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Affordable Housing Bill 2023: What are the Key Highlights?

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When the High Court declared the Housing Levy unconstitutional on 28th November, 2023, the government went straight back to the drawing board. On 4th December, 2023 Majority leader Kimani Ichung’wah tabled the Affordable Housing bill in parliament.

Previously, the levy was anchored in the Finance Bill, 2023 which, after several legal tussles passed and was implemented, but the housing Levy, continued to attract legal battles from multiple fronts. During the High Court ruling, it was noted that the levy was discriminatory as it only applied to employed Kenyans. In addition, the judges explained that the levy lacked proper legal framework.

In response to this ruling, the government introduced the Affordable Housing Bill, 2023, in an effort to provide a proper legal framework for the levy and other elements within the Affordable Housing Program (AHP). Just recently, Members of Parliament concluded public hearings on the bill. The forums held in 19 selected counties attracted submissions from ordinary citizens, professional bodies and regulatory authorities in different sectors.

But what exactly is in the Affordable Housing Bill. Is the levy making a comeback? Apart from salaried Kenyans, who else will pay the levy?

The Bill is broken down into five main parts that affect the Affordable Housing Program. The key focus is however on the Levy and the Housing Fund.

Types of Units

The first part of the Bill provides definitions. Here, different types of housing are introduced. There are mainly three types of units under the Affordable Housing Program according to this Bill. The first type is Social Housing which should have a plinth area of 18 to 30 square metres. 30 square metres is the size of a small one-bedroom unit or a large studio unit in the Kenyan property market. These types of units are to be sold to people with a monthly income of less than Ksh. 20,000.

The second type of units should measure between 36 and 80 square metres and these are reserved for people earning between Ksh. 20,000 and Ksh. 149,000. The last category of housing, called “Affordable Market Housing Unit” targets people making more than Ksh. 149,000 in a month. These units should be at least 60 square metres. 60 square metres could be a large 2 bedroom unit.

The Housing Levy

Part two of the bill covers the housing Levy. Levy deductions are set at 1.5% of monthly income. The deductions are supposed to be remitted to a “collector” presumably the Kenya Revenue Authority (KRA). The collector is then supposed to transfer the money to the “Affordable Housing Fund” by the 9th day of the month. Just as previously directed, employers are supposed to deduct this 1.5% levy from their employees and match the amount collected from each employee, before remitting to the collector.

To rectify the discrimination issue, the bill includes a second category. Part II, section 4 (2) reads:

“The levy shall be at the rate of 1.5% of-

(a) The gross salary of an employee or:

(b) The gross income of a person received or accrued, which is not subject to the levy under paragraph (a)”

Though part (b) of this section does not make it clear, who else is supposed to remit the levy, it does hint to the possibility that more Kenyans will be expected to contribute. Previously, only formally employed and salaried Kenyans were making contributions. While speaking during an interview at Citizen TV, earlier in the week, the Finance Committee Chairperson, Kimani Kuria admitted that the committee responsible for drafting the bill erred in this clause as they failed to clarify the exact type of income (other than monthly salary) that will be subjected to deductions.

The bill further proposes a 3% monthly fine for delayed remissions. If one does not pay the debt, the bill recommends recovering the money “summarily” as civil debt. It is not clear, which government body will be responsible for recovering the debt. The term “summarily” could mean without notice or formalities.

Affordable Housing Fund

Previously, there have been concerns about where the levy deductions end up and whether they are used for their intended purposes. In this Bill, the lawmakers provide clarity on these two issues.

The Bill recommends an Affordable Housing Fund to be set up. The Fund is to be managed by a board. In addition to the levy collections, the Fund will also receive money from other sources such as gifts, grants or donations, income accruing from investments made through the Fund, income from activities carried out through the Fund as well as money appropriated to the Fund by the National Assembly.

Alternative Loans

The Affordable Housing Fund is supposed to serve several purposes which include supporting the development of Affordable Housing Units and Affordable Housing Schemes in all counties. It will also be a source of loans for those seeking support to purchase the units. Another critical role is the maintenance of land, estates or buildings-it is not clear if the estates, land or buildings are strictly those within the Affordable Housing Schemes. The fund will also support the uptake and development of Affordable Housing Units and other incidental costs.

In addition to the clauses directing how the money will be spent, generally, the Bill proposes very clear percentages of the fund to go into specific arms of the Affordable Housing Program (AHP). The National Housing Corporation (NHC), for instance is supposed to be allocated 30% of the money. The NHC is a government body mandated with implementing the government’s Housing Policies and Programs.

The State Department for Housing and Urban Development which is responsible for implementing AHP programs will be allocated 36 % while a similar percentage will be used for slum upgrading projects, rehabilitation, maintenance and uptake of AHP projects. The Board, managing this Fund will get 2% for administrative roles while KRA also gets 2% to facilitate the collection of the levy.

Employment Act, 2007

There are also proposals to Amend the Employment Act, 2007 section 31(B)and C such that the housing levy deductions will be anchored in the Act, giving it a firmer legal framework. A similar proposal was included in the Finance Bill, 2023, when the levy deductions were initially set at 3%.

Mismanaging or misappropriating money from the funds, is set to attract a 10 million fine or a jail term, not exceeding five years or both.

No Refunds?

Other proposals in the Bill touch on the board’s composition, the board’s functions as well as criteria for changing unit allocations. The Bill also covers the eligibility criteria for Kenyans who wish to purchase units within the AHP projects.

One peculiar detail missing from the Bill is whether there will be refunds for people who do not wish to apply or purchase units. Initially, when the levy was introduced in June 2023, there was a section promising refunds. The Finance Bill had proposed a criteria for seeking refunds for the deductions after a given time frame. However, this is all missing in the Affordable Housing Bill. Based on the percentages of allocations detailed above, it seems, all the money will be spent on AHP projects and related functions while nothing will be spared for refunds.

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