Housing levy has dominated the 2023 Finance Bill. The president has talked about it, even his principal secretaries and the public.
And so have the employees who will pay the levy. Why is it so controversial? Do we have an alternative?
I have no doubt an average Kenyan would love to own a house. And they can do anything to fulfil that.
That is why they have lost lots of money in dubious housing schemes. Selling plots is big business, with the buyers hoping to build a house.
No other feeling is more satisfying than owning a home. Why then would we resist a helping hand from the government?
First, we have learnt to be sceptical about the government. Strangely, we vote for a government and then distrust it. The onus is on the government to gain the trust of its citizens.
Maybe more focus on successes. Some have argued the government does not blow its own trumpet, and outsourcing that is hard.
Two, the housing project is not well explained, even at the highest level. Remember, is it a tax or a levy?
Why should money go one way like electric current in a diode?
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Kenyans are asking when the first houses will be built, and where. How will they be allocated?
Tying this money to retirement is making Kenyans uneasy. We should see maps of where the houses will be located and artists’ impressions.
Three is that Kenyans feel they should decide what to do with their money, to save or consume. The choice is the pedestal on which economics stands.
In my opinion, this is the biggest hurdle to this project. Would making it optional make employees exhale?
Four, Kenyans fear other levies or taxes will follow if this one on housing goes through.
Some also think the housing levy is a decoy to distract us from other contentious issues in the Bill.
Clearly, the number of mortgage accounts in Kenya, about 30,000 in a population of 50 million people, demonstrates we need more houses.
Slums are the other evidence of house shortage.
Mortgage rates
High-interest rates keep borrowers off. Lowering mortgage rates would spur the housing market.
Will the new government housing project force banks and other lenders to lower the rates? Can rates go down to a level that makes it more sensible to pay a mortgage than rent?
Compare a mortgage rate of 15 per cent to that of five per cent. With such high rates, it’s no wonder buying plots to build is big business.
There are three other routes to affordable housing beyond low-interest rates.
Let’s start with our proximity to the equator and sunshine all year round – no need to cool the house or heat it. No double-glazed windows, no air conditioning. With such weather, our houses should be more about privacy than shelter.
We should use the cheapest material possible. Some houses built in Nyandarua’s happy valley have mud walls and have lasted for over 100 years. Why do we need concrete and stone blocks? Why are brick houses rare, except in western Kenya? That material is readily available.
The weather is so good in Kenya that we can even stay outside. But insecurity makes houses unaffordable. Think of metal grills, burglar-proof doors, razor wires and CCTV, and perimeter walls that use more stone blocks than the house itself.
Improve security, and houses will become more affordable. When buying houses or renting, we are willing to pay a security premium.
We hire private security or seek security in numbers, living in condos or apartment blocks.
The other input into affordable housing is land.
How do we reduce its price? Think of it, a plot going for Sh10 million even before fencing it! The solution is taller buildings.
That was the solution in crowded countries like Hong Kong or Singapore. Remember only about 20 per cent of Kenya’s workers are formally employed. More the reason we should focus on these causes of unaffordability in housing.
What of economies of scale in the provision of services? Each plot builds a toilet, think much land we waste on them. How do we encourage plot owners to pool resources and reduce costs?
Let’s also remember that housing is not just about towns and cities. Rural folks are way ahead of Nairobians with their own homes, no matter the material used. Why can’t we learn from them to reduce the cost of housing?
Who praises the rural folks for housing themselves without waiting for the government’s help?
Currently, most housing in Kenya is provided by the private sector. The government is coming in to supplement that. Any incentives for that sector?
How about a negative progressive rental tax? The more houses one builds, the lower the tax rate. The supply of housing will go up and reduce the prices.
Finally, we seem to be borrowing the Singaporean model to provide housing. We have even adopted the use of pension to purchase a home. What of housing bonds? Don’t we have such bonds for roads?
Singapore is a good benchmark, but her socio-economic setup is far different. They say in Central Kenya “ndîakagwo ta ya wakinî”. You do not build a house like someone else’s, each home is unique. That could apply to our housing models.
No one doubts that affordable housing is a priority. We know the end; affordable, dignified housing. It’s the means that is contentious. Let’s address that conclusively.
