Uhuru’s housing fund order risks Ksh.240B cash pool


Uhuru’s housing fund order risks Ksh.240B cash pool
President Uhuru Kenyatta during his adress to the nation at the Jamuhuri Day celebrations on December 12, 2019 PHOTO | PSCU

In Summary

  • The Ministry of Housing had bet on the compulsory remittance from employees and employers to shove up capital expenditure towards the ambitious construction of 500,000 cheap housing units by the close of the year 2022.
  • However, in his address to Kenyans on Jamuhuri day, President Kenyatta cited the need to move on from the legal hurdles and obstacles to the implementation of the mandatory contributions by making voluntary, all contributions citing the risk of the project’s derailment.
  • Voluntary contributions are projected to result in lower NHDF collection going by the latest stats where only 17,000 Kenyans have signed up to the voluntary provisions against a greater demand of 277,436 applications for the cheap homes as at the close of December 13.

President Uhuru Kenyatta’s order on the termination of mandatory contributions to the National Housing Development Fund (NHDF) has put into jeopardy the availability of an estimated Ksh.240 billion to fund the project.

This is after the Ministry of Housing had bet on the compulsory remittance from employees and employers to shove up capital expenditure towards the ambitious construction of 500,000 cheap housing units by the close of the year 2022.

However, in his address to Kenyans on Jamuhuri day, President Kenyatta cited the need to move on from the legal hurdles and obstacles to the implementation of the mandatory contributions by making voluntary, all contributions to the NHDF citing the risk of the project’s derailment.

“This program will continue to deepen and accelerate access to housing, far beyond our immediate target of 2020 and set Kenya on an extra ordinary path as Africa’s first country to substantially address housing and social amenities challenges,” President Kenyatta said.

Prior to the order, the Housing Ministry had been holding out for a High Court ruling in its favour to allow for the mandatory contributions which would see all formal employees estimated at 2.5 million remit 1.5 percent of their salaries to the scheme with an upper cap of Ksh.2500 per month.

Further, employers would be obligated to match up their employee contributions to the prescribed limit ending with a projected Ksh.48 billion in annual remittances to the fund or an equivalent Ksh.240 billion in five years.

Voluntary contributions are projected to result in lower NHDF collection going by the latest stats where only 17,000 Kenyans have signed up to the voluntary provisions against a greater demand of 277,436 applications for the cheap homes as at the close of December 13.

In spite of the now lower than expected pool of contributions, Principal Secretary in the State Department of Housing Charles Hinga reckons the project can still be pulled off through the leveraging of private equity.

According to the PS, the State has pulled back on direct funding to stick to its primary enabling role and has seen private equity respond via the initiation of Public-Private-Partnerships (PPPs).

“It’s not for the government to build this houses. The government plays an important role but not a financing one. We are very comfortable having broken ground on thousands of units with not a single coin of tax payers monies used, PS Hinga said in a December 10 interview.

“Capital loves certainty. We have seen this through policy and fiscal interventions which have provided clarity and policy guidelines for investors to put in money”.

Who said I wanted a cheap house?

In addition to the legal hurdles, the project remains plagued by doubts among the Kenyan public with a part of the population being puzzled by the requirement on contributions.

Moreover, the proposed lottery system on the housing’s allocation has resulted in outrage in spite of the government’s assurances on ‘no-human intervention’ in the processing of home beneficiaries.

To the present, the government has already broken ground on 10 projects around the country to include works in Ngara’s Park Road, Shauri Moyo in Kisumu , Embu, Machakos and Stoni Athi.

Combined, the 10 mini-projects are set to introduce 12,617 new units and will add to the United Nations supported 100,000 units under construction around the country.

The definition of an affordable house however remains a matter of open interpretation even as the proposed cost of units sits outside the State’s own guidance.

Of the 10 listed projects on the Housing Ministry’s website, the cheapest unit lies in Kisumu’s Shauri Moyo-civil servants block where a one bedroom unit is priced at Ksh.2.3 million.

The implementation of the long-term housing financing arm in the Kenya Mortgage Refinancing Company (KMRC) is however expected to prop home ownership will early indicators placing monthly repayments under the Tenant-Purchase Scheme (TPS) at between Ksh.3508 and a ceiling Ksh.5846 having factored in an effective fixed interest rate of seven percent.

The government will be hoping to bury the ghosts of past failures having made numerous attempts to hit the milestone with initiatives dating as far back to the 1953 colonial government which had established a housing ordinance to boost home ownership under the then Central Housing Board.

Excessive bureaucracy, political interference and corruption have been previously sighted as inhibitors to the quest to add to low income levels, high property prices & cost of funds and inadequate infrastructure.

By putting up the 500,000 cheap units, the government will be seeking to lessen the pent up demand for low-cost housing which is estimated presently at 200,000 units an year against a short supply of 50,000.

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Story By Kepha Muiruri
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