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Article | Global News Briefs

Kenya: Compulsory Housing Fund levy approved

By Esther Kadzo | June 29, 2023

To help alleviate the pressure of dramatically increasing housing costs in Kenya’s urban areas, employees and employers will pay a mandatory levy to finance the construction of affordable housing.
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Employer Action Code: Act

The 2023 Finance Bill introduces a compulsory levy payable by employees and employers to finance the National Housing Development Fund (NHDF). Managed by the National Housing Corporation, the NHDF aims to finance the construction of affordable housing for low- and middle-income households. The bill was signed into law on June 26, 2023.

Key details

  • The housing levy will be 1.5% of uncapped monthly wages, payable monthly by both the employer and the employee (for a total of 3%). The levy is expected to be payable starting July 2023.
  • As the levy will be considered a tax rather than a contribution (as was initially proposed in the Finance Bill), there will be no option for a refund of contributions for employees who decline to arrange/obtain a housing loan from the NHDF.
  • Under current rules (for voluntary participation in the NHDF) the program is open to all registered applicants who are Kenyan citizens age 18 or older who are actively contributing to the Fund, subject to a minimum monthly contribution of KES 200. The Fund works with property developers and banks on the development of housing projects for Fund members.

Employer implications

According to the NHDF, approximately 200,000 new homes are needed annually, but actual production is roughly 50,000 units. This puts significant pressure on housing costs in urban areas, with prices doubling since 2004. The NHDF was established in 2018, but prior attempts to require employer and employee contributions to finance it were thwarted by multiple legal challenges. To avoid a similar outcome this time, funding was changed from a contribution to a payroll tax levy in the final 2023 legislation. Employers should work with their payroll providers in preparation for the new tax.

Contact

Esther Kadzo
Gras Savoye - Willis Towers Watson (Kenya)

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