High-income earners will benefit from the affordable housing programme more than those who make less money, the Parliamentary Budget Office (PBO) has warned.
The budget office cautions that under the current law guiding implementation of the programme, allocation of funds towards development of houses for Kenyans earning up to Sh149,000 monthly is set at 60 percent, yet they constitute 77 percent of Kenyans working in the formal and informal sectors.
On the other hand, Kenyans earning above Sh149,000 — who constitute just 23 percent of the workforce — have been allocated 36 percent of the funds.
The Affordable Housing Bill, 2023 allocates 30 percent of the funds collected from Housing Levy to social housing projects (which target people with monthly incomes below Sh20,000); 30 percent to affordable housing projects (for people with a monthly income of between Sh20,000 and Sh149,000) and 36 percent of the funds to the institutional housing programme and projects (people who get a monthly income of above Sh149,000).
“However, statistics from the State Department of Housing and Urban Development indicates that about 74 percent of the formally employed individuals and about 80 percent of the informally employed people earn less than Sh149,000 per month, meaning that they are the target beneficiaries of the social and affordable housing projects.
“Despite their huge numbers (more than 74 percent of the targeted population), their categories of housing units are only being allocated 60 percent of the total monies in the fund,” the budget office observes.
The Parliamentary Budget Office — a professional, independent office of Parliament — also warns of the possibility of the misuse of money that remains unused at the end of each financial year, due to lack of clarification on how it should be treated.
The Public Finance Management (PFM) Act, 2012, requires that the administrator of a national public fund shall ensure that the accruals to a national public fund are retained in the fund unless the Cabinet Secretary directs otherwise.
“The bill is silent on how accruals to the fund at the end of each financial year are to be handled which contradicts the provision of Section 24 (6) of the PFM Act, 2012,” the budget office said.
It also raised the concerns in a report analysing the financial and economic implications of the programme, at a time the government is facing legal hurdles over its implementation, with the Court of Appeal having affirmed a decision by the High Court to halt collection of the Housing Levy from workers and employers in the formal workforce.
Employees and employers have contributed to the levy at the rate of 1.5 percent (each), since July last year. By end of December, the government had collected Sh26.8 billion.
The budget office also proposes that the law guiding implementation of the programme should require beneficiaries of the houses to be active contributors to the levy, which is currently not a consideration in the Bill.
“The Bill provides that a person is qualified to be allocated an affordable housing unit if the person is an adult Kenyan. In addition, it has also clearly stipulated some of the required accompaniments which include proof of the requisite deposit of 10 percent of the value of the respective affordable housing unit, a copy of the national identity card and a copy of the KRA PIN certificate.
“However, it did not include a requirement of proof of up to date contribution to of the Affordable Housing Levy as one of the requirements which is essential since the monies to be accessed are from contributions of Kenyans to the levy,” thebudget office stated.
The office also warns that there is no clarity on how funds allocated towards the Kenya Slum Upgrading, Low-Cost Housing and Infrastructure Fund (Kensuf) for development, maintenance, rehabilitation and off-take of slum upgrading and low cost housing programmes and projects— 30 percent of the collections—will be utilised.
The funds under Kensuf cater for projects to benefit Kenyans earning below Sh20,000 monthly.
“However, it is noted that the county governments also participate in the Kensuf programmes with slum upgrading projects currently being undertaken in 33 counties. In the financial year 2023/24, part of the funds from the Kensuf amounting to Sh3.3 billion were channeled to the participating counties as a conditional grant through the County Government Additional Allocation of Revenue Bill, 2023 (though the bill is yet to be approved by both Houses of Parliament). Therefore, the allocation of funds to Kensuf may require the Bill to provide procedures of negotiations with county governments on the framework for utilization of these funds,” the budget office said.
In the year ending June 2024 budget, the government had projected to collect Sh63.2 billion from the Housing Levy.
The budget office said that the government is already undertaking 13 social and affordable housing projects within the Nairobi Metropolitan area and 290 constituency affordable housing projects across different counties using monies from the Housing Levy.
The budget office warns that the government faces huge risks in the ongoing projects under the programme following the nullification of the Housing Levy that could expose taxpayers to risks on contracts that the government has entered with property developers.
