Why Employers Want Govt to Review Housing Levy Deductions

The Federation of Kenya Employers (FKE) is in talks with the National Treasury to review the 1.5% Housing Levy which was introduced through the Finance Act of 2023.

Speaking during an engagement forum in Kisumu County on Thursday, April 3, FKE President Jacqueline Mugo expressed concern over the number of statutory deductions which have seen employees take home less.

In some instances, Mugo noted that the salary deductions were more than two-thirds of employees' pay, contrary to the provisions of the Employment Act of 2007.
Also Read: How Your Net Salary Will Reduce in New NSSF Rates Starting February 2025

As a result, FKE revealed that employees had become demotivated, hence the need to review the levy that was introduced by President William Ruto's administration.

Currently, employed Kenyans have 1.5% of their gross pay deducted for the levy. The levy collected then goes towards the construction of affordable houses. Employers are also expected to match the employees' deductions.

"We are engaging to see if there is any way in which the level of contributions can be reviewed and also if we can put a cap on the period for which that payment is done.

"A substantial amount has been raised so far, which has helped build the houses. We are going to remain engaged with the government on this matter," she stated.

Earlier, while appearing on an interview on NTV in March, Lands CS Alice Wahome hinted that the Housing Levy would still be implemented for many years to come, given the housing deficit in the country.

Also Read: Govt in Ksh9.2 Billion Deal to Build Affordable Houses on a PPP Model

According to Wahome, Kenya had a deficit of 2 million houses even as the government targets to construct 200,000 houses per year.

She added that the current collections could not even finance the construction of the targeted units, hence the move to involve the private sector.

"As a government, we hope that the economy will also improve so that the pinch that Kenyans are feeling will also be met with other factors, such as the cost of food and fuel coming down. 

"On average, we hope to collect Ksh65 billion per year. We are doing well but there are defaulting areas. At our highest level, we will be collecting Ksh9 billion per month and that is not enough to do 200,000 units per year. We also want to use this levy to leverage private investors."

Apart from the Housing Levy and Pay As You Earn (PAYE), employees also face deductions for the Social Health Authority (SHA) at the rate of 2.75 percent of the gross salary.

Employees also make contributions to the National Social Security Fund (NSSF), whose enhanced rates took effect in February 2025.