Tax respite for ‘hustler businesses’ as housing levy returns
President William Ruto has signed the Affordable Housing Bill into law, offering a set of tax reliefs as he pushes forward with his administration’s key pledge: to make affordable housing accessible to all Kenyans.
This signing follows the unanimous passage of the Bill by both the Senate and the National Assembly last week, featuring crucial amendments that notably include the involvement of county governments in the initiative.
At the signing ceremony at State House Nairobi, President Ruto noted that “with as little as Kes3,000 monthly rent, ordinary Kenyans, including Mama Mboga, will own a house.”
This statement captures Dr Ruto’s vision of his administration to transform and dignify the lives of low-income earners across the country through housing. His critics, however, counter this position, stating that the asking prices for the houses on sale are out of reach for “Mama Mboga.”
For many Kenyans, the enactment of this Bill represents a critical moment, heralding the reintroduction of the housing levy on salaries—a policy that was previously deemed unconstitutional by the High Court late last year.
The Affordable Housing Act introduces a levy of 1.5 percent on the gross income of both businesses and individuals, matched by employers for their employees.
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Affordable housing relief
Additionally, the legislation introduces an affordable housing relief of 15 percent for employees who contribute to the levy, alongside tax-related incentives aimed at reducing the financial strain on informal sector contributors by halving the turnover tax from 3 percent to 1.5 percent.
Another aspect that comes with the new law is the establishment of a Fund into which the levy will be directed. The call for this Fund was one of the stand-out recommendations that characterized the legal hurdles and public resistance that faced this initiative for the better part of 2023.
The management of this fund will fall under the newly formed Affordable Housing Board, tasked with overseeing the allocation of resources raised through the housing levy.
To ensure transparency and accountability, the Board is mandated to prepare both five-year and annual investment programs, subject to Cabinet approval and subsequent presentation to Parliament.
These programs will serve as blueprints for the allocation of funds toward the implementation of affordable housing projects.
What’s more, the legislation proposes four categories within the Affordable Housing scheme: Social Housing Units for individuals earning less than Kes20,000, Middle-Class Housing for those with incomes above Kes49,000, General Affordable Housing for earnings ranging from Kes20,000 to Kes149,000, and Rural Housing for residents outside urban centers.
In a bid to foster localized oversight and input, county governments are tasked with forming County Affordable Housing Committees, which will offer input and directions on housing-related issues.
