In Summary
  • Many people are opposed to the National Housing Development Fund because they do not understand how it will work.

When the Finance Act, 2018, comes into effect, salaried workers will have even less money to take home, since 1.5 per cent of their gross pay will go towards the National Housing Development Fund (NHDF), a kitty meant to finance the construction of low-cost houses.

It is one of the government’s strategies for raising Sh57 billion a year for the construction of half a million affordable houses in five years.

Under the NHDF plan, an employer and employee are separately required to contribute 1.5 per cent of the employee’s monthly basic salary, so long as the combined sum does not exceed Sh5,000.

But this has not gone down well with workers in the formal sector, most of whom started poking holes in the scheme and even before it came into effect.

In July, a month after the National Treasury expressed its intention to introduce the housing levy, the Executive Director of the Institute of Economic Affairs, Mr Kwame Owino, termed it a back-door strategy by the government to raise revenue from formal workers who are already heavily taxed.

On September 28, 2018, in his regular commentary, Mr Mutuma Mathiu, the Nation’s Executive Editor, Daily Editions, wrote: “I oppose the housing levy. Like the Government Advertising Agency and the two-price posho before it, it is a hare-brained idea that will cost us a lot of money but end in tears. The philosophy of it is dead wrong and the practical application of it is like the lipstick on the road ­— a sick joke.”

The Executive Director of the Federation of Kenyan Employers, Mrs Jacqueline Mugo, told DN2 that employers object to the new tax.

“It is not clear how that money will be used. It is not clear what role the employers and workers will play in the fund’s management, and how this relates to the housing fund provided for in the Housing Act,” she said.

Besides, she noted, “The effective date for this proposal is October 1, 2018. Employers had not factored this in their budgets, therefore, it is ill advised to ask them pay the levy in the middle of the year.”

Dr Mwimali believes that, just because most Kenyans are complaining about the levy does not mean that they do not want to have a roof over their heads; it is because, for ages the government has not built houses they can afford, so most of them have already taken step towards owning a house.

The scheme does not take these personal efforts into consideration, a civil servant who did not wish to be named for fear of reprisal, said.

“You see, if I have bought a plot and want to build myself a house, or I have even taken some material to the site, the scheme does not recognise this. So I will be paying the legislated amount while at the same time trying to raise money to assure myself of accommodation. So I am doubly burdened,” he said.

SIMILAR SENTIMENTS

Similar sentiments were expressed by Mrs Mugo: “Employers already provide housing or pay housing allowance for employees of at least 15 per cent of their basic pay. The proposed amendment does not say whether this contribution will be in addition to the housing allowance, or whether it will be deducted from that benefit.”

For his part, Dr Raphael Kieti, a lecturer in the Department of Real Estate and Property Management at the Technical University of Kenya, says what needs to come out clearly is the period within which employees will get their money after the 15-year-period expires, noting that many workers have died before getting their pension.

“I am not formally employed but I am sceptical about that project. The country loses considerable resources to corruption; this is just another cash cow. Also, do we, as a country, really need affordable housing? What parameter is used to measure affordability? In housing, there is nothing like one-size-fits-all,” says Ms Wambui Muragu, a Nairobi-based interior designer.

She says what the government should do is create an enabling environment: access to opportunities, quality infrastructure, zero corruption and quality training.

“We will build our houses as a result,” she says.

In his commentary, Mr Mathiu also said, “What I don’t understand is, would that money be mine, or am I pouring it into the government’s black hole? Why am I building a house for other people? Can I opt out? Can I say I want none of it and leave it to those who are interested in government money?”

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