Civil Servants to Get Another Pay Rise in House Allowance Review

Civil Servants to Get Another Pay Rise in House Allowance Review

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Victor Juma

10 May 2011

ivil servants could get yet another pay increase if plans to get their housing allowances in tune with the prevailing rental charges by January next year succeeds.

Public Service minister Dalmas Otieno on Monday said the government had asked the Kenya National Bureau of Statistics (KNBS) to conduct a fresh audit of rents countrywide whose outcome will be used to review housing allowances at the beginning of next year.

The allowances were last reviewed 10 years ago, leaving civil servants way behind the prevailing rents that have more than doubled in most segments of the market over the same period.

"Current house allowances paid to civil servants are not competitive," said Mr Tom Odege, the head of Kenya Civil Servants Union, who said the review was long overdue.

Nairobi-based civil servants in job group K have, for instance, been receiving a house allowance of Sh10,000 per month rendering the mostly senior managers in the rank incapable of accessing housing in middle income estates where rents range between Sh25,000 and Sh50,000 a month.

To bring these allowances up to speed with the prevailing market rates means the government will have to double or triple what it offers the lowest paid workers signalling that additional provisions must be made in next year's budget to cater for the new pay structure.

Kenya's real estate market has registered its highest growth rates since 2003, more than tripling sale prices in the mid and upper segments with a similar impact on rents.

Official statistics show that a rapid urbanisation, undersupply of houses and the steady rise in private sector incomes as the economy grew uninterrupted between 2005 and 2007 were the main drivers of the surge in rental charges.

Public service pay, which remains largely out of tune with the developments in the economy, has eroded the competitiveness of the more than 200,000 government employees pushing many of them to the fringes of most cities or low income estates where rents are affordable.

Mr Otieno also announced plans to change the current housing allowances payment structure that splits the workers based on whether they live in cities, large or small municipalities.

Uniform allowances

Under the new dispensation, there will be only two categories of house allowances: for those living cities and the other geographical zones.

This means all municipalities will be lumped together and the workers paid uniform allowances.

Civil servants living in Nairobi, Mombasa and Kisumu have been getting the highest housing allowances based on the relatively higher cost of living.

Those living in large municipalities like Nakuru and Eldoret form the second tier in terms of allowances paid civil servants in the smaller municipalities have been getting the lowest allowances.

Mr Otieno's plan also portends a change in the structure of remuneration for civil servants living outside cities.

It could lead to possible loss of income for those living in large municipalities who will be lumped with their counterparts in small towns.

Nairobi-based public servants in job group L have, for instance, been earning house allowances of Sh20,000 per month compared to Sh12,000 and Sh8,000 that their peers in large and small municipalities earn respectively.

The least paid workers in job group A earn an average of Sh3,000 per month, which can only pay rent in informal settlements and Nairobi's low end estates like Kayole and Dandora.

Job group A -- drivers, personal secretaries, cleaners and messengers -- are set to be the biggest winners in the housing allowance reviews that are among a raft of efforts to reform the civil service and make it competitive in the labour market.

Kenya's annual demand for housing stands at 150,000 units whereas the market can only supply 30,000, leaving an annual shortfall of 120,000 units.

The shortage has been more acute in the lower end of the residential property market that is accessible to the majority of government employees.

Since the property boom began in 2005, a large fraction of the big investments in residential housing has gone to the middle and high end segments of the market where investors are assured of higher returns from wealthy tenants and buyers, leaving the low end market largely underdeveloped.

Rapid urbanisation, driven by rural-urban migration and expansion of the population has only added impetus to the housing crisis.

More than 12 million people or 32 per cent of Kenya's 38.6 million people now live in urban areas, according to the according to the 2009 census.

Since July last year, the government been paying a third of commuter allowances to civil servants in job groups A to Q.

Those on job groups A to F, for instance, get Sh1,100, while those in job groups G to J receive Sh1,400.

Union leaders say they expect the least paid workers to benefit further as they push for full payments of the commuter allowances agreed on in 2006 besides a general pay hike of 22.5 per cent and medical allowances.

"We are consulting with the government to implement the outstanding benefits and give civil servants a pay rise of 22.5 per cent," Mr Odede said.

Higher housing allowances for hundreds of thousands of government employees is however expected to renew competition for decent housing around the cities and towns, a move that could drive up rental charges in the near term.

This is set to benefit land lords holding residential properties where rental charges have slowed down in the past few years, especially in the middle and high end market.

The increase in benefits to civil servants, including house allowances is however expected to pile pressure on the government's wage bill at a time when revenue collection is being eroded by the recent tax waivers on key commodities like wheat, maize, diesel, and kerosene to avert public unrest over the surging costs of living.

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