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Workers spared housing levy MPs reject Treasury’s proposal

Workers have been spared a pay cut of up to Sh5,000 after MPs shot down a Treasury’s proposal to create a fund to finance a new low-cost housing fund.

The Treasury had set the low-cost housing deduction at 0.5 per cent of the gross pay per month as long as the contribution does not exceed Sh5,000.

Employers were to match the employees’ contribution.

The MPs said the move would cause significant cost burden to companies while hurting workers.

The State Department of Housing announced two months ago that it was finalising regulations to operationalise the housing development fund, whose finer details are yet to be released.

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This was the first time that the Housing ministry was establishing the fund that had been lying dormant under the Housing Act for decades.

Its implementation meant an employee earning Sh100,000 would contribute Sh500 every month to the fund – up to the maximum Sh5,000 for those earning Sh1 million and above.

The creation of the fund was meant to help the government realise the goal of delivering half a million affordable housing units in five years.

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However, the provision faced hostility from unions and employers who consider the tax burden already too heavy on them.

Four pillars

Affordable housing is one of the four pillars of President Uhuru Kenyatta’s agenda for the next four years.

Treasury defended introduction of yet another payroll levy on people in formal employment, who are already burdened by multiple levies, saying that it would help the government realise the goal of affordable housing.

The Finance Bill has also introduced amendments to the Central Bank of Kenya Act to include regulation of mortgage refinance companies.

The move paves the way for the establishment of state-backed Kenya Mortgage Refinancing Company meant to address the demand side of the housing market by offering liquidity to the mortgage industry.

Treasury did not offer details on how the fund will be managed.

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