Housing Levy Deductions to Start on March 19, KRA Announces

The Kenyan government is keen on addressing the housing crisis in the country with the recent approval of the Affordable Housing Bill by President William Ruto.

The bill which faced opposition from certain quarters has now become law, paving the way for the implementation of affordable housing programs and the collection of the corresponding levy. The Kenya Revenue Authority (KRA) has been designated as the collector of the Affordable Housing Levy, which will commence on March 19, 2024. Employers have been instructed to deduct 1.5% of their employees’ gross monthly salary as the levy, in addition to contributing an equal amount from their own resources. Similarly, individuals earning income in Kenya will be required to remit 1.5% of their gross income as the levy to the KRA.

The levy must be remitted on the ninth working day after the end of the month in which the gross salary or income was due or received. Employers will be required to declare the Affordable Housing Levy under sheet “M” of the PAYE return on the iTax platform and generate a payment slip under the tax head “agency revenue” and tax sub-head “Housing Levy.” Payments can be made at KRA agent banks, through mobile money using the eCitizen Paybill Number 222 222, or by dialling *222. Notably, Section 15 of the Income Tax Act allows for the deduction of the Housing Levy and residents who pay the affordable housing levy will receive affordable housing relief.

Failure to comply with the law will result in a penalty of 3% of the unpaid funds for every month that the funds remain unpaid. The Affordable Housing Bill, which establishes a framework for the collection of the levy and the implementation of affordable housing programs, faced opposition from the Azimio Party, who labelled it as illegal and unconstitutional. However, after being passed by the National Assembly, the bill was subsequently approved by the Senate with several amendments. The National Assembly then endorsed the Senate’s amendments, avoiding the need for mediation that could have delayed the bill’s passage.

The signing ceremony for the Affordable Housing Bill took place in Nairobi, marking a significant milestone in the government’s efforts to address the housing crisis in the country. With the bill now in effect, the KRA will play a crucial role in collecting the levy, which will fund the development of affordable housing initiatives across Kenya. However, a legal challenge has been mounted against the recently enacted Affordable Housing Act, 2023, by Nakuru medical practitioner Dr Magare Gikenyi. The aggrieved doctor has petitioned the High Court, seeking a temporary injunction to halt the implementation of the contentious legislation. At the heart of Dr Gikenyi’s grievances lies the belief that the Act unjustifiably impinges upon the fundamental rights of Kenyan citizens.

He contends that the Act fails to acknowledge the existing housing arrangements made by some Kenyans, encompassing aspects such as location, architectural style, design, and preferred payment modalities. Gikenyi asserts that there is a lack of logical justification for imposing the levy on the entire populace.