MPs Vote To Pass 1.5% Housing Levy

Kenyan employees will now face more deductions on their salaries after Members of Parliament (MP) voted to pass the controversial housing development levy contained in the Finance Bill, 2023.

184 MPs voted in support of the housing tax while 72 opposed it out of a total of 256 MPs who took part in the voting on Wednesday night, June 21, following a heated debate between Azimio la Umoja and Kenya Kwanza MPs in the House.

If the Finance Bill 2023 is assented to by President William Ruto into law, employees will be charged a 1.5 per cent tax on their gross salary starting July 2023.

Employers will also be required to match the 1.5 per cent housing deduction which is expected to fund the government's Affordable Housing Programme. 

An illustration of the Affordable Housing Programme by Boma Yangu Initiative under the National Housing Corporation. /BOMA YANGU KENYA

Voting was preceded by the heated debate on the proposed levy with National Assembly Minority Leader Opiyo Wandayi saying people have other big problems they are dealing with and housing wasn't one of them.

"Housing Levy will be a scandal in waiting. Without the framework, infrastructure and mechanism to administer it, we are basically throwing good money after bad money," he said.

"We need to deal with the scandalous adventures of millions of Kenyans who are living in slums and deal with Kenyans going about without food. We are worrying about shelter and food at the same time," Majority leader Kimani Ichung'wah countered.

The Housing Levy was the second major clause to sail through after the clause on the increase of fuel's Value Added Tax (VAT) from 8 per cent to 16 per cent.

The Housing Levy on Thursday, June 15 had its contribution by employers and employees reduced from 3 to 1.5 per cent during the reading of the 2023/24 budget, with President William Ruto to supplement the Ksh32.5 billion allocated to affordable housing with the deductions estimated to be Ksh83 billion per year. 

The government expressed commitment to turn the housing challenge into an economic opportunity to create quality jobs. This will be achieved through facilitating the delivery of 250,000 houses per annum and enabling affordable housing mortgages.

Of all the clauses in the Finance Bill, it was the Housing Levy that drew arguably the greatest degree of uproar across the country, and the most amount of questions.

On Sunday, June 18, President Ruto defended the contributions to the proposed housing levy under the Affordable Housing Programme, arguing that Kenyans' salaries would not be as adversely affected as they feared.

"I shall lead by example in contributing that 3 per cent so that we create employment opportunities for the youth in Kenya. When we ask that we contribute 3 per cent of the salaries we are paid for the purposes of housing so that 1 million young Kenyans get jobs, someone is refusing to let go of 3 per cent, don't you have humanity?

"All we are asking for is 3 per cent and you will remain with 97 per cent as we create jobs for our youth," he assured.