Nairobi, February 19- The Ministry of Lands, Housing, and Urban Development has clarified that the deductions made towards the Affordable Housing Programme are classified as a tax rather than personal savings. This statement was issued to address the widespread debate that followed Lands Cabinet Secretary Alice Wahome’s confirmation that the current 1.5 percent Housing Levy functions as a tax.
Initially, the National Assembly introduced the Housing Fund as a savings scheme under the Finance Act. However, Parliament later revised this approach, converting the fund into a levy. In March 2024, legislation was passed that formally transitioned the Housing Fund into the Housing Levy, mandating that all employed Kenyans contribute 1.5 percent of their income.
Following the enactment of this law on March 19, 2024, employers were required to begin deducting and remitting the levy from employee salaries. The government emphasized that these contributions are managed within a state-controlled fund, which plays a key role in financing affordable housing projects, supporting infrastructure development, and broadening access to homeownership opportunities.
Unlike voluntary savings in the housing portal, which individuals can utilize as a deposit towards purchasing a home, the levy is a national initiative designed to reduce housing costs and provide affordable financing solutions. However, making these contributions does not guarantee individuals a home through the programme. Those interested in owning a house must actively enroll in the financing options available.
During an interview on NTV’s Fixing the Nation, Wahome explained that the rent-to-own scheme could extend up to 30 years. She clarified that the levy funds the construction of houses, but contributors are still responsible for purchasing their homes through structured payment plans.
“The money being deducted is not meant to provide you with a house directly. Instead, it enables the government to build affordable homes, which contributors can then acquire through financing. It operates similarly to a tenant-purchase model, where individuals rent until they own the property,” Wahome stated.
Ultimately, the government asserts that while the levy is essential in supporting affordable housing development, homebuyers must still meet deposit requirements and commit to structured payment plans based on their chosen financing options.
Den took effect upon the Act’s assent on 19 March 2024, requiring employers to begin deducting and remitting the levy from March 2024 onwards,” the government said.
