If you have looked at your payslip since 2023 and noticed a deduction called "Housing Levy" or "AHL", you are not alone in wondering what it is, whether it is legal, and where your money actually goes. This guide answers all of it.
What is the Housing Levy?
The Affordable Housing Levy (AHL) is a mandatory monthly deduction introduced by the Kenyan government under the Affordable Housing Act 2024. It was designed to fund the construction of affordable housing units across Kenya for low and middle income Kenyans.
The levy is deducted from every formally employed Kenyan's salary at a rate of 1.5% of gross monthly salary, with the employer matching the same amount — meaning a total of 3% of your gross salary goes toward the Affordable Housing Fund every month.
Legal Basis — Was It Challenged?
Yes. The Housing Levy was initially introduced in 2023 but faced a legal challenge in the High Court, which declared it unconstitutional in November 2023. However the government appealed and the Court of Appeal reinstated it in February 2024. The Affordable Housing Act 2024 was then passed by Parliament to provide a firm legal foundation.
As of 2026, the levy is fully legal and mandatory. Employers who fail to deduct and remit it face penalties from KRA.
How Much Is Deducted?
The calculation is straightforward — 1.5% of your gross salary with no cap and no minimum.
| Gross salary | Employee deduction (1.5%) | Employer match (1.5%) | Total to fund |
|---|---|---|---|
| KES 20,000 | KES 300 | KES 300 | KES 600 |
| KES 52,500 | KES 788 | KES 788 | KES 1,575 |
| KES 100,000 | KES 1,500 | KES 1,500 | KES 3,000 |
| KES 200,000 | KES 3,000 | KES 3,000 | KES 6,000 |
| KES 500,000 | KES 7,500 | KES 7,500 | KES 15,000 |
There is no upper limit. High earners pay significantly more than low earners.
Is the Housing Levy a Pre-Tax Deduction?
Yes — and this is important for understanding your payslip. The Housing Levy is deducted from your gross salary before PAYE tax is calculated. This means it reduces your taxable income, which slightly reduces the PAYE tax you pay.
The deduction order on your payslip is:
- Gross salary
- Minus NSSF (pre-tax)
- Minus SHIF at 2.75% (pre-tax)
- Minus Housing Levy at 1.5% (pre-tax)
- = Taxable income (this is what PAYE tax bands are applied to)
- Minus PAYE tax (after personal relief of KES 2,400)
- = Net salary (take home)
Use our free PAYE calculator to see exactly how all four deductions interact for your specific salary.
What Does the Housing Levy Fund?
The money collected goes into the Affordable Housing Fund, managed by the National Housing Corporation (NHC) and overseen by the Affordable Housing Board.
The stated purpose is to fund construction of affordable housing units for Kenyans earning below KES 150,000 per month. Projects include:
- Nairobi: Pangani Estate, Park Road, and Starehe constituency developments
- Mombasa: Buxton Point affordable housing project
- Kisumu, Nakuru, and other counties: Various ongoing projects
Priority for purchasing these units is supposed to go to contributors — meaning Kenyans who have been paying the levy can apply to buy units at subsidised prices when projects are completed.
Can You Claim Back Your Housing Levy Contributions?
This is one of the most asked questions about the levy. The short answer is: not directly, not yet.
The government's framework allows levy contributors to use their accumulated contributions as part of a deposit when purchasing an affordable housing unit. However the mechanism for this — a formal contributors' register and application process — is still being rolled out as of 2026.
KRA tracks your contributions through your employer's payroll filings. You can verify your contributions are being remitted by checking your KRA iTax account under the housing levy section.
What Happens If Your Employer Does Not Deduct It?
Employers are legally required to:
- Deduct 1.5% from each employee's salary
- Match with their own 1.5% contribution
- Remit the combined 3% to KRA by the 9th of the following month
Failure to remit attracts a penalty of 2% per month on the unpaid amount plus interest. KRA has been actively auditing employers on housing levy compliance since 2025.
If you suspect your employer is not remitting your deductions, you can:
- Check your payslip to confirm the deduction appears
- Log into itax.kra.go.ke and check your housing levy account
- File a complaint with KRA's employer compliance department
Housing Levy vs NSSF — What is the Difference?
Both are mandatory deductions that go toward your future wellbeing — but they are different:
| Housing Levy | NSSF | |
|---|---|---|
| Rate | 1.5% of gross | 6% of gross (Phase 4) |
| What it funds | Affordable housing projects | Retirement pension |
| Can you withdraw it? | Only via housing purchase | Yes — on retirement or at 50 |
| Employer match | Yes — 1.5% | Yes — equal to employee |
| Managed by | Affordable Housing Board | NSSF |
Summary
| Question | Answer |
|---|---|
| What is the rate? | 1.5% of gross salary |
| Is there a cap? | No upper limit |
| Is it pre-tax? | Yes — reduces taxable income |
| Does employer contribute? | Yes — matches 1.5% |
| When was it legalised? | Affordable Housing Act 2024 |
| Can I get it back? | Via affordable housing purchase (framework in progress) |
The Housing Levy is here to stay. Understanding how it interacts with your other deductions helps you plan your finances accurately. Use our PAYE calculator to see your exact take-home pay after all four statutory deductions.