The elephant inside Ruto's affordable housing law

President William Ruto assents to the Affordable Housing Bill at State House, Nairobi County. [PCS, Standard] President William Ruto's desire to provide affordable housing for majority of Kenyans regardless of their social and economical status, was ultimately given the nod yesterday. The development closed the debate on one of the most contested pieces of legislation in recent times. But even as he affixed his signature and seal to the law that will inject Sh63 billion in form of taxes into the 2023-2024 financial year, Ruto acknowledged the opposition he had faced. "I have been asked on several occasions why I am forcing Kenyans to own houses. It is my obligation to ensure citizens have decent and affordable houses, that is why I asked MPs to support the affordable housing Bill," Ruto explained. Last year, three judges of the High Court ruled that the introduction of the Housing Levy through amendment of the Employment Act by Section 84 of the Finance Act, 2023 lacked comprehensive legal framework in violation of Articles 10, 201, 206 and 210 of the Constitution. Justices David Majanja, Christine Meoli and Lawrence Mugambi further said the imposition of the housing levy against persons in formal employment to the exclusion of other non-formal income earners to support the national housing policy, is without justification, unfair, discriminatory and irrational. The Court of Appeal ruled in January that introduction of Housing Levy through amendment of the Employment Act by Section 84 of the Finance Act, 2023 lacks a comprehensive legal framework. Justices Lydia Achode, John Mativo and Mwaniki Gachoka concluded that public interest tilts in favour of not granting the order sought by the government to continue collecting the housing levy. Attorney General Justin Muturi had pleaded with the court to allow the collection of the levy arguing that it had created more than 120,000 jobs since it was started six months ago. In Parliament, opponents of the Housing levy and National Assembly Minority leader Opiyo Wandayi had raised concerns that the law was being rushed through and sought more time for members to give their views due to the many amendments proposed by various members. His calls were not heeded by the majority side when it was passed. Nyamira Senator Okongo Omogeni had proposed the amendments pushed by the opposition that sought to have the deductions capped at Sh2,500 while the affordable housing levy to be paid at the rate of 1.5 per cent of the net salary of an employer or of an employee. Omogeni unsuccessfully sought to have the affordable housing levy based on net salary of an employee or any income received or accrued that is not a salary in what he said was aimed at ensuring it was fair to majority of Kenyans. He wanted the Treasury Cabinet Secretary to exempt from payment of the levy any person who enters into a subsisting mortgage that is not contemplated under the Act. He was also of the view that any person residing in a rural area is in possession of a certificate of title registered in their name be considered. Conditional grant The Nyamira Senator sought to have any person engaged in agricultural farming or business activities whose annual turnover is less than Sh288,000 yearly be exempted and sought to have all the funds collected through the levy, allocated to county governments as a conditional grant. The opposition also pushed to have exemptions for individuals aged 50 and above and are engaged in informal business activities as well as any person with less than five years remaining to statutory retirement at the time of the enactment of the Act. Omogeni sought to have counties entrusted with the management of the fund and not the proposed Affordable Housing Fund Board since development functions are a preserve of county governments and if boards were to undertake this function then it would be in conflict with provisions of the Constitution. The senator argued that the provision to create a board to be in charge of investment programmes on all housing projects in counties was in conflict with Schedule Six of the Constitution which reserves housing and development as a county function. The numerous other presentations made by the public when lawmakers visited 19 counties are now water under the bridge. The new law assented to by the President on Tuesday provides for the affordable housing levy at the rate of 1.5 per cent of the gross income of a business or an individual and a matching contribution of the same amount in the case of employers. The law provides a mechanism to prevent double taxation by exempting persons who pay the matching contribution from paying the levy on their gross salary. It also provides affordable housing relief at 15 per cent for employees who make contributions to the levy, other tax-related incentives relate to the reduction of the turnover tax from 3 per cent to 1.5 per cent, to alleviate the tax burden for the informal sector. "In compliance with the court decision, the law establishes a Fund, into which the levy is payable and the Fund shall be managed by Affordable Housing Board which shall be responsible for the management of monies raised through the Housing Levy," states the law. The law also establishes accountability mechanisms including a requirement that the board shall prepare a five-year investment programme and an annual investment programme The two investment programmes shall be approved by Cabinet and consequently be tabled in Parliament as well as a guide for the allocation of funds for implementation of the affordable housing programme. The law provides for the role of county governments in matters relating to affordable housing and provides for the establishment of the County Affordable Housing Committees, which shall advise the governor on affordable housing programmes within the county, develop a framework for attainment of affordable housing in every county in consultation with the Board among other functions. There were fears that some well-connected individuals would snatch up multiple houses, and to cure this, the law further provides for the eligibility criteria and application procedure for an affordable housing unit to ensure that each applicant accesses only one affordable housing unit one of the eligibility requirements is that an applicant must submit copies of their National Identity Card; their KRA Pin and a tax compliance certificate. "The Bill also provides for prioritisation for slum residents in the affordable housing projects through offering the residents of the settlements first right of purchase of a unit in the project or resettling them," reads part of the new law. For citizens who might not raise the requisite deposit, the programme offers them a flexible financial arrangement catered for by the provision that makes making voluntary savings with the Affordable Housing Fund possible for the purposes of raising a deposit towards the allocation of an affordable housing unit. Incase a person is not allocated an affordable housing unit, the law provides for the option of withdrawal of savings or applying to the Affordable Housing Board for approval of issuance of an affordable mortgage to develop a rural affordable housing unit. To address the challenges of institutional housing, the new law provides that the Affordable Housing Board may enter into an agreement with a public institution for the development of institutional housing units. The Affordable Housing law also addresses issues of employment, support for local communities and internship opportunities for students. It obligates the Board to ensure when it develops affordable housing units, it uses locally available materials, labour is sourced from the local communities, and students near affordable housing projects are granted internships or practical experience.

The elephant inside Ruto's affordable housing law

Subscribe Today & Save!

Related Topics

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

DIGGER JOBS

Digger Motors

Digger Real Estate

The elephant inside Ruto's affordable housing law

Subscribe Today & Save!

Related Topics

Trending Now

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS