The Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in Kenya released a public notice directing employers to start deducting 1.5% of their staff salaries as housing levy and submit the deductions to the National Housing Development Fund (NHDF).
The employer is also required to send the deduction together with other payroll statutory deductions to the Kenya Revenue Authority (KRA) by the 9th of every month starting on May 2019.
The directive states, “Both the employer and the employee shall each contribute 1.5% of the employee’s gross salary, so long as the sum of the total monthly contributions shall not exceed five thousand shillings. Failure to forward the contributions on time shall attract a penalty of 5 percent of the contributions payable by the employer for each month or part of the amounts remain unpaid.”
How the levy shall be put into work
The Housing Fund Levy is intended to back up the Affordable Housing Scheme which is set to deliver 500,000 houses in five years’ time to the low income earners. Mr. Peter Karanja, KPMG Kenya tax partner expounded the idea saying that 2.4 million Kenyans who earn not more than US $100 qualify for a mortgage under the affordable housing scheme.
About 77,000 high-earning Kenyan employees will not be eligible for the mortgage however they will make the monthly contributions anyway. Following a 2017 statistical index by Kenya National Bureau of Statistics, the government can collect US $473m annually from the house levy. Half of this amount is collections from the employers which goes to aid affordable housing while the rest is contributors’ funds dedicated to the cost of the house.
Just in case a contributor is not shortlisted for a home under the scheme, his/her levy can be transferred to a pension scheme, to another person under the affordable housing scheme or cash out after exit.