The government will collect Sh500 billion from workers through the controversial housing levy to build some 363,860 affordable homes over the next decade, a Treasury document has shown.
The National Treasury report indicates that the half a trillion shilling will be used to build houses and infrastructure like access roads, schools and hospitals—which are expected to further attract investors to construct affordable homes.
The 363,860 affordable homes includes houses targeting security personnel and civil servants as Kenya’s housing deficit continues to widen on increased urbanisation amid inadequate investments on affordable dwellings.
The government had initially announced plans to build 250,000 houses each year, aimed at eventually closing a housing deficit that the World Bank puts at more than two million units.
The latest affordable housing plan was launched in 2022, but available data indicate that less than 5,000 houses are already completed.
Treasury disclosures show that the State Department for Housing and Urban Planning will spend Sh357.65 billion on the delivery of various affordable housing units including rural housing loan programs by the end of 2032.
The difference of Sh142.35 billion will be used to deploy the associated physical and social infrastructure in what is aimed at attracting private developers to the projects.
While the houses captured in the Treasury document are way less than the targeted 2.5 million houses over the decade, the government has argued before that the deficit will be plugged by investors under the so-called public-private partnerships (PPPs).
The Principal Secretary for the State Department for Housing Charles Hinga did not respond to our queries.
However, he has previously mentioned that the houses being built through PPPs are not captured in the Treasury report.
Kenya’s government began deducting 1.5 percent of the gross salaries of locals and foreigners last July, to fund the construction of affordable houses for low-income earners.
The levy sparked an outcry from the opposition and a large section of Kenyans, who feel burdened by the raft of taxes introduced under President William Ruto.
In its first financial year, the government raised Sh64.8 billion, which was to be spent on the construction of affordable houses and related physical and social infrastructure including access roads, floodlights, health centres, footbridges, schools, markets and social halls.
However, the board of the National Housing Development Fund (NHDF) had spent less than a fifth of the money collected from the levy, or Sh15.39 billion, leaving it with the uphill task of raising and spending another Sh484.61 billion by the end of 2032.
The affordable housing programme, which was first mooted by the administration of retired President Uhuru Kenyatta, faced a slew of legal hurdles with the courts initially declaring it unconstitutional for being discriminatory as it only targeted salaried employees.
Additionally, the court faulted the State for rolling out the levy before establishing a fund, a legal deficiency the Ruto administration cured by enacting the Affordable Housing Act 2024, which established the NHDF and spreading the housing levy to anyone with an income.
By the end of 2032, the State Department for Housing and Urban Development plans to spend Sh127 billion to construct 217,654 affordable housing units for the middle class, some of which will be bought at market rates.
The development of 100,000 social housing units for the poor takes another Sh60 billion as the government seeks to upgrade major slums such as Kibera and Mukuru in Nairobi.
Construction of 69,000 prisons and police housing units, a programme that started in 2016, will take Sh140 billion of the fund, while houses for the civil servants will take Sh20.6 billion.
Another 10,333 housing units will be built for the Kenya Defence Forces, though the report does not reveal the estimated cost of the project.
Also not revealed is the cost of constructing 31,592 student hostels to be built by June 2028.
The National Housing Development Fund will also be used to build markets, health centres, schools, footbridges, social halls and dormitories for these housing projects.
Another Sh10 billion will be set aside for rural housing, where subsidized mortgages will be provided.
There are eight affordable housing projects at different stages of development, with most of them being in Nairobi.
The affordable housing programme was started by the Jubilee administration as part of the Big Four agenda, with the government setting a goal of constructing one million affordable houses in five years.
However, the roll-out of the affordable housing programme under the administration of retired President Kenyatta failed to take off after it failed to establish a housing fund that would be used to de-risk developers after the regulations establishing the fund ran into legal headwinds.
Initially, contributions towards affordable houses could be recouped with interest after seven years should the employees fail to get a house. However, in the Finance Act 2023, Parliament scrapped the clause, which required the State to offer refunds to contributors who missed out on the houses after seven years.
This technically turned the levy into a housing tax.
The Treasury report shows that the government will also spend close to Sh5 billion to build access roads to affordable housing projects and connect them to electricity by the end of 2032.
Access roads to the eight affordable housing projects will cost the government Sh3.81 billion.
Already, the government has spent Sh1.39 billion to build an access roads to eight affordable housing schemes, including Starehe, Shauri Moyo, Stoni Athi and East Africa Portland Cement Housing project.
Other housing schemes where access road construction has already begun are Kibera, Ruai, Park Road, Mariguini and Stoni Athi.
