President William Ruto during the inspection of construction of 220 affordable housing units in Bomet County.
The value of cash collection from the affordable housing levy funds invested in short-term government securities has risen to Sh46 billion, signaling low absorption of mandatory monthly contributions from workers and employers towards President William Ruto’s pet project.
The Affordable Housing Board, the agency that oversees the development of houses and their off-take, says the billions of shillings are being invested in three-month treasury bills instead of idling in accounts awaiting expenditure.
The amount invested in the 91-day Treasury bills has doubled from Sh20 billion in May last year. This emerges as the Controller of Budget warned that the projects being built from the monthly housing levy were engulfed by delays.
Avoid diversion of funds
Sheila Waweru, Acting CEO of the Affordable Housing Board.
The Affordable Housing Act, 2024 has ring-fenced the housing levy funds to be spent on construction of houses under a special fund to avoid diversion to other projects as has happened in the past. Cash meant for stabilisation of fuel prices, for instance, was spent on road projects.
The Sh46 billion, which includes re-investments, is equivalent to 51.8 percent of the Sh88.7 billion so far collected from workers as housing levy since inception in 2023.
Sheila Waweru, the acting chief executive of the Board, reckons the investment in T-bills is in line with the agency’s mandate which included growing the value of the affordable housing fund by investing, borrowing, or receiving donations.
“It is not prudent even as government to have money seated, lying idle in an account. The money is safe, fully invested in government securities and the accounts we are operating are CBK accounts which have full sight of the government on every expenditure,” Ms Waweru said.
“So we can put the money in Treasury bills as a manager of the [affordable housing] fund and it brings in additional money, say Sh2 billion, and that enables us to put up more units which we will not do if the cash was staying in an account idly. This is a measure for prudent management of the fund.”
The affordable housing law requires employers in the formal and informal sectors to deduct 1.5 percent of gross monthly pay to workers and match the contributions towards the housing levy.
Outcry from Kenyan workers
The levy sparked an outcry from the opposition and many Kenyans, who feel burdened by the raft of taxes introduced under President William Ruto.
It was implemented nearly at the same time as the controversial healthcare insurance levy, which will require people to contribute 2.75 percent of their monthly salaries to a social healthcare programme.
The deductions from employees — whether on permanent and pensionable terms or contract-based engagements — were initially declared unconstitutional by the courts largely for being discriminatory and creating unequal principles under Employment law. This was after they were only applied to workers in formal employment following the amendment to Employment law through the Finance Act, 2023.
That prompted lawmakers to enact the Affordable Housing Act, 2024 to comply with the ruling of the courts. President William Ruto signed the Act into law on March 19, 2024, enabling the Kenya Revenue Authority to enforce the levy in the informal sector.
Billions received per month
The board, which receives monthly reports on collections from the KRA, says monthly receipts from the levy range from Sh5.5 billion to Sh6.3 billion, or roughly an average of Sh6 billion.
The Board projects to collect Sh64.2 billion this financial year ending in June.
“We do our projections on inflows and outflows [from the Fund] and then see how much money will be coming in from the levy and the expenditure by the eight implementing agencies. So we know what expenditure will be coming in the next quarter or so, and allows to invest the balance,” Ms Waweru said.
Under the programme, the government is building social housing units (bed-sitters) targeted at persons earning less than Sh20,000 per month, affordable housing for workers with income of between Sh20,000 and Sh149,000 and affordable middle-class housing for those earning more than Sh149,000.
Some 124,000 houses are at different stages of construction in various parts of the country, with 4,888 units expected to be ready for occupation by June.
The government absorbed Sh16.65 billion of the collections from levy into housing projects last financial year ended June 2024, making up less than a third (30.75 percent) of Sh54.16 billion remitted in that period.
“Housing and Urban Development faced significant challenges in the Affordable Housing sub-program, with a low absorption rate of 26 percent, reflecting delays in project implementation,” Controller of Budget Margaret Nyakang'o wrote in the budget implementation review report for the year ended last June.
The board is charging between Sh640,000 and Sh5.4 million for the units it is building on public land, targeting 200,000 units a year.
The lowest-priced unit (a single room on a 20 square metre space) will cost Sh640,000, while the most expensive unit (a three-bedroomed house on a 90-square metre space) will go for Sh5.4 million. Successful homebuyers have the option of paying a 10 percent deposit upfront, with the remainder amount cleared under the tenant purchase scheme for a maximum of 30 years.
