The government issued a directive that employers start deducting 1.5% housing levy from all employees in the public and private sector.
Housing and Urban Development and the KRA in a joint statement said employers are required to deduct and remit the levy by the 9th of each succeeding month. According to President Uhuru, these houses will dignify the dwellings of people who live in informal settlements yet are paying rentals that are for a dignified place.
The affordable housing scheme is one of the pillars of President Uhuru Kenyatta’s Big 4 agenda. The Government is to provide 500,000 decent, affordable houses by 2022.
See also: Affordable Housing in Kenya: Big 4 Agenda
“Affordable housing scheme” means:
- social housing designated for monthly income earners earning up to 19,999 shillings;
- low cost housing designated for monthly income earners earning between 20, 000 to 49, 999 shillings;
- mortgage gap housing designated for monthly income earners earning between 50, 000 to 149, 999 shillings; or
- middle to high income housing designated for monthly income earners earning 150,000 shillings and above
The levy has two benefits which clauses many others:
1.Purchase of a home under the scheme.
The Kenyans that earn less than Sh50,000 per month will acquire homes under a tenant purchase scheme. Those earning over Sh50,000 will qualify for a 7% mortgage repayable within 15 years.
At 7% P.A, the pricing is cheaper than commercial rates that charge double-digit interest rates.
The contributors can use their savings as a deposit or security when negotiating for mortgages to buy affordable houses. Additionally, low-income buyers can use the savings to access tenant purchase schemes that eventually leave them as owners.
The initial plan was the construction of half a million house. Although, local and international developers have expressed interest in putting up to a million units.
2.The housing fund is Refundable
Don’t worry because if you won’t benefit from the housing project, you’ll get your money back at retirement. However, as an employer’s deduction won’t be refunded.
In addition, your money is transferrable to another person under the scheme or cash to self, spouse or dependent child.
Will high earners be affected?
Unfortunately, high earners were initially locked out of benefiting from the fund. Instead, they were offered refunds if their earning is above Sh150,000 plus interest after 15 years of contribution.
How it will housing fund work?
The Ministry of Housing and Urban Development is expected to open a website. It will assign an individual an automated score on whether they fall under low-cost housing bracket, social housing, or the mortgage cap.
To compute the score, a user will be required to enter details such as M-Pesa transactions, bank records, and KRA pin.
The developers will build up to 2,000 houses in every county annually. Those prequalified in the scheme will book a unit and begin paying for the off-plan units after registration.
The government will run a lottery every year to match the people who have booked to the number of houses available. Its to prevent a situation where rich individuals buy several units and rent them out, thus defeating the plan. The State is determined to lockout cartels trying to buy and resell the houses at a profit by using a yearly lottery scheme.
