How government is losing millions in rents from housing units

The government is losing more than Sh176.8 million in rent collections due to boarded houses that are either uninhabitable or have been transferred to other agencies.

A report by the Auditor General Nancy Gathungu has raised concerns over the state of these buildings, detailing how boarded units are now shrinking the government’s stock of houses.

The audit report shows no plan to replenish these units, which will further reduce rent collections from government houses. This is even as the government is battling with unremitted and below-target rent collections.

According to the report for the 2023/2024 financial year, the statement of receipts and payments shows Sh974.8 million was collected as rent from various government houses.

“However, the statement of comparison of budget and actual amounts indicated that the State Department had budgeted to collect Sh1.1 billion against actual on a comparable basis of Sh974.8 million, resulting in an under-collection of Sh140.2 million or 13 per cent of the budget,” the report says.

Rent potential

The report shows that the State Department for Housing and Urban Development is expected to receive rent amounting to Sh1.06 billion. “However, review of annual rent receipts schedule revealed that the State Department received Sh974.8 million, resulting in an unrealised rent of Sh8.3 million,” the report says.

The total number of government houses across the country as at June 30, 2024, stood at 49,555 with an expected monthly rental income of Sh109.8 million, resulting in an annual rent potential of Sh1.3 billion on the assumption of full occupancy, according to the report.

However, the report says rent collections on government houses for the year under review amounted to Sh974.8 million, resulting in an under-performance of Sh342.8 million or 26 per cent of the full potential.

“The under-collection of rent is likely to impact negatively on the ability of the State Department to meet its revenue and expenditure target,” the report says.

Further analysis of the inventory showed that 5,397 units under the State Department of Housing and Urban Development have been boarded countrywide.

This is either through demolition, transfer to other entities, natural perils (fire, flooding, condemned, re-development) or converted to office for other entities.

“The boarding of the houses has depleted the government houses, resulting in revenue loss and reduced availability of houses for critical government services. These boarded houses had an estimated annual rent of Sh176.8 million, assuming full occupancy,” the report says.

Government houses

The report adds that despite the boarding of the houses, there is no evidence that the State Department of Housing and Urban Development has embarked on the re-stocking of the government houses pool or inventory.

“In the circumstances, the effectiveness of internal controls on revenue collection could not be confirmed,” the report says.

In the 2018-2022 strategic plan for the then Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works, the government had targeted to deliver 400,000 affordable housing units, 100,000 social housing units, 10,400 units for civil servants’ housing schemes and refurbish 14,272 government houses.

The shortage in government housing is documented in the Auditor General report as well, which shows that in the period, the State Department for Correctional Services leased a house for the Commissioner General of Prisons at a monthly rent of Sh250,000. “During the year under review, the State Department paid Sh3 million as rent in respect of the leased house,” the report says.

The Auditor General, however, notes that the Commissioner General of Prisons was entitled to a house allowance of Sh100,000 per month; therefore, the provision of a Sh250,000 leased residential facility was higher than his benefit.

The report says management did not provide evidence to confirm the registration of the lease with the State Department for Housing and Urban Development. Additionally, the higher benefit was not based on advice from the Salaries and Remuneration Commission (SRC) pursuant to the provisions of Article 230(4)(b) of the Constitution of Kenya.

“In the circumstances, management was in breach of the law,” the report says.

Severally, concerns have been raised over the state of housing for the Prison Services and the National Police Service, with the government offering pledges to either build new units or refurbish the old ones, which explains why leasing is the only available option, especially for senior offices.

Findings contained in the Kenya National Taskforce on Police Reform, led by former Chief Justice David Maraga, detailed the housing challenges for the uniformed government workers.

The report states that in many places across the country, the Kenya Prison Service officers and National Police Service are living in mud housing, dilapidated, congested, and in condemned structures.

In Kenya Prison Service stations, the report says, different families live in dormitories with each family only separated by a bedsheet curtain.

“Officers also live in tents or shacks that they construct for themselves. Needless to say, these conditions undermine the morale of officers in the Service and consequently affect their performance and service delivery,” the report reads.

Sustainable construction

To remedy the situation, the taskforce recommends that the Prisons Council (to be appointed) should urgently develop a housing policy to guide matters such as affordable and sustainable construction and the equitable allocation of houses.

“The taskforce urges the government to adequately fund the NPS to modernise its facilities, equipment, and gear, and enhance its logistical and technological capabilities as well as provide decent housing for NPS officers to enable the Service discharge its mandate efficiently and effectively,” the report says.

According to the National Police Service (NPS) strategic plan 2023-2027, this matter is mentioned. The plan put forward a request asking the government to forfeit the rent it collects from police housing and instead channel it to NPS who can do renovations on time.

“Seek part retention of police generated housing revenues to finance housing and facility development and renovations,” reads the strategic plan in part.

This is in a bid to fill the Sh195.6 million resource gap that the NPS has in the implementation of the plan.