Housing Levy: Breakdown Of How Ruto's Govt Spends 1.5% Of Your Salary

• The government collected over KSh 34 billion from the Affordable Housing Levy as of April 2024
• State Department for Housing Principal Secretary (PS) Charles Hinga said the average monthly collection is KSh 5.5 billion
• Appearing before the National Assembly’s Committee on Housing, Hinga reveals that the money is not spent but invested in government bonds
• Market analyst at FXPesa Rufas Kamau explained that the move to invest the funds in bonds shows that the government collects the money as tax to fund the exchequer

TUKO.co.ke journalist Wycliffe Musalia brings over five years of experiforce in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

President William Ruto's government has collected over KSh 34 billion to the Affordable Housing Scheme.

Data from the State Department for Housing indicated that the government collected KSh 34.72 billion as of April 2024.

Where does the Housing Levy collected go?

Principal Secretary (PS) Charles Hing told the National Assembly’s Committee on Housing, Urban Planning and Public Works on Tuesday, May 21, that housing projects have only spent KSh 6.93 billion from the funds collected.

Hinga revealed that the Affordable Housing Board invested KSh 20 billion into government Treasury Bills and Bonds.

“The board received guidance from the Treasury to invest the first KSh20 billion in Treasury bonds and bills. The board needs to open an account at the CBK to receive the money,” said Hinga, in the meeting chaired by MP Johana Ng’eno.

The PS noted that the board will continue stashing the 1.5% cut from Kenya's gross monthly salary, which is matched by a 1.5% employer contribution since it has no legal power to spend the money, as affordable housing faces legal hurdles.

He said the implementing agencies should submit a five-year plan to the board before the money is released for spending.

Implications of investing housing levy in govt bonds

In an exclusive interview with TUKO.co.ke, market analyst at FXPesa Rufas Kamau noted that the move by the government to invest money in bonds and bills indicates it was a tax.

"The funds use has just been cleverly redirected to the budget. This essentially proves that it was a tax. It raises the question why the government would force a housing levy when there was no immediate need for such money," said Kamau.

Kamau argued that to repay the housing levy fund, the government would have to collect more taxes or issue more bonds (domestic borrowing).

He said that translates to the government borrowing from its own coffers and repaying it back to its own account with interest.

How much does govt target in housing levy?

Hinga confirmed that over KSh 5.5 billion is collected every month from the Affordable Housing Levy.

The PS revealed that the scheme targets over KSh 63.22 billion from the levy in the financial year 2024/25.

Out of this, KSh 32.5 billion will be used to construct affordable housing, social housing (KSh 15 billion), police housing (KSh 1 billion), and social and physical infrastructure, with KSh 14.66 billion for social and physical infrastructure.

In February 2024, the Parliamentary Budget Office (PBO) revealed that in the past six months, employers and employees contributed KSh 26.8 billion under the controversial housing levy.

Proofreading by Otukho Jackson, a multimedia journalist and copy editor at TUKO.co.ke