Recap - Understanding the Housing Levy

The Affordable Housing Levy has been a hot topic since its introduction under the Affordable Housing Act, 2024. Designed to fund Kenya’s ambitious affordable housing program, this levy impacts both salaried and non-salaried individuals. Whether you’re an employer, employee, or self-employed, understanding how this levy works is crucial for compliance and financial planning.

What is the Housing Levy?

The Housing Levy is a mandatory contribution aimed at financing Kenya’s affordable housing initiatives. It was reintroduced in 2024 after the High Court ruled the previous levy unconstitutional due to legal ambiguities. The new law rectifies those issues and provides a clear framework for implementation.

Who is Required to Pay?

• Salaried employees: Deducted directly from gross salary.
• Employers: Required to match employee contributions.
• Non-salaried individuals (self-employed, business owners, etc.): Expected to remit their contributions, though the exact mechanism is yet to be clarified.

How Much is the Housing Levy?

• Employees contribute 1.5% of their gross salary.
• Employers match this with an additional 1.5%.
• Self-employed individuals are also expected to contribute 1.5% of their income, though further regulations are awaited.

Definition of Gross Salary

The levy is based on an employee’s gross salary, which includes:

• Basic salary
• Cash allowances (e.g., house, travel)
• Any other regular cash payments

Excluded from the levy: Leave allowances, bonuses, gratuities, pensions, severance pay, and terminal benefits.

How is the Levy Paid?

Employers are required to:

• Deduct the levy from employees' salaries.
• Match the amount deducted.
• Remit the total (3% of the employee’s gross salary) to the Kenya Revenue Authority (KRA) by the 9th working day of the following month.
• Use iTax to declare and process payments.

For self-employed individuals, the remittance process is expected to be detailed in upcoming regulations.

Penalties for Non-Compliance

Failure to remit the levy results in a penalty of 3% per month on unpaid amounts. The penalty is enforced as a civil debt, meaning legal action can be taken against defaulters.

Restrictions on Selling Affordable Housing Units

Beneficiaries of affordable housing projects cannot sell their units without prior approval from the Affordable Housing Board. This prevents speculative buying and ensures that homes remain accessible to those who need them.

Retroactive Effect of the Levy

Deductions made under the previous Finance Act, 2023, are deemed valid, meaning no refunds will be issued, even though earlier collections were challenged in court.

Final Thoughts

The Housing Levy is now firmly embedded in Kenya’s legal framework. Employers and employees must comply with the remittance process, while self-employed individuals await further guidance. Staying informed and ensuring compliance will help avoid penalties while contributing to a national cause—affordable housing for all.

For more updates and clarifications, keep an eye on government announcements and KRA guidelines.

Do you have questions or concerns about the Housing Levy?

Share your thoughts in the comments below!