top of page

EXPLORING KEY PROVISIONS IN THE KENYAN AFFORDABLE HOUSING ACT, 2024

Writer: Valarie OnchuruValarie Onchuru

Updated: Dec 31, 2024

Disclaimer : This article is meant for informational purposes only and should not be construed as a legal opinion. Should you have any questions or need clarifications on the subject matter, kindly feel free to contact us for legal advice.

 

The Finance Act 2023 made headlines thanks to an assortment of contentious issues with the most prominent being the introduction of a compulsory Affordable Housing Levy. Following a raging debate in and out of court, ultimately, the High Court of Kenya on 28th November 2023 declared that the housing levy was unconstitutional. Criticisms against the levy ranged from its lack of a governing framework to concerns over usurping the role of County Government, transparency and discrimination against salaried employees within the formal sector. In what the government termed as compliance with the Court decision, the government immediately embarked on drafting a new legislative framework, culminating in the enactment of the Affordable Housing Act 2024 (the Law) on 19th March 2024.


This Article looks into some of the notable provisions under the Law.



1. Applicability to both formal and informal sector


The Law introduces the affordable housing levy at a rate of 1.5% on the gross salary of employees, with a corresponding contribution from employers. Additionally, individuals engaged in business activities, albeit not formally employed are required to pay the levy at the same rate of 1.5% of their gross income. These provisions became effective on the date of assent, 19th March 2024.



2. The Collector

The Law appoints the Commissioner General of the Kenya Revenue Authority (KRA) to oversee levy collection, with payments due by the 9th working day after the month's end. Failure to meet this deadline attracts a 3% penalty on the unpaid amounts.


Notably, the Law includes provisions for tax reliefs related to the levy payments, allowing expenditure incurred by businesses on the levy to be deductible for tax purposes and providing an affordable housing relief for resident individuals who have paid the levy.


3. Creation of the Affordable Housing Fund

The Law introduces the Affordable Housing Fund (the Fund), managed by the Affordable Housing Board (the Board), to finance affordable housing initiatives. Funding sources include the Affordable Housing Levy, appropriations, donations, loans, and investment income. The Fund's objectives are promoting home ownership, facilitating low-interest housing loans, and supporting infrastructure development across counties.


Furthermore, the Law mandates the creation of regulations, by the Cabinet Secretary (CS) for Housing in consultation with the Board, within 30 days of commencement to provide guidance on various aspects, including exemption criteria, eligibility for housing allocation, requirements for application, change of affordable housing units, voluntary savings, and off-take of housing units.



4. The Role of County Governments

The Law mandates the establishment of County Rural and Urban Affordable Housing Committees in every county, comprising representatives nominated by the county governor and other stakeholders. These committees are tasked with developing affordable housing frameworks, advising the governor on housing programs, and creating investment programs tailored to each county's needs. These committees report to the Board, and provide regular updates to the county assembly on housing initiatives.



5. Allocation of Public Land to Follow Public Participation

The Law dictates that Public land owned by the county government cannot be assigned or allocated for purposes of affordable housing unless the Board has conducted public participation and engaged with stakeholders in the affected community within the county and according to the specified procedure.



6. Implementation of the Affordable Housing Scheme

The Law emphasises the rights of residents in existing settlements, requiring the Board to issue notices, develop resettlement mechanisms, and offer priority purchase options for affordable housing units to residents affected by new developments.


The Law allows the Board to appoint national government agencies for housing development and infrastructure, and to enter into agreements with public and private institutions for construction, financing, and material supply, subject to prescribed procedures and tendering processes. Another critical consideration is community support and local involvement in housing projects, including the use of locally available materials, sourcing labour from local communities, and providing internships or practical experience to students from nearby educational institutions.



7. Eligibility and Criteria in Purchasing Affordable Housing Units

To be eligible for an affordable housing unit, an applicant must meet the specific criteria outlined in regulations.


Applicants are required to submit their applications to the Board, along with proof of deposit, a copy of their identification card and evidence of tax compliance. Although the Law mentions that a copy of certificate of incorporation is among the requirements in cases of body corporates, the Law expressly prohibits body corporates from owning affordable housing units under Section 48(2). Priority in the allocation process is given to marginalized groups, including youth, women, and persons with disabilities.


Eligible individuals also have the option to save with the Fund to accumulate a deposit, with the interest earned credited to a separate bank account. Those who have not been allocated a housing unit can either withdraw their savings or apply for an affordable mortgage, with their savings and land serving as collateral upon approval.


The Board, with the CS's approval, facilitates the transfer of ownership to eligible applicants upon the completion of full payment of the agreed price. The Registrar is prohibited from registering any transfer of housing units without the explicit written consent from the Board.



8. Resale of Affordable Housing Units is Prohibited without the Board’s Consent

Purchasers of Affordable Housing Units are prohibited from selling or agreeing to sell their units or any interest therein to another party without prior written consent from the Board.



Criticisms of the Law

The Affordable Housing Act 2024 has been hailed by the Kenya Kwanza regime as a landmark legislation aimed at addressing Kenya's housing crisis. However, the Law continues to find itself embroiled in controversy and legal challenges. Critics have particularly scrutinized the provision on sale of units built on public land. This practice, they opine, amounts to privatization of public land for the benefit of a select few individuals. They contend that instead of selling these units, they should be made available for rent, ensuring broader access to affordable housing for a larger segment of the population.


On 20th March 2024, Petition No. E154 of 2024 was filed in court seeking to halt the implementation of the Law. The petitioners raise concerns about the Law's perceived centralization of housing functions, arguing that it encroaches upon responsibilities traditionally held by county governments. Additionally, they criticize the Law's perceived discrimination against corporations, which are barred from owning affordable housing units. According to the petitioners, this unfairly penalizes companies that contribute significantly to the economy. Moreover, they argue that the provisions of the Law suggest an attempt to introduce communist ideologies into a nation not structured as such. Despite these concerns, the Court declined to suspend the Law's implementation. The fate of the petition lies in the hands of the judiciary, with hearings scheduled for 16th May 2024.



Conclusion

The Law represents a concerted effort to address Kenya's housing challenges, albeit amidst legal and logistical challenges. Although it signifies progress, a cloud of mistrust looms large over its implementation. Kenyans harbor legitimate concerns about whether those entrusted with managing the Affordable Housing Fund can resist the temptation of mismanagement and corruption. The specter of past scandals haunts public perception, raising apprehensions about the Law's potential to become another chapter in Kenya's history of financial misconduct. As uncertainty prevails, the question remains; will the Law pave the way for genuine change, or is it merely another scandal in waiting?


 

THE END

Comments


bottom of page