Uncertainty hangs around housing plan ahead of implementation

New upgraded slum house in Soweto Kibera.

An air of uncertainty hangs over implementation of President Uhuru Kenyatta’s housing fund.

It is not yet clear when employers shall begin remitting deductions from employees’ pay and their own share towards the National Housing Development Fund.

Both employer and employee are required to contribute 1.5 per cent of an employee’s basic salary to the kitty, after Uhuru signed the Finance Bill, 2018.

There have been unconfirmed reports that the new tax measure might become effective on October 1.

The fund will be used for construction of about half a million low-cost houses by 2022.

There have been fears that employees will begin contributing towards the kitty without necessary regulations put in place.  

Consumer Federation of Kenya Secretary General Stephen Mutoro said the housing fund has the making of a scam.

“The structures and legal structures have not been put in place,” he said, adding that the deductions are likely to be challenged in court.

However, the Finance Act says the Cabinet Secretary in charge of housing in consultation with the CS for Finance will gazette the regulations for the fund.


“This section shall become effective upon gazettement of regulations prescribing the requirements for qualification to the scheme by the Cabinet Secretary responsible for housing in consultation with the Cabinet Secretary responsible for finance,” reads the Act.

It was not immediately clear the specific regulations that Transport and Housing Cabinet Secretary James Macharia would put in place.

By the time of going to press, Mr Macharia had not responded to our questions.

The Government has also not revealed when the regulations will be gazetted.

Even before the contribution was raised to 1.5 per cent from the initial 0.5 per cent proposed in the 2018/19 budget, employers had opposed the plan through their umbrella body.

Federation of Kenya Employers Chief Executive Jacqueline Mugo said it was not clear what role both employers and workers would play in the management of the fund and how it related to the Housing Fund provided for in the Housing Act.

She said employers were already providing housing or paying housing allowance to employees of at least 15 per cent of their basic pay.

“What benefits are there in it for the employers and employees? Is it guaranteed that every employee who contributes will get a house or access to a credit facility guaranteed by that fund? The proposed amendment does not provide answers to these issues,” said Ms Mugo.

The Government believes it has addressed all these fears.

“The main complaint that reached Parliament and the reason they picked up the levy as one of the reasons they rejected the Finance Bill was that workers did not really see the value of the fund, especially if they were not assured of getting houses,” said Mr Macharia.

Employees not getting a house after 15 years of contribution or after retirement will have their money including interest accrued transferred to their retirement scheme.

They can also transfer their contributions to any person that is registered and is eligible for affordable housing under the housing fund.

“The National Housing Development fund will purchase houses in bulk from developers for purposes of the Affordable Housing Programme (AHP). These units will then be managed through a National Tenant Purchase Scheme,” said the Housing ministry in an advertisement on Friday.

Civil servants will contribute about Sh5 billion annually to the fund, which will be matched by the Government’s contribution of another Sh5 billion.

Treasury Cabinet Secretary Henry Rotich had initially pegged the contribution by both employers and employees at 0.5 per cent before the MPs shot down the proposal.

President Kenyatta in his memorandum on the Finance Bill re-introduced it, adjusting it upwards to 1.5 per cent.


Questions have been raised as to the effectiveness of the fund, given the nightmare retirees go through trying to get their money from NSSF, a similar fund where employees save for retirement. 

Some pensioners have died before getting a dime from the NSSF. Most Kenyans fear that the housing fund will not be any different.

The chairman of the Institute of Certified Public Accountants of Kenya, Julius Mwatu, said while the housing fund was well-intended owing to the country’s housing crisis, affordability might be a hindrance.

“The only problem is that it is a direct tax that will go straight at the consumer. If I earn Sh100,000 I will have to pay Sh1,500. But can I afford it?”

He said some people in formal employment might be earning less than those in the jua kali sector, yet the latter are not expected to pay the  levy.

“The Government should look at other areas to widen the tax net because there are limits to how much tax one can pay... and that is why MPs interacting with the people on the ground are uneasy about the taxes,” said Mr Mwatu.


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