Housing Levy Could Stay on Payslips Post-Ruto via Planned Sh100bn Securitisation

The State Department for Housing intends to securitise proceeds from the Affordable Housing Levy to raise Sh100 billion. This move aims to help close a funding gap in the ambitious programme to deliver low-cost homes.

Parliamentary disclosures reveal the plan as part of broader efforts to mobilise resources for construction. The levy requires salaried workers to contribute 1.5 per cent of their gross pay, matched by employers.

For the 2026/27 financial year, affordable housing construction requires Sh228.3 billion. Budget allocations cover only Sh110 billion, leaving a gap of Sh118.3 billion. The proposed bond would bridge Sh100 billion of that shortfall.

The remaining Sh18.3 billion gap, along with another Sh50 billion, would come from sales of completed units. Securitisation links future levy collections directly to bond repayments. This structure effectively commits the revenue stream until investors are fully paid.

Such arrangements allow governments to access large sums upfront. They support simultaneous rollout of multiple housing projects rather than waiting for gradual levy accumulation. Similar approaches have already been used for other funds, including sports and tourism levies.

The Kenya Kwanza administration targets one million affordable units by the end of 2027. Annual construction goals stand at 250,000 homes. The levy forms a central pillar of this effort, though collections have not always matched spending needs.

Principal Secretary Charles Hinga has noted the strategy as one component of capital raising. Other tools include asset-backed instruments using sales proceeds, rental income, or instalment payments as security. Traditional donor financing from bodies like the World Bank will continue alongside these.

Critics point to the long-term implications. Many treasury bonds extend beyond a single presidential term. Opposition figures, including Rigathi Gachagua, have pledged to scrap the levy if they win power in 2027. Experts caution that securitisation could complicate such moves without compensating bondholders.

The programme has seen significant spending growth. In one recent quarter, housing development expenditure rose more than fourfold year-on-year. This positions it as a leading area of government capital outlay, ahead of traditional sectors like roads.

Initial resistance to the levy centred on its focus on formal sector workers. Subsequent legal changes broadened it to all income earners, though collection from the informal sector remains limited. Courts have upheld its constitutionality.

Housing projects under the Boma Yangu initiative continue across the country. The securitisation plan signals confidence in sustained revenue flows. It also underscores the scale of financing required to meet national housing targets amid tight fiscal space.

Workers may see the deduction persist on payslips for years. Bond maturities often stretch 10 to 15 years or more. This raises questions about the levy’s temporary nature versus its emerging role as a structural funding mechanism.

The State Department maintains that committed funds for ongoing projects fall short of pipeline needs. Issuing the bond backed by levy receivables would accelerate delivery of units. Details on exact terms and investor safeguards remain under discussion in parliamentary processes.

This development fits into wider use of securitisation across infrastructure. Road maintenance and railway development levies have seen or are slated for similar treatment. Each case ties specific revenue streams to debt obligations that outlast individual governments.

For the construction sector, steady funding flows matter. Contractors rely on predictable project financing to maintain momentum on sites nationwide. Any delays in bridging gaps could stall works already in progress.

The full impact on workers and future budgets will depend on final bond structure and parliamentary approval. As the 2026/27 budget process advances, the proposal is likely to draw close scrutiny from lawmakers and stakeholders.