Explainer: All you need to know about Ruto's 3% housing fund cut

Kenyans have all but been in a frenzy after his excellency president William Ruto revealed that there would be new deductions to their payslips and it isn't a small cut.

If you haven't heard about it for various reasons the president announced government plans to introduce a housing levy for every Kenyan employee with employers contributing just as much, for every employee they have.

But what is this housing levy and how is being deducted?

A housing Fund is a sum of money contributed to the development of housing facilities within a country. 

The housing fund in Kenya came into effect in 2019 when the government introduced a 1.5% salary cut for every employee. This means every employee would contribute about Sh 200, with the limit of the combined deductions not exceeding Sh 5,000 per month. 

Implementation of the fund hit a snag when the court issued restraining orders after a group of employers and consumers challenged it in court. In December 2019, former president Uhuru Kenyatta directed the National Treasury to make the housing levy voluntary. 

The housing levy regulations 2018 placed employees earning up to KSh 19,999 under the Social housing scheme, Low-cost housing (between KSh 20,000 and KSh 49,999). 

Employees earning between KSh 50,000 and KSh 149,999 under the Mortgage gap housing while those pocketing over KSh 150,000 under the Middle to high-income housing Under regulations, the kitty managers face a penalty for misappropriation of funds not exceeding KSh 10,000 or two years of imprisonment or both.

According to the head of state, now the levy isn't optional and they will start the rollout with civil servants before extending it to other workers in the formal and nonformal sectors.

The government is on a plan to build over 200,000 affordable housing units every year to bridge the existing two million gap by 2030. 

Speaking about the project President William Ruto said his administration intends to build one million housing units by 2027. According to him, low-income earners in the country will take up the units offered by the affordable housing programme. 

Due to this, the president feels it is only right that civil servants (all government-employed Kenyans) lead by example. In return be the first to benefit from the program.

Ruto said Kenyans will contribute 3% of their basic salary to start their journey to affordable housing with their employers contributing another 3% making the total housing fund levy 6%.

"We will start with all 700,000 civil servants who will contribute 3%, the government will also contribute 3% to the Housing kitty,” said the president.

He said the levy will extend to all employees in the country, with the law requiring the employer to contribute a similar amount per employee to the kitty. 

According to Ruto, the housing levy will improve the country's reserves, together with the National Social Security Fund (NSSF), to reduce external borrowing.

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