, cites years of professional experience as the major determinant of how much one makes in this sector.

Apart from architects, the report covered quantity surveyors, engineering, landscape architects, environmental design consulting, construction project managers, interior design, and urban planners.

“In terms of the number of staff, most companies have 1-5 employees at 43 per cent, 26 per cent of them have 6-10 employees, while 10 per cent of them have 11-15 employees. Notably, the highest number of employees recorded was 2000,” the report says.

Most of the jobs referred to by the President are likely to be informal.

“In Kenya, informal jobs are often concentrated in trade, manufacturing, transport, and other services activities,” says the KNBS 2023 Economic Survey report. “The informal sector still remains the main source of employment in Kenya.”

It documents that in 2022 employment in the informal sector rose by 4.6 per cent to record 16.0 million jobs.

“Wholesale and retail trade, hotels and restaurants continue to be the leading sector that provides informal employment followed by manufacturing,” the report says.

The KNBS report shows construction does pay more per employee per year at sh638,601 compared to manufacturing at Sh497,225 and agriculture Sh321,034.

The estimated real average annual wage earnings per employee in real estate activities is Sh272,987.

Another report, Employment Creation Potential for Youth in the Kenyan Economy by researchers from Kenya Institute for Public Policy Research and Analysis and Zetech University, however, puts considerable promise in the real estate sector even naming it top three as an employment multiplier. This is the capacity to generate output at a faster rate while creating job opportunities.

The August 2022 report does give projections on how the sectors would grow giving rise to new jobs.

The report projects wage employment to grow from 2.9 million in 2019 to 3.9 million in 2025. And if the economy grows at the same rate as it grew between 2012 and 2019, in 2025 wage employment in real estate activities would have 5,172 and 371,392 in construction.

Construction engaged 419,700 jobs in 2022 from the KNBS 2023 Economic Survey.

“The sectors with the highest level of employment multipliers are agriculture, fishing and forestry; finance, real estate and business services and trade,” the report reads. “Manufacturing, hotels and restaurants and electricity and water have the lowest multipliers which are below the national average.”

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