Gov’t says 17,000 Kenyans have signed up to housing fund salary deductions


Gov't says 17,000 Kenyans have signed up to housing fund salary deductions

In Summary

  • The voluntary contributions are against the stay of a legal snag to the mandatory remittance of 1.5 percent of employee salaries capped to a maximum of Ksh.2500 under ongoing civil action by employer/worker groups.
  • Housing Principal Secretary Charles Hinga reckons the free will subscriptions are a reflection of the government’s own belief in the housing concept which remains shrouded in speculation and mystery.
  • The Housing Ministry remains confident of pulling off the project via public-private partnerships (PPP) by leveraging on surpluses in the capital markets.

17,000 Kenyans have begun making voluntary deductions to the State’s affordable housing plan, the State Department of Housing has confirmed.

The voluntary contributions come on the back of a court order that barred the government from carrying out a mandatory deduction of 1.5 percent of employee salaries capped to a maximum of Ksh.2500 as contribution to the housing fund.

According to Housing Principal Secretary Charles Hinga, the free-will subscriptions are a reflection of the government’s own belief in the housing concept which, however, remains shrouded in speculation and mystery.

“Kenyans want houses that is a fact. The houses we have advocated are decent and have got all the amenities with the offering of the desired high quality of life,” he said.

Civil groups including the Federation of Kenyan Employers (FKE), the Central Organization of Trade Unions (COTU) and the Consumer Federation of Kenya (COFEK) challenged the mandatory levy in court rendering the government’s attempt at implementation of the employee checkoffs in March and April as null and void.

In spite of the lock out in the mandatory deductions, the Housing Ministry remains confident of pulling off the project via public-private partnerships (PPP) by leveraging on surpluses in the capital markets.

“There was a lot of noise made on how the deductions were to be made operational in spite of following global best practices. While we still believe it’s the right way to go, we are looking at alternative means of achieving the same ends,” PS Hinga added.

“The market has responded. Capital loves certainty, and as such, we have made guidelines for investors to put in money through policy and fiscal interventions.”

The government had initially hoped to raise an estimated Ksh.48 billion annually from the forced deductions to the National Housing Development Fund (NHFD) to fund the cheap homes dream.

With the measure having seemingly fizzled out, the government will now look to rein in private sector investments into the scheme to meet the ambitious goal of putting up 500,000 affordable homes by the year 2022.

Already, multilateral institutions including the World Bank have made deals with the State to activate the plan flanked by commercial investments by domestic and regional based lenders including the Pan-African based Shelter Afrique’.

Earlier in February, the Housing State Department confirmed the receipt of in excess of Ksh.3 trillion in financial commitments by investor’s world over to partly assure of the success of the plan.

The commitments have meanwhile been matched up to demand with over 275,000 Kenyans signing up as off takers of the under-construction homes.

Nevertheless, the project remains plagued by vagueness to the definition of what an affordable house entails and costs with stakeholders failing to establish agreeable terms.

The provision for mandatory deductions beginning January 1 remains enshrined in law through the assented Finance Act of 2019 but will likely fade into the background there being no decision yet on the funds’ remittance lock-down.

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Story By Kepha Muiruri
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