Return of housing levy: President Ruto to assent Bill today
President William Ruto signs the Finance Bill, 2023 to law at State House, Nairobi on June 26, 2023.
What you need to know:
- The Bill was last week approved by Parliament despite opposition from opposition MPs.
- Consequently, the new legislation will become effective with the enactment of the new law.
President William Ruto will this morning sign into law the controversial Affordable Housing Bill, 2023.
The court had stopped the government from effecting housing levy deductions from salaried Kenyans because it was introduced without a legal framework.
However, the Bill — with amendments — was last week approved by Parliament despite opposition from opposition MPs.
President Ruto is targeting to construct 200,000 affordable housing units annually, which he has promised will create between 600,000 and 1 million jobs each year.
National Assembly Finance and National Planning Committee Chairperson Kimani Kuria said that by the President appending his signature to the Bill, a new legal framework — the Affordable Housing Act, 2024 — will take effect.
Further, the new law repeals provisions of the Finance Act Section 84 of the Employment Act with the insertion of new section 31B and 31C, which the previous deductions were based on.
Consequently, the new legislation will become effective with the enactment of the new law, hence no backdating.
“With the enactment of the Affordable Housing Bill into law, it gives rise to a new legal framework and, therefore, housing levy deductions will only come into effect on the enactment of the Bill,” said Mr Kimani.
“There will be no backdating of the deductions as the previous deductions were made as per provisions of the Finance Act Section 84 of the Employment Act with the insertion of new section 31B and 31C. These sections have now been repealed in the Affordable Bill,” added the Molo MP.
National Assembly Leader of Majority Kimani Ichung’wah said: “No deduction will be backdated. Commencement date is upon assent and, therefore, the deductions become effective immediately upon assent.”
In November last year, the High Court ruled that the housing levy was introduced without a legal framework, and in January this year, the Court of Appeal declined to suspend the High Court order.
The government had been collecting the levy since the beginning of the current financial year ending June 2024, appointing the Kenya Revenue Authority (KRA) as the collection agent.
With the court blow, the government was forced to come up with a new legal framework — Affordable Housing Bill, 2023 — in order to address issues raised by the courts.
The new Bill, which seeks to anchor the 1.5 per cent housing levy on both salaried and income-earning Kenyans in law, was approved last week by Parliament despite opposition from Azimio la Umoja Coalition MPs who termed it unconstitutional.
Both the National Assembly and the Senate passed the Bill last week, albeit with amendments by the Senate.
To address the issues raised by the court, the Bill has expanded the imposition of the monthly 1.5 per cent affordable housing levy to include incomes other than salaries paid to employees in the formal employment sector.
The court had ruled that Section 84 of the Finance Act, which amends the Employment Act to introduce the housing levy, violates the principles of taxation for making distinction between formal and informal sectors, thus creating unequal and inequitable principles.
The new Bill establishes the Affordable Housing Fund, which will be financed through a 1.5 percent housing levy on gross salaries.
The Bill also seeks to establish the Affordable Housing Fund, where the levies deducted from incomes shall be paid, to be managed by a national board.
The Bill has also been amended to have a person eligible for allocation of only a single housing unit, provided they meet prescribed criteria in the regulations.
“This amendment seeks to clarify that a person refers to a natural person and the said person may only access one unit. This will ensure that the objective of the Bill to ensure that Kenyans have access to affordable housing is achieved,” said Senate Transportation and Housing Committee Chairperson Karungo Thang’wa.
The proposed law has also given reprieve to persons who made voluntary savings and have not been allocated an affordable housing unit to apply for withdrawal of their savings by issuing a 90-day written notice for a refund with any accrued interest.
The amendments state that should a person who has made a voluntary saving miss out on the unit, then they may withdraw their savings by issuing a 90-day written notice to the agency for refund with any accrued interest.
The individual can also apply to the board for approval of issuance of an affordable mortgage to develop a rural affordable housing unit.
The application will need to be accompanied by an agreement that the applicant agrees to have their savings and the land upon which the unit is to be built used as collateral.
To restrict ownership, a clause that the beneficiary of a house shall not sell his or her house to any other person unless with the prior written consent of the Board has been included.
