Housing Levy is a hot topic nowadays in Kenya. There are mixed thoughts about it. Let’s find out what’s latest with the Housing Levy.
Without any doubt, the citizens of any country are its building blocks. The government makes a lot of money off the taxes and levies the citizens pay. It is one of the highest income sources for the government.
UPDATE: The National Assembly Finance Committee proposed several amendments to the Finance Bill 2023, including a reduction of the Housing Fund from the current proposal of 3% to 1.5% and that the monthly deductions be subjected to employees only.
The government will wait until January 2024 to deduct the Housing Fund from employees. The committee retreated for a report writing in Naivasha after the bill went through public participation.
It is important to note that the Finance Bill is still under review by the National Assembly, and the final version of the bill may differ from the proposals made by the Finance Committee.
In this article, we are talking about the newly announced Housing Levy in Kenya. It is a housing tax that the employer and the employees shall pay. President has requested
3 percent 1.5 Percent of an individual’s basic salary or Kshs 2500 at maximum for people who earn more as the housing levy.
Housing Levy Kenya
The Kenya Housing Levy is a new tax introduced in May 2023. It was introduced in the Financial budget. As soon as it was announced, mixed reactions were observed.
Some are ok with it, while others oppose it.
The government has set a target of building 2 million affordable housing units by 2030. The housing levy is expected to generate about Kshs. 57 billion (US$570 million) per year, which will be used to finance the construction of these units.
Key Points of Housing Levy Tax
- The employer shall pay to National Housing Development Fund.
- A contribution of 1.5% shall be made from the employee’s monthly basic salary.
- The sum of the employee and employer contributions shall not exceed KES five thousand per month.
Kenya Housing Levy 2023: Public Reactions
The housing levy has been met with mixed reactions. Some people have welcomed it to address the country’s housing deficit. Others have criticized it as an unfair tax that will place a burden on low-income earners.
The government has defended the housing levy, arguing that addressing the country’s housing crisis is necessary. The government has also said that the levy will be progressive, meaning that high-income earners contribute more than low-income earners.
Advantages to Housing Levy Payers
Employees who qualify for affordable housing, their contributions will be used to finance the purchase of a home under the housing scheme
The employees who are not eligible for affordable housing, upon the expiry of seven years, starting from their first contribution, can be benefitted in any of these ways:
- Transfer of their contributions to a retirement benefits scheme or pension scheme
- Transfer of their contributions to any person registered and eligible for affordable housing
- Transfer of their contributions to their spouse or dependent children
- Receive their contributions in cash. However, in this case, it shall be noted that the paid-out cash shall be included in the contributor’s taxable income and will be subjected to a tax deduction.
Note: The returns on the Housing levy will be based on the fund performance
Effective Date of Housing Levy in Kenya
As per the recent update, It is proposed that this housing levy will be effective from January 2024
The employer shall pay the Housing tax before the 9th day of the following month after the education was made.
Frequently Asked Questions
What is the housing levy tax in Kenya?
It is a contribution programme implemented by the Kenyan government to facilitate the provision of affordable housing for its citizens.
What is the need to implement a housing levy?
The implementation of the housing levy seeks to address the critical issue of affordable housing in Kenya and provide citizens with ownership opportunities.
What are the advantages to the contributors?
Advantages of the housing levy include the opportunity to purchase a property through an affordable housing programme.
In the event that an individual does not purchase a home, their contributions will be transferred to a pension plan. It is essential to observe that employers must deduct and remit the housing levy and other statutory payroll deductions. Noncompliance with this directive may result in noncompliance penalties. After retirement, contributors who did not purchase a home will receive a refund of their contributions.
What did President Ruto say about this new house tax in Kenya?
He said that the housing levy is not a tax but a saving. He said he’d take personal responsibility to ensure the money would not be lost in corruption.
Is the housing levy worth it?
The housing levy is a new policy, and it is too early to say how effective it will be. However, the government is committed to addressing the country’s housing deficit, and the housing levy is one of the essential policy tools it uses to achieve this goal.