The Ministry of Lands, Housing, and Urban Development clarified that deductions for the Affordable Housing Program constitute taxes rather than savings.
Alice Wahome, the cabinet secretary for land, affirmed Wednesday that the current 1.5% deduction on the housing levy is a tax, not a savings, sparking a firestorm that the clarification aims to put out.
The government clarified in a statement provided to Kenyans.co.ke that although the Housing Fund was initially established under the National Assembly Finance Act as a savings contribution plan for the Affordable Housing Program, this was later repealed by Parliament.
The explanation states that “the National Assembly passed a law in March 2024 transitioning the Housing Fund into the Housing Levy, which is a tax every employed Kenyan is required to fulfill.”
After the new laws were passed, the levy was converted to tax and the deduction rate was lowered to 1.5% per contribution.
“Employers must start deducting and remitting the levy from March 2024 onwards, as this provision became effective upon the Act’s assent on March 19, 2024,” the government stated.
The administration clarified, however, that the funds are being transferred to a government-managed fund that aids in funding the development of infrastructure, the construction of affordable housing, and the expansion of homeownership opportunities for all qualified Kenyans.
“The levy is a national initiative that ensures lower home prices and affordable financing options for everyone,” the government continued, adding that “your voluntary savings in the housing portal are personal and can be used towards your home deposit.”
The CS added that contributors will not be guaranteed a home under the program despite the obligatory affordable housing deductions. The government made it clear that anyone looking to purchase a property under the program had to apply for financing.
The rent-to-own program can last for up to 30 years, she said on NTV’s Fixing the Nation. “Your contributions are essentially the offtake; they are not meant to buy you a house. It assists us in building the house, but you are ultimately responsible for paying for it. We’re not giving you and building. Rent to own is similar to tenant purchase, Wahome explained.
The government stated late yesterday night that “even though the levy is essential to funding the program, buying a home still requires a deposit and structured payments depending on the financing option chosen.”
As per the government’s explanation, this guarantees that purchasers obtain property ownership in a sustainable and controllable manner.
A deposit and structured payments based on the chosen financing plan are still necessary when buying a home, even if the levy is essential to finance the program.
