(Nairobi, Kenya) – Kenya’s government has stopped parking workers’ housing levy deductions in short term Treasury bills, a move that signals faster execution of affordable housing projects and improved use of funds.
Housing Principal Secretary Charles Hinga said the Affordable Housing Fund currently has no money invested in Treasury bills, marking a turnaround from the programme’s early years.
“There’s currently zero money in T bills from the Fund,” Mr Hinga said, attributing the change to stronger budget absorption and earlier procurement planning that has accelerated implementation of housing projects.
The housing levy was introduced in July 2023 through the Finance Act and later entrenched under the Affordable Housing Act, 2024. The law requires employers to deduct 1.5 percent of employees’ gross monthly pay and make a matching contribution, creating a dedicated funding stream for State backed housing projects.
For the first two years, collections repeatedly outpaced spending, prompting the government to invest surplus cash in three month Treasury bills rather than leave it idle.
The investments generated billions of shillings in additional income. In June 2025, the State Department for Housing and Urban Development told the National Assembly’s Budget and Appropriations Committee that it had earned KES 4.2 billion in interest from housing levy funds invested in Treasury bills. That figure equals approximately $27 million or £21.3 million at current exchange rates.
Reports from the Affordable Housing Board had previously indicated that at least a third of housing levy collections were not immediately deployed to projects, despite being ring fenced for the programme. About KES 46 billion of housing levy cash was sitting in Treasury bills in February last year. That amount translates to roughly $295 million or £233 million.
The Board defended the investments as prudent cash management, arguing that leaving large balances idle would have been wasteful while projects awaited procurement and construction.
Mr Hinga said the investments were mainly a consequence of procurement timelines rather than a lack of projects to finance.
“The reason why we kept the money in the 91 day T bills is that procurement and tendering processes take time, usually four to six months,” he said.
The government continued receiving levy payments while procurement was underway and contractors prepared to start work after tenders were awarded.
Mr Hinga added that public finance procedures also delayed access to funds because withdrawals could not begin until accounting officers had been formally appointed by the National Treasury.
“Processes usually delay the start of projects until September. So there’s a two month disruption from the beginning of the financial year in July,” he said.
National Treasury data for the year ended June 2026 shows the State Department for Housing and Urban Development spent KES 129.96 billion against a target of KES 140.99 billion under the development vote. The spending figure equals approximately $835 million or £658 million, while the target was roughly $906 million or £714 million.
This represented an absorption rate of 92.18 percent, steeply higher than during the programme’s early phase, when procurement delays left large amounts unspent.
According to the Economic Survey 2026, absorption of housing levy funds jumped to 96.3 percent of the KES 79.03 billion budget in the year ended June 2025. That budget was equivalent to about $508 million or £400 million.
That compared with 32.6 percent of the KES 78.18 billion allocation a year earlier in 2023/24, underlining the rapid improvement in the programme’s ability to deploy funds. The earlier allocation translates to roughly $502 million or £396 million.
Actual spending on housing has surged more than five times to KES 129.96 billion from KES 25.49 billion, reflecting the rapid scaling up of affordable housing projects. The earlier spending figure equals approximately $164 million or £129 million.
Mr Hinga said the improvement reflected lessons learnt during the programme’s initial rollout, particularly the need to begin procurement earlier.
“The reason absorption has improved is that we are now able to start the tendering processes earlier based on lessons from the past years,” he said.
The faster deployment comes as the housing levy has become a significant source of dedicated payroll supported funding, with collections exceeding KES 206 billion since its introduction in July 2023. That cumulative figure is roughly $1.32 billion or £1.04 billion.
Over three financial years, the levy raised KES 206.46 billion, falling KES 6.32 billion short of the Treasury’s cumulative target of KES 212.78 billion. The shortfall equals approximately $41 million or £32 million.
In the first year, collections reached KES 54.16 billion against a KES 54.58 billion target, while collections rose 35.16 percent to KES 73.20 billion in financial year 2024/25. The first year figures equal roughly $348 million or £274 million in collections against a $351 million or £276 million target.
The 2024/25 collections exceeded the KES 63.20 billion target by KES 10 billion, providing a critical boost to the fund’s resources. The surplus amounts to approximately $64 million or £51 million.
The Treasury then raised the collection target sharply to KES 95 billion for the year ended June 2026. Actual collections reached KES 79.10 billion, leaving an apparent KES 15.90 billion gap against the revised target. Those figures translate to roughly $610 million or £481 million in collections against a $612 million or £482 million target, with the apparent gap at about $102 million or £81 million.
Mr Hinga rejected the characterisation of the latest figure as a revenue shortfall, saying the higher target incorporated KES 25 billion carried forward from the previous financial year.
“There is no shortfall in collection. At the start of the year 2025/26, the target amount of levy to be collected was KES 73 billion,” he said.
“However, there was KES 25 billion not utilised from the previous year,” Mr Hinga added.
He said the government sought a supplementary budget increase to KES 95 billion so it could spend the carried over funds alongside fresh collections.
“Based on this, the actual estimated levy to be collected was surpassed as we ended FY2025/2026 at KES 79.1 billion realised,” the PS said.
The end of Treasury bill parking means the housing levy is increasingly functioning as a direct construction fund rather than temporarily serving as a source of short term government financing.
| Item | KES | USD | GBP |
|---|---|---|---|
| Interest earned from T bills (June 2025) | 4,200,000,000 | 27,000,000 | 21,300,000 |
| Levy cash in T bills (February last year) | 46,000,000,000 | 295,000,000 | 233,000,000 |
| Development spending (year ended June 2026) | 129,960,000,000 | 835,000,000 | 658,000,000 |
| Development spending target | 140,990,000,000 | 906,000,000 | 714,000,000 |
| Absorption rate | 92.18% | – | – |
| Budget absorption (year ended June 2025) | 96.3% | – | – |
| Budget absorption (2023/24) | 32.6% | – | – |
| Housing budget (year ended June 2025) | 79,030,000,000 | 508,000,000 | 400,000,000 |
| Housing allocation (2023/24) | 78,180,000,000 | 502,000,000 | 396,000,000 |
| Earlier housing spending | 25,490,000,000 | 164,000,000 | 129,000,000 |
| Cumulative levy collections | 206,460,000,000 | 1,320,000,000 | 1,040,000,000 |
| Cumulative collection target | 212,780,000,000 | 1,370,000,000 | 1,080,000,000 |
| Cumulative shortfall | 6,320,000,000 | 41,000,000 | 32,000,000 |
| First year collections | 54,160,000,000 | 348,000,000 | 274,000,000 |
| First year target | 54,580,000,000 | 351,000,000 | 276,000,000 |
| 2024/25 collections | 73,200,000,000 | 470,000,000 | 370,000,000 |
| 2024/25 target | 63,200,000,000 | 406,000,000 | 320,000,000 |
| 2024/25 surplus | 10,000,000,000 | 64,000,000 | 51,000,000 |
| 2025/26 target | 95,000,000,000 | 610,000,000 | 481,000,000 |
| 2025/26 actual collections | 79,100,000,000 | 508,000,000 | 401,000,000 |
| Apparent gap | 15,900,000,000 | 102,000,000 | 81,000,000 |
| Carried forward funds | 25,000,000,000 | 161,000,000 | 127,000,000 |
| Original 2025/26 collection target | 73,000,000,000 | 469,000,000 | 370,000,000 |