The Affordable Housing Act, No. 2 of 2024 was assented by the President on 19th March 2024, immediately placing obligations on both employers, employees and the self-employed including persons in informal employment. The Act seeks to give effect to Article 43 of the Constitution of Kenya which provides Kenyans with the right to accessible and adequate housing. The main change in the Act is the mandatory legal requirement at section 4 of the Act that all employees and employers to each contribute 1.5% of employee’s gross salary to the Affordable Housing Fund as Affordable Housing Levy (AHL) on a monthly basis. The Levy is to be paid not later than the ninth (9th) working day after the end of the month in which the gross salary was due or gross income was received or accrued to the collector who is the Commissioner-General of the Kenya Revenue Authority. The Regulations to the Act will hopefully provide more clarity on how non-salaried persons and those in informal employment will make contribution to the Levy.
Cumulatively then, an amount equivalent to 3% of an employee’s gross salary must be remitted monthly to the Fund in respect of each employee.
The Act was another attempt by Parliament to cure the deficiencies and irregularities identified in the initial law (Act) by the Courts in Okiya Omtatah and 6 others v the Cabinet Secretary for the National Treasury and Planning and 3 others (Petition No. E181 of 2023) and in National Assembly & Another (Applicants) vs Okiya Omtatah Okoiti & others (Respondents) Consolidated Civil Application No. E577 of 2023.
In the section below, we highlight the salient features of the Affordable Housing Act, 2024.
Key Provisions of the Affordable Housing Act, 2024
Under the Act, in section 2(2) there are classifications of housing units which target individuals according to their monthly income.
- Individuals whose monthly income is below Ksh. 20,000 shall be eligible for social housing units;
- Individuals whose monthly income is between 20,000 and Ksh. 149,000 are entitled to affordable housing units.
- Thirdly there are affordable middle-class housing units which are targeted to individuals whose monthly income is over Ksh 149,000.
- Rural affordable housing units which refers to houses targeted at persons living in areas which are not classified as urban area
Section 6 of the Act gives the Cabinet Secretary responsible for housing the powers to exempt certain income classes and categories of persons from payment of the Levy through a Gazette Notice.
In case of default on payment of the housing levy, the person liable to make the payments shall be liable for a penalty equal to three per cent (3%) of the amount due every month or the unpaid amount or part of the unpaid amount.
The Affordable Housing Fund is to be vested and managed by a Board established under section 8 of the Act. The funds vested under the board shall be the monies from voluntary contributions by citizens, gifts, donations, income from investments of the funds, and loans approved by the cabinet secretary in charge of the National Treasury.
The Board is established to oversee the development, design and maintenance of affordable housing, institutional housing and associated social and physical infrastructure. The purpose of the Fund shall be to provide funds for the design, development and maintenance of affordable housing, institutional housing and associated social and physical infrastructure.
The Act also provides for the establishment of County Rural and Urban Affordable Housing Committees which shall work in tandem with the Board to ensure the development and actualization of a framework at the county level for the attainment of the Affordable Housing Program.
Under the Act, county government's land should not be allocated unless the Board has conducted public participation and stakeholder engagement with the affected community.
The Act further provides an agreement with public and private institutions for housing to ensure the development of affordable housing and physical infrastructure.
Application and Eligibility Criteria for the Affordable Housing Units
The units shall only be owned by natural persons and in select cases. An individual may also make voluntary contributions towards the affordable housing units. Such an individual is required to raise money for a deposit to be allocated to the housing unit. In case an individual has voluntarily paid the price and has not been allocated an affordable housing unit then they may request to withdraw their money with accrued interest by providing a ninety day's written notice. Alternatively, an applicant may apply for the issuance of an affordable mortgage to develop a rural affordable housing unit.
An application for the affordable housing units shall be accompanied by
- proof of requisite deposit as may be prescribed by the Cabinet Secretary;
- a copy of the national identity card or such other form of identification as may be prescribed by the Cabinet Secretary;
- copy of incorporation certificate in the case of a body corporate;
- a copy of the Kenya Revenue Authority personal identification number certificate and tax compliance certificate;
- such other information that may be determined by the Board.
The ownership of housing units shall be transferred to the qualified applicant upon completion of the agreed price.
Selling or agreeing to sell the affordable housing units to other individuals is prohibited and may only be done with the consent of the Board.
Legal Challenges
Following the assent into law, other petitions have been filed before the High Court alleging the unconstitutionality of the act. One such case that has been filed before the High Court at Milimani Law Courts is the case of Dr Magare Gikenyi, Pauline Kinyanjui and 4 others vs The Cabinet Secretary Lands, Public Works Housing and Urban Development, the CS Treasury and others HCCHRPET/E154/2024. The petitioners’ grounds include claims that the new legislation threatens the freedom to own property as entrenched under the constitution of Kenya based on the fact that it compels civil servants to participate in making contributions towards the affordable housing project.
The Court however declined to grant any conservatory orders suspending the implementation of the Act. Accordingly, the law is in effect and must be complied with unless and until a different verdict is delivered by the Courts. Indeed, the Kenya Revenue Authority, (which is the collecting agency of the Levy), has issued a Circular/Alert which also provides details on payment of the Levy.
