Housing Principal Secretary Charles Hinga when he appeared before the National Assembly Committee on Housing, Urban Planning and Public Works at Bunge Towers in Nairobi on May 21, 2024. Photo credit: Dennis Onsongo | Nation Media Group
The government is investing Sh20 billion collected from the affordable housing levy in Treasury bills and bonds, signalling a low absorption rate for the funds meant to build cheaper homes for low- and middle-income households.
Bonds are medium to long-term government securities and their purchase indicates that the government is collecting the levy at a faster pace than it can deploy in the construction of the houses.
The State Department for Housing says the government had collected a total of Sh34.72 billion by the end of April 2024.
Housing Principal Secretary Charles Hinga told the National Assembly’s Committee on Housing, Urban Planning and Public Works that Sh6.93 billion from the fund had been spent so far.
He said out of the total collections, Sh20 billion has been transferred to the Affordable Housing Board for investment in Treasury bills and Treasury bonds. Most of the future collections are also set to be parked in the debt securities first, helping to fund the government as the building of houses takes a back seat due to a legal hitch.
The fund is derived from the mandatory monthly deduction of 1.5 percent of an employee's gross salary which is matched by the employer.
“The new money after the Affordable Housing Fund Act came into effect on March 19, 2024, is now being collected under the Affordable Housing Fund Board,” Mr Hinga said.
“The board has written to the Treasury to open an account at the Central Bank of Kenya for collection of the levy.”
He said the Treasury had given the board guidance to invest all proceeds of the levy in Treasury bills and bonds.
“The first Sh20 billion is headed for investments in Treasury bonds and bills. The board needs to open an account at the CBK to receive the money,” Mr Hinga said.
He told the committee chaired by Emurua Dikir MP Johana Ng’eno that the Affordable Housing Act vests the responsibility of determining how funds will be spent on the board. He said the board has not yet received an investment plan.
“The Act envisions a situation where the board can allocate money for projects to be developed in private lands. But they have not been able to receive funds from the housing levy board,” Mr Hinga said.
Mr Hinga told MPs that until Parliament amends the law to give the board powers to spend the money, the housing levy funds cannot be utilised by the board.
“The board can only invest the money in Treasury bills because it is not an implementing agency. The Act does not provide an avenue for the board to spend the money,” he said.
“Starting this week, the board will write to implementing agencies to provide their five-year investment plans. The board is not an implementing agent. All the implementing agents will have to prepare their proposed projects.”
He said the board will be required to submit the five-year plans and the budgets from the various implementing agencies to the Cabinet and Parliament for scrutiny.
Mr Hinga said the Affordable Housing Board is expected to receive Sh63.22 billion from the affordable housing levy in the 2024/25 financial year that starts in July.
Out of the Sh63.22 billion, Sh32.5 billion is earmarked for the construction of affordable housing, Sh15 billion for social housing, Sh1 billion for construction of police housing and Sh14.66 billion for social and physical infrastructure.
Kenyans are expected to pay between Sh840,000 and Sh5.76 million for the low-cost homes programme, which targets putting up 250,000 units every year. Affordable housing units will be made up of studios (bedsitters), and two- and three-bedroom apartments. Social housing, a lower tier of the programme, will meanwhile comprise one-, two- and three-room houses targeting slum dwellers.
Additionally, the programme will oversee the development of market-driven units which will comprise two-and three-bedroom houses.
“On average, we are collecting Sh5.5 billion every month from the affordable housing levy,” Mr Hinga said while defending the State Department’s budget for the financial year 2024/25.
“The money is no longer an appropriation of the State Department for Housing but the board. I will have to go to the board to seek funding just like other implementing agencies like the National Housing Corporation,” he said.
Mr Hinga said before the levy, the Treasury allocated the Ministry of Lands, Public Works, and Housing Sh13 billion annually but has now reduced it to Sh2 billion. He said the Treasury has pushed the State Department to the housing levy board.
“I came to this committee to disentangle my budget. Everything has been pushed to the levy. I will not be able to operate if my budget is tied to the housing levy.
“If this committee does not untie my budget from the housing levy, I will not have money to spend. The Treasury lumped my budget together with the housing levy. You must help me,” the Principal Secretary said.
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