NEW DEVELOPMENTS
This page provides a summary of key developments within the legal and regulatory framework relevant to the affordable housing sector in Kenya. The below updates are current as at 10th September 2024
Retirement benefits (mortgage loans) (amendment) regulations, 2020
· In November 2022, the Regulations were quashed and an order was issued against their implementation by the High Court in Republic v National Assembly & 2 Others; Okoiti (Exparte); Retirement Benefits Authority (RBA) & 2 others (Interested Parties) (Judicial Review) (23 November 2022) (Judgement).
· The Court found that Section 38(1A) of the Retirement Benefits Act and the Regulations were introduced through a flawed parliamentary process and lack of public participation.
Finance Bill, 2024
· After month-long demonstrations and protests against the Finance Bill, 2024, the president backed down and failed to assent to the bill therefore with it all the potential changes that may have affected the housing value chain sunk.
Finance Act, 2023
· The Court of Appeal declared the whole of the Finance Act unconstitutional due to lack of public participation in. However, the Supreme Court on the 20th of August, 2024 issued conservatory orders suspending and staying the declaration by the Court of Appeal. (See Cabinet Secretary for the National Treasury and Planning & 4 others v Okoiti & 52 others (Petition E031, E032 & E033 of 2024 (Consolidated)) [2024] KESC 47 (KLR) (20 August 2024) (Ruling))
· The Supreme Court in the Cabinet Secretary for the National Treasury and Planning & 4 Others v Okiya Omtata Okoiti & 52 Others Petition No. E031 of 2024 and consolidated with petitions No E032 and EO33 of 2024[i] held that the Finance Act is constitutional. Given that the Supreme Court is the highest court in Kenya it is unlikely its decision will be challenged.
· The Supreme Court’s decision together with the withdrawal of the Finance Bill 2024 renders the Finance Act 2023 to be relevant and applicable.
National Retirement Benefits Policy
· The Cabinet approved the draft National Retirement Benefits Policy on 3rd November 2023.
National Building Code, 2024
· The code had existed as the draft National Building Code, 2022 for a while.
· It was published as the National Building Code 2024 on 1st March 2024 vide Legal Notice No. 47 of 2024.
· The Code repeals the Local Government (Adoptive By-Laws) Building Order of 1968. The Code will be operational one year after its publication.
National Construction Authority (Defects Liability) Regulations, 2020
· The High Court on the 28th April, 2022 in Republic v National Construction Authority & 2 others; Joint Building and Construction Council (Exparte) (Judicial Review Application E1120 of 2020) [2022] KEHC 333 (KLR) quashed these regulations for lack of consultation with the NCA Board and consideration of all submitted views and the fact that the regulations were not tabled in parliament for approval as required by the National Construction Authority Act.
Affordable Housing Act, 2024
· The Act came into force on the 21st March, 2024 and provides a framework for the development and access to affordable housing and institutional housing including the imposition of the Affordable Housing Levy.
Affordable Housing Levy
· The Affordable Housing Levy (“Levy”) is imposed by the Affordable Housing Act 2024 payable at a rate of 1.5% on the gross salary of an employee with a matching contribution from the employer. The Levy was initially introduced through Section 84 of the Finance Act 2023 as an amendment to the Employment Act. This was however challenged before the High Court in a number of cases.
· The Court decided that the introduction of the Levy through an amendment of the Employment Act by the Finance Act was unconstitutional as it lacked a comprehensive legal framework providing for its administration. The Court also issued orders barring the collection of the Levy.
· In compliance with the High Court’s ruling, the National Assembly passed the Affordable Housing Act, 2024 upon which the Levy is currently anchored.
Housing Scheme Fund Regulations, 2018 (Legal Notice No. 238 of 2018)
· These regulations were revoked by the Affordable Housing Act 2024 and are not applicable.
Emerging jurisprudence affecting housing in Kenya
a) The Cabinet Secretary for the National Treasury and Planning & 4 Others v Okiya Omtata Okoiti & 52 Others Petition No. E031 of 2024 and consolidated with petitions No E032 and EO33 of 2024.
· The above Petitions before the Supreme Court are a culmination of a legal battle challenging various changes proposed by the Finance Act 2023 and the constitutionality of the Act in its entirety. Below is a summary of the different rulings by the courts leading to the petitions before Supreme Court:
Supreme Court
SC Petitions No. 31, 32 and 33 of 2024
Court of Appeal
National Assembly & Another v Okiya Omtatah Okoiti & 55 Others
Judgement – The Finance Act 2023 held to be unconstitutional in its entirety
High Court
Okoiti & 6 Others v Cabinet Secretary for The National Treasury and Planning & 3 Others, Commissioner-General, Kenya Revenue Authority & 3 Others (Interested Parties)
Judgement– Some provisions of the Act were held to be unconstitutional. (For instance, the amendment of the Employment Act to provide for the Affordable Housing Levy.
· On 31st July 2024, the Court of Appeal declared the entire Finance Act 2023 to be unconstitutional for the following reasons:
The National Assembly failed to give reasons for the rejection or adoption of proposals emanating from the public participation process; and
Failure to include revenue estimates in the Appropriation Bill 2023 and subsequently the Appropriation Act 2023. These estimates were also not provided in the process leading to the enactment of the Appropriation Act, 2023 and the Finance Act 2023 in violation of the Constitution of Kenya 2010, which requires submission of the revenue and expenditure estimates to the National Assembly two months prior to the end of each financial year.
· The constitutionality of the introduction of the Affordable Housing Levy through the Finance Act 2023 was also an issue for determination in the suit before the Court of Appeal. This was however determined to be moot given the enactment of the Affordable Housing Act 2024 on which the levy is currently hinged.
· The impact of the nullification of the Finance Act 2023 was a reversion to the prior regime i.e. Finance Act 2022 particularly in light of the rejection of the Finance Bill 2024 by the President and its subsequent withdrawal by the National Assembly.
· The Court of Appeal’s decision was appealed before the Supreme Court together with applications seeking orders to stay the judgement. On 20th August 2024, the Supreme Court granted the conservatory orders staying the implementation of the Court of Appeal’s judgement pending the determination of the appeal. This rendered the Finance Act 2023 applicable as the suit was being heard.
· On 29th October 2024, the Supreme Court pronounced itself on the matter and it set aside the Court of Appeal’s finding declaring the Finance Act 2023 to be unconstitutional.
b) Gikenyi & 41 Others v Cabinet Secretary Lands & 13 Others
· Six petitions were filed before the High Court challenging the constitutionality of the Affordable Housing Act 2024 on the following grounds:
i. Lack of adequate public participation prior to its enactment;
ii. The affordable housing levy imposed by the Affordable Housing Act, 2024 is discriminatory and imposes an extra burden on the taxpayer.
· The matter was determined, with the High Court ruling that the right legislative process was followed in the enactment of the Affordable Housing Act 2024, including adequate public participation was conducted. The Court also held that the petitioners had failed to prove that the affordable housing levy was discriminatory or that it imposed extra burden on the taxpayer.
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