Legal Battles on the Housing Levy Continues

By Treezer Michelle Atieno

In a recent turn of events, salaried Kenyans find themselves entangled in a legal web surrounding the Affordable Housing Levy (AHL). Introduced in July as a component of President William Ruto’s housing program, the levy aimed to fund affordable housing projects across the nation.

However, a recent setback unfolded when a three-judge bench declared the Housing Levy unconstitutional. Despite this ruling, a temporary 45-day stay order was granted, allowing the levy collection to persist until January, providing the government an opportunity to appeal the decision.

The Affordable Housing Levy marked a significant departure from the norm for formally employed Kenyans, who saw deductions from their gross salaries. The Kenya Revenue Authority (KRA) assumed the role of collecting and managing these funds, with the intention of financing much-needed affordable housing initiatives.

The recent court ruling striking down the Housing Levy deemed it discriminatory and criticized its creation of unequal principles. The judges argued that the levy violated fundamental taxation principles by making distinctions between formal and informal sectors, resulting in inherent inequality. Moreover, the court highlighted the government’s failure to provide a rational explanation for imposing the levy and questioned the absence of a legal framework supporting it.

Despite the court’s ruling against the Housing Levy, the High Court opted to suspend its decision until January 10, 2024, effectively allowing the government a window to appeal. The court emphasized its authority to grant stays pending appeal, underscoring that it does not have the final say on the matter. This temporary reprieve extends the uncertainty surrounding the levy’s fate, leaving both employers and employees in a state of flux.

In response to the court’s decision, the Ministry of Lands, Public Works, Housing, and Urban Development issued a statement instructing employers to continue deducting the Affordable Housing Levy from employees’ salaries. Failure to comply with this directive may result in penalties equivalent to two percent of the unpaid funds for each month of non-payment, according to Cabinet Secretary Alice Wahome.

The legal uncertainties surrounding the Housing Levy have prompted varied reactions among Kenyan citizens. Some express frustration over the imposition of a levy deemed unconstitutional, while others voice concerns about the potential impact on affordable housing projects. The successful implementation of the levy holds significant weight in the government’s ability to finance these housing initiatives.

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