The government is seeking additional sources of money to keep its affordable housing programme on track after acknowledging that the Housing Levy alone cannot finance the planned 200,000 homes each year.
Housing Principal Secretary Charles Hinga said the 1.5 per cent levy generates roughly Sh6 billion every month, but the revenue is not enough to meet the cost of delivering the government’s annual construction target.
“The levy on its own, the total collection of the levy, we are collecting about Sh6 billion a month. Now, Sh6 billion a month in itself, without anything else, cannot be able to sustain 200,000 units a year,” Hinga said.
The government is therefore weighing a financing arrangement that would bring together several sources of funds to support construction over the long term.
Hinga said the State is considering working with international development institutions, including the World Bank, as it looks for more money to supplement collections from the levy.
He explained that the housing programme is designed to recover money invested in construction through the sale of completed homes, allowing the funds to be used again for new projects.
Under the model, the levy would not be the programme’s only source of income. Revenue from houses that have been completed and sold would be added to the levy, while development partners would provide additional financing.
“As soon as the units are completed and titled and there is somebody who lives there, we are going to get the money back. We will now have the levy and the sales,” he added.
The proposed arrangement is also expected to give the government a more reliable source of long-term funding for the Tenant Purchase Agreement scheme.
Under the scheme, beneficiaries pay for their allocated homes over an agreed period as they work towards ownership of the units.
The government has set an annual goal of 200,000 affordable housing units as it seeks to expand access to decent homes for Kenyans.
However, the size of the target has exposed the limits of relying on the Housing Levy as the main source of funding. With monthly collections standing at about Sh6 billion, Hinga said additional financing will be needed to maintain the pace of construction.
The Housing Levy was introduced in 2023 through the Finance Act before the courts declared it unconstitutional. The government later reintroduced it under the Affordable Housing Act, 2024.
Since its introduction, the levy has faced criticism, especially from salaried workers who have raised concerns over deductions from their wages to finance the housing programme.
The government’s latest plan would see the levy form part of a wider financing structure, with income from completed homes and money from development partners helping to fund the next phase of construction.