President William Ruto’s administration absorbed less than a third of Sh54.16 billion remitted by employers and employees towards housing development levy in the first year of enforcement, pointing to delays in the implementation of projects.
Treasury Cabinet secretary John Mbadi says the deductions at the rate of 1.5 percent of gross salaries and wages, matched by employers, narrowly missed the target of Sh54.58 billion for the year ended June 2024 by Sh415 million or 0.76 percent.
The Treasury made the disclosures on the housing levy deductions from workers’ payslips following requests from the public who sent their views on the 2024 Budget Review and Outlook Paper (BROP).
Separate data from Controller of Budget Margaret Nyakang’o, however, shows that a measly Sh16.65 billion was spent on affordable housing in the review year. This translates to 30.75 percent of the amount collected by the Kenya Revenue Authority.
The expenditure on affordable housing projects massively underperformed the Sh64.82 billion, which the State Department of Housing and Urban Development initially budgeted for the year, according to CoB.
“Housing and Urban Development faced significant challenges in the Affordable Housing sub-programme, with a low absorption rate of 26 percent, reflecting delays in project implementation,” Dr Nyakang’o wrote in the budget implementation review report for the year ended June.
The deductions from employees — whether on permanent and pensionable terms or contract-based engagements— were initially declared unconstitutional by the courts largely for being discriminatory and creating unequal principles under labour law. This was after they were applied to workers in formal employment only.
This prompted lawmakers to enact the Affordable Housing Act 2024 to comply with the ruling of the courts. President Ruto signed the Act into law on March 19, enabling KRA to resume the deductions which had been suspended in January.
The law requires workers in the informal sector to also pay the housing levy at the rate of 1.5 percent of their gross monthly earnings to fund Dr Ruto’s pet project, but modalities for collections are not yet in place.
Housing PS Charles Hinga told the National Assembly in May that the bulk of the collections were being invested in Treasury bills and bonds, citing an implementation hitch after the law vested the expenditure responsibilities in the Affordable Housing Board.
“The board will write to implementing agencies to provide their five-year investment plans. The board is not an implementing agent. All the implementing agents will have to prepare their proposed projects,” Mr Hinga told the parliamentary Committee on Housing, Urban Planning and Public Works.
The PS said the board was required to submit the five-year plans and the budgets from the various implementing agencies, like the National Housing Corporation, to the Cabinet and Parliament for scrutiny.
Kenyans are expected to pay between Sh840,000 and Sh5.76 million for the low-cost homes programme, which targets putting up 250,000 units every year. Affordable housing units will be made up of studios (bedsitters) and two- and three-bedroom apartments, according to a plan prepared earlier by the State Department for Housing.
Social housing, a lower tier of the programme, will meanwhile comprise one-, two- and three-room houses targeting slum dwellers.
Additionally, the programme will oversee the development of market-driven units which will comprise two-and three-bedroom houses.
The lowest-priced unit (a single room on a 20-square-meter space) will cost Sh840,000, which will require prospective homebuyers to deposit Sh84,000 and clear the remainder through monthly payments of Sh3,200 over 30 years.
A two-room house of 30sqm will cost Sh1.26 million, with prospective owners required to deposit Sh126,000 and pay Sh4,800 monthly for 30 years, while the price for a 40sqm three-room unit is Sh1.68 million paid through a Sh168,000 deposit and Sh6,400 monthly payments.
A bedsitter, or studio, on 20 square metres space will cost Sh960,000 with occupiers charged Sh5,200 monthly payments for 30 years on top of Sh96,000 deposit.
