Our Kenya

Ruto and Affordable Housing Levy

4 min read

The affordable housing levy, a mandatory 1.5% deduction from every Kenyan employee's salary, was one of the most controversial policies of William Ruto's presidency. Introduced through the Finance Bill 2023 Kenya and operationalized in July 2023, the levy was designed to fund the government's ambitious affordable housing program. Employers were also required to match the employee contribution at 1.5%, bringing the total to 3% of gross salary. The government projected the levy would raise approximately KES 56 billion annually to build 200,000 affordable housing units per year. Instead, it triggered a constitutional crisis and became a symbol of the Ruto administration's willingness to tax struggling Kenyans to fund programs of uncertain benefit.

The legal basis for the levy was the Affordable Housing Act of 2023, which designated affordable housing as a "national priority" and established the Affordable Housing Fund. The law required all formal sector employees to contribute, with no opt-out provision. This was not a voluntary savings scheme. It was a compulsory deduction. The government argued that housing was a critical need, that the private sector had failed to deliver affordable units, and that a dedicated funding mechanism was necessary to achieve scale. Critics called it a tax by another name.

Opposition came immediately. The Central Organisation of Trade Unions (COTU) and the Law Society of Kenya challenged the levy in court, arguing that it was unconstitutional. They contended that it violated the principle of progressive taxation, imposed a disproportionate burden on low-income workers, and lacked transparency in how the funds would be managed. In September 2023, the High Court temporarily suspended the levy, ruling that the plaintiffs had raised serious constitutional questions. The government appealed, and in November 2023, the Court of Appeal overturned the suspension, allowing the levy to proceed while the constitutional challenge continued through the courts.

In July 2024, the Supreme Court delivered its final ruling. In a split decision, the court upheld the levy, ruling that affordable housing was a legitimate public interest and that the government had the authority to impose contributions to fund it. However, the court also ruled that the levy could not be structured as a tax and that contributors must have a legal right to access housing units or recover their contributions. This meant the government had to transform the levy from a tax-like deduction into a true savings scheme with clear beneficiary rights. The ruling was a partial victory for both sides, but in practice, the levy continued.

By 2024, the levy had raised over KES 40 billion, but only a fraction of the promised 200,000 housing units had been built. The government pointed to projects in Nairobi, Mombasa, and Kisumu as evidence of progress, but civil society audits revealed that many of the units were behind schedule, poorly constructed, or unaffordable to the very low-income workers who were funding the program. Some units that were supposed to cost KES 600,000 were being priced at over KES 1.5 million, putting them out of reach for hustlers.

The levy also became a lightning rod for broader frustrations about taxation. It was introduced at the same time as the Fuel Subsidy Removal 2022 and preceded the Finance Bill 2024 and Gen Z Uprising. For many Kenyans, it felt like yet another way the government was squeezing ordinary people while the wealthy continued to evade taxes. The fact that the levy was deducted automatically from salaries while the rich could hide income in offshore accounts deepened the sense of injustice.

The affordable housing levy remained one of the clearest examples of the gap between Ruto's policy intentions and lived reality. On paper, the program was designed to address a genuine housing crisis and create jobs in the construction sector. In practice, it became yet another mandatory deduction from workers who were already struggling with the cost of living, with little evidence that it would deliver the homes it promised.

See Also

Sources

  1. "Supreme Court upholds affordable housing levy with conditions," The Star, July 26, 2024. https://www.the-star.co.ke/news/2024-07-26-supreme-court-upholds-housing-levy/
  2. "Housing levy: A tax in disguise?" Daily Nation, August 3, 2023. https://nation.africa/kenya/news/housing-levy-tax-in-disguise-4317654
  3. "Affordable Housing Levy: Constitutional questions remain," Kenya Law Review, September 2023. https://kenyalawreview.org/2023/09/housing-levy-constitutional-questions/
  4. "Where is the affordable housing? Tracking the levy's spending," KHRC Audit, November 2024. https://www.khrc.or.ke/2024-reports/affordable-housing-levy-audit

Backlinks