Deductions towards the Affordable Housing Programme are a tax, not savings, according to a clarification released by the Ministry of Lands, Housing and Urban Development.
The clarification seeks to quell the firestorm that emerged on Wednesday after the Lands Cabinet Secretary, Alice Wahome, confirmed that the current 1.5 per cent deduction on the Housing Levy is a tax, not savings.
In the clarification statement shared with Kenyans.co.ke, the government states that while the National Assembly Finance Act originally introduced the Housing Fund as a savings contribution scheme towards the Affordable Housing Programme, Parliament later repealed this.
“In March 2024, the National Assembly passed a law transitioning the Housing Fund into the Housing Levy, which is a tax every employed Kenyan is required to fulfil,” reads part of the explainer.
Following the new laws' passage, the deduction rate was reduced to 1.5 per cent per contributor, and the levy shifted to tax.
“This provision 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.
However, the government further explained that the money is being remitted to a government-managed fund, which helps finance the construction of affordable housing, develop the necessary infrastructure, and expand access to homeownership for all eligible Kenyans.
“While your voluntary savings in the housing portal are personal and can be used towards your home deposit, the levy is a national initiative that ensures lower home prices and affordable financing options for all,” the government added.
The CS further stated that the mandatory affordable housing deductions will not guarantee contributors a house under the scheme. The government emphasised that those seeking to acquire homes under the scheme must sign up for financing.
She told NTV’s Fixing the Nation that the rent-to-own scheme can run for up to 30 years. “The money you are contributing is not supposed to give you a house; it is basically the offtake. It helps us build the house, but after that, it is you who actually pays for that house. We are not building and giving you. It is like tenant purchase—you rent to own,” Wahome said.
“While the levy plays a crucial role in funding the programme, purchasing a home still requires a deposit and structured payments based on the selected financing option,” the government said late last night.
According to the government's clarification, this ensures that buyers secure ownership of their homes in a sustainable and manageable way.
While the levy is crucial in funding the programme, purchasing a home still requires a deposit and structured payments based on the selected financing option.
