Members of Parliament have proposed changes to the Public Finance Management Act to close legal gaps that currently exclude the housing levy from the Controller of Budget's (CoB) oversight.

The Constitutional Implementation Oversight Committee highlighted that billions of shillings collected annually through the housing levy remain unmonitored due to the levy’s classification outside the CoB’s mandate. This loophole restricts transparency and weakens accountability over funds deducted from workers’ salaries and employer contributions.

Legal and Operational Challenges

Controller of Budget Margaret Nyakang’o informed the committee that the existing legislation limits the office's ability to supervise the housing levy, which collects approximately Sh63 billion yearly. The funds, intended to finance affordable housing projects, are invested in Treasury bills and bonds, yet delivery of housing units has lagged behind schedule.

The committee noted that the CoB's mandate is undermined by legislative restrictions and a lack of enforcement powers, hindering its capacity to ensure public funds are properly managed. They recommended amending the Public Finance Management Act to grant the CoB authority to oversee all special funds and levies, including the housing levy.

Calls for System Integration and Enforcement Powers

  • MPs urged the National Treasury to establish an integrated payment system linking the CoB and the Central Bank of Kenya to track housing levy funds from collection to expenditure.
  • They also proposed amendments to the Controller of Budget Act to provide enforcement powers, enable economic reporting, and introduce sanctions for non-compliance.

Background on the Housing Levy

The Affordable Housing Act, effective from March 2024, mandates a 1.5% pre-tax deduction from employees’ gross monthly income, matched by employers, to fund affordable housing under the government’s Bottom-Up Economic Transformation Agenda. Despite the financial inflows, the housing programme has faced delays and challenges in implementation.

Principal Secretary Charles Hinga reported monthly collections between Sh5 billion and Sh6 billion. The affordable housing initiative aims to deliver at least 200,000 units annually to address Kenya’s housing deficit and create jobs for low- and middle-income earners.

The committee’s recommendations seek to enhance oversight, strengthen accountability, and ensure the housing levy funds are effectively utilized in line with the government’s commitments.