Workers who will be locked out of Uhuru housing scheme

President Uhuru Kenyatta at a past function.

A worker earning Sh100,000 a month or more does not qualify to benefit from President Uhuru Kenyatta’s affordable housing scheme.

Such workers will, as of January next year, be required to part with Sh1,500 every month, an amount to be matched by their employers, including the State.

These contributions will be transferred to their pension upon attaining retirement age.

This discrimination that is likely to be subject of court cases, as well as the selection criteria for the beneficiaries of the scheme.

Consumer Federation of Kenya Secretary General Stephen Mutoro warned that the scheme had the hallmarks of a scam.

“I think it will be challenged in court,” he said, mirroring the fears shared by many.

The President’s affordable housing dream will receive Sh55 billion a year from taxpayers’ pockets - way more than earlier budgeted for.

It follows last week’s enactment of the Finance Bill, which tripled the monthly contributions of salaried workers to three per cent.

At the earlier rate of one per cent, the total collections until 2022 were projected at Sh118 billion. Cumulative annual salaries for private and public sector workers was Sh1.8 trillion last year, or Sh150 billion a month.

The levy will pile to more than Sh350 billion, according to confidential Government records, by the end of Uhuru’s tenure.

He expects to build half a million homes under his affordable housing legacy pillar.

Employers and their workers are to share equally in the contributions that lock the highest contributors out of the housing scheme.

The funds will be directed to the National HousingDevelopment Fund, which is expected to finance the construction of housing or acquire ready homes for onward sale through mortgage to low and middle-income earners.

Last Thursday, Uhuru succeeded in pushing through Parliament the proposals to tax workers to fund the scheme.

It was uncharacteristic for MPs to approve of the three per cent considering they had rejected an earlier proposal to charge a lower rate of one per cent.

Legislators who confided in The Standard said approving the President’s proposals was a trade-off as their benefits, which had been chopped by the National Treasury in the supplementary budget, were reinstated.

It has also emerged that the three per cent housing tax is not new after all — the State had considered it in its projection from as far back as September 2017.

A confidential note relating to affordable housingindicates that the discussions on levying the higher housing tax have been ongoing, even as recently as during the Devolution Conference in April. HousingPrincipal Secretary Charles Hinga gave the revenue projections at a round table 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 at the round table talks, 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 built.

It is expected that the entire project will require nearly Sh750 billion, some to be raised from borrowing to supplement the employer/employee contributions.

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

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

In 2010, the demand for urban housing was estimated at around 80,000 units a year, with demand projected to increase to nearly 300,000 units a year by 2050, Hinga said.