Affordable Housing Levy Guidelines


On March 19, 2024, President Ruto signed the Affordable Housing Bill into law, following its passage by an Act of the Parliament. This Affordable Housing Act replaces a previous attempt to introduce the Kenya affordable housing levy through the Finance Act of 2023.

The Challenge and Fix

The affordable housing levy was initially introduced through the Finance Act of 2023. The initial plan required only employees to deduct an equivalent of a 1.5% of their gross monthly income as contributions to the affordable housing scheme. Thereafter, the employer would match the contributions respectively. The mandate to administer and collect the affordable housing levy was taken up by the Kenya Revenue Authority. However, in November 2023, this provision in particular was suspended by the High Court of Kenya by terming the deduction and remittance of the Affordable Housing Levy as unconstitutional. In response, the Government of Kenya filed an appeal at the Court of Appeal seeking order to continue collecting the levy. On the 26th January, 2024, the Court of Appeal rejected the Government's request to continue collecting the levy until the hearing and determination of the substantive appeal. In its decision, the Court of Appeal identified no legal basis for the Kenyan government to proceed with the deduction and remittance of the affordable housing levy thereon.

A New Approach

In response, President Ruto led an official law-making process of the affordable housing bill. The Parliament, the Affordable Housing Bill was introduced, debated, and refined to address concerns and ensure legal compliance. This process culminated in the Affordable Housing Act.

The Affordable Housing Levy Now

The Act establishes a standard 1.5% levy on the gross turn-over of non-employed personnel as well as on the employee gross salaries, with a matching contribution from employers. This levy became effective on the date the Act was signed (March 19th, 2024). Employers are now required to include this levy in their payroll calculations starting from March 2024 onwards. This tax alert has detailed the key sections of the Affordable Housing Act.

1.Affordable Housing Levy Units 

The Act has defined affordable housing as housing that is adequate and costs less than 30%of the income of a person to acquire or rent. Further, the Act has stipulated four categories of affordable housing units as follows;
  • Social Housing Unit - A house targeted to a person whose monthly income is below 20,000.
  • Affordable Housing Unit - A house targeted to a person whose monthly income is between 20,000 and 149,000 shillings.
  • Affordable Middle Class Housing Unit – Housing targeted at persons whose monthly income is over 149,000 shillings.
  • Rural Affordable Housing Unit - Housing under section 42 targeted at a person living in any area, which is not an urban area.

    2. Imposition of Affordable Housing levy  

The Act stipulates that the Levy shall be a mandatory contribution made by both employer and employee.  The contribution is expected to be made at 1.5% of the employees’ monthly gross salary with a matching contribution from the employer.  In addition, people not employed but in business are required to pay the levy at a rate of 1.5% of their gross income.  Just like the PAYE, the levy will become due and payable within nine working days after the end of the month in which the gross salary was due or gross income was received or accrued. Any non- compliance to the payment of the levy shall attract a penalty equivalent to three per cent (3 %) of the unpaid funds.   Penalties shall accrue for each month or part thereof that the levy remains unpaid and shall be recovered as a civil debt for the person liable to remit the amount.

3.Administration and Management of the Levy

  • The Collector
The Act appoints the Commissioner General of the Kenya Revenue as the levy collector charged with the responsibility of forwarding the collected levy to the Affordable Housing Fund (the Fund) 
  • The Affordable Housing Fund
According to the Act Section 8, there shall be an establishment of a Fund known as Affordable Housing Fund managed by a board. The aim of the Fund is to provide money for the design, development and maintenance of affordable housing, institutional housing and associated social and physical infrastructure.   Section 10 outlines the purpose of the fund as follows;
  1. To facilitate the provision of funds for affordable housing and affordable housing schemes in the promotion of home ownership
  2. To provide low interest loans or low monthly payment home loans, where applicable for the acquisition of affordable housing units within the approved affordable housing schemes.
  3. To facilitate design, development and maintenance of affordable housing affordable housing schemes in all counties.
  4. To facilitate development of institutional housing units.
  5. To develop long term finance solutions for the development and off-take of affordable housing.
  6. To provide funds for maintenance of any land or building, estate or interest therein, for any of the purposes of the Fund. 
  7. To fund any other activities incidental to the furtherance of the objects of the Fund.
To facilitate the provision of services to the projects under the management of the Fund.

4.Affordable Housing Relief / Claim

According to the Housing Levy Act, the following  amendment should be made in the Income Tax Act to include that expenditure incurred by a person carrying on a business in payment of Affordable Housing Levy as provided under section 5 (b) of the Affordable Housing Act, 2024 shall be deductible while computing income or profits chargeable to tax. This is to say that any business that incur the expenditure of paying the housing levy is allowed to claim the expense while declaring its profits chargeable to tax. On the other hand, a resident individual who has paid the Levy in a year of income shall be entitled to the affordable housing relief when computing the individual’s taxable income under the Income Tax Act. The current affordable housing relief is currently 15% of the employee’s contribution subject to a CAP of KES 108 000 per year.


The Cabinet secretary, through a gazette notice, may exempt from the levy any income, class of income, any person, or category of persons. At present there are no exemptions extended to any persons or any income other than the ones clarified above (non-cash benefits and income not paid regularly).

6.Implementation of the affordable Housing

Land held by a county government shall not be allocated unless the Board has, in the prescribed manner, carried out public participation and stakeholder engagement with the affected community within the county.  The Board may enter into an agreement with a public institution for;— Agreement for institutional housing. (a) the development of institutional housing units; and (b) the repayment of the monies paid out of the Fund for the development of the institutional housing units. The Board may enter into an agreement with a private institution— Agreement with private institutions and persons. (a) to develop and construct affordable housing units and associated social and physical infrastructure; and (b) for the supply of goods and materials in connection with the construction of affordable housing units.

7.Eligibility criteria and application procedure for affordable housing unit 

Any application made under subsection (1) shall be accompanied by;— (a) proof of requisite deposit as may be prescribed by the Cabinet Secretary; (b) a copy of the national identity card or such other form of identification as may be prescribed by the Cabinet Secretary; (c) copy of incorporation certificate in the case of a body corporate; (d) a copy of Kenya Revenue Authority personal identification number certificate and tax compliance certificate; and any other information determined by the board In allocating the affordable housing units the Board shall give preference to marginalized persons, vulnerable groups, youth, women and persons with disabilities.

8.Restrictions to owners of affordable housing unit

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 levy is a mandatory contribution that will be contributed by both the employer and employee. The employer is required to remit in respect of each employee both:
    • Contribution by employee at 1.5% of the employee's monthly gross salary
    • Contribution by employer at 1.5% of the employee's monthly gross salary
The responsibility to remit the levy by the ninth day of the following month lies with the employer.
  • The Act also incorporates non-salaried persons, who were not previously covered by the provisions that the High Court suspended. Under the new law, Kenyans in the informal sector and others not salaried will pay 1.5 per cent of their monthly gross earnings to fund the government’s housing programme.
  • The Kenya Revenue Authority had previously clarified that gross monthly salary constitutes basic salary and regular cash allowances. The regular allowances include housing, travel or commuter and car allowances, as well as any regular cash payments but this excludes non-cash payments as well as income not paid regularly, such as leave allowance, bonus, gratuity, pension, severance pay, or any other terminal dues and benefits.
  • Affordable housing relief - Effective 19 March 2024, the affordable housing relief shall be extended as per section 30A of the Income Tax Act. The amount of the relief shall be 15% of the employee's contribution but shall not exceed KES 108,000 per annum (KES 9,000 per month).
  • Exemption- At present there are no exemptions extended to any persons or any income other than the ones clarified above (non-cash benefits and income not paid regularly).


Please be aware that the rules for the Affordable Housing Act are still being finalized. These regulations will clarify how affordable housing units will be allocated, how ownership can change hands, and how to handle disputes related to unpaid contributions to the housing fund. The affordable housing levy is based on the idea that everyone deserves safe and secure housing, as enshrined in our Constitution. We believe that if implemented effectively, this program can significantly address the challenge of homeownership in Kenya. However, it's important to acknowledge the cost.  Employees will see a 1.5% reduction in their salaries, and businesses will experience a 1.5% decrease in their turnover, as both contribute to the fund.

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