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POOR POLICY MAKING

Why mandatory housing levy is an awful idea

In Summary

• The law does not spell out exactly how the money raised will be used toward this purported purpose.

• There’s no option to opt out, which makes no sense because there are many reasons one would want to opt out. One could already be a homeowner or paying a mortgage for one.

Housing PS Charles Hinga
Housing PS Charles Hinga
Image: FILE

Every country has laws it enacts to pursue policies that soon or later prove to be extremely ill-conceived, with some having long-lasting adverse effects.

For example in Kenya, the racist colonialists passed the Vagrancy Act in 1968 intended to nab innocent Kenyans for being guilty of nothing but being unemployed. The law went even further to define “vagrant” so broadly to include anyone “with no fixed abode, unemployed, and has no permanent means of providing for himself.”

The law was racist to the core because it was used to arrest any African walking around a White area. There were other laws that were used to restrict the movement of Kenyans in their own country.

As one observer put it, “technically, if you were broke and unemployed, you could be arrested and hauled into a rehabilitation center.” Imagine that. This stupid and racist law was finally repealed in 1997.

That doesn’t mean we’ve had the last of these ill-conceived or ill-advised laws, even though it’s safe to say we don’t have to worry about those that were racist or tribalism-based as that’s in the rare view mirror now.

However, neutral, non-tribal laws are still being applied in a manner such that they heavily favour one tribe or another against the letter and spirit of the Constitution. That's what the handshake and the Building Bridges Initiative intend to cure.

Which brings us to the mandatory housing levy, a law that history will no doubt confirm is just as ill-conceived and ill-advised as the Vagrancy Act of 1968, unless something drastic is done to fix it, if not altogether repealing it.

To be sure, the vision to have all Kenyans have a home is neither ill-conceived nor ill-advised. How the government is going about this is.

Under the government’s plan, an employer and employee are separately required to contribute 1.5 per cent of the employee’s monthly basic salary.

All well and good except there are several issues that turn this into a very bad idea.

First, the law does not spell out exactly how the money raised will be used toward this purported purpose. This would easily mean it’s another cash cow for hungry corruption cartels, who without doubt will find ways to effortlessly steal from the fund as it is.

Second, the law does not recognise individual efforts to build their own homes. In fact, the opposite can be said to be the case — it discourages someone from making efforts to build their own home, hoping to get one from the government.

Third, in the same vain, the law burdens those saving to buy land or build because it makes it more difficult as what little they may have left over from their salary will be made even less when the mandatory tax is levied on the already heavily taxed worker.

Fourth, the levy will disincentivise employers already providing allowances. They’ll likely deduct their 1.5 per cent of the levy from the house allowance they normally give, leaving the burden on the employee.

Fifth, there’s no option to opt out, which makes no sense because there are many reasons one would want to opt out. One could already be a homeowner or paying a mortgage for one.

Last but not least, the government has the right to levy taxes and an obligation to ensure that the people’s economic, social, and cultural rights, including the right to housing, are provided.

That, however, doesn’t mean ramming through Parliament, enacting and trying to enforce a bad law like this one.

Rather, the government should first recover some of the looted funds, enough to raise the Sh57 billion sought in this bad law and then follow that with creating opportunities for economic growth and prosperity.

This will in turn make it possible for individuals to afford and buy their own homes without government help.