The tax burden
On top of P.A.Y.E, NSSF, NHIF and personal relief, you will need to dig deeper into your pockets and part with the housing fund levy. The tax burden has gone a notch higher.
Moreover, the gross salary of people in both the private and public sector will further depreciate by 1.5 % as the country starts facilitating the housing fund levy as of 9th May, 2019. For individuals earning a basic salary of Sh166,000 and above, the monthly maximum levy deduction is Sh2,500.
Employers will be required to pay a similar amount for every employee to the National Housing Development Fund. This puts the maximum contribution per worker at Sh5,000.
The Big Four Agenda
The housing fund levy is expected to finance the Affordable Housing Scheme under the Big Four Agenda.President Uhuru Kenyatta unveiled the Big 4 Agenda two years ago saying his government would put up half a million low-cost houses.
As one of the pillars under the Big Four Agenda, the concept is good but the practicality at this moment is zero. As such, The burden of this levy is evidently too heavy for “wanjiku” knowing that basic commodity prices are skyrocketing day in day out.
It increases the cost of living
How many meals can you squeeze out of yourself to cough up the levy? The financial situation in the country is already tough, and it could get worse.
The housing fund levy has already faced a lot of backlash on social media and in the local dailies. Many Kenyans agree that the project is being shoved down their throats owing to the fact that there was no public participation.
A better alternative would be for the government to provide sufficient employment and a conducive business environment for the common mwananchi. This would in turn empower Kenyans to build their own houses.
Misappropriation of funds
As is norm, Kenyans suspect that this levy will be subject to corruption and gross mismanagement. It is public knowledge that the government has been unable to manage any funds in the past. To add on to that, many Kenyans could end up losing their jobs as most employers cannot sustain paying this levy for their employees.
Correspondingly, the Housing Fund Levy will also approve its own budget and direct its own spending with no moderation from parliamentary bodies. Financial analysts suspect that this is a loophole for looters to siphon money from the corporation. If someone steals Kes 5 Billion, they will only be fined a total of Kes 10,000 or a maximum of two years’ imprisonment.
See More; Mortgage options; to buy or sell home first?
Let’s do the math
Assuming you earn Kes 20,000 per month, 1.5 % of that goes to the Housing Fund levy making your monthly contribution Kes 300 and your yearly contribution Kes 3,600. It will take you roughly 23 years to own a house whose value is Kes 1 Million.
In the light of all those facts, how viable is the levy given that you don’t know where your money is being kept, where your house is being built and where to claim your title deed from. There is no solid structure in place that guarantees you solid answers to these questions.
Government should leave housing projects to realtors and private developers. They are better placed to provide housing solutions for Kenyans. Any attempt to monopolize the real estate industry will only dent the economy further.