Return of housing levy as Ruto assents Bill
President William Ruto on Tuesday morning signed into law the controversial Affordable Housing Bill, 2023, signaling the return of housing levy deductions.
The Kenya Kwanza government had been stopped by the courts from effecting the deductions with the court ruling that the housing levy was introduced without a legal framework.
However, the Bill – with amendments – was last week approved by Parliament despite opposition from Azimio MPs.
President Ruto is targeting to construct 200,000 affordable housing units annually, which he has promised will create between 600,000 and 1 million jobs each year.
National Assembly Finance and National Planning Committee Chairperson Mr Kimani Kuria said that by the President appending his signature to the Bill, a new legal framework – the Affordable Housing Act, 2024 – comes into place.
Further, the new law repeals provisions of the Finance Act Section 84 of the Employment Act with the insertion of new section 31B and 31C, which the previous deductions were based on.
Consequently, the new legislation will become effective with the enactment of the new law, hence no backdating.
“With the enactment of the Affordable Housing Bill into law, it gives rise to a new legal framework and therefore housing levy deductions will only come into effect on the enactment of the bill,” said Mr Kimani.
“There will be no backdating of the deductions as the previous deductions were made as per provisions of the Finance Act Section 84 of the Employment Act with the insertion of new section 31B and 31C. These sections have now been repealed in the Affordable Bill,” added the Molo MP.
National Assembly Majority Leader Mr Kimani Ichung’wah added: “No deduction will be backdated. The commencement date is upon assent and therefore the deductions become effective immediately upon assent.”
In November last year, the High Court ruled that the housing levy was introduced without a legal framework and in January this year, the Court of Appeal declined to suspend the High Court order.
The national government had been collecting the levy since the beginning of the current financial year ending June 2024, appointing the Kenya Revenue Authority (KRA) as the collection agent.
With the court blow, the government was forced to come up with a new legal framework, the Affordable Housing Bill, 2023, in order to address issues raised by the courts.
The new law, which seeks to anchor the 1.5 percent housing levy on both salaried and income-earning Kenyans in law, was approved last week by Parliament despite opposition from Azimio MPs, who termed it unconstitutional.
Both the National Assembly and the Senate passed the law last week, albeit with amendments from the Senate.
To address the issues raised by the court, the law has expanded the imposition of the monthly 1.5 percent affordable housing levy to include incomes other than salaries paid to employees in the formal employment sector.
The court had ruled that Section 84 of the Finance Act, which amends the Employment Act to introduce the Housing Levy, violates the principles of taxation for making distinction between formal and informal sectors, thus creating unequal and inequitable principles.
The new law establishes the Affordable Housing Fund, which will be financed through a 1.5 percent housing levy on gross salaries.
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