The High Court last week declared the levy unconstitutional, citing a number of illegalities that the Ruto team has swiftly moved to seal.
The three-judge bench termed the levy discriminatory as it targeted only salaried Kenyans while excluding those in the informal sector.
In a new bill sponsored by National Assembly Majority Leader Kimani Ichung'wah, the government now proposes to expand the tax net to all Kenyan adults with an income.
Like salaried employees, the government seeks to take 1.5 per cent of gross income of those outside formal employment.
"The levy shall be payable to the collector, for remittance into the fund not later than the ninth working day after the end of the month in which the gross salary was due or gross income was received or accrued," part of the Affordable Housing Bill, 2023, reads.
This means that a landlord, for instance, will now have to pay the levy in addition to a 10 per cent tax on gross monthly rental income.
A landlord earning Sh2.5 million in rent will have to part with an extra Sh37,500 every month to the exchequer as housing levy.
If such landlord has other sources of income, they would be compelled to pay more.
The new bill also means hustlers in the Jua Kali sector will have to dig deeper into their pockets to pay the housing levy.
The proposal is likely to trigger uproar at a time there is outcry on the high cost of living.
While drumming up support for the housing levy, President Ruto insisted the unemployed stood to gain the most through the jobs created and decent houses.
"I have said that those with payslips should give something small so that the unemployed have a payslip. But you [unemployed] have accepted to be lied to by the employed because they do not want to give something. They want you to continue suffering," Ruto said.
The details came just days after the government revealed a plan to have every household in Kenya pay 2.75 per cent of their monthly income to the newly created Social Health Insurance Fund.
According to the Social Health Insurance (General) Regulations, 2023, that were issued by Health Cabinet Secretary Susan Nakhumicha, the amount payable each month shall be not less than Sh300.
However, for those who are not employed the amount is paid annually.
This means that an unemployed person has to pay at least Sh3,600 every year, putting a heavy burden on the many hustlers who live from hand to mouth.
Those who fail to enlist for SHIF will be denied government services.
The Affordable Housing Bill, 2023, also proposes stiff penalties for employers who fail to remit the housing levy deductions.
The bill proposes employers to pay three per cent of the unpaid amount for every month in arrears.
The penalty has been revised upwards by one per cent from the two per cent that was proposed in the Finance Bill, 2023, now an Act of Parliament.
“Where an amount of the levy remains unpaid after the date when it becomes due and payable by a person liable to remit the amount, a penalty equal to three per cent of the unpaid amount shall be due and payable for each month or part thereof that the amount remains unpaid and shall be summarily recovered as a civil debt from the person liable to remit the amount,” the bill reads in part.
This would hit employers hard at a time the Federation of Kenya Employers has complained about the rising cost of doing business.
“We are currently in a situation where businesses are not able to meet their operational costs, and at the same time employees are not able to make ends meet,” FKE chief executive officer Jacqueline Mugo said two weeks ago, warning of looming layoffs.
In the bill before Parliament, Ruto's government proposes to establish the Affordable Housing Fund.
The bill also fleshes out the organisational structure, management and operationalisation of the fund.
It also addresses the issue of how the proceeds of the housing levy will be administered once collected.
The other issue that arose in court was the question of the identification of beneficiaries of the fund and what criteria would be used so that the process is fair, transparent and accountable.
The bill now captures the eligibility criteria and application procedure when it comes to affordable housing.
The scheme has three categories: Social housing, affordable housing and affordable market housing.
Social housing targets Kenyans with a monthly gross income of Sh20,000 and below, while affordable housing targets those with a gross monthly income of between Sh20,000 and Sh149,000.
Affordable market housing targets Kenyans whose monthly gross income is above Sh149,000.
Regarding dealing with those who will misappropriate money meant for affordable housing, the bill proposes stiffer penalties.
There will be a Sh10 million penalty or a jail term not exceeding five years or both for anyone who is found to have misappropriated the proceeds of the housing levy.
The initial Housing Fund Regulations 2018 had set the penalty for misappropriation of the housing fund proceeds at Sh10,000, a jail term not exceeding two years or both.
