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State: Why housing levy won't be voluntary

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 The CS for Lands Zach Njeru and his PS Charles Hinga when they appeared before the Senate committee on Roads, Transport and Housing in Naivasha. [Antony Gitonga, Standard]

The government has explained why the three per cent housing levy cannot be voluntary contribution while rallying Kenyans' support amid protests and confusion on the deduction.

Yesterday, State Department for Housing and Urban Development Principal Secretary Charles Hinga said the deduction mimics the model around fuel levy.

He also addressed the hygiene issues around the fund explaining why the government is silent on how much interest those who will not be interested in houses, will get.

Mr Hinga asked Kenyans to look at the bigger picture - a housing unit at the end of the seven year saving period - and not how much interest they seek to get if they are not interested in a home.

The PS described the housing fund as a 'sweetheart deal' that will position Kenya in the path to put up the two million housing units needed.

"The minute you give a guaranteed interest rate, you get an obligation that becomes like a debt," he said, disclosing that the targeted interest rate for the fund is seven per cent.

The housing fund, one of the proposals under the Finance Bill 2023 that forms the budget for the 2023-24 financial year, is one of the funding avenues for President William Ruto's administration for affordable housing agenda.

It is estimated the three per cent deduction, capped at Sh2,500 per employee, with a matching figure from the employer, will offer the government Sh9 billion more every month. Employees will contribute according to their pay.

The idea as explained by Hinga, will give the government a good bargaining ground to convince investors to start developing units across the country as there will be funds to pay them off once they hand over the keys. The government, through Boma Yangu platform, will then facilitate Kenyans to own those units at a single digit interest rate.

Hinga said anchoring the fund in the law, like with the fuel levy, gives confidence to investors. He argued that it is through fuel levy that the government has been able to build roads and the housing fund will work the same way.

"When it is driven by law, I can confidently tell the investor that as long as the law is there, they will be paid," he said at the press conference called by State House Spokesman Hussein Mohamed.

"If we didn't have that (the law), the investor will tell us that we cannot afford," he added.

The PS said the fund should not be mistaken for tax. "Do you know we have a road to Moyale, which is built by taxes? You may not benefit from the road as a taxpayer, the housing fund confers you a direct right to own a house," he said.

The idea of a housing fund has not been received with open arms by many Kenyan workers who through their respective unions and associations have made it clear that it is a burden for the overtaxed and underpaid worker.

This is in addition to upward adjustments to the statutory contribution to the National Social Security Fund (NSSF), National Health Insurance Fund (NHIF) and the proposed 35 per cent income tax on those with an income of over Sh500,000 monthly.

These are the same Kenyans burdened with increased cost of living fuelled by food inflation, depreciating shilling against the US dollar and drought.

"I know at times it looks like we are insensitive. But how do you get out of a global crisis? You must create a consumptive demand," Hinga said.

"We don't have to be Harvard economists to understand how you create jobs. If we build these two million houses how many jobs are you going to create?" he posed.

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