State plans to use Housing Levy as loan security

Added: 2026-06-04

[00:00:00]Now, a bold fiscal maneuver could lock the controversial housing levy into Kenyan payslips for generations. A new parliamentary report reveals that the State Department for Housing plans to plug a massive 118 billion shilling budget deficit by securitizing the housing levy to borrow 100 billion shillings from development partners.

[00:00:24]NTV's senior reporter, Ibrahim Karanja, explains that this move could effectively block future administrations from vowing to scrap the deduction because defaulting on such a securitized loan would plunge the country into catastrophic legal and financial penalties.

[00:00:42]>> It is a proposal that could permanently redefine the place of the housing levy in Kenyan payslips. Despite expressed desires by a section of citizens and opposition politicians to scrap the levy after the Ruto administration new budget documents suggested it deduction is here to stay. According to the budget and appropriations committee report on the 2026-2027 budget estimates, the affordable housing program has an estimated funding requirement of 228.3 billion shillings. However, it faces a financing shortfall of approximately 118.3 billion shillings. To bridge this gap, the State Department for Housing plans to mobilize 150 billion shillings through two avenues.

[00:01:33]The first one is securitization, where approximately 100 billion shillings will be borrowed from development partners while committing the housing levy as direct security.

[00:01:44]The second avenue is asset sales aimed at raising 50 billion shillings from the proceeds of completed housing units.

[00:01:52]In response to questions from NTV, the State Department for Housing and Urban Development states that the Affordable Housing Levy has from the outset been the base of the program's financing and it remains so.

[00:02:08]But a national undertaking of this scale was always going to draw on more than a single source of capital. The levy was designed to anchor the program while additional sources were introduced as it matured and that is now taking shape.

[00:02:24]The clarification further states that meeting the financing demands of this national program truly calls for a deliberate capital raising strategy that draws on a range of instruments as one would expect of any large-scale housing venture. Securitization of receivables is one component of that strategy. It sits alongside other instruments available to the Affordable Housing Board that includes real estate investment trusts.

[00:02:53]For months, formal sector employees have watched 1.5% of their gross income go to the housing project with employers matching the contribution.

[00:03:04]While the government champions the project as a progressive success, it remains highly contentious.

[00:03:11]Politicians opposing the Ruto administration have vowed to abolish the levy entirely if they take power.

[00:03:18]However, that political promise is now colliding with harsh financial realities.

[00:03:24]If the government uses the housing levy as collateral for the 100 billion shillings loan, scrapping the deduction would mean Kenya is failing on its debt obligations. Any future administration attempting to cancel the levy would face tedious, extremely expensive legal battles and severe international financial penalties.

[00:03:48]While specifics such as the exact duration of the loan or the identity of the lenders are not yet public, committing levies for long-term borrowing is a tried and tested strategy in Kenya. History shows this playbook before, such as the securitization of portions of the road maintenance levy fund and the sports fund to finance major infrastructure like the Talanta Stadium.

[00:04:12]Once the revenue is bound to a loan, it becomes government debt.

[00:04:19]For the Kenyan worker, this latest strategy means the housing levy is no longer just a project, but a committed loan repayment guarantee that will likely outlast current political administrations.

[00:04:33]Ibrahim Karanja, NTV.