Charles Hinga: Yes, you can opt out of Ruto housing plan... here is how

President William Ruto insists his controversial plan to deduct workers’ salaries to fund the construction of affordable housing will go on despite spirited opposition from political leaders, experts, employers, workers and their unions.

The plan to deduct a three per cent levy from workers’ pay slips every month plus a similar contribution from employers is contained in the Finance Bill 2023.

Also Read: Ruto housing plan - The good, bad and the ugly

Charles Hinga, the Housing and Urban Development Principal secretary, is the man who has been literally sweating it out to secure buy-in from Kenyans.

He spoke to Nation’s Julians Amboko and Fred Muitiriri, and here are excerpts of the interview and research from the ministry's published literature on the plan:

Q: Why is the government pursuing the affordable housing agenda?

A: Official data show that whereas Kenya’s annual housing demand stands at 250,000 units, the available supply provides only 50,000 units creating a huge deficit. Further, official data show that only 2.0 per cent of the supplied housing units target the low-income end of the market.

Also Read: Citing housing tax, Panyako quits UDA post

Q: How will the housing levy deduction be done?

A: If the Finance Bill 2023 is passed in its present form, there will be a mandatory deduction of 3.0 per cent of one’s basic salary matched by another 3.0 per cent by the employer. This will be capped at Sh5,000.0. Important to note that the deduction is on one’s basic salary.

Q: Is there an opt-out provision?

A: If the Finance Bill 2023 is passed in its present form, one will be allowed to opt out of the Housing Development Fund contribution after seven years. The routes for exit are as follows:

• Transferring one’s contribution to their retirement scheme registered with the Retirement Benefits Authority.
• Transfer their contributions to any person registered and eligible for affordable housing under the National Housing Development Fund.
• Transfer their contributions to their spouse or dependents.
• Cash out upon which the amount cashed out will be subject to tax.

Also Read: Raila Odinga to Kenyans - 'This is not about me'

Q: Upon opting out, does one access both their contribution and that of their employer?

A: Should one opt out after seven years (before attaining the retirement age), they will access only their contribution as an employee. The employer’s matching contribution will be retained in the fund and made available only after another 7 years (14 years in total). Should one’s retirement age precede their seven years contributing to the fund, they will be allowed to access both their contribution and that of the employer upon exit.

Q: Why is the government intent on retaining employers’ contributions when the employee exits voluntarily?

A: The State Department of Housing has stated that the goal is to ensure there is capital preserved in the fund.

Also Read: Hinga leaves meeting after tough questions on housing

Q: Will one be able to contribute more than the prescribed ceiling of Sh5,000?

A: Yes, provided this is done on a voluntary basis.

Q: Who will be eligible to join the fund?

A: Thus far, the government has indicated that only those who contribute to the fund will be eligible as beneficiaries. Additionally, it is expected that regulations generated should the proposal be passed by Parliament will further prescribe the eligibility criteria.

Be that as it may, it is important to observe that under the already ongoing affordable housing programme, the following classifications apply:

• Social Housing targets persons earning less that Sh19,999 monthly.
• Low cost housing targets persons earning between Sh20,000 and Sh49,999 monthly.
• Mortgage financed units for those earning between Sh50,000 and Sh149,999 monthly. Currently, persons financing through this route are expected to deposit at least 12.5 per cent of the value of the house and seek the remaining amount from finance institutions.

Q: Looking at the eligibility based on income levels, are the incomes assessed individually or as a household?

A: This is entirely dependent on how the application is made. If it is made individually, the income will be assessed at an individual level. If made jointly, it will be assessed at a household level.

Q: What type and size of houses will be available under this programme?

A: Under social housing:

• One bedroom fetching Sh600,000.
• Two bedrooms fetching Sh1,000,000.
• Three bedrooms fetching Sh1,400,000.

Under affordable housing

• One bedroom of 20sqm Sh1,000,000.
• One bedroom of 30sqm Sh1,500,000.
• Two bedrooms of 40sqm Sh2,000,000.
• Three bedrooms of 60sqm Sh3,500,000

Q: How many houses will one be allowed to buy?

A: An individual is entitled to only one house under the affordable housing programme.

Also read: Housing levy unstoppable, President Ruto tells Raila

Q: How will maintenance of these houses once purchased be done?

A: The government says that home owners will be required to pay a service charge towards the maintenance of common-use facilities. A portion of the service charge will be channelled towards a sinking fund which will be used to finance major repairs within the housing complex.

Q: Is one allowed to sell their house in the event they opt to move out?

A: An owner is not allowed to sell their house in the open market before seven years have lapsed. However, they will be allowed to sell it back to the Housing Fund before seven years lapse.

Q: Where a county government has donated land for construction of affordable housing units, will its residents be granted priority?

A: The government has stated that in such a scenario, between 20 per cent and 30 per cent of the houses developed will be ring-fenced for residents from that county with a first right of refusal.

Q: What role does the national government say it will play in the affordable housing plan?

Answer:

• Providing land that is owned by the state.
• Delivery of bulk infrastructure such as access roads, sewer systems, as well electricity connectivity.
• Providing tax incentives to developers.

Q: What happens in the event of death of a home owner?

A: The ownership of the housing unit will be transferred to the registered next of kin.

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