Economy

President Ruto’s housing scheme favours the rich, says Parliament Budget Office

housing

President William Ruto inspecting the affordable housing project in Homa Bay Town. PHOTO | PCS

High-income earners will benefit more from the government’s affordable housing programme, defeating its primary aim of benefitting lower earners more, the Parliamentary Budget Office (PBO) has warned.

The PBO cautions that under the current law guiding implementation of the programme, allocation of funds towards the development of houses for Kenyans earning up to Sh149,000 monthly is set at 60 percent, yet they constitute 77 percent of Kenyans working in the formal and informal sectors.

On the other hand, Kenyans earning above Sh149,000—who constitute just 23 percent of the workforce—have been allocated 36 percent of the funds.

The Affordable Housing Bill, of 2023 allocates 30 percent of the funds collected from Housing Levy to social housing projects (which target persons with monthly incomes below Sh20,000), another 30 percent to affordable housing projects (which target persons with a monthly income of between Sh20,000 and Sh149,000) and 36 percent of the funds to institutional housing programme and projects (which targets persons with a monthly income of above Sh149,000.

Read: President Ruto pleads with court to allow housing levy

“However, statistics from the State Department of Housing and Urban Development indicate that about 74 percent of the formally employed persons and about 80 percent of the informally employed persons earn less than Sh149,000 per month, meaning that they are the target beneficiaries of the social and affordable housing projects.

“Despite their huge numbers (more than 74 percent of the targeted population), their categories of housing units are only being allocated 60 percent of the total monies in the fund,” the PBO observes.

The office- a professional, independent office of Parliament- also warns of the possibility of misuse of money in the hands of the Fund that remains unused at the end of each financial year, due to a lack of clarification on how it should be treated.

The Public Finance Management Act, 2012, requires that the administrator of a national public fund shall ensure that the accruals to a national public fund are retained in the fund unless the Cabinet Secretary directs otherwise.

“The bill is silent on how accruals to the fund at the end of each financial year are to be handled which contradicts the provision of Section 24 (6) of the PFM Act, 2012,” the PBO observed.

The office raised the concerns in a report analysing the financial and economic implications of the programme, at a time when the government is facing legal hurdles over its implementation, with the Court of Appeal affirming a decision by the High Court to halt collection of the Housing Levy from workers and employers in the formal workforce.

Employees and employers have contributed to the levy at the rate of 1.5 percent (each), since July last year. By the end of December, the government had collected Sh26.8 billion through the Housing Levy.

The PBO also proposes that the law guiding the implementation of the programme should require beneficiaries of the houses to be active contributors to the levy, which is currently not a consideration in the Bill.

Read: State nets Sh26.8bn from housing levy amid legal row

“The bill provides that a person is qualified to be allocated an affordable housing unit if the person is an adult Kenyan. In addition, it has also clearly stipulated some of the required accompaniments which include proof of the requisite deposit of 10 percent of the value of the respective affordable housing unit, a copy of the national identity card, and a copy of the KRA PIN certificate.

[email protected]