Finance Bill proposals streamline how one can sell affordable housing units

The Finance Bill 2024 has proposed the deletion of Section 54 of the Affordable Housing Act, 2024, which will now streamline the disposal of units acquired through the state-funded programme.

The section proposed for deletion  contains the restrictions on how one can sell a unit acquired through the Affordable Housing Programme.

The Bill, which will inform the tax regime for the financial year 2024/25, explains that the deletion of Section 54 is based on an advisory from the Attorney General.

The Bill has also proposed an affordable housing relief for employees, set at 15 per cent but not exceeding Sh108,000 per annum.

This means that for every contribution an employee makes to the Affordable Housing Fund, their relief will be 15 per cent of the contribution. For example, if the deduction is Sh1,500, the employee will be entitled to a relief of Sh225.

“The Bill also amends Section 54 of the Affordable Housing Act to revise the provision following the advisory from the Attorney General,” the Bill reads in part.

Section 54 of the Affordable Housing Act states that “except with the prior written consent of the Board, a purchaser of an affordable housing unit under this Act shall not by contract, agreement, or otherwise, sell or agree to sell his or her unit or any interest therein to any other person.”

The previous restriction, as indicated in the Finance Act 2023, was seven years. However, when the levy was contested in court and later declared unconstitutional, Parliament resolved to streamline it by creating the Affordable Housing Act, which included Section 54.

This decision, however, did not sit well with stakeholders who feared that well-to-do individuals might exploit this section, disadvantaging Kenyans in dire need of housing units.

“Our view was to put a caveat of seven years, but Parliament decided not to prescribe it in the statute. However, you cannot sell the unit without the Board’s permission,” explained Principal Secretary of the State Department for Housing & Urban Planning, Charles Hinga, during an interview with The Standard Group’s Spice FM.

“I think in the regulations, they will sort out the details,” he added.

In the Affordable Housing Regulations published a month after the Act came into force, this restriction was set at eight years.

“For purposes of Section 54 of the Act, a purchaser shall not sell their affordable housing unit until eight years after the completion of payment of the agreed price,” the regulations state in part.

It adds that the provisions of subregulation (1) — the above-quoted section — shall not apply to the purchase of an affordable housing unit through a mortgage.

It also states that upon meeting the requirement under subregulation (1), a purchaser of an affordable housing unit who intends to sell or agrees to sell the unit or any interest therein to any other person shall seek the consent of the Affordable Housing Fund Board in accordance with Section 54 of the Act.

“An application for consent to sell an affordable housing unit under regulation 31(3) shall be made in writing to the Board, indicating the reasons for the request. Upon receipt of an application under this regulation, the Board shall make a determination and notify the applicant of its decision within 14 days,” the regulations read.

The Affordable Housing Levy was introduced in the Finance Act 2023 and is contributed by employees and employers at 1.5 percent of the worker’s gross income, which is one reason it is being contested.

The levy is also expected to be paid by self-employed entities, with a recent memo from the tax authorities reminding landlords and small business owners to comply with the provisions. The payment is due by the ninth of every month starting in May.

There are currently ten cases in court against the implementation of the levy.