The Affordable Housing Act in Kenya: Key Provisions, Implications, and Opportunities
- Muhoro & Gitonga Associates
- Mar 20, 2024
- 9 min read
Updated: Oct 14
Table of Contents
Background and Constitutional Roots
Definitions, Scope and Institutional Structure
Principal Provisions of the Act
4.2 Affordable Housing Fund and Governance
4.3 Role of County Governments
4.4 Public-Private Partnerships and Institutional Housing
4.5 Eligibility, Off-Take, Voluntary Savings and Deposit Assistance
Levy Mechanics, Compliance and Incentives
5.1 Employee and Employer Contributions
5.2 Levy for Self-Employed / Informal Sector
5.3 Remittance, Reporting and Penalties
Regulations and New 2025 Regulatory Framework
Judicial Challenges, Key Court Decisions and Recent Developments
7.1 Precursor: Finance Act 2023 Levy and Judicial Stay
7.2 High Court Decision in Benjamin & Others v CS Lands
7.3 Consolidated Petitions and Constitutional Validation
Current Implementation Status, Delays and Risks
Benefits, Criticisms and Risks
Recommendations for Stakeholders
1. Introduction
Kenya’s housing deficit remains one of the most pressing socioeconomic challenges. The Affordable Housing Act, 2024 sets out to introduce a sustainable legal and financial regime to deliver affordable, decent housing to millions of Kenyans.
This article explores in detail the law’s structure, compliance obligations, recent court rulings, benefits, risks, and best practice recommendations for all stakeholders.
2. Background and Constitutional Roots
Kenya’s 2010 Constitution guarantees in Article 43(1)(b) the right to accessible and adequate housing. The Affordable Housing Act is intended as the legislative tool that gives substance to that right.
Prior to the Act, the Finance Act 2023 introduced a 1.5 % housing levy via amendments to the Employment Act. That levy faced successful legal challenges. The High Court in November 2023 declared several sections of the Finance Act 2023 (including section 84) unconstitutional.
The Court of Appeal maintained suspension of those sections pending appeal. To circumvent legal uncertainty, Parliament enacted the stand-alone Affordable Housing Act, 2024, which was assented on 19 March 2024 and published on 22 March 2024.
Note: Some parts of the Act commenced immediately (notably the levy provisions), while others await commencement notices by the Cabinet Secretary.
3. Definitions, Scope and Institutional Structure
The Act provides clear definitions and institutional architecture to guide interpretation and implementation. Key definitions include:
Levy — the Affordable Housing Levy under section 4.
Affordable housing unit — includes social housing, mid-income housing, rural affordable housing, and institutional housing, priced such that cost does not exceed 30 % of a beneficiary’s income.
Institutional housing — housing for public institutions (police, teachers, hospitals, etc.).
Off-take agreement — legally binding arrangement committing to purchase units in a housing scheme.
Institutional bodies created by the Act include:
The Affordable Housing Board (with national and county representation)
The Administrator of the Fund
County Affordable Housing Committees
Designated roles for KRA (collector of the levy)
These structures form the backbone of governance, oversight and execution of housing schemes.
4. Principal Provisions of the Act
4.1 Affordable Housing Levy
Section 4 imposes a 1.5 % levy on the gross salary of employees and a matching 1.5 % on the gross income of non-employees.
Section 5 provides that an employer that deducts the employee share and remits the matching share is exempt from further levy on gross income.
The levy became effective on 19 March 2024 (assent date).
Remittance must occur by the ninth working day of the month following accrual.
Penalties for late or non-remittance include 3 % per month applied to outstanding amounts.
The Commissioner General of KRA is designated the collector.
4.2 Affordable Housing Fund and Governance
Section 8 establishes the Affordable Housing Fund, which aggregates levy contributions and other resources.
The Board oversees policy, approves budgets, investment programs, audits and strategy.
The Administrator handles day-to-day operations and coordination with implementing agencies.
The Fund may disburse for design, infrastructure, deposit assistance, off-take financing, maintenance, and related housing services.
4.3 Role of County Governments
Counties must establish County Affordable Housing Committees to coordinate planning, community input and project identification.
Counties have an obligation to allocate land (including public land) for housing schemes.
They are to integrate housing into county development plans and local investment priorities.
Community engagement is mandatory, aligning local expectations with project design.
4.4 Public-Private Partnerships and Institutional Housing
The Act encourages public-private partnerships (PPPs) to leverage private sector capital, efficiency and innovation.
Institutional housing is explicitly included — schemes aimed at public institutions are to follow comparable affordability norms.
Projects may be sited on public land, subject to legal compliance and oversight.
The sale or allocation of units under PPPs or public land use has drawn criticism about potential privatization of state assets.
4.5 Eligibility, Off-Take, Voluntary Savings and Deposit Assistance
Eligibility conditions include Kenya citizenship, being 18 years or older, and not having previously been allocated an affordable housing unit.
A prospective buyer may use voluntary savings lodged into the Fund to build a deposit.
Off-take agreements legally commit parties to purchase units once completed.
Deposit assistance is available as low-interest or conditional loans, repayable on sale, transfer, default or surrender.
Regulations permit unit switching, upgrading or downgrading subject to availability and eligibility criteria.
5. Levy Mechanics, Compliance and Incentives
5.1 Employee and Employer Contributions
Employees contribute 1.5 % of their gross salary, while employers must match 1.5 %.
If the employer undertakes the deduction and matching contribution correctly, they are exempt from further gross income levy.
Illustration:If an employee’s salary is KSh 80,000 →
Employee contribution = KSh 1,200
Employer matching = KSh 1,200
Total remitted for that employee = KSh 2,40
5.2 Levy for Self-Employed / Informal Sector
Persons with non-employment income must remit 1.5 % of gross income.
The Act is less explicit on compliance and enforcement for the informal sector, which remains a point of debate.
5.3 Remittance, Reporting and Penalties
Employers must remit deductions plus matching share by the ninth working day of the month following accrual.
Reporting occurs via KRA’s iTax, typically under schedule “M” or appropriate tax head.
Penalties: 3 % per month or part month on outstanding levy.
Employers must maintain evidence and audit-quality records of deductions and remittances.
5.4 Tax Relief and Deductions
Affordable housing relief: individuals may claim 15 % of their contribution, subject to a cap.
The employer’s matching payment is an allowable deduction under the Income Tax Act.
From 27 December 2024, contributions to the housing levy are treated as allowable deductions from taxable income.
6. Regulations and New 2025 Regulatory Framework
The Affordable Housing Regulations, 2025 (Legal Notice 114 of 2025) came into effect on 9 July 2025.
Key regulatory enhancements include:
Detailed definitions of deposit assistance, financing agreements, off-take, tenant purchase etc.
Clarified eligibility and allocation procedures.
Frameworks for credit rating, unit switching, and repayment modalities.
Harmonization with County, land and finance laws to reduce conflicts.
Specification of oversight, audit, procurement and compliance standards.
These regulations fill many of the implementation gaps that critics had flagged in the original Act.
7. Judicial Challenges, Key Court Decisions and Recent Developments
7.1 Precursor: Finance Act 2023 Levy and Judicial Stay
The High Court in November 2023 struck down key sections of the Finance Act 2023, including the housing levy, on constitutional grounds.
A stay was allowed until 10 January 2024, after which the prohibitory orders came into effect pending appeal.
The Court of Appeal in early 2024 declined to stay the High Court’s orders, effectively prohibiting collection of the levy under the Finance Act.
Some legal commentary held that no legal basis existed for deductions in January 2024 given the Court of Appeal’s stance.
7.2 High Court Decision in Benjamin & Others v CS Lands
In Benjamin & 4 others v Cabinet Secretary Lands, Public Works, Housing and Urban Development & 4 others; National Land Commission & 16 others (Interested Parties) (Petition E154, E173, E176, E181, E191 & 11 of 2024 (Consolidated)) [2024] KEHC 13060 (KLR) (Constitutional and Human Rights) (22 October 2024) (Judgment); Petitioners sought to declare the Affordable Housing Act null and void on various constitutional grounds (public participation, devolution, discrimination, ambiguity).
The court, in its ruling, held that Section 4 (levy) is not unconstitutional, and that the levy was properly enacted and did not offend Article 43 (right to housing). The petitioners’ claims of discrimination were rejected; the court found the levy did not unfairly burden particular classes.
The court declined to issue an injunction halting the implementation of the levy.
7.3 Consolidated Petitions and Constitutional Validation
Multiple petitions (E154, E173, E176, E181, E191, etc.) were consolidated before the High Court under the lead case Benjamin & Others. Matters at issue included adequacy of public participation, compliance with devolution, failure of CRA to consider the Bill, retrospective application, and appointment of KRA as collector.)
The Kenya Human Rights Commission (KHRC) and Katiba Institute are among petitioners in one prominent case filed April 2024 seeking nullification of the Act. One central holding is that while public participation was conducted in a subset of counties, the doctrine of reasonableness and transparency standard were met.
The court reaffirmed that taxation authority lies with National Government, and the Act respects principles of devolution by involving county representation in the Board. Importantly, the court noted that failure of the Commission on Revenue Allocation (CRA) to opine on the Bill was not fatal to its validity, given the Act’s compliance with broader constitutional norms.
8. Current Implementation Status, Delays and Risks
The government initially projected that housing beneficiaries would start occupying units by December 2024, but legal challenges and operational delays pushed the timeline to April 2025. As of early 2025, the Affordable Housing Program (including pre-Act projects) reports over 111,975 units completed or in development.
One significant operational risk is injunctions on specific land projects: for example, a Kiambu County court granted an injunction halting a housing project in Muguga / Gitaru / 1042 over title disputes.
Land acquisition, title clarity, local resistance, procurement bottlenecks, and financing constraints remain major obstacles.
Moreover, the Act’s success depends significantly on good governance, accountability, and transparent fund management. Any perception of misuse or corruption could derail public trust.
9. Benefits, Criticisms and Risks
Benefits
Substantially boosts housing supply, especially for low and middle income categories.
Provides reliable sustainable funding through a levy model, not one-off allocations or donor dependence.
Stimulates economic growth in construction, materials, services, and related sectors
Promotes social equity and inclusion by enabling low-income Kenyans to access decent housing.
Encourages innovation through PPPs and modern delivery models.
Criticisms and Risks
Cost burden on employers and employees: The matching requirement could strain small and medium enterprises.
Ambiguity in informal sector collection: Some critics argue the law lacks clarity on enforcement in the informal economy
Public participation concerns: Some contend that the public hearings were limited, localized, or inadequately publicized.
Devolution tension: Housing is a county mandate; some argue the Act centralizes too much power or conflicts with county autonomy.
Use of public land: There is concern that public land may be leveraged for projects benefiting private interests.
Quality and maintenance: Ensuring construction standards, durability and upkeep over time is demanding.
Delays and legal risks: Injunctions, litigation, administrative delays and land title disputes threaten project timetables.
Governance and accountability: Ensuring the Fund and Board operate transparently, avoiding corruption or misallocation, is critical.
10. Recommendations for Stakeholders
Employers should promptly upgrade payroll systems, staff training, and compliance checks to manage the 1.5 % deduction, matching contribution and reporting cycles.
Employees should verify deductions, maintain payslip records, and understand their rights to relief.
Informal sector groups and associations should engage government in defining practical compliance regimes, possibly via sectoral cooperatives or self-assessment models.
County governments must proactively identify and allocate land, streamline planning approvals, and coordinate local consultations.
Developers and financiers should carry out rigorous due diligence on titles, procurement, risk mitigation, and structure off-take guarantees.
Legal, civic and CSO actors must monitor court developments, intervene where needed, and push for transparent, inclusive processes.
Fund Board and administrators must adopt robust governance frameworks, regular audits, public reporting, and stakeholder engagement.
Parliamentary oversight and audit institutions should actively review implementation, budgets, and performance metrics.
11. Conclusion
The Affordable Housing Act in Kenya represents a landmark intervention in Kenya’s housing sector. It aims to convert the constitutional promise of housing into tangible homes for citizens. Its success depends on synergy among national and county governments, private sector partners, communities, and vigilant legal oversight.
While significant judicial challenges and operational obstacles exist, recent High Court validation and consolidation of petitions lend legal solidity. The rollout must emphasize transparency, accountability, public trust, and timely delivery to fulfill its social and economic promise.
If properly administered, the regime could deliver thousands of homes, stimulate industry, and uplift living standards across Kenya.
12. Frequently Asked Questions (FAQ)
Q: When did the Affordable Housing Act, 2024 take effect?
The Act was assented on 19 March 2024 and published on 22 March 2024. Some sections are active immediately, while others await commencement by the Cabinet Secretary.
Q: What is the levy rate and who pays it?
A 1.5 % levy on the gross salary of employees and a matching 1.5 % charged on gross income of non-employees.
Q: Who collects the housing levy?
The Commissioner General of KRA is designated as the collector under the Act.
Q: What if an employer deducts the levy and remits matching share?
If correctly done, the employer is exempt from additional levy on gross income.
Q: What are penalties for late payment?
A 3 % monthly penalty applies to unpaid or late remittances.
Q: How does it affect informal sector / self-employed persons?
They are required to pay 1.5 % of gross income; the Act and regulations attempt to provide modalities, though enforcement in informal settings is challenging.
Q: Are there tax incentives or reliefs?
Yes. A taxpayer can claim 15 % relief on their contribution (within a ceiling). The employer’s matching payment is allowable as a deduction. Since 27 December 2024, contributions are treated as allowable deductions in taxable income.
Q: What are off-take agreements and deposit assistance?
Off-take agreements commit a purchaser to acquire a housing unit. Deposit assistance provides low-interest loans or grants to meet deposit requirements.
Q: Is the Act constitutionally valid?
Yes, in Benjamin & Others v CS Lands (Oct 2024) the High Court upheld the constitutionality of Sections 3 and 4 (levy) and declined to issue injunctions halting implementation. Further, consolidated petitions challenging the Act were dismissed in a constitutional ruling affirming its validity.
Q: What are key risks to implementation?
Delays, injunctions, land disputes, governance failures, insufficient public participation, tension with county governments and financing constraints are among major challenges.
To explore this further, see the Affordable Housing Act, 2024.
