The High Court of Kenya has unanimously declared the proposed Housing Levy unconstitutional. The three-judge bench ruled that the levy, which was imposed on salaried workers in the formal sector to fund affordable housing initiatives, is discriminatory and violates Article 27 of the Constitution, which guarantees freedom from discrimination.
The Court found that the Housing Levy is a tax, not a fund and that the government failed to provide a clear framework for how the funds would be used or who would benefit from them. Additionally, the Court noted that the levy disproportionately burdens salaried workers, unfairly singling them out to bear the cost of affordable housing.
However, the Court has given the government until January 10, 2024, to wind down the Housing Levy operations and ensure a smooth transition. This is to allow the government to standardise the operations of all involved offices and minimize disruptions.
The High Court’s decision has far-reaching consequences for the real estate and finance sector. While the government will need to address the funding gap for affordable housing initiatives, the nullification of the Housing Levy also removes administrative burdens and provides some financial relief for salaried workers. Stakeholders in both sectors should closely monitor the government’s response and any potential impact on their respective industries.