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Housing fund: Noble but rushed, experts say of tax plan amid uproar
The government intends to tax employees three percent of their monthly income and a matching contribution from their employers towards a fund to build affordable houses. FILE PHOTO | SHUTTERSTOCK
The reactions to the proposed housing fund from a cross-section of Kenyans who stand to be taxed for the government initiative have been quick, curt and candid: Rejected, we don’t want it as structured.
A fortnight after the Ministry of Finance released the Finance Bill indicating proposals on how it intends to finance the next budget and invited the public to voice their opinions, responses show that one of the least preferred pitches is the housing fund.
In the proposal, the government intends to tax employees three percent of their monthly income and a matching contribution from their employers towards a fund to build affordable houses.
Under the arrangement, the funds are to be pooled and used to support government initiatives for affordable housing.
However, a majority of Kenyans have not fallen in favour of the idea.
Mukasa Amboko wondered why everyone is being forced to contribute to a kitty when some have already built their own units or prefer to build at their own pace in their locations of choice as opposed to being confined to a set of government housing schemes in pre-determined locations and predetermined designs.
“I took a loan I am repaying to build a retirement home. Now the government wants me to save for a house. Which house? I do not intend to be polygamous,” said Amboko, a high school teacher in the Coastal region.
“And even the 3 percent will not be enough considering that I want to exit employment in less than 10 years. Let Kenyans decide to settle where they want and not in some pre-determined densely populated area in low-cost houses which are likely to mushroom into urban slums.”
Zakary Kogoh took the task with the fact that by law, an employer is supposed to provide a housing allowance to an employee and wondered how the Housing Fund proposal will be adopted while such a provision to house employees still stands and is often implicitly included in the wholesome salary.
“It is a noble idea to awaken the employer to cater for the housing needs of their employees and to make deliberate efforts for every Kenyan to own a house at some point and make retirement pleasant,” said Kogoh, a commercial finance expert.
“The biggest challenge, like any government deductions is management of the funds. Nobody can trust the government with private funds. A better proposal would be to make it statutory but give employers and employees where to save money (and clear returns). Similar to pension contributions, they should be able to settle on a mortgage finance institution which then guides on policies and access periods.”
Kogoh’s sentiments are shared by property funding experts who say that while the idea is noble and well-meaning, it appears rushed.
Industry players say that a lot needs to be ironed out in the proposal before the public can get the buy-in.
Experts say the government need not make the contributions mandatory. The explanations on procedures of who, how and when a person who saves with the scheme qualifies for a housing unit need to be clearer.
There are also concerns around the type of houses that will be provided under the scheme, their valuation and if it is a guarantee that anyone who contributes will secure a unit and if they do not if they get their monies contributed back.
“I think the housing fund is a great idea. However, it should be voluntary. I think there is an acute gap in house ownership in the lower middle class that needs to be addressed and this fund is attempting that,” said Nelly Kamwale, a realtor.
The lack of communication of clear guidelines and workings of the Housing Fund seems to have echoed back to the government.
State Department of Housing and Urban Development Principal Secretary Charles Hinga recently had to clarify that the way the workings of the Housing Fund have been communicated to the public has not been conclusive, in-depth and detailed enough.
While the government goes back to the drawing board to communicate clearly the workings of the Housing Fund, the public is not sold. This week alone, workers unions have threatened a strike over taxes.
“There are approximately half a million civil servants in Kenya. Now tell me, which government in the world has the capacity to build 500,000 houses for its workforce? How many units per year? What criteria will be used to allocate the houses?” wondered Mr Amboko.
