Government Plans to Use Housing Levy as Loan Collateral in Move That Could Keep Deductions on Payslips for Decades

Kenyan workers could continue contributing to the Affordable Housing Levy for years to come after the government unveiled plans to use future levy collections as collateral to secure a proposed Ksh100 billion loan for the Affordable Housing Programme.

Budget documents tabled in Parliament reveal that the State Department for Housing intends to securitise future housing levy revenues in a bid to raise additional financing from development partners and other lenders.

The proposal is contained in the Budget and Appropriations Committee report on the 2026/27 Budget Estimates, which shows that the Affordable Housing Programme requires Ksh228.3 billion to achieve its targets but is currently facing a funding gap of Ksh118.3 billion.

To bridge the shortfall, the government plans to mobilise Ksh150 billion through a combination of borrowing and revenue generation measures. Of this amount, Ksh100 billion is expected to be raised through the securitisation of future housing levy collections, while another Ksh50 billion is projected to come from the sale of completed housing units.

The move effectively places future housing levy revenues at the centre of the government's long-term housing financing strategy.

Securitisation is a financial arrangement in which a predictable stream of income is pledged as security for borrowing. In this case, future collections from the housing levy would be used to guarantee repayment of the proposed loan.

The plan has sparked debate over the long-term implications of the levy, which has remained controversial since its introduction.

Critics argue that tying future levy collections to debt repayment could make it difficult for any future administration to abolish or significantly alter the deduction before the loan is fully repaid.

Any attempt to discontinue the levy while outstanding obligations remain could expose the government to legal, financial, or contractual challenges from lenders relying on the levy as security.

The issue is particularly significant given that opposition leaders have previously pledged to abolish the housing levy if they assume power after the administration of President William Ruto.

Under the proposed financing arrangement, however, future governments could find themselves constrained by debt obligations linked directly to levy collections.

The State Department for Housing has defended the strategy, arguing that the Affordable Housing Programme was never intended to rely solely on one source of financing.

Officials maintain that the housing levy has always been the programme's primary funding source but insist that additional capital mobilisation mechanisms are necessary to support a project of such magnitude.

According to the department, large-scale housing initiatives around the world typically combine multiple financing instruments, including borrowing, public-private partnerships, and revenue from completed projects.

The government further argues that leveraging future revenues to attract capital is a common financing model used to accelerate infrastructure and housing development.

The Affordable Housing Programme remains one of President Ruto's flagship projects and forms a central pillar of the administration's economic agenda.

The programme aims to increase access to affordable homes while creating employment opportunities through large-scale construction projects across the country.

Since 2024, employees in both the public and private sectors have been contributing 1.5 percent of their gross monthly salaries to the Affordable Housing Fund, with employers required to match the contribution.

The deductions have generated billions of shillings in revenue but have also faced criticism from workers, employers, and opposition politicians who argue that the levy increases the cost of living and places additional pressure on household incomes.

As Parliament scrutinises the latest budget proposals, the government's plan to securitise the housing levy is expected to generate fresh debate over the sustainability of the Affordable Housing Programme and the long-term financial commitments being placed on Kenyan workers.

If approved, the arrangement would cement the housing levy as a key component of the government's housing financing framework for years to come, potentially extending its lifespan beyond the tenure of the current administration.