Employees across Kenya are set to experience a 1.5% drop in their net salaries as the government will officially start deducting the new housing levy by the end of the month.
The Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in conjuction with KRA confirmed the commencement of the levy through a notice published on the Daily Nation on April 16, 2019.
In the notice, employers were ordered to ensure that remittance of the housing levy fund was effected by May 9, 2019.
However, the notice indicated that the monthly deductions will not exceed Ksh 5,000.
"Both the employer and employee shall each contribute 1.5% of the employee's monthly basic salary, provided that the sum of the total monthly contributions shall not exceed Ksh 5000," stated an excerpt of the notice.
According to the ministry, the funds raised would be used to finance the affordable housing scheme that forms one of the pillars in the jubilee governments' Big 4 Agenda.
The ministry also affirmed that in case an individual for some reason opts to forfeit the home built by the new fund, it may be transferred to a spouse, dependent children or in form of cash back to self.
The housing levy was set to take effect on January 1, 2019. However, COTU went to court in December 2018 to challenge the legality of the fee, citing the total lack of public participation prior to imposition of the tax as unconstitutional.
In her ruling, Justice Hellen Wasilwa suspended the levy pending the hearing of the case, terming the issue as extremely urgent.
The trade union had argued that deducting 1.5% of employees' basic salaries would plunge the population into servitude, resulting in widespread public discontent.
In an affidavit, Cotu Secretary-General Francis Atwoli argued that such a move required a serious public debate to enable stakeholders to understand the implications of the provisions.
However, Transport, Housing and Infrastructure Cabinet Secretary (CS) James Macharia, affirmed that the construction of the housing units would begin in a few weeks after the start of the housing levy deductions.
“The project is now clear and will be launched in a few weeks. The first 2,000 units will be constructed in Park Road in Nairobi,” he revealed to the Daily Nation on January 30, 2019.
