Understanding the Housing Fund Levy in Kenya
Definition of Key Terms
- Affordable Housing: Housing that is adequate and costs no more than 30% of a person’s monthly income for rent or acquisition.
- Institutional Housing: Adequate housing for public institutions such as universities, colleges, police, defense forces, government pool housing, and prisons.
Imposition of the Levy
- As per Section 4 of the Affordable Housing Act, the Affordable Housing Levy is charged at 1.5% of the gross salary of an employee or gross income of a self-employed individual.
- Employers must remit both their contribution and that of the employee by the 9th day of the following month.
- Failure to remit on time attracts a 3% penalty per month on the unpaid amount.
- The Cabinet Secretary (National Treasury) may exempt specific persons or income from the Levy upon recommendation from the Cabinet Secretary of Lands, Public Works, Housing, and Urban Development.
Allowable Deductions and Personal Reliefs
- The employer’s contribution is tax-deductible under Section 15 of the Income Tax Act.
Procedure for Payment of the Levy
- Kenya Revenue Authority (KRA) collects the Levy.
- Employers must declare the Levy under Sheet ‘M’ of the PAYE return on iTax.
- A payment slip is generated under ‘agency revenue’ with the sub-head ‘Housing Levy’.
- Payments can be made via KRA agent banks or eCitizen Paybill number 222222.
Categories of Affordable Housing
The Act defines four categories of affordable housing units:
- Social Housing Unit: For individuals earning below KES 20,000 per month.
- Affordable Housing Unit: For those earning between KES 20,000 and KES 149,000 per month.
- Affordable Middle-Class Housing Unit: For those earning over KES 149,000 per month.
- Rural Affordable Housing Unit: For individuals residing outside urban areas.
Establishment of the Affordable Housing Fund & Board
- The Affordable Housing Fund (the Fund) is managed by the Affordable Housing Board (the Board).
- Every five years, the Board develops an Affordable Housing Investment Programme, which is submitted to the Cabinet and Parliament for approval.
- The Fund receives contributions from the Levy, voluntary contributions, and other investments.
- The Fund is used to design, develop, and maintain affordable and institutional housing, including associated infrastructure.
Eligibility Criteria & Application for Affordable Housing
- To qualify, individuals must provide proof of deposit and meet set criteria (to be published in Regulations).
- Applications are submitted to the Board, with preference given to marginalized persons, youth, women, and persons with disabilities.
Voluntary Savings
- Eligible individuals can make voluntary savings to raise a deposit for an affordable housing unit.
- These funds are deposited into separate bank accounts managed by the Fund’s administrator.
- Unallocated contributors can withdraw savings after 90 days’ notice or apply for an affordable mortgage for a rural affordable housing unit.
Ownership & Restrictions on Sale of Affordable Housing Units
- The Board transfers ownership once the full purchase price is paid.
- Owners cannot sell affordable housing units without prior Board approval.
Implementation of the Affordable Housing Scheme
- A national government agency will oversee the development of affordable housing units and infrastructure.
- The Board may partner with private institutions for construction and material supply.
Role of County Governments
- County governments must conduct public participation before allocating land for affordable housing.
- Every county must establish a County Rural and Urban Affordable Housing Committee, responsible for:
- Setting an affordable housing framework.
- Advising on housing programs.
- Developing a five-year affordable housing investment programme.
- Ensuring representation of youth, women, and marginalized groups.
Accountability & Misappropriation of the Fund
- The Fund’s administrator must keep proper financial records and submit annual reports to the Auditor-General.
- Misuse of funds can result in fines up to KES 20 million, imprisonment, and additional penalties.
- Providing false information attracts a KES 10 million fine or imprisonment.
Use Our Housing Fund Calculator
Our Housing Fund Calculator helps you easily determine your Affordable Housing Levy deduction based on your gross salary or income. Simply enter your details, and our tool will compute your monthly and annual contributions, ensuring compliance with Kenyan tax laws.