John Mbadi: Govt Considers Restructuring Housing Levy, to Exempt Low Income Kenyans
- The World Bank issued recommendations for the Kenyan government in its Public Finance Review for 2025
- Treasury Cabinet Secretary (CS) John Mbadi announced plans to revise the 1.5% housing levy
- Mbadi acknowledged complaints raised by Kenyans over the deduction on their payslips, noting that reforms are underway
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Wycliffe Musalia has over six years of experience in financial, business, technology, climate, and health reporting, providing deep insights into Kenyan and global economic trends. He currently works as a business editor at TUKO.co.ke.
President William Ruto's administration has announced plans to restructure the housing levy.
Source: Twitter
This followed recommendations in the World Bank Public Finance Review 2025, calling for reforms in the scheme.
How govt will restructure housing levy
The Bretton Woods institution urged the state to exempt low-income earners from contributing to the housing levy.
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In consideration of the global lenders' call, Treasury Cabinet Secretary (CS) John Mbadi told the Senate on Wednesday, June 5, that the government plans to restructure the levy.
Mbadi acknowledged complaints raised by Kenyans contributing to the scheme, saying more pronouncements will be made in the coming days.
"There is a discussion around restructuring the housing levy. Although it has serious benefits, the individual employees whose pay is cut have complaints that you cannot ignore. So, a lot of restructuring is going on, and more pronouncements will come in due course."
The Kenya Kwanza government introduced the 1.5% monthly contribution to help spearhead its agenda on building 200,000 housing units per year.
Ruto said the levy will help offset the two million housing deficit in the country and give Kenyans a decent living.
Every working Kenyan contributes 1.5% of their gross salary to the kitty. Non-salaried Kenyans are also required to pay the same rate.
Why govt plans to revise housing levy
The scheme has faced many challenges and opposition since its launch in financial year 2023/24.
The government has formulated several legislations to redefine the levy and its viability.
Earlier, the president argued that the housing levy was not a tax but a contribution that would guarantee Kenyans access to the units.
However, in February 2025, Housing Cabinet Secretary (CS) Alice Wahome affirmed that the housing levy is a tax, and no Kenyan paying it is guaranteed a house.
Wahome said Kenyans contributing to the kitty and want an affordable housing unit will have to register afresh for purchase and pay.
Which other recommendation came from World Bank?
The international lender also urged the government to review the Social Health Insurance Fund (SHIF) contribution model, calling for the exemption of low-wage formal workers and the poor population.
The World Bank said the government should fund contributions for this group of Kenyans via the exchequer.
The bank also recommended changes to the income tax brackets affecting low-wage and high-income Kenyans.
According to the bank, the existing 30% tax rate for Kenyans earnings between KSh 32,334 and KSh 166,667 per month should be reduced to 25%.
The World Bank also advocated for an increase in the income tax bracket for high-income earners who pocket more than KSh 800,000 per month from the current 35% to 38%.
Proofreading by Mercy Nyambura, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
