EDITORIAL: Low-cost home plan has glaring weaknesses

That many Kenyans, who are set to contribute thousands of shillings every month to the low-cost home ownership fund are unhappy with the just released operating guidelines is no longer in doubt.

Many of the provisions released early this week make little sense in terms of delivering the promise of affordable housing to the contributors and most importantly, the guidelines are silent on some critical aspects of the plan while leaving loopholes that could be exploited to the detriment of the good intentions of the fund.

Take for instance the provision that to qualify for the houses individuals will have to make contributions continuously for five years. This is a requirement that is at best not alive to the realities of our job market. It effectively shuts out those who will lose their jobs in-between and are therefore rendered incapable of contributing – even for a while.

The five-year requirement implies that the homes will not be immediately available to contributors even as all indications were that this pillar of President Uhuru Kenyatta’s economic programme would begin to produce benefits at least before he exits the presidency. In the event of a worker exiting employment for whatever reason and becoming unable to contribute, the cash contributed by the employer will neither go to the employee nor the organisation that remitted the money on the individual’s behalf. That’s a major loophole that the corrupt and hungry tenderpreneurs will be waiting to use and just make the money disappear from the state coffers.

Our view is that the law ought to take account of the costs to the employer of providing this benefit and erect strong safeguards against its pilferage. In fact, there are genuine fears that some companies may react to this new levy by cutting back on new employment or on the existing positions to reduce the tax load. Should that happen, it will amount to a negative consequence of a well-intentioned policy.

It is also discomforting that the regulations do not provide for a minimum guaranteed rate of return that contributions will earn during the time that they are being managed by the fund.

It is well that the regulations specify that those who take up loans will pay an interest of seven per cent per year, quite a generous level for the mortgager given the double digit market rates. This should, however, imply that there is a rate for contributors, who do not take up any mortgage.