The Court of Appeal upheld the constitutionality of the Affordable Housing Act, 2024, dismissing 42 cases challenging the law and the Affordable Housing Levy.
The ruling preserves the legal framework underpinning the government’s affordable housing programme, including the levy deducted from employees and matched by employers.
The Affordable Housing Act was assented to by President William Ruto on March 19, 2024, and came into operation on March 22, 2024. The law established the Affordable Housing Fund and set out how the levy would be imposed and administered.
Under the Act, an employer is required to contribute an amount equivalent to 1.5 per cent of an employee’s gross salary, while the employee contributes a further 1.5 per cent.
The law provides that the levy funds the development of affordable housing and associated social and physical infrastructure, as well as affordable home financing for Kenyans.
The levy has been the subject of several court challenges since its introduction, with petitioners raising questions about its legal basis, public participation, taxation powers and whether imposing it on formal-sector employees was discriminatory.
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Court Battles Over the Levy
The legal dispute dates back to the earlier housing levy introduced through the Finance Act, 2023.
In a judgment delivered in November 2023, the High Court found that the levy introduced through the Finance Act lacked a comprehensive legal framework. The court also held that imposing it on people in formal employment while excluding non-formal income earners was discriminatory and unconstitutional.
The High Court subsequently issued an order prohibiting the collection of the levy on the basis of the provision that had introduced it.
The government responded by introducing the Affordable Housing Bill in Parliament in December 2023. The Bill went through the legislative process before receiving presidential assent on March 19, 2024. The Supreme Court later recorded that the new Act was enacted to address concerns raised in the earlier court proceedings.
High Court Upheld the New Law
The 2024 Affordable Housing Act was later challenged through consolidated petitions before the High Court.
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On October 22, 2024, a three-judge High Court bench comprising Justices Sewe, Chigiti and Mong’are dismissed the petitions and upheld the constitutionality of the Act.
The judges found that Parliament had conducted adequate public participation before passing the legislation. The process included newspaper advertisements inviting memoranda, stakeholder hearings in 19 counties and opportunities for written and oral submissions.
The court also rejected the argument that the levy discriminated against formal-sector workers, finding that the different treatment of formal and informal earners was not arbitrary and could be justified by the manner in which taxes are administered.
The court further held that taxation through legislation for a public purpose did not amount to an unconstitutional violation of property rights.
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