Kenya’s Housing Levy Alone Can’t Fund 200,000 Homes a Year, PS Says — State Turns to World Bank Loans and House Sales

Market Analysis

NAIROBI, KENYA  |  15 SEPTEMBER 2026  |  PROPERTY NEWS AFRICA

Kenya’s flagship Affordable Housing Programme is moving to a broader funding model. On 4 September, Housing Principal Secretary Charles Hinga said the 1.5 per cent Affordable Housing Levy — deducted from formal payslips and matched by employers — brings in about KSh6 billion (roughly US$46 million) a month, and that this alone cannot sustain the government’s target of 200,000 new homes a year, according to reports by People Daily and Kenyans.co.ke.

The levy was designed as the programme’s dedicated funding source. The State Department for Housing now intends it to be one leg of a three-legged structure: levy collections, proceeds from selling completed units, and long-term loans from development partners including the World Bank. For developers, contractors and investors with Kenyan residential exposure, the practical question has shifted from how much the levy raises to how the balance will be financed — and what that means for the pace of a construction pipeline that now exceeds 200,000 units.

What the PS said

Hinga’s framing was direct: KSh6 billion a month, on its own, “cannot be able to sustain 200,000 units a year.” The proposed structure is a build-sell-recycle loop. Completed units are titled and occupied under the Tenant Purchase Agreement scheme, buyers pay instalments toward ownership, and those receipts are channelled back into new construction alongside fresh levy income. Development-partner financing, including from the World Bank, would bridge the years before sales revenue reaches scale, as The Eastleigh Voice reported.

No figure, timeline or terms for a World Bank facility have been disclosed yet. The scale of the requirement is not new, however. Appearing before the National Assembly’s Housing Committee on 13 May, Hinga asked MPs to support an additional KSh150 billion in the 2026/27 Budget. In the same period, NTV reported him putting the programme’s annual requirement at roughly KSh400 billion (about US$3.1 billion), against around KSh100 billion a year from the levy — a rounded figure; actual receipts in 2025/26 were KSh79.1 billion.

The arithmetic

Treasury records cited by the Daily Nation show the levy generated KSh54.16 billion in 2023/24, KSh73.20 billion in 2024/25 and KSh79.10 billion in 2025/26 — about KSh206 billion (US$1.6 billion) in three years. The first year was interrupted by a three-month court suspension after the original framework was found unconstitutional for applying only to formal workers; the Affordable Housing Act, 2024 restored collections from March 2024 and extended coverage to the informal sector. The Act also allows the Fund to receive parliamentary allocations, grants, loans and income from unit sales and rentals, which is the legal basis for the model Hinga is now describing.

Receipts for 2025/26 came in below the KSh95.84 billion revenue target Treasury published when the budget was set, although the PS has noted they exceeded the department’s own spending-side estimate for the year. Spread across 200,000 units, KSh79.1 billion amounts to about KSh395,000 per home — roughly a quarter of the KSh1.5 million entry price of a one-bedroom unit in the affordable band. The pipeline is costlier than that: Kenya National Bureau of Statistics data cited by Kenya Engineer put 138,474 units under the programme at an estimated construction cost of KSh385.8 billion — an average of about KSh2.8 million per unit by Property News Africa’s calculation. At that cost, 200,000 homes a year would run to roughly KSh560 billion, higher than the KSh400 billion figure reported in May, a difference that may reflect different cost assumptions.

Delivery: pipeline versus completions

The programme’s scale is substantial. KNBS recorded 205,311 public-sector housing units under construction at December 2025, worth close to KSh500 billion; the State Department now puts the figure at 220,536 units under development, with 1.31 million people registered on the Boma Yangu portal and 14,219 units allocated. Cumulative savings on the platform more than doubled between May 2025 and July 2026, from KSh2.47 billion to KSh5.47 billion, and the New Mukuru project in Nairobi drew 20,426 applications for 4,342 social housing units — nearly five applicants per home.

Completions are a smaller number. KNBS counts 6,738 units finished by the State Department in 2025, up from 1,655 in 2024, plus 410 by the National Housing Corporation, as reported by KBC. The Controller of Budget’s review of the 2025/26 financial year records 4,536 social housing units completed and handed over during the year. Set against a 200,000-a-year target, 2025 output was about 3.5 per cent, which is why the government has launched a Rapid Results Initiative directing the Affordable Housing Board to complete 45,000 units by December 2026 and 15,000 more in early 2027 — a near-sevenfold increase on last year, budgeted at about KSh52 billion.

Fund absorption has improved markedly. Utilisation of levy funds rose from 32.6 per cent in 2023/24 to 96.3 per cent in 2024/25, according to the Economic Survey 2026 cited by Business Daily. For 2025/26, the Controller of Budget’s implementation review shows KSh122.18 billion spent against a revised allocation of KSh124 billion — a 99 per cent absorption rate — while physical progress on works covering 217,654 units stood at 24.5 per cent against a 52 per cent target for the year. The earlier practice of placing idle levy cash in Treasury bills, examined by a parliamentary committee in 2024, has been wound down as construction spending caught up with collections.

Snapshot

Where official figures differ by source or date, each is shown. Government delivery targets and budget projections are official statements, not verified outcomes. USD conversions are approximate at about KSh129 per US dollar.

Budget timing and oversight

The 2026/27 budget sets the affordable housing construction line at KSh50.7 billion, down from KSh64.5 billion originally allocated for 2025/26 and KSh73.3 billion after supplementary revisions, according to Daily Nation and Kenyans.co.ke. Treasury projections then have it rising to KSh201.1 billion in 2027/28, within a KSh360 billion housing envelope that Hinga has said assumes higher revenue from house sales alongside stronger levy receipts. The sales-recycling model will therefore need to begin generating meaningful revenue during a period when the construction allocation is lower.

Parliamentary oversight is also increasing. MPs have proposed amending the Controller of Budget Act to give that office enforcement powers over levy spending, and a Sunday Nation spot-check this month found projects advancing at different speeds across regions, with some sites reporting delayed payments. Residents interviewed at one completed estate praised the homes but asked whether lower-income households could access units priced from KSh1.5 million; the programme’s social housing band, for households earning under KSh20,000 a month, is priced below that level. Separately, the Finance Act has since 1 July given the Kenya Revenue Authority powers to enforce unpaid levy through account freezes and asset recovery — a compliance point for employers to note.

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