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Housing Fund Levy in Kenya

By William Maema and Martin Munyu

Please see the key highlights relating to the Housing Fund Levy below.


The Housing Fund Levy was proposed for implementation to support the President’s Big Four agenda in relation to housing.

Legal basis

The Finance Act 2018 which was signed into law by the President on 21 September 2018.

Section 85 of the Finance Act 2018 amends Section 2 of the Employment Act by introducing employer and employee contributions to the National Housing Development Fund (the “Fund”) established under the Housing Act.

Section 86 of the Finance Act 2018 introduces a new Section 31A in the Employment Act which sets out the mechanism for deducting the Housing Fund Levy (“Levy”) as follows: 

The percentage deductible from both the employer and employee

Both employer and employee shall contribute 1.5% of an employee’s basic salary for a total of 3% monthly contributions provided that the total contributions do not exceed Kshs. 5,000.

The benefits for contributors to the Fund

An employee becomes entitled to participate in the affordable housing scheme subject to their meeting the eligibility criteria under the Housing Fund Regulations.

Regulation 17 of the Housing Fund Regulations sets out the following eligibility criteria: 

  1. first in first out principle of loan processing;
  2. applicable loan threshold for each grade of the beneficiary;

Regulation 3 (2) of the Housing Fund Regulations sets out the following thresholds for the affordable housing scheme:

  1. social housing designated for monthly income earners earning between 0 to 14,999 shillings;
  2. low cost housing designated for monthly income earners earning between 15, 000 to 49, 999 shillings; or
  3. mortgage gap housing designated for monthly income earners earning between 50, 000 to 100, 000 shilling]
  4. compliance with the provisions of regulation 16(2) [documents that must be provided alongside an application];
  5. ability to repay the loan within existing statutes and the stipulated time;
  6. no borrower shall be eligible for more than one loan at a time from the Housing Fund within five years; and
  7. any other conditions as may be specified by the Corporation.

For employees who are not eligible to participate in the affordable housing scheme, the following options are available after the expiry of 15 years from the date of making contributions to the Fund or attaining retirement age, whichever comes earlier:

  • transfer their contributions to a pension scheme registered under the Retirement Benefits Act;
  • transfer their contributions to a person eligible under the affordable housing scheme;
  • transfer their contributions to their spouses or dependent children; or
  • receive their contribution in cash subject to income tax deductions.

The deadline for remitting to the Fund and penalty for default

Contributions should be remitted by the 9th day of every month failing which an employer shall be liable to pay a penalty of 5% of the contributions payable for each month or part that the Levy remains unpaid.

Voluntary contributions

For persons who are not in formal employment, Regulation 6 of the Housing Fund Regulations provides for voluntary contributions of Ksh. 200 per month.


Foreigners working in Kenya are excluded from registration with the Fund as contributing employees pursuant to Regulation 4 (2) of the Housing Fund Regulations. 

Effective date

Through a newspaper advertisement published on 16 April 2019 (the “Notice”), the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works in conjunction with the Kenya Revenue Authority (“KRA”) put the country on notice  that the provisions of the Finance Act, 2018 relating to the housing fund levy (the Levy”) had come into effect. Consequently, employers were required to remit the Levy to the KRA month effective 9th May 2019.

This publication of the Notice generated stiff opposition from many quarters, including the powerful Central Organisation of Trade Unions (COTU)  particularly because the Employment and Labour Relations Court (“ELRC”) had on 19 December 2018 ordered the suspension of the implementation of the Levy and on 8 April 2019 extended the suspension until 20 May 2019. The ELRC on the same day (16 April 2019) issued another order suspending the implementation of the Levy until 20 May 2019 when the case is expected to come up for mention for further directions on the hearing and determination of the isue.

Current status

The implementation of the Levy remains suspended until a determination by the ELRC.