Access to shelter is a fundamental human right and basic need.
Article 42(1)(b) of the Kenyan Constitution gives every Kenyan the right to accessible and adequate housing and reasonable sanitation standards.
Recent public discourse on the introduction of a 1.5% housing levy by both the employee and the employer to the National Development Housing Fund to support affordable housing in Kenya has been intense. This is not the first time such a proposal has been mooted. Through the Finance Act 2018, and later the Housing Fund Regulations 2018, employers were required to remit contributions to the Fund by deducting 1.5% from the employee’s basic salary and contributing the other 1.5%, subject to a maximum total contribution of Kshs.5,000.
Kenya has in the past implemented similar measures to deal with internal economic challenges and shocks. A case in point is the tax reforms in 1993/94 and 1994/95 where a levy was introduced to deal with drought.The situation had discouraged planting, thus reducing agricultural productivity.
The 1994/95 Finance Act introduced a temporary drought levy by imposing an additional 2.5% tax on taxable corporate profits and the income of individuals in the highest tax bracket. This approach was redistributive in taxing the wealthy and well-off individuals to support livelihoods through interventions in drought.
The government could have adopted a similar approach in introducing the housing levy.It is agreeable that housing is a significant challenge in Kenya, especially in the urban areas. According to the World Bank Report, over 70 % of urban households in Kenya experience severe housing affordability challenges, manifested in high levels of homelessness, poor human settlement conditions, high prices of housing relative to the incomes of households, mortgage delinquencies, defaults, and foreclosures.
Kenya’s population is over 47 million people, of which about 12 million are urban dwellers. However, a child born in 2017 in a metropolitan area will see Kenya’s urban population double to 24 million by 2035 and more than triple to 40 million by 2050.
We note that considerable progress has been made in supporting this sector. According to the Economic Survey 2023, as of December 2021, there were 3,480 housing units under construction by the State Department for Housing (SDH), with an estimated construction cost of Ksh. 6.9 billion.
The role of the private sector should be considered when crafting the housing agenda.Necessary preconditions such as financing instruments, access to land, providing basic infrastructure, and improving the efficiency of accelerating mortgage registration and title transfers should be established.
We should rethink the taxation model and benchmark with the Finance Act 1994 provisions. Instead of the current 1.5% contribution by both the employee and employer, it is time we experimented with a 1.5% % levy on taxable corporate profits and the income of individuals in the highest tax bracket as a temporal measure.
FCPA George Mokua