In an ambitious move to tackle the housing crisis, the Kenyan government has initiated a robust plan aiming at the delivery of 1 million affordable homes over the next five years through the Big Four economic blueprint. This affordable housing endeavour is poised to transform urban areas and boost home ownership among the middle to low-income Kenyan workers, demonstrating a significant stride towards alleviating the national housing shortage, which currently stands at a daunting 2 million units. The project’s broad scope encompasses key urban centres including Nairobi, Mombasa, Nakuru, Kisumu, and Eldoret, leveraging thousands of acres for housing development.
Under the stewardship of the William Ruto government, the affordable housing campaign is gaining momentum, with 110,000 units already under construction, highlighting the government’s commitment to public housing and social housing advancements. The introduction of the Tenant Purchase Scheme (TPS) by the national housing corporation further illustrates innovative strategies to foster homeownership among average Kenyans. This concerted effort showcases a pivotal moment in Kenya’s housing construction narrative, underpinned by a constitutionally mandated public participation framework, ensuring citizens play an active role in shaping the country’s affordable housing future.
Overview of the Affordable Housing Act, 2024
The Affordable Housing Act, 2024, officially enacted on March 19th by President William Samoei Ruto, introduces a comprehensive framework for escalating the development and accessibility of affordable housing across Kenya. This legislative measure, a response to a prior High Court ruling, sets forth a structured levy system aimed at funding the housing initiative.
Key Features of the Act
- Levy Implementation: An affordable housing levy of 1.5% is imposed on the gross salary of employees, matched by employers, and a similar rate applies to self-employed individuals’ gross income. This levy is due by the ninth working day of the following month, with a 3% penalty for late payments.
- Affordable Housing Fund: Managed by the Affordable Housing Board, this fund is the cornerstone for financing the construction and maintenance of housing units. It accumulates resources through the levy, government appropriations, and other contributions.
- Housing Categories: The Act categorizes housing into social, affordable, middle-class, and rural segments, broadening the scope of beneficiaries.
- Regulatory Framework: Within 30 days from the Act’s initiation, detailed regulations regarding levy exemptions, eligibility, and application processes for housing units are mandated to be established by the Cabinet Secretary.
- Community and Economic Engagement: Emphasizing local involvement, the Act encourages the use of local materials and labour in housing projects, also integrating educational opportunities through student internships.
This structured approach not only aims to alleviate the housing crisis by increasing the stock of accessible homes but also integrates community involvement and economic stimulation through its comprehensive legislative framework.
Key Provisions of the Draft Affordable Housing Regulations
Levy Implementation and Management
- Affordable Housing Levy: The Act mandates a 1.5% levy on the gross salary of employees, with an equal contribution required from employers, aimed at financing affordable housing projects.
- Affordable Housing Fund: This fund is the primary financial reservoir for the design, development, and maintenance of affordable housing, fed by the levy proceeds.
Exemptions and Eligibility
- Income Exemptions: Certain classes of income, such as pensions, insurance compensations, and reimbursements for work-related expenses, are exempt from the levy.
- International Agreements: Individuals exempt under international agreements to which Kenya is a party are also exempt from the levy.
Offences and Penalties
- Misappropriation of Funds: Any misappropriation is punishable by fines or imprisonment.
- False Information: Providing misleading information regarding levy payments is subject to similar penalties.
Collection and Compliance
- Collection by KRA: The Kenya Revenue Authority is tasked with collecting the levy by the ninth day of each month, ensuring timely fund accumulation.
- Non-compliance Penalties: A 3% monthly penalty is imposed on unpaid levies, recoverable as a civil debt.
Additional Provisions
- Housing for All: The levy supports the constitutional right to quality affordable housing by raising funds for low-cost homes, stabilizing the housing market.
- Cultural Considerations: Administration fees replace interest on loans for financing institutions serving the Muslim community, respecting religious practices.
Exemptions and Eligibility Criteria
Eligibility for Affordable Housing Units
To qualify for an affordable housing unit allocation, individuals must be Kenyan citizens aged 18 or above. The Affordable Housing Board is tasked with determining eligibility, prioritizing marginalized persons, vulnerable groups, youth, women, and persons with disabilities. Applicants are required to submit necessary documentation including proof of deposit, identification, and tax compliance certificates.
Exemption Provisions
Certain incomes or classes of income, as well as specific persons or categories of persons, may be exempted from the housing levy. The Cabinet Secretary for the National Treasury holds the authority to recommend these exemptions, which are then officially confirmed through a gazette notice.
Voluntary Contributions and Opt-Out Options
Eligible persons may also choose to make voluntary savings with the Affordable Housing Fund to accumulate a deposit for a housing unit. Additionally, individuals have various methods to opt-out of the housing levy, such as transferring contributions to a registered retirement scheme, receiving a cash payout, or upon the individual’s death.
Resettlement and Prioritization Mechanisms
Before the commencement of an affordable housing project on any land, the Board must issue a notice to the residents of the land. A resettlement mechanism is in place to ensure that residents of the settlement are prioritized for purchasing a unit in the new project, aligning with efforts to stabilize the housing market and ensure fair access to new developments.
Application Process for Exemptions
Step-by-Step Guide to Applying for Exemptions
- Identify Eligibility for Exemption:
- Determine if your situation or income class qualifies for an exemption from the Affordable Housing Levy.
- Prepare Required Documentation:
- Gather all necessary documents, including a valid tax clearance certificate, which is essential for the application process.
- Submission of Application:
- Applications must be directed to the Cabinet Secretary responsible for the National Treasury. Ensure that the application details the reasons for seeking the exemption.
- Review Process:
- The Cabinet Secretary will review the submitted applications. This process involves assessing the validity of the reasons provided and the accompanying documentation.
- Notification of Outcome:
- Applicants will be notified of the approval or rejection of their exemption request. It is vital to provide accurate contact information for this purpose.
Impact on Kenyan Citizens and the Housing Market
Employee Financial Impact
- Reduced Disposable Income: The implementation of a 1.5% housing levy directly reduces the disposable income of employees, potentially leading to decreased job satisfaction and increased financial stress.
- Investment and Savings: With less disposable income, employees may find it challenging to invest or save, affecting their long-term financial stability and contributing to economic stagnation.
Housing Affordability Concerns
- Local Feedback: Residents of Tana River have voiced concerns that the houses being constructed are not as affordable as promised, suggesting a disconnect between policy intentions and ground realities.
Reevaluation of the Housing Bill
- Government Reconsideration: Acknowledging issues with the initial framework, the government is reevaluating the Affordable Housing Bill to better align with the needs and expectations of its citizens.
Market Dynamics
- Turnover Rates: The financial burden imposed by the levy could lead to higher turnover rates, as employees seek better-paying opportunities elsewhere to compensate for the levy deduction.
Public Participation and Next Steps
Public Participation in the Affordable Housing Initiative
The Affordable Housing Board, responsible for overseeing the development of affordable housing projects, is actively engaging with the public to ensure that the voices of Kenyan citizens are heard and incorporated into the housing policies. The National Assembly’s Housing Committee, led by Emurua Dikir MP Johana Ng’eno, is set to continue public participation on the Affordable Housing Bill, with a report due by the following Wednesday. This initiative underscores the government’s commitment to inclusive policymaking.
Legal Framework and Policy Amendments
Following a ruling by the Court of Appeal, which halted tax deductions from employees’ payslips, but not public participation, Parliament’s Finance and National Planning Committee Chairman Kuria Kimani has expressed support for President William Ruto’s ongoing affordable housing projects. Kimani also announced plans for legal amendments to refine the project’s policies, demonstrating a proactive approach to addressing public concerns and legal challenges.
Enhancing Local Participation
Residents have advocated for more representation in the Kenyan Affordable Housing Board, a move that could further democratize decision-making in the housing sector. The High Court’s decision to dismiss a petition challenging the conduct of public participation in the Affordable Housing Bill further paves the way for continued community involvement, ensuring that the development of housing policies remains a collaborative effort between the government and its citizens.
