The government will not yield to pressure to protect tenants against eviction in the wake of financial hardships brought about by the coronavirus pandemic.
The National Treasury Cabinet Secretary Ukur Yatani said compelling landlords to forego their monthly rental income in the wake of the crisis would in effect kill the real estate industry.
Mr Yatani said the government can only appeal to the landlords to empathise with the hundreds of thousands of workers who have lost their jobs as companies scale back their operations and the economy slides into a downturn.
The CS acknowledged having received several calls to waive rent to Kenyans whose sources of income have been disrupted by the coronavirus pandemic but ruled out any direct intervention.
“We decided that that (calling for reduction of rent) could destroy the industry,” said Yatani during a recent interview with Financial Standard.
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This comes at a time when sharp divisions have emerged among landlords, with some taking a hardline position against any rent waiver, saying it is their only source of income.
Others, especially big real estate companies with commercial properties, have shown willingness to ease the burden of their tenants, acknowledging that some might have cash flow constraints occasioned by the pandemic that has brought most economic activities to a standstill.
Globally, a number of real estate players, including governments that own property, have considered waivers to help tenants navigate through the current financial storm. In most cases, these players have offered deferral of rent payments. The International Monetary Fund has waded into the debate, asking governments to find ways of protecting both the tenants and landlords.
While the government has been non-committal on how it intends to help out those who can no longer afford rent, President Uhuru Kenyatta is on record thanking landlords who have slashed or waived rent for their tenants for a few months.
“I note with appreciation that some property owners have reduced monthly rent to help provide a roof over the heads of our vulnerable brothers and sisters. In that regard, I urge others to emulate these acts of personal and financial sacrifice. This is a time for compassion and understanding,” he said recently.
As the coronavirus pandemic continues to wreak havoc, crippling businesses and throwing thousands from their jobs, there have been increased calls for the government to cushion tenants from being ejected from their homes.
About 4.6 million households in the country live in rented houses, according to the latest data from the Kenya National Bureau of Statistics. In Nairobi, nine out of every 10 families live in a rented house.
In Mathare Sub-county, arguably Nairobi City’s poorest area, according to analysis done by Financial Standard on various socio-economic factors, virtually everyone (97 per cent) lives in rented property.
Other areas with high rental occupation include Kamukunji (95.4 per cent), Embakasi (94.8 per cent), Starehe (94 per cent) and Makadara (93.5 per cent).
For some families, rent takes up as much as a third of their income, with the rest going to food, transport and other essentials.
It is even worse for casual workers such as the hundreds of thousands who make a living in flower farms as well as hotel waiters, who have been laid off as these industries take a major hit from the stringent measures put in place to stem the spread of the viral disease.
CS Yatani noted that consumers have been given “a lot” of tax reliefs aimed at ensuring they have more disposable income.
These tax measures include slashing of value added tax (VAT) from 16 to 14 per cent and waiving Pay As You Earn (Paye) for those earning Sh24,000 and below. Those earning above Sh24,000 will, on the other hand, see their Paye decrease from 30 to 25 per cent beginning this month.
“The net effect in terms of reduction in income tax will mean there will be more disposable income and, therefore, the power to purchase more. Assuming they retain their salaries, they can purchase more consumer products than before,” said Yatani.
Parliamentary Budget Office, an advisory agency on budget-making for Members of Parliament, has recommended additional tax measures to help relieve tenants of the pressure of paying rent.
Besides the five tax measures that the government has introduced, PBO has proposed a scheme which would allow landlords not to charge rent for a specified period of time and “utilise the rent forfeited to offset the residential income tax”.
“This would cushion the citizen, especially those who will not benefit from the income tax relief due to the nature of their daily unpredictable wage earnings,” read part of PBO’s special bulletin.
The agency noted that the information obtained through this exercise would also be valuable to the Kenya Revenue Authority (KRA) in enhancing tax administration on rental income.
However, compliance on rental income tax has been poor, forcing the taxman to aggressively go after defaulters.
Besides tax reliefs, borrowers who might have difficulties repaying their loans can restructure their personal loans, extending the repayment period by over 12 months in a deal that was brokered by Central Bank of Kenya.
Rescheduling of personal loans, reckons the government, will also have the effect of leaving consumers with more disposable income they can use on such essentials as rent and food.