Hinga: How housing levy will help workers benefit at the expense of employers

Housing Principal Secretary Charles Hinga

Housing Principal Secretary Charles Hinga. 

Photo credit: Francis Nderitu | Nation Media Group

Housing Permanent Secretary (PS) Charles Hinga has urged workers to support the government's compulsory housing levy. 

He complained that the scheme was suffering from too much propaganda and lies, "especially from those who want the government to fail in the run-up to the 2027 elections".

Speaking live on Inooro TV last night, Mr Hinga put the blame of the country's housing crisis on colonialists, the International Monetary Fund and reckless borrowing by the Jubilee administration, prompting the government to introduce a compulsory levy on workers.

He further hinted that the plan will be amended to address serious concerns raised. This is in contrast to President William Ruto's public statements that the plan will be approved as is.

Mr Hinga said if the employer is not interested in buying the houses to be built under the plan, "then after seven years we will refund you the money we have collected from you, together with the amount your employer has contributed".

He said: "This is like forcing your employer to give you a salary increase for your future benefit and if you get a house, the plan becomes one of forcing your employer to help you own a house."

The PS said the money one will get back will earn interest and will not be taxed by the Kenya Revenue Authority.

"We are now engaging the employers on the grievances they have raised. That is why we are now in the public participation phase. By the second reading of the Bill, you will like us ... we are listening. The issues raised are real. Employers are complaining of increased burden because of the many increases in statutory obligations that the government has brought forward," he said.

Mr Hinga said the questions being raised about the plan are salient and are informing what the final Bill will look like.

The government is proposing a mandatory deduction of a maximum of Sh2,500 from both the employee and the employer in a plan aimed at pooling together Sh9 billion a month.

The money will be used to build affordable homes across the country, which will be sold to workers and others in need.

"If we go for voluntary levy for this plan, we will not have cash flow security. Currently, we have voluntary levy but in the last five years it has only given us Sh1.8 billion. Mandatory levy will give us Sh9 billion per month. It will give us a foothold in our dealings with partner investors," said the PS.

He hinted that there is a partner from Qatar who is willing to pump in Sh500 billion to build some of the houses, be paid off and leave the government to sell the units to its people.

Mr Hinga said the basic arithmetic in the programme is 5 per cent - profit for the partner investors, profit on sales and interest on loans for the buyers.

Mr Hinga said the colonialists never wanted people to move to towns and in 33 years since 1928, only 14,000 houses were built for urban dwellers.

"After independence in 1963, the country experienced an influx of rural-urban migration and the self-rule government in 1967 started building houses in urban areas mainly to accommodate its employees," he said.

He said the IMF came into the picture in the late 70s and advised the country to stop building houses through Housing Finance, saying the task was best left to the private sector.

"This was given as a condition by the IMF to give us loans. That marked the beginning of our housing crisis, which we are now taking the hard road to correct," he said.

He said the housing crisis, which the private sector failed to address as advised by the IMF, created a situation where slums were created through the forcible occupation of both public and private land.

"We now have 1,400 slums across the country and it is impossible to upgrade many of them because they are on private land," he said.

Mr Hinga added that it would have been easy to get out of the mess if the Jubilee administration had not borrowed too much.

"If our national debt was safe, we would have borrowed to implement this plan. But look, we will end this year with a national debt of Sh9.6 trillion out of the Sh10 trillion ceiling. Every year, we spend Sh1.2 trillion servicing the national debt. We are in bad shape. Our revenue target is Sh2 trillion, so we are in the red," he said.

He added that the economic crisis informed the government's decision to introduce the mandatory housing levy.

“The best way to solve our housing crisis is to whip people into saving with us. Savings as a percentage of gross domestic product is currently below 10 per cent, compared to the African average of 17 per cent. We want to go up to 25 per cent. The housing levy is a mandatory tactic to increase our savings culture," he said.

He said the pooled housing fund will help the government gain cash flow certainty to finance the programme.

"This is a deliberate plan that also seeks to create jobs right from the quarry, to the factory, to the hardware, to the workshops and on the construction sites as we build the first 200,000 houses. The jobs that will be created in the plan are a serious way of reviving the grassroots economy," he said.

He said the houses, for example, "will require artisans to make windows, doors, painters, plumbers, electricians, the builders, transporters of building materials, 18 million bags of cement sellers, steel ... and the locals are the ones who will get priority".

He said the success of the plan will greatly empower many at the bottom and middle of the pyramid.

"Our 2017 study shows that the average cost of a house in Nairobi then was Sh11 million.  Of those who were employed then, 97 per cent could not afford to buy the houses on hire purchase because the deductions were Sh154,000 per month while their salaries were Sh50,000 and below," he said.

He said the Jubilee government came up with cheap technologies and decided to build the houses on government land to beat the high cost of land.

"That is how we managed to bring down the cost of a house to between Sh1 million and Sh3 million. A loan to buy that house comes down from Sh154,000 to Sh42,000 per month. That translates into monthly instalments coming down to between Sh5,000 and Sh15,000 per month over a period of 30 years," he said.

Mr Hinga said he has a Sh20 billion budget over the next five years to upgrade slums and the housing levy will be a huge boost to the housing plan.

"We will also force landlords to upgrade their rentals to United Nations guidelines for standard habitable houses. We will also seek to correct the property market by addressing its imperfections and distortions and, above all, stop the forced evictions that are exacerbating our housing crisis," he said.