For the whole of this week, Kenyans have been having a back and forth on social media after it was revealed that the government intends to deduct a percentage of their salaries in order to fund its ambitious housing program.
For those who have forgotten, housing was one of the pillars on which the current government led by President William Ruto was voted. Infact the government promised that it would construct 250,000 houses a year without expensive borrowing from external markets.
“This transformative Plan goes beyond the provision of affordable housing units to presenting opportunities for gainful employment and wealth creation to millions of Kenyans struggling to put food on the table,” said Kenya Kwanza in its manifesto.
It is worth noting that the current affordable housing initiative though not entirely. It was launched in 2017 in order to provide citizens with low-cost decent homes while also reducing Kenya’s housing deficit and increasing home ownership rates.
However, due to various setbacks including opposition by workers against a requirement that they donate 1.5 percent of their salaries through the housing levy, the government delivered less than 3,000 units through the Pangani and Park Road projects.
As part of his campaign promises, Ruto declared affordable housing as one of his main agendas with the aim of delivering 250,000 units per year and a target of 5,000 units per county. This means that by the end of Ruto’s first term in 2027, the government shall have constructed 1.25 million units.
The key question now is where will the money required to build all these houses come from?
Assuming the average production cost for a house will be Sh2 million, to produce 250,000 houses per year will cost the government Sh500 billion. This is a sixth of Kenya’s entire annual budget. In the 2022/2023 budget, only Sh20.3 billion was allocated to the housing sector.
The government is thus stuck between a rock and a hard place as it is. Yet, housing in Kenya, especially the urban areas, has been one of the bottlenecks that successive governments have failed to address. According to Habitat for Humanity, the housing deficit in Kenya stood at 2 million in 2012 and it continues to increase at a rate of 200,000 units every year. It is clearly evident that this issue needs to be addressed with utmost urgency.
In 2018, the Uhuru government introduced a similar scheme where all employees were supposed to get a 1.5 percent salary cut. Implementation of the fund hit a snag when the court issued restraining orders after a group of employers and consumers challenged it in court.
Due to this, the president feels it is only right that civil servants (all government-employed Kenyans) lead by example. In return be the first to benefit from the program.
It is however worth noting that this is not the first levy in Kenya. Over time, levies have been introduced to raise funds for various key priority areas. Some of the levies include; Sugar Development Levy (SDL), Railway Development Levy (RDL), Road Maintenance Levy Fund , the National Hospital Insurance Fund (NHIF) , the National Social Security Fund (NSSF), Hotel and Catering Levy, Fuel Levy, Standards Levy, Export Levy among others.
