Frequently asked Questions about the Contributory housing scheme

A house on sale in Kenya(Courtesy of Jumuia). Teachers are opposed to the new housing scheme by the government

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.

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