Kenya Court Upholds 1.5% Housing Levy on Salaries, Foreign Staff Included

An appeals court has upheld the Kenya housing levy, a 1.5 percent payroll charge on workers and employers. Anyone on a Kenyan payroll, foreign staff included, keeps paying, and no refunds are due.

Kenya, a country of about 57.5 million people, is a regional base for many foreign companies in East Africa. On Friday 25 September 2026, its Court of Appeal, the second-highest court, ruled on a disputed payroll charge.

Five judges dismissed 42 consolidated appeals against the Affordable Housing Act of 2024. The ruling protects President William Ruto’s flagship plan to build 200,000 affordable homes a year.

What the court decided on the Kenya housing levy

The levy takes 1.5 percent of an employee’s gross monthly salary. The employer pays the same amount again, so the total equals 3 percent of pay.

The bench held that the Act advances the constitutional right to accessible and adequate housing. It said a law cannot be struck down simply because taxpayers find the levy burdensome.

The judges rejected claims that the levy unfairly singles out salaried workers. They also rejected the argument that housing belongs only to Kenya’s county governments, calling it a shared function.

The court upheld Section 60 of the Act, which applies the law backwards to money collected under an earlier levy. The appeals that sought refunds of those deductions therefore failed.

It also confirmed that the Commissioner General of the Kenya Revenue Authority (KRA), the national tax agency, may collect the levy. The KRA already runs the monthly payroll collection.

The limits the judges set

The ruling was not a blank cheque. Any allocation of public land for the programme needs approval from the National Land Commission, an independent constitutional body.

“Any allocation of public land without the approval of the NLC will, accordingly, be unlawful,” the bench held. That matters because many projects sit on state or county land.

The judges also voiced concern about who benefits. They noted that buyers must show a deposit, so the scheme mainly serves people able to buy homes.

The court warned that the poorest Kenyans risk being left out without proper safeguards. It said, however, that whether taxpayers are overburdened is a question for politicians, not judges.

Why the levy has been in court since 2023

The levy first appeared in Kenya’s Finance Act of 2023. The High Court struck it down, finding it lacked a proper legal framework and discriminated against formal-sector workers.

The government answered with a stand-alone law. Mr Ruto signed the Affordable Housing Act into law on 19 March 2024.

After the High Court upheld the new Act, challengers filed 42 appeals. They included Busia Senator Okiya Omtatah and Nakuru surgeon Magare Gikenyi.

Dr Gikenyi argued that the levy forces salaried Kenyans to pay for homes they may never receive. The bench of Justices Wanjiru Karanja, Patrick Kiage, Aggrey Muchelule, Weldon Korir and George Odunga disagreed.

What it means for foreign workers and employers

Conversions here use 129.5 Kenyan shillings to the US dollar (open.er-api.com, 26 September 2026). On a monthly salary of 200,000 shillings (about US$1,544), the employee pays 3,000 shillings (about US$23).

The employer then adds another 3,000 shillings (about US$23). Both amounts go to the KRA through the normal payroll.

Nothing changes in the next payroll cycle. The ruling simply removes the chance that a court would halt the levy or order refunds.

For investors, the ruling protects a steady revenue stream for a government under debt pressure. Bloomberg reports that Kenya remains at high risk of debt distress.

More than half of tax revenue goes on servicing debt, the same report said. Tax rises are politically sensitive in Kenya and sparked mass protests against Mr Ruto in 2024.

The money behind the housing plan

Bloomberg describes the housing drive as a US$14 billion plan. Besides homes, it covers hostels and upgrades to informal settlements and markets.

The Treasury expects levy collections of 110 billion shillings (about US$849 million) in the year to June 2027. That is up from 95 billion shillings (about US$734 million) previously.

Even so, the money falls short of the 200,000-homes target. A parliamentary report found 176 projects, about 15 percent of construction, had stalled by the end of June.

The report blamed funding gaps and late payments to contractors, which also pushed up costs. Such funding gaps, rather than the courts, now look like the programme’s main risk.

What to watch next

Dr Gikenyi told Bloomberg he will take the case to the Supreme Court. It was unclear on Saturday whether a petition had been filed.

Until any Supreme Court ruling, the levy stays in force. Watch also how the National Land Commission handles land requests, and whether stalled building sites restart.

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