Kenya’s Housing Levy in the Finance Bill 2023: A Step towards Affordable Housing?

Was the Housing Levy a Campaign Promise?

There was scant debate on the housing of hustlers during the presidential election campaigns in 2022. Never-the-less the Kenya Kwanza Government has introduced the Finance Bill 2023 in which several measures aimed at stimulating economic growth and addressing critical sectors of the economy have been baked in. One notable provision in the bill is the introduction of the Housing Levy, which seeks to address the country’s housing challenges and enhance the availability of affordable housing for Kenyan citizens. The Housing Levy is an innovative approach by the government to mobilize funds for the development of housing projects and promote homeownership among the population.

Why Now?

Kenya, like many developing nations, faces a significant housing deficit, with a growing urban population and limited affordable housing options. Recognizing the need to bridge this gap, the government has introduced the Housing Levy as a means to generate funds for the construction of affordable housing units and related infrastructure.

Key Features of this Housing Levy

Under the provisions of the Finance Bill 2023, every employed Kenyan citizen will be required to contribute 1.5% of their monthly salary to the Housing Levy. The contributions will be made by employees, with the employer deducting the levy from the employee’s salary and remitting it to the National Housing Development Fund (NHDF).

The Housing Levy aims to mobilize significant resources to finance the development of affordable housing projects across the country. The collected funds will be utilized by the NHDF to construct affordable housing units, improve housing infrastructure, and provide mortgage financing options to eligible individuals.

The Good

1. Affordable Housing Opportunities: The Housing Levy is expected to provide affordable housing opportunities to Kenyan citizens who have long struggled to secure decent and affordable homes. The funds collected will be channeled towards the development of housing projects that cater to the needs of low and middle-income earners, making homeownership a reality for a broader segment of the population.
2. Infrastructure Development: Adequate infrastructure is crucial for the sustainability of housing projects. The Housing Levy will contribute to the development of housing infrastructure, such as roads, water supply systems, electricity connections, and sewage systems. These infrastructure improvements will not only benefit the housing projects but also enhance the overall livability of the surrounding areas.
3. Job Creation and Economic Growth: The construction sector is a significant contributor to employment and economic growth. The Housing Levy will stimulate job creation through the implementation of housing projects, providing employment opportunities for skilled and unskilled labor. Additionally, the increased construction activities will have a positive ripple effect on other sectors of the economy, such as manufacturing and services.
4. Increased Access to Mortgage Financing: The funds generated through the Housing Levy will be used to provide mortgage financing options to eligible individuals. This initiative will enhance access to affordable long-term financing for homebuyers, thereby making homeownership more attainable for many Kenyans.

The Bad & Ugly

While the Housing Levy presents promising opportunities for the housing sector, there are a few challenges and considerations that need to be addressed:

1. Transparency and Accountability: The proper management and utilization of the funds collected through the Housing Levy are of utmost importance. Clear mechanisms must be put in place to ensure transparency and accountability in the disbursement and implementation of housing projects.
2. Affordability Concerns: Although the Housing Levy aims to facilitate affordable housing, concerns have been raised regarding the potential impact on employees’ take-home pay. Striking a balance between adequate contributions and employees’ financial well-being is crucial to maintain the affordability of housing and ensure the levy does not burden individuals disproportionately.
3. Mandatory Contribution: Whereas there is a need for housing, making it mandatory to own a home may not be in the best interest of the scheme. In a capitalist society market forces guide demand and supply. Creating artificial supply of homes does not necessarily alter the customer preferences and demand to own homes. Ultimately, the purchase of homes will be on a willing buyer willing seller basis.

All in all, the introduction of the Housing Levy in the Finance Bill 2023 represents a significant step towards addressing Kenya’s housing challenges. By mobilizing funds for affordable housing projects and improving housing infrastructure, the government aims to make homeownership a reality for more Kenyan citizens. With careful implementation, transparency,and accountability, the Housing Levy has the potential to create positive change in the housing sector, stimulate economic growth, and improve the quality of life for many Kenyans.