Contributions under the Housing Development Levy are expected to soar by 40.8 percent to hit Sh89 billion in the 2026/27 financial year, up from Sh63.2 billion in the current fiscal cycle.
Estimates from the draft Budget Review and Outlook Paper (Brop) show the contributions will stand at Sh70 billion in the 2024/25 fiscal year and Sh78 billion in financial year 2025/26.
The expected growth has partly been attributed to anticipated general wage growth for salaried employees over the four years along with growth in the number of persons in wage employment.
“From a general perspective, it’s reasonable to expect that there will be growth in the figure as a result of an increase in the wages of all salaried employees as well as the projected increase in the number of people joining the job market,” Housing Principal Secretary Charles Hinga told the Business Daily on Tuesday.
The Treasury could not immediately respond to queries on sources of growth in contributions to the fund.
At present, an estimated three million Kenyans are making contributions to the fund based on wage employment statistics from the Kenya National Bureau of Statistics at the end of 2022, with the bulk of contributors being teachers and security forces.
The affordable housing levy was introduced via the Finance Act as a mandatory charge to both employers and employees at the rate of 1.5 percent of gross salary.
The levy is expected to be deployed in the development of affordable housing and associated social and physical infrastructure and affordable home financing.
It is to be remitted by the 9th day of each subsequent month after its collection and attracts a late penalty of two percent on the amount unpaid.
Previously, the levy was proposed at three percent of gross salaries with a contribution limit of Sh5,000.
The Ministry of Lands, Public Works, Housing and Urban Development appointed the Kenya Revenue Authority (KRA) as the collecting agent.
Last month, the levy’s collection began with employers making double deductions on employee payslips to factor in unremitted July contributions which were at the time frozen by a court dispute.
The new administration plans to use the funds for the construction of an estimated 200,000 affordable housing units per year to supplement the estimate of 50,000 affordable housing units by the private sector.