Looking past politics of the raging housing levy debate

When President William Ruto commissioned blocks of affordable housing in Nairobi's Mukuru slum. [Denish Ochieng, standard] While numerous proposals in the Finance Bill, 2023 are likely to leave Kenyans worse off, the proposal on the housing levy appears to be the most contentious. The housing levy will dent the amount of money that Kenyans in formal employment will take home. Following the concerns raised by the public, the proposed levy has been halved to 1.5 per cent of an employee's basic salary from the initial proposal of three per cent. Employers will, however, not be required to match what their employees pay, according to revisions on the Bill following the public participation phase. The State had earlier expected that the levy would generate some Sh9 billion per month or Sh108 billion per year for building affordable houses. This will significantly reduce following the revision of the Finance Bill, 2023. The government has tried to explain that while the levy is compulsory, it is at the same time a saving. "There has been a misconception that the affordable housing levy is a tax, yet it is not. The levy is a savings plan deduction with benefits accruing to the employee. It will also enhance the national saving plan," said National Treasury in a note "demystifying the facts" in the Finance Bill, 2023. It further explains that the levy would lead to homeownership for some employees but also noted that others would be able to take their money out of the fund after seven years. "For employees who are not eligible for affordable housing, upon the expiry of seven years from the date of the start of making the contributions, or after the attainment of retirement age, whichever is earlier, the employee may opt to: transfer contributions to a retirement scheme or convert to pension, transfer contributions to another registered person of their choice, transfer contributions to a spouse or dependent children or receive back all the contributions made in cash hence a savings plan," says Treasury in the Bill. The proposal has, however, faced opposition. The Federation of Kenya Employers (FKE) has opposed the levy, noting that owning a house is not guaranteed even after contribution to the kitty, with the criteria of how those who will get houses yet to be made clear. The employers' lobby warned that this will hike the cost of doing business in the country and businesses are likely to shed jobs as they try to tame costs. FKE says the levy should be voluntary. Different players have also called for certain structures to be put in place before the government imposes the levy. The Architectural Association of Kenya (AAK) has proposed the setting up of the Kenya Housing Board, which the lobby says would formulate policy as well as look into modalities of financing developments that could include the introduction of the housing levy. "We strongly recommend the establishment of the Kenya Housing Board led by industry professionals. The proposed housing board, in collaboration with other stakeholders and county governments and urban management boards, will be responsible for establishing standards, regulations and policies that will guide the operationalisation of the affordable housing programme," said AAK President Florence Nyole. "The Kenya Housing Board will play a crucial role in guiding and managing the housing programme effectively. It will ensure any funds earmarked for the provision of housing are effectively and efficiently used to address the housing needs while ensuring excellence and affordability of housing." Ruto defends housing levy on workers, says it's part of savings Sylvia Kasanga, an architect and AAK member further explained that as with other funds, the housing board would be funded by levies but it should first be in place. After that, it can determine, in consultation with the industry and the public, how to source funds and further, how to utilise the money. "Looking at other existing levies, it is imperative that for there to be a levy, there has to be a body that manages the levy. What we are suggesting is that the Kenya Housing Board become the overarching body that oversees all housing requirements," she said. Ms Kasanga added that the conversation has so far centred on building houses but noted that there are other factors to consider in real development that do not feature in the ongoing debate over the levy. "There is a lot more that goes into housing... it is not just construction of a house," she said. Experts note that numerous underlying issues have held back the State's plan to address the country's housing shortage, which they note is already a crisis. There is a demand for about 250,000 housing units annually, but production stands at 50,000. The unmet demand has over time resulted in a deficit of over two million low-income homes. These underlying issues, experts say, are the reason why the country has few mortgage loans. They are also Instances where the government has built social houses that were aimed at enabling slum dwellers to upgrade from slums, but they would soon rent out the new units and move back to the slums. Chairman Joint Building Construction Council (JBCC) Muchiri Waititu noted that the raging debate has largely been around the politics of the housing levy, while little has been done to understand the situation on the ground that would then inform policy, including the imposition of a levy. "Some of the things that are being suggested already exist. The National Housing Corporation has a housing fund, which used to work well, and that is how we put up estates like Madaraka. There is already an ecosystem that used to work. We need to ask ourselves why it is not working anymore. We do not want to set up something, which again will repeat the mistakes that we did in the past," he said. Having a workable ecosystem, Mr Waititu added, would provide long-term financing solutions that would enable Kenyans to own homes. "Housing has traditionally been a mismatch of funding expectations. We are using short-term funds to fund long-term projects. Housing is long-term. We are using commercial bank loans to do housing, and that is why we are having all these sorts of failures in the funding structure. The housing fund should come and give us a long-term structure for onward lending to the mwananchi," he said.

Looking past politics of the raging housing levy debate

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