For salaried people, their net pay was going to go down by 1.5 percent on implementation of the controversial Housing Levy.
The employer would also have to match an employee’s contribution. The deductions, the notice said, should be remitted to Kenya Revenue Authority (KRA) by May 9 and each succeeding month thereafter.
Important as the notice by the State Department of Housing and Urban Development and the KRA was, there was no indication that something of such nature was coming.
The Federation of Kenya Employers (FKE), in its reaction to the notice, suggested that employers were being ambushed.
“This is a public interest matter and it is important to handle it as envisaged by the Constitution, which requires consultations instead of ambushing employers with unilateral changes which will increase the cost of doing business and reduce employees’ purchasing power,” said FKE Executive Director Jacqueline Mugo.
In reality, the Housing Levy has been an ambush, with no public participation — a top-down formulation and implementation of a policy with major consequences for families.
As a result of lack of public participation, there are dozens of unanswered questions about what the implementation of the fund will mean.
The answers to those questions could determine whether President Uhuru Kenyatta’s legacy project has any chance of being achieved.
The first unanswered question is whether indeed there had been public participation.
Housing Principal Secretary Charles Hinga, in a November 2018 interview with the Sunday Nation, said that public participation had taken place.
“The Housing Fund regulations were subjected to a public participation process to include the views of all Kenyans as we look to operationalise the fund. We have also had wide consultations with various stakeholders,” he said.
But the Consumer Federation of Kenya (Cofek), in a petition filed in the Employment and Labour Relations Court, avers that there was no public participation.
“ … there was no known public participation before insertion of Section 31A of the Employment Act, 2007, and that before issuance of the public notice by the 1st respondent as made on April 16, 2019,” Cofek states.
Public participation is a principle anchored in the Constitution and has been a ground the courts have used in the past to void certain government decisions and actions.
Another important question the housing agency needs to answer is the way the levy was legislated.
Important as it is, there is no stand-alone legislation establishing the Housing Fund and stating how it will be managed.
Instead, the establishment of the Fund is a small insertion in the Finance Act 2018 through which the government amended the Employment Act by inserting Section 31A, which establishes the Fund.
In suit papers, Cofek says the way the Fund was established does not inspire public confidence going by the country’s history of massive financial scams.
“Members of the public are at a loss as to how the Housing Levy Fund will be operationalised owing to the fact that there is no inclusive statutory body corporate that is representative of diverse interests,” the consumer lobby says.
Moreover, Cofek adds that without proper law and a statutory body to manage the fund, “the petitioner avers that it has legitimate concerns and fears that the Housing Levy Fund will not be managed any differently (from past instances of poor management of public funds) and as such it amounts to misuse of public funds”.
But Mr Hinga insists that legislation exists. “The regulations on the Housing Fund are based on the Housing Act of 1953. The Finance Act 2018 only operationalises the Fund. Granted, there are clauses in the Housing Act and which relate to the Affordable Housing Programme and the Fund that are outdated and therefore require review,” he says.
Another question the government needs to answer is how it arrived at 1.5 per cent as the rate of contribution by salaried workers.
Initially, the Treasury had proposed a 0.5 per cent levy. Yet today, we are talking of 1.5 per cent that will be deducted from a worker’s gross pay, with employers matching the employees’ contributions.
Meanwhile, the government has been promising that it will build 500,000 housing units by 2022. How realistic is this target when not a single foundation has been laid?
There are about 1,350 days to December 31, 2022, and if the government was to meet its target of 500,000 houses by that time, it would have to construct 370 houses per day or 15 per hour. This is almost an impossible feat to achieve.
Mr Hinga, however, insists it is possible. “It is not true that no foundation has been laid. The construction of Park Road where 1,370 units will be put up has already commenced, and the first 300 units will be delivered by October 2019,” he says.
“Further, the target of 500,000 units is achievable given the overwhelming response we have seen from investors who have expressed interest in partnering to deliver the affordable houses.”
Related to the practicability of the project is the question concerning the Fund’s inability to guarantee contributors’ house ownership.
Even if the target of 500,000 is achieved, not all contributors would be guaranteed a house.
Instead, the government says applicants will be put through a lottery to pick the lucky ones who will be given the houses through a mortgage scheme.