Court of Appeal upholds Housing Levy: What the ruling means for Kenyan workers

Kenya's Court of Appeal has upheld the Affordable Housing Act and the Housing Levy, allowing the government to continue collecting the controversial 1.5 per cent contribution from workers after dismissing dozens of challenges to the programme.

A five-judge bench on Friday dismissed consolidated appeals challenging the Affordable Housing Act, 2024, largely affirming an earlier High Court decision that had allowed the programme to continue.

The decision gives President William Ruto's flagship housing programme another significant legal victory after years of litigation over how the levy is imposed and collected.

The current Affordable Housing Levy requires an employee to contribute 1.5 per cent of gross salary, with the employer making an equivalent 1.5 per cent contribution.

People earning income outside formal employment are also subject to the contribution under the statutory framework.

The Court of Appeal found no basis to invalidate the law on most of the grounds advanced by the petitioners.

But judges found a problem with Parliament's process

The government's victory was not absolute.

The appellate court found that the Commission on Revenue Allocation should have been given an opportunity to consider the Affordable Housing Bill and make recommendations before Parliament passed it.

The judges nevertheless declined to invalidate the entire legislation on that basis.

The ruling therefore leaves the levy operational.

That is the most immediate consequence for workers: deductions do not stop as a result of the latest court challenge.

Employers must also continue making their matching contributions.

Why has the levy been in court for so long?

The Housing Levy has had a complicated legal history.

The original levy was introduced through amendments to tax legislation but was challenged in court.

Judges found problems with that earlier framework, including concerns over unequal treatment because salaried employees carried the burden.

The government subsequently introduced the Affordable Housing Act, 2024, creating a new legal foundation for the programme and extending the contribution more broadly.

That new law generated another round of constitutional challenges.

The latest Court of Appeal judgment concerns that revised statutory framework rather than simply resurrecting the original levy struck down in earlier litigation.

What happens to your payslip?

For an employee earning Sh50,000 gross per month, a 1.5 per cent levy translates to Sh750 from the worker.

The employer contributes another Sh750.

At a Sh100,000 gross salary, the employee contribution is Sh1,500 and the employer matches it with Sh1,500.

Someone earning Sh200,000 contributes Sh3,000, again matched by the employer.

The ruling means those deductions continue unless another court subsequently orders otherwise or Parliament changes the law.

The government says the money is necessary to finance construction of affordable homes while creating employment and expanding home ownership.

Critics have questioned whether compulsory contributions are justified, how beneficiaries are selected and whether people who may never acquire a house under the programme should be required to finance it.

Those policy disagreements remain even after the legal ruling.

The Court of Appeal's role was to determine the legal challenges before it, not whether the Housing Levy is politically popular.

Could the dispute continue?

Court of Appeal decisions can in appropriate circumstances be challenged at the Supreme Court, subject to constitutional and procedural requirements.

The latest judgment therefore may not necessarily be the final chapter in litigation surrounding affordable housing.

But unless a competent court issues a different order, the practical position is straightforward.

Kenyan employees should expect the 1.5 per cent Housing Levy deduction to remain on their payslips.

Employers must continue contributing their corresponding share.

For the Ruto administration, the judgment removes an immediate legal threat to one of its biggest domestic programmes.

For workers, it confirms something more tangible: the monthly deduction continues.