NAIROBI, Kenya — The Court of Appeal has upheld the Affordable Housing Act and dismissed a legal challenge to the law and deductions made under the Affordable Housing Levy.
In a judgment delivered in Nairobi on September 25, 2026, a three-judge bench found no merit in the appeal and upheld the High Court’s determination on most of the issues raised by the petitioners.
Court Faults Process Involving CRA
Although the judges upheld the law, they faulted the legislative process over the failure to establish whether the Commission on Revenue Allocation (CRA) had been given an opportunity to consider provisions affecting county governments.
The court said Article 205 of the Constitution requires the CRA to consider and make recommendations on Bills containing financial matters concerning county governments before Parliament debates and passes them.
“Since the Constitution, in Article 205, requires that when a Bill includes any financial matter concerning county governments is published, the Commission on Revenue Allocation shall consider those provisions and may make recommendations,” the judges said.
The court disagreed with the High Court’s interpretation that the CRA’s role would arise only during implementation of the legislation.
According to the appellate judges, the opportunity for CRA input should arise before the Bill is considered by Parliament, rather than after the law has been enacted.
CRA Was Not Party to Case
The Court of Appeal, however, noted that the CRA had not been made a party to the proceedings.
As a result, the judges said they could not conclusively establish from the record whether the commission had actually been denied the opportunity to consider the Bill.
“The CRA was never made a party to the proceedings and hence its position as to whether or not this opportunity was afforded was not clearly brought out,” the court said.
The finding therefore raises an issue concerning the legislative process without, on the record before the court, establishing that the CRA was in fact denied the opportunity required under Article 205.
Court Upholds Retrospective Application
The appellate court also upheld the retrospective application of the Affordable Housing Act.
The judges found that Section 60 was intended by Parliament to apply retrospectively to preserve transactions that had taken place under Section 84 of the Finance Act 2023 before the High Court’s determination in Petition 181 of 2023.
The court said the petitioners had not demonstrated that the retrospective application would impair contractual obligations, take away existing rights or otherwise violate a constitutional prohibition.
The judges therefore agreed with the High Court that Parliament intended Section 60 to have retrospective effect.
KRA Commissioner General Can Collect Levy
The Court of Appeal also upheld the appointment of the Commissioner General of the Kenya Revenue Authority (KRA) as the collector of the Affordable Housing Levy.
The judges relied on the Kenya Revenue Authority Act, which establishes KRA as the government’s agent for the collection and receipt of revenue.
The court also considered the statutory functions of the Commissioner General, including responsibility for the management of KRA’s funds, property and affairs.
The judges consequently found no legal basis to fault the appointment of the Commissioner General as the collector of the levy.
The Affordable Housing Act provides for a 1.5 per cent levy on gross salary for employees and a corresponding levy on qualifying gross income, with employers required to deduct and remit the employee component.
Housing Levy Challenge Rejected
The legal challenge had sought to overturn the framework governing the Affordable Housing Levy, which has been the subject of litigation since its introduction under the Finance Act 2023.
The earlier litigation resulted in the Finance Act provisions being challenged before the courts, after which Parliament enacted the Affordable Housing Act 2024 as a separate legal framework for the levy. The Court of Appeal had previously observed that the 2023 Finance Act housing levy issue had become moot following enactment of the new law.
The current appeal challenged the constitutionality and implementation of the new framework.
The court has now dismissed the appeal, leaving the Affordable Housing Act and its levy framework intact.
Final Orders
In its final orders, the Court of Appeal dismissed the appeal for lack of merit.
