Making the rationale for Housing Levy make sense
President William Ruto has proposed a housing levy for all employed Kenyans, which he says will help address the country’s housing crisis. Under the proposed plan, all employed Kenyans would contribute 3% of their monthly salaries to a government-run fund, which would be used to construct affordable housing units for those unable to afford their own homes.
Those who support the proposal argue that it is a necessary step towards alleviating the housing crisis that plagues the nation, while critics contend that compelling taxpayers to build houses for others is unfair and unacceptable.
Many have argued that they have or intend to build their own homes in their rural areas, which they prefer as retirement destinations. They also argue that they would rather be free to build at their own pace and in locations of their choosing rather than be confined to government housing schemes.
While explaining the Housing Fund to Kenyans, Housing and Urban Development PS Charles Hinga said the government simply wants to help Kenyans own, not rent, the houses they live in.
“The county of Nairobi has over four million residents, most of whom live in rented houses. There is a projection that by 2030, Kenyans should enjoy a better quality of life. However, a critical question arises: How can we achieve a high quality of life when over 65 percent of our people live in informal settlements?” he posed.
“We determined that for us to be able to provide those houses at those prices, Sh5000, Sh10,000, Sh15,000 – these are the monthly premiums the government envisions for one, two and three-bedroom units respectively – we have got to do something that every Kenyan knows how to do. And that is a national chama.”
Hinga told the Senate Committee on Roads, Transportation, and Housing, chaired by Kiambu Senator Karungo Thangwa that the Kenyan Government is committed to building 200 housing units per constituency in the 2023/24 financial year beginning June 2023.
Kenya is grappling with a severe shortage of housing units, with over 2 million units needed, according to the Kenya National Bureau of Statistics. The scarcity is most pronounced in urban areas, where housing costs are skyrocketing at an alarming rate.
While the government has previously endeavored to tackle the housing crisis by constructing low-cost housing units, these initiatives have often fallen short, plagued by subpar quality and limited affordability for many Kenyans.
The newly proposed housing levy fund is a departure from past government initiatives in several ways. Firstly, instead of relying on government borrowing, the fund would be funded by contributions from taxpayers. Secondly, the fund management would be entrusted to the private sector rather than the government. Lastly, the fund’s primary focus would be on constructing affordable housing units, as opposed to luxury homes.
Whereas most Kenyans simply oppose the proposal because it makes it mandatory for all employed Kenyans to contribute, the International Monetary Fund (IMF) has supported it, viewing it as a crucial tool in addressing Kenya’s housing crisis. The IMF believes that the fund’s reliance on a sound economic model enhances its likelihood of success.
Drawing parallels to the American housing projects of the 1930s and 1940s, the Kenyan housing levy fund has the potential to be a resounding success. The American projects proved instrumental in resolving the housing crisis in the United States.
Nonetheless, effective fund management and ensuring the funds are used to construct high-quality housing units are paramount to its success. If implemented effectively, the housing levy fund could make substantial strides toward resolving Kenya’s housing crisis, significantly improving the lives of millions of Kenyans.The government has set an ambitious target of building 500,000 housing units over the next five years, and pledged to provide tax breaks to developers who participate in constructing affordable housing units.
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