• Tuesday, 19th of March 2024, the President signed into law the Affordable Housing Levy Act, 2024.

• The Act covers individuals in both the formal and informal employment sectors and requires employers to remit contributions on behalf of employees.

• Kenya Revenue Authority has been appointed as the collection agent for the Affordable Housing Levy.

Summary

On March 19, 2024, the Affordable Housing Act, 2024 (the Act) received assent from the President of Kenya, significantly impacting employers. This act replaces provisions related to the deduction and remittance of the affordable housing levy, which were suspended by the High Court of Kenya under the Finance Act, 2023.

Under the Act, employers must remit both their own and their employees’ contributions towards the levy, amounting to 1.5% of each employee’s monthly gross salary. This provision came into effect immediately upon assent, necessitating employers to incorporate the levy into their March 2024 payroll and onward.

Detailed Discussion

The Act categorizes housing units into four types based on income levels:

1. Social housing unit: for individuals earning below KES 20,000 monthly.
2. Affordable housing unit: targeted at those earning between KES 20,000 and KES 149,000 monthly.
3. Affordable middle-class housing unit: aimed at individuals with incomes exceeding KES 149,000.
4. Rural affordable housing unit: designated for those residing outside urban areas.

The Affordable Housing Levy is mandatory for both employers and employees, set at 1.5% of monthly gross salary for each. Employers are responsible for remitting this levy by the ninth day of the subsequent month.

The Act expands coverage to non-salaried individuals who must contribute 1.5% of their gross income. The Kenya Revenue Authority clarifies that gross monthly salary comprises basic salary, regular cash allowances, but excludes non-cash payments and irregular income.

Penalties amounting to 3% of the unpaid levy are imposed on defaulters, accruing monthly until settled.

Affordable housing relief is granted to resident individuals who demonstrate levy payment during a tax year. This relief, effective March 19, 2024, amounts to 15% of the employee’s contribution, capped at KES 108,000 annually (KES 9,000 monthly).

Exemptions from the levy may be granted by the Cabinet Secretary through gazette notices, currently limited to non-cash benefits and irregular income.