Kenya explores new funding model as housing levy falls short of 200,000-unit annual target
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Kenya is exploring long-term financing options, including with the World Bank, after the 1.5 per cent housing levy proved insufficient to fund its target of building 200,000 affordable homes a year.
Kenya's government is exploring alternative funding arrangements for its Affordable Housing Programme, with Housing Principal Secretary Charles Hinga saying the mandatory 1.5 per cent housing levy cannot sustain the target of constructing 200,000 units every year.
Speaking on Friday, September 4, Hinga said the levy currently raises about Ksh6 billion per month, but that collections alone are not sufficient to finance the programme. He said the government is now examining long-term financing options with international development partners, including the World Bank, to bridge the funding gap.
"The levy on its own, the total collection of the levy, we are collecting about Ksh6 billion per month. The Ksh6 billion per month on its own is not sufficient to sustain 200,000 units per year," Hinga said.
Under the proposed model, the government would combine housing levy collections with proceeds from the sale of completed units and financing from development partners. The Affordable Housing Programme currently operates by constructing and selling units, with the proceeds recycled into the development of additional houses.
The government also intends to use the levy as part of a broader financing structure for its Tenant Purchase Agreement scheme, under which beneficiaries pay towards ownership of allocated units over an agreed period and receive sectional title deeds once payments are completed.
The housing levy was introduced through the Finance Act, 2023, declared unconstitutional by the courts, and later reinstated under the Affordable Housing Act, 2024. It has faced criticism from salaried workers who question deductions for a programme they may never directly benefit from.