Uhuru bows to ‘legal hurdles’ with review of housing levy

Kenyan workers will not be compelled to pay the controversial housing levy after the government succumbed to citizens’ pressure to make the contributions voluntary.

Citing court cases and resistance from employers and workers, President Uhuru Kenyatta on Thursday ordered a revision of the laws relating to the Kenya Housing Fund Levy to make the contribution voluntary, with immediate effect.

“The implementation of the Housing Fund Levy as a mandatory contribution, for both employees and employers, has been fraught with an avalanche of legal hurdles and obstacles,” President Kenyatta said in his Jamhuri Day speech.

“In this regard, and to ensure that the implementation of the programme is not derailed any further, I direct and order that The National Treasury and the ministry responsible for Housing move to Parliament a revision to the legal requirement in respect to the Housing Fund Levy to make the contribution voluntary, with immediate effect.”

Under the Finance Act 2018, workers were supposed to contribute to the National Housing Development Fund a 1.5 per cent of their basic monthly salary – capped at Sh5,000 a month, with the employers obligated to match each worker’s contribution.

The government was seeking to raise Sh57 billion annually from 2.5 million workers to finance the National Housing Development Fund, which is meant to aid the construction of 500,000 affordable houses countrywide in five years.

Deductions of the levy were to take effect on May 9, 2019, but lobby groups such as Central Organisation of Trade Unions (Cotu), Consumer Federation of Kenya (Cofek) and the Federation of Kenya Employers (FKE) successfully challenged the levy in court, saying it would raise the tax burden for workers and employers.  

The Presidential directive comes at a time when the government is preparing to make the first allocation of homes under the much hyped affordable housing scheme – which has so far attracted over 265,000 Kenyans.

READ: Only 60 Kenyans qualify for State low cost homes

Under the rules governing the fund, the lowest paid workers, earning less than Sh14,999 per month, (2.62pc of Kenya’s formally employed workforce) will qualify for social housing – with homes selling for about Sh500,000.

Individuals earning Sh15,000-Sh49,999 per month (72pc of workforce) will be offered homes under the tenant purchase scheme, while those grossing Sh50,000-Sh99,000 (23pc of workforce) will be offered mortgages at 7pc per annum repayable within 15 years.

READ: Kenya housing fund explained in 400 words

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