Housing Levy in Kenya: Everything You Need to Know

The Housing Levy has been one of the most debated fiscal policies in Kenya since its introduction. Designed to fund the Affordable Housing Programme (AHP), the levy affects every employed Kenyan and has sparked both support and controversy. This comprehensive guide explains everything you need to know about the Housing Levy.

What Is the Housing Levy?

The Housing Levy is a mandatory contribution deducted from employees' salaries and matched by employers to fund the construction of affordable housing units across Kenya. It was established under the Affordable Housing Act, 2024, replacing the earlier Housing Fund provision in the Finance Act, 2023.

Key Facts

• Rate: 1.5% of gross monthly salary (employee) + 1.5% (employer)
• Total contribution: 3% of gross salary per employee
• Effective date: March 2024 (following Supreme Court ruling)
• Administered by: Kenya Revenue Authority (KRA) via iTax
• Beneficiary: Affordable Housing Fund managed by the National Government

How the Housing Levy Works

For Employed Individuals

1. Deduction: Your employer deducts 1.5% of your gross salary each month
2. Employer match: Your employer contributes an additional 1.5%
3. Remittance: Total 3% is remitted to KRA by the 9th of the following month
4. Tracking: Contributions are recorded against your KRA PIN

For Self-Employed Individuals

1. Declaration: Declare your income on iTax
2. Contribution: Pay 1.5% of declared income
3. Frequency: Monthly or as determined by KRA
4. Compliance: Mandatory for all registered taxpayers

Calculation Examples

Registration and Compliance

How to Register

1. Log in to your KRA iTax account
2. Navigate to the Housing Levy section
3. Confirm your employment details
4. Employers register employees through their iTax portal
5. Obtain your Housing Levy reference number

For Employers

1. Register on iTax as a Housing Levy agent
2. Add all employees to the system
3. Deduct 1.5% from each employee's gross salary
4. Match with 1.5% employer contribution
5. File and remit by the 9th of each month
6. Generate employee Housing Levy certificates

Penalties for Non-Compliance

• Late payment: 3% penalty per month on unpaid amount
• Under-declaration: Up to KES 10 million fine or imprisonment
• Employer non-remittance: Criminal liability and penalties
• Fraudulent claims: Up to KES 5 million fine

Legal Journey of the Housing Levy

Timeline

1. 2018: President Uhuru proposes Housing Levy under Big Four Agenda
2. 2019: First attempt through Finance Act, challenged in court
3. 2023: Reintroduced through Finance Act, 2023
4. November 2023: High Court declares the levy unconstitutional
5. February 2024: Court of Appeal overturns the High Court ruling
6. March 2024: Supreme Court upholds the levy as constitutional
7. March 2024: Levy becomes effective and deductions begin
8. 2024: Affordable Housing Act enacted to provide comprehensive framework

Key Court Rulings

• The Supreme Court ruled the levy is a tax, not a contribution
• Parliament has the authority to impose taxes for housing
• The levy serves a legitimate public purpose (affordable housing)
• Employer matching does not violate constitutional rights
• Refund provisions protect contributors' financial interests

Benefits of the Housing Levy

1. Access to Affordable Housing

• Contributors get priority access to AHP housing units
• Units priced at KES 1M–3M (significantly below market value)
• Allocation based on contribution history and need

2. Refundable Contributions

• If you don't purchase an AHP unit within 7 years, contributions are refundable
• Refund includes accrued interest
• Application for refund through the Boma Yangu portal

3. Tax Relief

• Housing Levy contributions qualify for tax relief
• Monthly relief of 15% of contributions (capped at KES 9,000/year)
• Reduces your overall income tax burden

4. Mortgage Subsidy

• Contributors can access subsidised mortgage rates
• Kenya Mortgage Refinance Company (KMRC) backs affordable mortgages
• Interest rates as low as 9.5% through partner banks

5. Supporting National Development

• Contributes to closing the 2M+ housing deficit
• Creates construction jobs (estimated 500,000+ jobs)
• Develops infrastructure in underserved areas
• Stimulates the building materials industry

How to Apply for an Affordable Housing Unit

Step 1: Register on Boma Yangu

1. Visit bomayangu.go.ke
2. Create an account using your ID number
3. Complete your profile with personal and financial details
4. Link your KRA PIN to track Housing Levy contributions

Step 2: Browse Available Projects

• View ongoing and completed AHP projects
• Filter by location, unit type, and price
• Check eligibility requirements for each project

Step 3: Apply for a Unit

1. Select your preferred project and unit type
2. Submit your application through the portal
3. Provide supporting documents (ID, KRA PIN, payslips)
4. Await allocation notification

Step 4: Secure Financing

• Apply for an affordable mortgage through partnered banks
• Use your Housing Levy contributions toward the deposit
• Sign the sale agreement and complete the purchase

Allocation Criteria

• Length and consistency of Housing Levy contributions
• First-time homebuyer priority
• Income level (lower income gets priority)
• Family size and housing need
• Geographic preference and availability

Affordable Housing Projects Funded by the Levy

Completed and Ongoing Projects (2025)

Frequently Asked Questions

Q: Can I opt out of the Housing Levy?

A: No. The Housing Levy is a mandatory tax under the Affordable Housing Act. All employed and self-employed Kenyans are required to contribute.

Q: What happens to my contributions if I leave Kenya?

A: Your contributions remain in the system. You can apply for a refund after 7 years or use them to purchase a unit if you return.

Q: Can I use the levy to buy a house I choose?

A: The levy is specifically for units built under the Affordable Housing Programme. You cannot redirect contributions to private purchases. However, after 7 years, you can claim a refund.

Q: Does the levy apply to allowances and bonuses?

A: The levy is calculated on gross salary, which includes basic salary and taxable allowances. Bonuses may also be subject to the levy depending on how they are classified.

Q: What if my employer doesn't remit my contributions?

A: Report non-compliance to KRA. Employers face criminal penalties for failing to remit deducted Housing Levy contributions.

Q: Is the Housing Levy the same as NSSF?

A: No. The Housing Levy and NSSF are separate deductions. NSSF is for retirement benefits, while the Housing Levy funds affordable housing construction.

Q: Can I contribute more to get priority allocation?

A: The standard rate is 1.5%. While voluntary additional contributions are not currently part of the framework, consistent contributions over time improve your priority ranking.

Criticisms and Concerns

Common Criticisms

1. Regressive nature: The flat 1.5% affects lower-income earners disproportionately
2. Implementation delays: Slow project delivery relative to collections
3. Transparency concerns: How are funds being utilized?
4. Employer burden: Additional 1.5% employer contribution increases labour costs
5. Accessibility: Whether the resulting units will truly be affordable

Government Response

• Regular public reporting on fund utilisation
• Accelerated project timelines through PPPs
• Progressive allocation system favouring low-income contributors
• Independent oversight through the Affordable Housing Board

Conclusion

The Housing Levy represents Kenya's most ambitious attempt to address its massive housing deficit through a structured funding mechanism. While controversies remain, the programme offers tangible benefits — from priority access to affordable homes to refundable contributions and tax relief. As a contributor, staying informed about your rights, tracking your contributions, and registering on the Boma Yangu platform will ensure you maximise the benefits of this programme.

Check Your Housing Levy Status on Boma Yangu →