Housing and Urban Development Principal Secretary Charles Hinga has acknowledged that the government cannot rely on the Affordable Housing Levy alone to finance its ambitious target of constructing 200,000 housing units every year.
Hinga said the levy, which currently generates approximately Sh6 billion each month, does not provide enough money to sustain construction at the scale envisioned by the government.
“The sh6 billion per month on its own is not sufficient to sustain 200,000 units per year,” Hinga said.
His remarks have highlighted a major financing challenge facing President William Ruto’s Affordable Housing Programme as the government searches for additional sources of capital to maintain construction.
The admission means the 1.5 per cent Housing Levy, despite generating billions of shillings from workers and employers, cannot independently carry the cost of delivering the government’s annual housing target.
The Affordable Housing Levy requires employees to contribute 1.5 per cent of their gross monthly salary, while employers make a matching contribution.
The government introduced the levy as one of the main financing mechanisms for its affordable housing agenda. However, Hinga has now made it clear that the collections must work alongside other sources of financing if Kenya is to maintain construction at the targeted scale.
At approximately Sh6 billion a month, the levy would generate about Sh72 billion over 12 months if collections remain at that level.
The government has therefore started looking beyond levy collections to finance the programme.
According to Hinga, the State is considering a financing model that combines the Housing Levy with money generated from completed houses and long-term funding from development partners.
Hinga explained that the government wants to create a cycle in which money invested in completed housing units returns to the programme when beneficiaries purchase the homes.
Under the Tenant Purchase Agreement model, occupants pay for their homes over an agreed period. The government expects the proceeds to provide another stream of revenue that can support subsequent housing projects.
“As soon as the units are completed and titled and there is somebody who lives there, we are going to get the money back. We will now have the levy and the sales,” Hinga said.
The model would reduce the programme’s dependence on the monthly levy by creating a revolving pool of funds.
In practical terms, the government hopes to use money from the levy and completed-house sales to attract additional capital, construct more units and then recycle the proceeds into new projects.
Hinga has also indicated that the government wants to use the Housing Levy as part of a broader financing structure to attract international development partners.
The government is exploring long-term financing arrangements that could provide the upfront capital needed to construct housing before the State recovers money through sales and tenant purchase payments.
In May, Hinga asked Parliament for an additional Sh150 billion to help bridge funding shortages affecting the Affordable Housing Programme. Treasury had allocated Sh50.6 billion to the programme in the 2026/27 financial year.
The State Department of Housing has previously acknowledged financing requirements running into hundreds of billions of shillings.
A recent report put the programme’s annual financing requirement at about Sh400 billion, although the exact amount varies depending on the construction costs, infrastructure requirements and number of units included in the programme.
The funding debate has also intensified questions about how much money the government has collected and how those funds translate into completed homes.
Housing Levy collections reached Sh73.2 billion in the financial year ending June 2025, according to figures cited in recent reporting.
The government has maintained that the Affordable Housing Programme remains active, with hundreds of thousands of units either completed or at different stages of construction.
However, the need for additional financing has raised concerns about whether levy collections can keep pace with the government’s construction ambitions.
The government must also finance infrastructure surrounding housing developments, making the programme more expensive than the construction of individual housing units alone.
Another challenge is expanding contributions beyond formal payrolls.
The formal employment sector provides a relatively straightforward mechanism for collecting the levy because employers can deduct the contribution from workers’ salaries.
The informal sector, however, presents a more complicated collection environment. The government has been working on mechanisms to bring more informal workers into the housing financing system, but collecting regular contributions from workers outside formal payroll systems remains difficult.
Increasing participation in this segment could potentially expand the Housing Levy’s revenue base, but it would still not eliminate the need for other forms of financing.
