Affordable Housing Levy survives court challenge: Inside Kenya’s 1.5% housing contribution

The judgment delivered on September 25, 2026 keeps the housing levy in force, but it also provides an important legal history lesson.

The levy currently being deducted from incomes is not the same legal framework that courts struck down in 2023.

A five-judge Court of Appeal bench comprising Justices Wanjiru Karanja, Patrick Kiage, Aggrey Muchelule, William Korir and George Odunga found no merit in the appeals.

The court also made no order on costs, citing the public-interest nature of the litigation.

What exactly is the Affordable Housing Levy?

The levy is a statutory contribution created to finance Kenya’s Affordable Housing Fund, established under the Affordable Housing Act, 2024.

For employees, the law requires a contribution of 1.5 per cent of gross monthly salary from the employee, matched by another 1.5 per cent by the employer.

A worker earning a gross salary of Sh100,000 contributes Sh1,500, while the employer contributes another Sh1,500.

The law also extends the levy beyond formal employment.

A person whose income is not already subject to the employee levy is required to pay 1.5 per cent of gross income. KRA is the designated collector.

The money is paid into the Affordable Housing Fund rather than ordinary government tax accounts.

The Act provides the legal framework for using the fund to support affordable and institutional housing programmes.

Why was the first Housing Levy struck down?

The legal battle began with the Finance Act, 2023, which introduced the original housing levy.

In November 2023, the High Court declared the levy unconstitutional.

Among its findings was that the arrangement lacked a comprehensive legal framework and was discriminatory because it imposed the burden on people in formal employment while excluding people earning income outside formal payrolls.

The court also raised concerns about the constitutional requirements surrounding public finance and taxation.

The government subsequently went back to Parliament with a standalone housing law.

That produced the Affordable Housing Act, 2024, which was assented to by President William Ruto on March 19, 2024. Sections 4 and 5 - the provisions imposing the levy and requiring employers to deduct and remit it - commenced on assent.

The remaining provisions were brought into operation through a Gazette notice.

What changed in the 2024 law?

The new law was designed to address the defects identified in the earlier litigation.

Most notably, it created a dedicated statutory framework for the housing programme and broadened the levy beyond formal employees by providing for a 1.5 per cent charge on qualifying gross income outside the payroll system.

Parliament's legislative report records that the new Bill was specifically developed after the earlier court challenge.

The law also established the Affordable Housing Fund and Affordable Housing Board, alongside structures for administering housing programmes.

The Court of Appeal ruling

The latest court challenge argued, among other things, that the Act was unconstitutional, that the levy was discriminatory and that Parliament had failed to conduct adequate public participation.

The five-judge Court of Appeal rejected those arguments and upheld the Act.

The court agreed with the earlier High Court finding that the legislative process met the constitutional threshold for public participation and that the levy did not unlawfully discriminate.

The court also addressed the use of public land.

It held that any allocation of public land for affordable housing requires approval by the National Land Commission (NLC).

An allocation made without the commission’s approval would therefore be unlawful.

The court separately upheld the retrospective operation of Section 60, which was designed to protect transactions and projects already commenced under the earlier housing framework.

Where does the money go?

The levy is a major source of funding, but it does not finance the entire housing programme by itself.

Housing Principal Secretary Charles Hinga said earlier in September that collections were averaging about Sh6 billion a month, equivalent to roughly Sh72 billion a year at that rate.

He also acknowledged that the levy alone cannot finance the government's target of building 200,000 units annually.

The government is therefore exploring additional long-term financing, including potential partnerships with institutions such as the World Bank, while also looking at money generated from completed housing units.

The programme is intended to operate at a scale much larger than monthly levy collections alone can support.

The State Department of Housing currently lists affordable housing projects across the country and says applicants can register through the Boma Yangu platform, save towards a deposit and select available units.

What does the ruling mean for workers?

For employees, the 1.5 per cent employee contribution and the matching 1.5 per cent employer contribution remain legally enforceable under the current law.

The ruling does not mean every contributor automatically receives a house.

The housing programme has separate eligibility and allocation requirements, and contributing to the fund is not the same as being allocated a unit.

It also does not end the legal debate permanently.

Because the case concerns constitutional questions, further litigation may still arise, including possible proceedings before the Supreme Court.

What the September 25 ruling does establish for now is that Kenya’s Affordable Housing Act, 2024 remains the operative legal framework for the levy, and the Court of Appeal has found the challenged provisions constitutionally valid.

For millions of Kenyans whose payslips now contain the deduction, the issue has therefore moved beyond whether the levy exists.