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What is Housing Levy and What You Need to Know About it

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Employee Management

What is Housing Levy and What You Need to Know About it

Affordable housing is essential for every Kenyan citizen today. The Kenyan constitution dictates that the state should

Workpay
April 17, 2019
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April 17, 2019
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What is Housing Levy and What You Need to Know About it

Affordable housing is essential for every Kenyan citizen today. The Kenyan constitution dictates that the state should take legislative measures to ensure that there is adequate and available housing for every Kenyan. Among the key aspiration of the President’s big four agenda is to deliver five hundred thousand affordable homes by 2022 to ensure most Kenyans own a home. To achieve this, there is a suggestion to introduce a payment plan to the National Housing Corporation (NHC) commonly known as “The Fund.”

Contribution

The Kenyan government has directed all employers to deduct 1.5 percent from their monthly income to contribute to the housing levy starting May. So, employers in all organizations are required to deduct and remit the amount by the 9th of each subsequent month. Employers and workers shall contribute 1.5 percent of their monthly income not exceeding KES 5000. On the other hand, non-citizens and those in informal employment are required to contribute about KES 200 every month.

The benefit of the housing levy

The government focus is on the 2.5 million salaried Kenyans who are expected to generate about KES 57 billion a year.  As a result, local and international developers have expressed interest in putting up one million units to help out.  The government expects to expand the project to other regions. Individuals earning above KES 100, 000 will be refunded their contribution plus interest after 15 years of contribution. Contributors will be allowed to use their savings as collateral when securing mortgages. Employees who earn below KES 50, 000 will get housing under the tenant purchase scheme. However, those who earn over KES 50, 000 will qualify for a seven percent mortgage payable within 15 years. Other benefits of this housing levy fund include:

  • Individuals will be able to purchase a home under an affordable housing scheme.
  • If you don’t get a house, the contribution is transferred to a pension scheme.

Conclusion

In conclusion, the government requires every employer to deduct and remit the levy together with other payroll statutory deductions. The regulations indicate that failure to adhere to this directive will attract various penalties for non-compliance. Similarly,  those who will not get a house from this plan will get a refund after retirement. Subscribe to our 14 days FREE UNLIMITED ACCESS to our complete HR & Payroll solution.

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Workpay is a HR and Payroll software company that offers time & attendance, payroll, human resource, leave, expenses and remote teams solutions to businesses across Africa.

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