After months of pull and shove between the government and workers’ unions, the Housing levy by the government has finally been effected. Employees and employers will make their first contributions into the scheme in May, 2019. Via a paid up advert in the local dailies, the Kenya Revenue Authority (KRA) and the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works say the first batch of the contributions should be effected by 9th May, 2019.
“The Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in conjunction with Kenya Revenue Authority wishes to inform employers, employees and the Public that the provision of the Finance Act 2018 relating to Housing Fund Levy has come into effect,” reads a joint notice by the taxman (KRA) and the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works; appearing on today’s dailies.
The implementation of the housing levy has had rocky times with the umbrella workers’ union, the Central Organization of Trade Unions (COTU), filing a case in court against it.
In the housing levy that is taking effect this month, April, 2019, both the employer and the employee shall each contribute 1.5% of the employee’s monthly basic salary, provided that the sum of the total monthly contributions shall not exceed five thousand shillings (Kshs 5,000). It is important to note that this is a statutory deduction that will affect all workers in formal employment.
For those in informal employment, they can make voluntary contributions to the scheme; at a minimum of two hundred shillings per month.
“The Employers are required to deduct and remit the levy together with other statutory levies from both the employer and employee by the 9th of each succeeding month together with other payroll statutory deductions,” adds the notice.
Consequently, the first contribution shall be due by 9th May, 2019; meaning employees will expect the deduction in the April, 2019, salaries.
The Housing Fund shall be used to finance the Affordable Housing Scheme under the Big 4 Agenda by the Government. This is in a bid to ensure employees own decent housing units; according to the government.
The benefits of contributions in respect of the employee shall include;
Purchase of a home under the affordable housing scheme
In case of ineligibility for a home the contribution may be transferred;
a). To a pension scheme or
b). To another person under the scheme as cash to self, spouse or a dependent child.
The Government of Kenya through the Kenya Housing Fund is set to roll out a mandatory housing scheme for all workers. The housing scheme targets a minimum of Kshs. 3.4 Billion annually from employers and employers after the housing fund levy was signed into law by the President in the 2018 Finance Bill. provision of low cost housing units is part of President Uhuru Kenyatta’s big 4 Agenda. The housing scheme was expected to be rolled out in January 2019, but its implementation was halted by the High Court, in December 2018, after a petition was filled by the Central Organization of trade Unions’ (COTU) secretary, Mr. Francis Atwoli. Also opposed to the implementation of the housing scheme are the two teachers’ unions; the Kenya National Union of Teachers (KNUT) and the Kenya Union of Post Primary Education Teachers (KUPPET). Read more details here:Reprieve for employees as Court suspends the controversial Contributory housing scheme
Rationale behind the introduction of the Housing Scheme:
The implementation of the Housing Scheme is geared towards helping the government to deliver 500,000 affordable housing units in 5 years. This is in a bid to curb the expansion of slums in major towns in Kenya: Nairobi, Mombasa, Kisumu, Nakuru and other towns. Presently, Kenya as a country requires a minimum of 250,000 housing units annually. Unfortunately, the government and other private developers are able to build about 50,000 housing units. This leaves an unmet demand/ deficit of 200,000 housing units per year.
How much will each worker contribute?
Under the Affordable housing scheme, employees will contribute 1.5 percent of their monthly basic salaries towards the National Housing Development Fund while the employer tops up with an equal amount; provided that the sum of the employer and employee’s contributions do not exceed Kshs. 5,000 per month. Employees earning over kshs. 166,000 per month will contribute Kshs. 2,500. The housing scheme will be accessed through a tenant purchase scheme for those in the low cost housing bracket. For employees with high income, they will be given mortgages.
How will i get a housing unit, once I start contributing?
The kenyan government will run a yearly lottery to match the employees who have booked the number of housing units available. This is meant to block the the rich employees from buying several housing units so as to rent them out. The winners of the lotteries will hence start paying for the housing units.
When does the housing scheme mature?
According to the finance bill of 2018, a contributor will have to wait for a minimum period of fifteen years before the fund matures. “For employees who qualify for affordable housing, the contributions accrue to the employee and shall be used to finance the purchase of a home under the affordable housing scheme (upon expiry of the fifteen years from the date one starts to make contributions),” reads the 2018 finance bill, in part.
Contributions by individuals shall only be accessed for purposes of offsetting housing loans, security for mortgage or housing development after five years of uninterrupted contribution and shall attract such an annual return as may be determined by the Corporation. The Corporation shall set out the rate of return on investment for the contribution made by the employer and employee. The Corporation shall, on an annual basis specify the return applicable on members’ contributions into the Housing Fund.
How does one qualify for the Housing fund?
Home buyers will qualify for the social houses bracket if they earn less than Kshs. 15,000. Those earning between Kshs. 15,000 to Kshs. 49,000 per month will qualify for the low cost housing units. While, employees earning monthly salaries of Kshs. 50,000 to 99,000 will qualify for mortgages.
The home buyers will be given a 15% monthly tax relief on their gross earnings when they pay for the housing units.
Is the housing scheme open for self employed individuals?
For self employed individuals, they are classified as voluntary members under the contributory housing scheme. Every voluntary member shall contribute to the Housing Fund a minimum contribution of one hundred shillings designated to cover the costs and operations of the Housing Fund and a minimum amount of one hundred shillings per month to accrue as a benefit to the member.
Am I allowed to contribute more than the quoted figure of 1.5%?
Every member of the Housing Fund may make additional contributions which shall be credited to member’s individual account as the Housing Fund Credit.
The Corporation shall cause to be established and maintained for each member of the Housing Fund, an individual account to be known as the Housing Fund Credit to which shall be credited all contributions made to the Housing Fund by and in respect of each member of the Housing Fund.
What happens to my contributions if I earn over Kshs. 100,000?
Employees who earn over Kshs. 100,000 per month do not qualify for benefits from the housing scheme. Such employees do not qualify because they are classified under the high income range. For this group of employees, they will have their contributions and all interest accrued transferred to their retirement schemes after 15 years or upon reaching retirement age; whichever comes first.
What happens if I fail to contribute?
Any employer who fails, neglects or refuses to make a contribution under this regulation commits an offence and shall, upon conviction, be liable to imprisonment for a term of two years or to a fine not exceeding ten thousand shillings or to both.
The Federation of Kenya Employers, FKE, has termed the move by the government to effect the Housing Fund Levy unlawful. Through its boss, Jacqueline Mugo, FKE says the government is in breach of the law as a case concerning the Housing Fund is still in court. The government on Tuesday 16th April, 2019, published a notice on the local dailies saying the housing fund Levy is now operational and deductions to be paid by 9th May, 2019.
Here is the Presser from FKE;
“Our attention has been drawn to the Public Notice published in today’s Daily Nation Newspaper under the headline Housing Fund Levy.
The notice by the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in conjunction with Kenya Revenue Authority has issued a go-head on the implementation of the Housing Fund Levy with effect from 9th May 2019. This is contrary to the Court Orders which are still in force.
The Federation of Kenya Employers (FKE) attended Court on the 8th of April 2019 for the further mention of this case and obtained an extension of the Court Orders suspending the implementation of the Housing Levy upto the 20th of May 2019 when the case will come up again for mention for further directions from the Court on the Hearing and determination of this case.
The Gazette Notice is therefore unlawful and we shall keep you posted on any further developments.”
Affordable housing is one of President Uhuru kenyatta’s big four agenda; others being Enhancing Manufacturing, Food Security & Nutrition and Universal Health care. The housing scheme has already been given a green light by the president, when he signed the 2018 Finance act, recently. Under the Affordable housing scheme, employees will contribute 1.5 percent of their monthly basic salaries towards the National Housing Development Fund while the employer tops up with an equal amount; provided that the sum of the employer and employee’s contributions do not exceed Kshs. 5,000 per month.
The Deputy President (H.E William Ruto), while addressing the Kenya union of Post Primary Education Teachers (KUPPET) delegates on Saturday 15th December 2018, defended the housing scheme saying: “We want to make it possible for a Kenyan with five thousand shillings to have a mortgage (where they pay Ksh. 5,000 per month) and in fifteen years or twenty years, instead of paying rent of five or ten thousand (monthly) the house becomes yours.” This means that for one to own a house under this scheme he/she will have to wait for a whooping 15 years! This is not, definitely, a good deal for teachers whose payslips have already been raided by the marauding Monster; the AON-Minet Medical insurance scheme. Teachers are also staring at a loss of 7.5% of their salaries to a proposed contributory Pension scheme. In the scheme, the employee will contribute 7.5% of his/ her monthly earnings while, the employer tops it up with 15%. This scheme, to be effected next year (2019), is mandatory for all employees joining the service and all those below 45 years.
According to the finance bill of 2018, a contributor will have to wait for a minimum period of fifteen years before the fund matures. “For employees who qualify for affordable housing, the contributions accrue to the employee and shall be used to finance the purchase of a home under the affordable housing scheme (upon expiry of the fifteen years from the date one starts to make contributions),” reads the 2018 finance bill, in part. The sad part is, if one does not qualify for the housing unit or retires before the expiry of the fifteen years such an individual will either transfer the accrued sum to a pension scheme or receive the contributions in cash. When the contributions are to be paid in cash they shall be included in the contributor’s taxable income for that year and be subjected to tax; at the prevailing rates. This is a big rip off, that is distasteful!
According to the Deputy President (DP), teachers will be the ‘biggest’ beneficiaries of the housing scheme. “In fact, the biggest beneficiaries of our housing scheme will be the teachers of Kenya; I dare to say and you will poof me right one day. (This is) because you are the people in the middle class,” said the DP. This was met with protests from the delegates who expressed their dissatisfaction; forcing the DP to say that the government was ready to engage the teachers further. “And that is why, Mr Secretary general (KUPPET’s Akello Misori) we are willing , we are ready, to sit down and engage with you on behalf of KUPPET and the teachers of Kenya. So that you can understand how this housing plan will benefit the teachers of Kenya,” said the DP. This caused, further, wild protests from the delegates. “We want to commit that even if it means we isolate part of this housing plan specifically for teachers, we will do that. Even if it means that we re-invent part of of this plan to belong specifically to teachers, we are willing to go that direction. Because you people (teachers) can see directly how your 1.5% (contribution) is going to benefit you,” the DP added.
The teachers’ unions are already opposed to the way this housing plan has been formulated and are asking the government to engage them in talks; on the way forward. On Thursday, the Kenya National Union of Teachers’ (KNUT) delegates made their intention clear on the housing scheme. The delegates, attending their Annual Delegates Conference at the BOMAS in Nairobi, shutdown the Principal secretary (to the Ministry of Transport, Infrastructure, Housing and Urban Development), Mr. Charles Hinga Mwaura, when he stood to highlight on the scheme. The angry delegates did not give Mr. Hinga time to even introduce himself. A frustrated Mr. Hinga insisted that the Contributory Housing Scheme will be implemented as planned, amid shouting from the disgruntled delegates. KNUT’s Secretary General, Hon Wilson Sossion, has already warned of industrial action if the deduction is effected. This shows the gravity and anguish attached to the housing scheme.
Also opposed to the Housing scheme is the Secretary General to the Central Organization of Trade Unions (COTU), Mr. Francis Atwoli. Similarly, during their Annual Delegates’ Conference (yesterday), KUPPET General Secretary (Mr. akello Misori) said teachers are strongly opposed to this housing scheme, as currently constituted. “Your excellency (the Deputy President), I do not want to forget this. There is a new legislation which require teachers or workers of this country to fund housing to the tune of 1.5% . We are apprehensive, because we feel that will do well with a mortgage, for professionals like us. But, the process of having this 1.5% is going to hurt us,” Akello told the deputy president.
Mr. Akello says if no talks are held between the union and the government, then they will call for industrial action from the members. “We will wish to ask a re-looking to this policy and therefore, the matter taken back to parliament. Currently, teachers are on loans, huge ones. Some of them do not earn,” added Misori. He further noted that further deductions from teachers’ payslips will leave them with no option than venturing into side hustles; to raise an extra coin.
The DP in his address, yesterday, indicated that most teachers do not have decent housing units and hence will be the biggest beneficiaries to the new housing scheme. Wherever the Deputy President got the statistics from, one wonders! For your information, Mr. Deputy President Sir, most teachers own houses; decent ones. Secondly, with the coming of delocalization teachers will definitely continue staying in rental houses. A mortgage can do better as at now, for the teachers.
A house on sale in Kenya(Courtesy of Jumuia). Teachers are opposed to the new housing scheme by the government
Fast forward, a good government is one that listens to her workers. If pertinent issues have been raised against the housing scheme and even the AON medical scheme, by teachers, then the government is obligated to amicably solve these biting concerns. Having knee jerk decisions and forcing unpalatable policies on workers is quite unfortunate and uncalled for.
The move to deduct 1.5% of gross salary of teachers and civil servants to finance the housing scheme is just but another oppression on the already overtaxed Kenyan teachers and civil servants of this country. Its totally unfair to hurt employees so as to advance political interests. It’s more strange that the scheme is only getting support from the government, no other Kenyan is supporting it but the government seems determined to push it through. This leads to the big question, who is the likely beneficiary of this scheme, is it the teacher or the ordinary Kenyan civil servant? The answer seems to be a big No.
In a country where plundering of public resources seems fashionable, corruption celebrated and rewarded, the 1.5% deduction is another opportunity for some people to smile all the way to the bank while the Kenyan teacher and civil servants who will be bank rolling the scheme cry all the way from the bank.
Kenya has more than enough money to finance the housing scheme without hurting and demoralizing the hardworking teachers and civil servants by adding another deduction and an obvious pathway yo more plunder of resources on our already overwhelmed payslips. A country where billions are looted almost everyday from almost every sector doesn’t need to overtax its citizenry to finance projects, all it needs is to seal corruption loopholes and save the billions which can then finance these ambitious projects.
Another question that begs for serious answers is, how will the units be distributed to these workers? What happens to the many workers who already have their own houses?
It’s time the leadership of this country listened to the teachers and other workers. Forcing unpopular deductions on our payslips without commensurate salary increments is unacceptable. A time has come for the Kenyan worker to be in solidarity with each other and make one voice in unison by saying NO to this housing deduction, that time is now.
By Laban Bosire.
(The Writer is the Current Kenya Union of Post Primary Education Teachers (KUPPET) Chairman, Kisii County.)
