The government is seeking to amend the Finance Bill 2026 to empower the Kenya Revenue Authority (KRA) to recover more than Ksh 100 billion in unremitted Affordable Housing Levy deductions, addressing a legal gap that has allowed employers to evade compliance since the levy’s introduction.
The proposal would give the Commissioner General authority to treat unpaid levy amounts as civil debts due to the government, enforceable in the same manner as tax arrears.
Under the Affordable Housing Levy Fund Act 2024, employers are required to deduct 1.5 percent of employees’ salaries and match the same contribution, channeling the proceeds into the construction of affordable housing units.
Yet, according to Affordable Housing Fund Board Chairperson Jeremiah Simu, employers have withheld deductions without remitting them, leading to cumulative losses exceeding Ksh 100 billion and monthly shortfalls of about Ksh 3 million.
“To collect the Ksh 100 billion that employers have failed to remit, we need to ensure that the KRA is empowered by the law to enforce the payments,” said Simu, noting that the current framework imposes penalties but lacks audit, assessment, and recovery mechanisms.
Affordable Housing Fund Chief Executive Joseph Kagicha underscored the urgency of the amendment, citing findings by the Auditor-General that revealed structural weaknesses in the law.
“Section 7 of the Act imposes a penalty of 3 percent per month on unremitted levy and allows summary recovery as a civil debt, but it supplies none of the audit, assessment, investigation or recovery machinery that effective collection requires,” said Kagicha.
He argued that the absence of enforcement tools has created inequity, as compliant employers and employees effectively subsidize those who default.
The proposed insertion of Section 39B into the Tax Procedures Act would give KRA a general mechanism to recover outstanding amounts, protecting the integrity of the ring-fenced Fund.
The financial implications are substantial. Collections in the 2024/25 financial year reached approximately Ksh 73.2 billion, surpassing targets, yet arrears remain concentrated in the informal sector and among non-compliant employers.
Kagicha stressed that empowering KRA to enforce compliance is not only a revenue issue but also a matter of fairness, ensuring that the burden of funding affordable housing is shared equitably across the workforce. “When properly remitted, the levy performs strongly.
The outstanding issue is non-remittance, concentrated in the informal sector and among non-compliant employers. Equipping the collector to address it is squarely in the public interest,” he said.
Beyond enforcement, the State Department for Housing has urged Parliament to extend tax relief measures to construction services for affordable housing projects.
Currently, contractors and professionals face a 16 percent Value Added Tax on services, which cannot be offset against exempt housing outputs and therefore inflates unit prices.
Kagicha argued that extending relief to services, not just goods, would lower costs and improve affordability, aligning fiscal policy with the government’s housing agenda.
The Finance and National Planning Committee of the National Assembly, chaired by Kuria Kimani, is now considering these proposals during public participation.
If adopted, the amendments would mark a decisive step in strengthening the Affordable Housing Levy’s enforcement framework, ensuring that the ambitious housing program is not undermined by legal loopholes and employer non-compliance.
The outcome will determine whether the levy can deliver on its promise of expanding access to housing while maintaining fiscal discipline and equity in contribution.
