After about 18 months of paying affordable housing levy introduced by the William Ruto administration, many Kenyans are scratching their heads on a government move to seek extra financing through bonds to fund the programme.
The levy—charged at 1.5 percent of gross pay and matched by employers, or 1.5 percent of business or personal income for the self-employed—was implemented despite widespread opposition from both the public and private sectors.
In April, the Parliamentary Budget Office said the levy was unnecessary, arguing that the initiative could easily be financed through existing tax revenues. Now the government says even the contributions collected so far are insufficient to realise its housing dream.
The state is now planning to issue a Sukuk bond—a Sharia-compliant instrument targeting Islamic investors—and two Real Estate Investment Trusts (REITs) at the Nairobi Securities Exchange (NSE) to supplement the programme’s funding.
For a country teetering on the edge of debt distress, turning to borrowing to finance a project that experts say could be fully funded through taxes has raised eyebrows.
In this interview with Business Daily, Housing Principal Secretary Charles Hinga explains why the government is turning to debt to support the affordable housing programme—and addresses other pressing issues surrounding the initiative.
Why is the government taking on more debt to fund affordable housing?
So, the long and short of it is that we don’t have enough money to meet the targets we have. We’re targeting 200,000 units per year. If you use a conservative estimate of Sh2 million per unit, that’s about Sh400 billion annually.
The housing levy brings in at most Sh72 billion, so we must leverage that. We’re partnering with investors to bring in private capital and use the levy as an off-take guarantee.
Now that we’ve built critical mass, the next step is to multiply our financial capacity six to seven times.
Right now, we have Sh300 billion worth of contracts signed, but we’ve only collected Sh120 billion. We need to collect more to meet our existing contractual obligations.
We’re looking at going to the market next year and raising about $1 billion (Sh129 billion) through a Sukuk bond and REITs listed on the Nairobi Securities Exchange.
If the levy isn’t enough, why is most of the money parked in Treasury bills?
It takes about 24 months to build an estate. Obviously, the money collected today isn’t building houses immediately. We pay contractors gradually as certificates are due. So, what do we do when we collect money today, but the next payment is due in September?
The Affordable Housing Act allows us to prudently invest idle funds. That’s why we put them in 90-day T-bills—because we’ll need that money within the quarter. Instead of leaving the money idle, we earn interest, which helps to close the funding gap.
Why is Turkish businessman Harun Aydin’s company still listed on your website as a master developer, even though the Lands Cabinet Secretary Esther Wahome said it wasn’t awarded a contract?
First of all, what is wrong with Harun Aydin? While others may deal in sentiment, I have a duty to deal in facts. We have an investor who has undergone all our vetting processes. To date, they have not been awarded anything — so there’s nothing wrong with listing them as a strategic investor.
They’ve met all the criteria to be shortlisted: they’ve demonstrated experience and partnered with a major company that has an annual turnover of $1 billion (Sh129 billion). They’ve delivered some of the largest developments in Turkey — how do you disqualify that?
We’re very objective. We do proper KYC (Know Your Client). At the point of awarding a project, the investor must disclose their funding sources. I write to the Central Bank, the NIS, and our foreign missions — they conduct their own KYC checks.
But right now, we’re only at the shortlisting stage. They are listed on our website alongside nearly 300 others. No contract has been awarded yet. And even if one is awarded, there’s nothing wrong with that. We can’t disqualify someone based purely on perception — we must remain objective.
Some buyers say their housing levy contributions were deducted from their deposit when buying houses. Is that how the system works now?
No. The levy is a tax — that’s what people need to understand. But it also gives you an expectation that you will eventually get a house. The challenge is matching demand with supply.
Not everyone can get a house on day one as we build progressively. What you need to do is register on Boma Yangu. That puts you in the queue. But remember, the contribution isn’t your personal savings — it’s a tax, just like the fuel levy.
The procurement watchdog recently ruled that you overstepped your mandate by cancelling a tender. Why did you do it?
At the heart of this issue is a contractor who submitted forged documents. They claimed a turnover of Sh3 billion, but when I contacted KRA, the actual figure was Sh180 million. They also submitted a letter from Equity Bank claiming access to a Sh3 billion credit line. When I reached out, the bank disowned it, saying the Meru branch that issued it wasn’t even permitted to do so.
So when the file landed on my desk, I didn’t just rubber-stamp it. I’m part of the evaluation process. I asked questions and sent it back to the evaluation committee.
They failed to address the issues I raised. By the time they responded, the bid had expired — the timeline had lapsed. That’s why the tender was cancelled.
