Govt to collect up to Sh48b annually from new housing levy

September 24, 2018
The housing levy is expected to finance the Government’s Big 4 Agenda of affordable housing/FILE

NAIROBI, Kenya, Sept 24 – The Government can collect up to Sh48 billion annually from employers and employees through the recently passed 1.5 percent housing levy contained in the Finance Act 2018.

Employers are expected to submit the deductions to the National Housing Development Fund (NHDF) every month once the regulations are published.

The housing levy is expected to finance the Government’s Big 4 Agenda of affordable housing with employees who do not make use of the levy expected to get back their contribution after 15 years.

KPMG Kenya tax partner Peter Karanja explains that 2.4 million Kenyans who earn below Sh100,000 per month are eligible for a mortgage under the affordable housing scheme, leaving out 77,000 high-earning employees who nevertheless will make the monthly contributions.

“Based on the 2017 Statistical Index from the Kenya National Bureau of Statistics, the country’s wage bill in 2016 was Sh1.6 trillion. This means that the government can potentially collect Sh48 billion annually from the levy. Of this, Sh24Billion is collections from the employers which goes to subsidise affordable housing while the balance is contributors’ funds which will go towards the cost of the house or is refundable at the end of 15 years,” said Karanja.

The contributions are to be remitted on or before the ninth day of the following month to the NHDF.

Failure to remit the contributions on time attracts a penalty of 5 percent of the contributions payable by the employer for each month or part thereof that the amounts remain unpaid.

The contributions are set to deliver President Uhuru Kenyatta’s ambitious Big Four Agenda which promises to deliver 500,000 houses in five years among other promises.

Currently, Kenya requires more than 250,000 housing units every year to meet demand. This is against the annual average of 50,000 units delivered by the government and private developers per year.

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