When the government first pitched the Affordable Housing Levy in Kenya, it was a simple enough idea where workers would give 1.5% of their gross salary, employers would match it, and the country would build affordable homes.
Simple, controversial, but somewhat noble on face value at least. Two years into the Affordable Housing Act, 2024, the picture looks considerably less noble.
The levy is now permanent and non-refundable, and the government has borrowed KES 100 billion using it as collateral, with the loan going not toward bricks and mortar but toward repaying a Eurobond, a move known as securitization. That is a big distance from the original promise.
To be clear about what securitizing the levy actually means, future collections from Kenyan workers’ paychecks will be committed to repaying that loan.
The government that comes after this one will collect the levy, and the one after that, and who knows what new noble policy it will come with.
The housing fund has, in effect, been converted into a debt instrument where workers may not necessarily be contributing to their future homes but to servicing a past loan.
The banks on the other end of this deal are the Trade and Development Bank (TDB) and Afreximbank, institutions Kenya also holds equity in. That detail has received far less scrutiny than it deserves.
Kenya is one of the highest shareholders in TDB and has committed $50 million in share capital to Afreximbank, with President William Ruto announcing an additional $100 million injection into TDB in October 2025.
So Kenya is simultaneously a part-owner of both banks and a borrower from both of them, with its housing levy pledged as collateral.
Meanwhile, more than KES 30 billion of levy proceeds sat unspent in Treasury bills while the government simultaneously borrowed KES 100 billion in the levy’s name.
The Affordable Housing Board argues that idle funds should be invested rather than left unused. However, holding the money in Treasury bills while a separate KES 100 billion loan continues to accumulate interest raises questions about the government’s financial approach.
Then there are the contractors. A government-commissioned report found that for every KES 100 deducted from a worker’s pay, KES 30 ends up as contractor profit.
The first batch of developers under the program is projected to collectively pocket KES 85.6 billion from projects worth KES 285.5 billion. These developers also avoid land acquisition costs entirely. Workers fund the levy. Developers collect the margin.
Kenya’s debt-to-GDP ratio surged from 50% in 2015 to a high of 72% in 2023. Debt servicing now absorbs more than two-thirds of annually collected revenue. That figure should stop everyone cold.
The government earns money, and before it builds a road or pays a teacher, two shillings in every three are already spoken for.
Kenya’s persistent fiscal deficit has averaged 7.1% of GDP over the last 10 financial years. That is not a run of bad luck; it is now a structural habit. Debt fills the gap when spending routinely outpaces revenue.
When tax revenues fall short, or when existing loans come due, the government reaches for new means, and the Housing Levy was simply the latest one within reach.
The Controller of Budget has warned that increased domestic borrowing drives up interest rates, crowding out private sector investment and making it harder for businesses and individuals to borrow. Basically, the government competing for money in local markets pushes up the cost of loans for everyone else.
The IMF projects Kenya’s debt-to-GDP ratio rising to 71.6% in 2026 and 72.4% in 2027, with fiscal deficits estimated at 6.4% of GDP in both years, as reported by The Kenyan Wallstreet.
To make matters worse, spending pressures are likely to increase as the 2027 elections draw closer. After the backlash and protests surrounding the Finance Bill 2024, any government would find it difficult to introduce new taxes without finding alternative ways to do so.
Borrowing, on the other hand, attracts less immediate public attention, with the costs ultimately falling on future governments, workers, and taxpayers.
The Housing Levy became permanent not because affordable housing depended on it, but because it created a predictable source of revenue that the government could borrow against.
Workers were told their contributions would help build homes, yet those same contributions are now being used to support government borrowing.
When a levy cannot be refunded and has been committed to securing a loan, it functions less as a housing policy and more as a financing tool presented as a social welfare program.
