Let’s ‘tokenise’ the housing levy

Wednesday April 24 2019

One of the President’s Big 4 Agenda – Housing – is under serious threat after Kenyans realised that they have to surrender 1.5 percent of their incomes as contribution to the ambitious project of building over one hundred thousand housing units every year.

The money must indeed come from somewhere, but Kenyans are sceptical, and rightly so, about the government additional housing tax, when it has had a poor track record on what it does with the regular taxes it collects.

A new agency, known as the National Housing Development Fund has been proposed to collect and manage the housing levy in this housing project. Kenyans have come to associate any government agency with the word ‘Fund’ in its name with rampant corruption.

From Youth Fund to Enterprise Fund, Sports Fund to Constituency Development Fund, you name it, you will find that most of them have had a good share of ‘prime time’ in the annual Auditor General’s reports tabled in Parliament.

Kenyans must therefore be forgiven for trying to #RESIST the new housing levy since it is likely to fight for space in the annual list of scandals that the auditor general religiously reports year in year out.

But can technology be used to spare the housing levy from the usual suspects sticky fingers?


Well, sceptics have repeatedly pointed out that all the current corruption dealings have so far happened in spite of the accelerated government efforts to automate its operations. However, there is a new technology kid on the block – Digital Ledger Technology (DLT) or more widely known as Blockchain.

Blockchain could be deployed in real estate not only to assist in capital mobilisation but also enhance transparency around how money collected is used.


One major concern from Kenyans with respect to the housing levy is the that the money collected is relatively small in absolute terms, such that it may take 50 to 100 years for individual contributions to rise to the value of a two-bedroom house.

Another concern is that some employees are nearing retirement age and deducting housing levy for them is simply making them incur additional tax that many feel will not really benefit them.

Sort of making a financial contribution into some big dark hole; the type of hole that politicians love raiding when campaign time kicks in.

Blockchain technology has some interesting features that can address some of these concerns.

Using the ‘token’ feature of Blockchain, contributors could own digital assets that correspond to the value of the contributed funds. A token is a quantified unit of value that is eventually recorded onto the Blockchain ledger.

Safaricom’s Bonga points or airtime, Kenya Power’s tokens for pre-paid customers could loosely be equated to tokens.


However, Blockchain tokens are radically different in that their record-keeping mechanism is not centrally managed but is instead decentralised and independently executed on autonomous computers through some consensus mechanisms.

The autonomous computers would independently follow pre-agreed instructions known as smart-contracts that determine how contributions are accepted, validated and eventually recorded into the ledger in a transparent manner.

The Blockchain ledger will be tamper-proof or immutable, transparent, resilient and a lot more difficult for the usual suspects to execute their fraudulent activities since they need to compromise not a single central entity, but a multitude of autonomous systems.

In any case, even if they were to succeed in stealing these digital housing tokens, the owners would immediately become aware since access to the token is directly controlled by the contributor.

This is unlike the traditional way of pooling funds together, where the directors or politicians can have a field day raiding the coffers once the contributions are in, without the contributors being aware until a year later when they read about it in audited reports.

Additionally, the housing token would be worthless outside the housing ecosystem, the same way airtime or Bonga points are not useful outside its ecosystem.

Corrupt officials would therefore not be able to use the housing token to pay for a holiday in Cape Town, buy property or other assets that are outside the defined housing Blockchain network.

That in itself would be a good deterrent for keeping the usual suspects from being interested in the housing levy since it may note blend well with their traditional forms of money laundering.


Finally, and perhaps more importantly, tokenisation of the housing levy would enable Kenyans to ‘fractionally’ own the houses according to the amount or value of their contributions. In other words, even if you had to retire early and your contributions are minimal, you will still benefit from those fractional contributions through interest earnings – irrespective of whether you get the house or not. This could reduce or eliminate the current levels of resistance towards contributing to the levy, particularly for those who already have a house, are about to retire or simply live outside the towns that will actually host the houses.

As a matter of fact, such a digital asset or housing token should be tradable on secondary market or exchange points, creating a new value chain of economic activities.

This would make it easy for token holders to liquidate their housing token with less friction as compared to the current system where selling or buying a house can take several months to years.

Lets 'tokenise' the housing levy and better protect the interest of Kenyans.

It definitely wont be easy, since this disruptive approach may displace a lot of traditional middlemen who are already lined up to gain from the traditional way of doing things.

But unless we redesign the whole process, the Housing agenda is likely to continue to meeting resistance from Kenyans.

Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT.

Email: [email protected], Twitter: @Jwalu