The Government’s Housing Fund levy is fighting a legal war but that has not held it hostage as Principal Secretary for the State Department of Housing and Urban Development, Hon. Charles Hinga, announced that Kenyans could begin voluntary contributions.
The voluntary contributions to the Government’s house funding shall not be less than 200 shillings per month, according to the Housing Fund Act. The announcement by PS Hinga kick starts contributions from willing individuals.
The Government project dubbed ‘Boma Yangu’ has currently received 225,000 registrations from Kenyans which could be viewed as a sign of interest from Kenyans in the Affordable Housing Scheme.
Operationalization of the Boma Yangu initiative is, therefore, set to be backed by voluntary contributions and 5 billion shillings seed funding from the National Treasury as provided for in the National Budget 2019/2020.
The Housing Fund levy is likely to have a long court process, which might delay delivery of the affordable homes especially considering the time sensitivity of the Kenyan Government’s plan to deliver 500,000 units by 2022.
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If approved, the government plans to use funds from the Housing Fund to bring on board private developers by providing off take guarantees, with funds expected to be collected through public statutory contributions set at 3 percent of employees’ gross salary shared equally by employees and their employers.
The government targets 55 billion shillings in the first year from approximately 2.5 million employees, and subsequent increases thereafter as the number of contributors continue to grow. The majority of the country’s population remains against the mandatory contribution, due to a number of reasons as listed below:
- The perceived burden on those who already own homes or are currently servicing a mortgage
- The increased wage bill for employers
- The imposition on the formal sector alone, and not the whole population
- The ballot-based system meaning not all contributors will benefit from the scheme. The government aims to deliver 500,000 homes against at least 2.5 million contributing Kenyans, therefore leaving 2.0 million out of the affordable housing program.
According to Cytonn Real Estate, if the state does manage to obtain voluntary contributions, it will mobilize the rest of the population to partake in the housing fund, particularly the low-income earners who qualify for the affordable housing scheme.
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