Housing Levy Kenya 2026

What is the Housing Levy?

The Affordable Housing Levy is a mandatory statutory deduction introduced by the Kenyan government to fund the national affordable housing programme. Established under the Affordable Housing Act and upheld by the Supreme Court, the levy requires both employees and employers to contribute a percentage of the employee's gross salary each month. The collected funds are directed towards building affordable housing units across Kenya.

In 2026, the Housing Levy continues as one of the four key statutory deductions that affect every employee's take-home pay in Kenya, alongside PAYE, NSSF, and SHIF. Understanding how it works is important for both payroll compliance and personal financial planning. Use our salary calculator to see the exact Housing Levy deduction for any salary level.

Current Housing Levy Rates in 2026

The Housing Levy is calculated as a simple percentage of the employee's gross monthly salary, with contributions from both parties:

Key points about the 2026 rates:

• The rate is a flat percentage with no upper cap, meaning it applies to the entire gross salary regardless of amount
• The employee's 1.5% is deducted from their salary (reduces take-home pay)
• The employer's 1.5% is an additional cost borne by the employer (not deducted from the employee's salary)
• The combined 3% is remitted as a single payment to KRA

Housing Levy Calculation Examples

Since the Housing Levy is a straightforward percentage calculation, here are examples across different salary levels:

Detailed Example: KES 80,000 Salary

Let us walk through the complete Housing Levy calculation for an employee earning KES 80,000:

1. Gross Salary: KES 80,000
2. Employee Housing Levy: KES 80,000 × 1.5% = KES 1,200 (deducted from salary)
3. Employer Housing Levy: KES 80,000 × 1.5% = KES 1,200 (additional employer cost)
4. Total Housing Levy Remitted: KES 1,200 + KES 1,200 = KES 2,400

The employee sees KES 1,200 deducted from their salary, while the employer pays an additional KES 1,200 from company funds. The combined KES 2,400 is remitted to KRA.

Impact on PAYE Calculation

One of the most important aspects of the Housing Levy for payroll processing is its interaction with PAYE tax. The employee's Housing Levy contribution (1.5%) is an allowable deduction for PAYE purposes. This means:

• The employee's 1.5% Housing Levy is subtracted from gross salary before taxable income is calculated
• This reduces the taxable income, which in turn reduces the PAYE tax payable
• The employer's 1.5% contribution has no effect on the employee's PAYE calculation

PAYE Impact Example: KES 100,000 Salary

Here is how the Housing Levy affects PAYE for an employee earning KES 100,000:

1. Gross Salary: KES 100,000
2. NSSF Employee: KES 6,000 (see NSSF guide for breakdown)
3. Housing Levy Employee: KES 100,000 × 1.5% = KES 1,500
4. Taxable Income: KES 100,000 – KES 6,000 – KES 1,500 = KES 92,500
5. PAYE is then calculated on KES 92,500 using the progressive tax bands

Without the Housing Levy deduction, taxable income would be KES 94,000, resulting in higher PAYE. The KES 1,500 Housing Levy deduction saves the employee approximately KES 450 in PAYE tax (at the 30% marginal rate). So the actual net cost of the Housing Levy to this employee is about KES 1,050, not the full KES 1,500.

Remittance via iTax

The Housing Levy is remitted to the Kenya Revenue Authority (KRA) through the iTax platform, alongside PAYE. Here is the process:

Step-by-Step Remittance Process

1. Calculate: Determine the employee and employer Housing Levy for each employee
2. Deduct: Deduct the employee's 1.5% from their net pay
3. Log in to iTax: Access itax.kra.go.ke with your employer KRA PIN
4. File return: File the Housing Levy return under the Affordable Housing Levy section
5. Generate payment slip: iTax generates a payment slip with the total amount due
6. Pay: Make payment via bank transfer, RTGS, or mobile money before the deadline

Deadline

The Housing Levy must be remitted by the 9th of the month following the payroll month. This aligns with the PAYE remittance deadline. For example, Housing Levy deducted from February 2026 salaries must be remitted by 9th March 2026.

Penalties for Late Remittance

• Late payment penalty: 5% of the amount due
• Interest: 1% per month on the unpaid amount
• Late filing penalty: KES 10,000 or 5% of the levy due, whichever is higher

Given these steep penalties, timely remittance is essential. Automated payroll systems like SmartHR Kenya help ensure you never miss a deadline by calculating the correct amounts and providing remittance-ready reports.

Employer vs Employee Obligations

The Housing Levy creates obligations for both parties in the employment relationship:

Employer Obligations

• Deduct 1.5% from each employee's gross salary every month
• Contribute an additional 1.5% of each employee's gross salary from company funds
• Remit the combined 3% to KRA via iTax by the 9th of the following month
• File accurate Housing Levy returns showing each employee's contribution
• Display the Housing Levy deduction on each employee's payslip
• Keep records of all Housing Levy deductions and remittances for at least 7 years

Employee Obligations

• The levy is mandatory — employees cannot opt out or request exemption
• Verify that the correct amount (1.5% of gross salary) is being deducted on your payslip
• Keep records of deductions for your personal tax filing
• Register for the affordable housing programme to potentially benefit from the scheme

Affordable Housing Programme Benefits

The Housing Levy is not just a tax — it is designed to fund a tangible benefit. The Affordable Housing Programme aims to deliver affordable housing units across Kenya. Here is what contributors can look forward to:

• Affordable purchase: Contributors may qualify to purchase housing units at subsidised prices
• Priority allocation: Consistent contributors may receive priority in housing unit allocation
• Nationwide coverage: Housing projects are planned across multiple counties, not just Nairobi
• Various unit types: The programme includes one-bedroom, two-bedroom, and three-bedroom units to cater to different family sizes and budgets
• Contribution tracking: Your total contributions are tracked and may count towards your housing purchase

While the programme is still scaling up, the government has committed to building 250,000 affordable housing units. Contributors who maintain consistent payments position themselves for future allocation opportunities.

Housing Levy in the Context of Total Deductions

To understand how the Housing Levy fits into the bigger picture, here is a summary of all statutory deductions for an employee earning KES 80,000 in 2026:

The Housing Levy represents a relatively small portion of total statutory deductions, but its pre-tax deduction status provides a useful tax benefit. For a complete calculation showing all deductions together, see our PAYE calculation guide or use the salary calculator.

Frequently Asked Questions

Is the Housing Levy mandatory in Kenya?

Yes. The Affordable Housing Levy is mandatory for all employed persons in Kenya. Following the Supreme Court ruling upholding its constitutionality, both employers and employees must contribute 1.5% each of the employee's gross salary. There is no opt-out provision, and employers who fail to deduct and remit face penalties from KRA.

Does the Housing Levy reduce my PAYE tax?

Yes. The employee's 1.5% Housing Levy contribution is an allowable deduction for PAYE purposes. It is subtracted from your gross salary before taxable income is calculated, which reduces your PAYE tax. The tax saving depends on your marginal tax rate. For example, at the 30% tax band, a KES 1,500 Housing Levy deduction saves you KES 450 in PAYE, making the effective cost of the levy KES 1,050.

When must the Housing Levy be remitted?

The Housing Levy must be remitted to KRA through iTax by the 9th of the month following the payroll month. This is the same deadline as PAYE remittance. Late payment attracts a 5% penalty plus 1% monthly interest on the outstanding amount.

Does the employer also pay the Housing Levy?

Yes. The employer contributes an additional 1.5% of each employee's gross salary from company funds. This is not deducted from the employee's salary — it is an extra cost to the employer. Combined with the employee's 1.5%, the total levy remitted is 3% of gross salary per employee. For a company with 50 employees averaging KES 60,000, the monthly employer Housing Levy cost is KES 45,000.

Staying compliant with the Housing Levy is straightforward when you have the right tools. SmartHR Kenya automatically calculates both the employee and employer Housing Levy contributions, includes them in your payslips, and generates iTax-ready returns for remittance. Check our pricing and let SmartHR Kenya handle the compliance so you can focus on growing your business.