Govt Invests More Housing Levy Billions in T- Bills as Construction Lags Behind

The Affordable Housing Board has announced that Ksh46 billion from housing levy contributions have been invested in government securities, accounting for more than half of the total deductions collected. 

The figure marks a double increase from the Ksh20 billion that had been invested in government securities in early 2024. 

This decision was made to utilize the funds effectively amid delays in the construction process, rather than leaving the money idle in current accounts.

According to Sheila Waweru, Chair of the Housing Levy Board, the funds have been invested in short term government securities to prevent the money from lying idle in current bank accounts. There is more money coming to the fund every month than the amount being spent on construction projects. 

“It is not prudent even for the government to have money seated, lying idle in an account. The money is safe, fully invested in government securities and the accounts we are operating are CBK accounts which have full sight of the government on every expenditure. 

“So we can put the money in Treasury bills as a manager of the [affordable housing] fund and it brings in additional money, say Ksh2 billion, and that enables us to put up more units which we would not do if the cash was staying in an account idly. This is a measure for prudent management of the fund,” Waweru was quoted by Nation. 

The funds are currently held in 90-day Treasury Bills, a move that has drawn criticism from some quarters. Critics argue that this approach effectively allows the government to lend itself money through mandatory contributions from employed workers.

This development comes a few days after Lands Cabinet Secretary Alice Wahome announced a significant reduction in the government's housing targets, scaling down from one million units per year to “at least 700,000”. 

Wahome blamed court cases as the biggest factor in the delayed construction. 

The Controller of Budget, Margaret Nyakango, has also raised concern over the low absorption rate of the housing levy contributions. In a report on the 2023/2024 Financial Report, Nyakango noted that only 26 percent of the total funds contributed had been put into building houses. 

Since the housing levy was introduced in August 2023, a total of Ksh88.7 billion has been collected. Under this scheme, employees contribute 1.5% of their gross salary, matched by an equal contribution from their employers.

However, the levy has faced criticism, particularly from workers who are servicing loans. Some have reported that the deductions have significantly reduced their net pay, causing it to fall below the required one-third minimum threshold.