Housing PS on why 3pc housing fund is must for overburdened taxpayersThursday May 25 2023
The National Treasury has proposed changes to the Employment Act to allow deductions of three percent from employees’ basic pay to fund President William Ruto’s ambitious affordable housing plan.
The proposed statutory deduction will add another extra levy on employed Kenyans who are struggling with the rising cost of living amid salary increases and employment freeze by Kenyan employers.
The policy, which was first mooted and rejected during President Uhuru Kenyatta’s second term, will see employers contribute to the fund, adding to the cost of doing business in the country.
In a media address on Wednesday, Housing Principal Secretary Charles Hinga set to explain and clear the air over the plan that has been opposed by employers and workers' unions terming it as another tax in a tough economy.
Who qualifies to own a house under the affordable housing programme?
Anybody can qualify but just like your Saving and Credit Cooperative Organisations (Sacco), we have got rules of engagement.
The rules are that there is a prioritisation. One of the questions we ask you in the BomaYangu portal is whether you are a first-time homeowner.
If you have a home and someone else has and you are going for the same unit, we will prioritise you who doesn’t have a home.
We also say that if you are disabled, you should tell us so that you can choose if you want to go stay on the first floor and all that information is available in the BomaYangu portal.
What’s the fate of my money if I exit the fund after the minimum seven years of contribution?
Those who opt to exit the fund after a minimum of seven years will only receive their contributions, while the employer’s contribution would be held for a further seven years.
It is only by the death of full retirement will the full amount become accessible.
What measures are you putting in place to avert a situation where houses that have already been built do not lack homeowners?
We are unlikely to end up in a situation where the houses built will lack someone to buy them. I highly doubt we are going to have that.
Unfortunately, if we lack buyers, we have people who are providing public service like the police, defence, national youth service and firefighters that you need to house in those places in every part of the country and they will still be repaying every month.
Why is the government not putting up affordable houses with subsidised rent as is the case in the developed world rather than forcing Kenyans into mandatory deductions to fund a house they may not want?
What you need to know is that 91 percent of Kenyans in Nairobi rent homes. Our plan is to subsidise the rent but through a rent-to-own structure and that is our plan.
That is why we are saying you will get a home for Sh5,000 or Sh10,000 under the affordable housing programme. If you are in social housing, you will pay Sh2,500 for a one-roomed house, you will pay Sh4,500 for a two-roomed house and you will pay Sh6, 500 for a three-roomed house but that house, you will rent and you will own.
The question that we get is, why own? We ask the question, do Kenyans rent because they like to rent or do they rent because they cannot afford to own? As I say, it’s a dialogue and you have the answer.
Will it be mandatory for a home buyer to live in the same house he bought?
This is a very good question. Those people who are living in Park Road signed a contract with us that says that they will live in those houses.
But tell me, how do you police an enterprise? For that three-bedroom, they are paying Sh19,000 per month to us they are getting a rent of Sh55,000 out of it.
If we stopped and forced people to live in the houses they bought, we will have lost the plan. The only thing I can tell is that you cannot buy two houses and you can’t sell that unit until after seven years because that unit is so subsidised.
If I allow you to do that, you will take up the unit at Sh3 million and sell it at Sh7.6 million then you buy another two units and sell again.
What is the fate of home buyers who are already on-boarded on the BomaYangu platform but are yet to get a house?
We have transitioned from the Telkom platform to the e-citizen and we have transitioned every one of them so your money is still there.
As a matter of fact, those people that have said I have Sh1.8 billion of their money you need not worry because your money is still there and you will still get a home.
How about you subsidise building materials to allow Kenyans to build their own houses?
One of the most painful cost in construction is VAT but we have written it off. It means that for affordable houses on Park Road, there was no VAT on cement, steel and that how we were able to drive its cost down.
We have other incentives like if you import any material and you use the Standard Gauge Railway, the railway development levy is different from other people carrying different materials on the train.