Appeals Court upholds housing levy and affordable housing

The Court of Appeal has declined to scrap the Affordable Housing Programme and the accompanying Housing Levy deductions.

A five-judge bench comprising Justices Wanjiru Karanja, Patrick Kiage, Aggrey Muchelule, Weldon Korir, and George Odunga unanimously ruled that the applicants did not move the court to stop Housing Levy deductions or block the construction of houses on county land.

The petition was filed by Nakuru-based surgeon Dr Gikenyi Magare alongside Pauline Nduta, Philemon Abuga, Shallum Kaka, Jamlick Otondi, and Peter Okiro.

The bench, led by Justice Wanjiru, held that there was robust public participation across 19 counties before the levy was introduced. They noted that the land designated for the project would be transferred from the national government through the National Land Commission (NLC).

The appellate judges stated that public land is held in trust for Kenyans and can be utilized for social enterprise, asserting that housing is a mandate shared by both the national and county governments.

The court also dismissed arguments that the Kenya Revenue Authority (KRA) could not act as a collection agent for the levy on the basis that it was not a standard tax. The judges held that since the law empowers the Commissioner General to manage the funds, property, and affairs of the authority, KRA’s appointment could not be faulted.

Furthermore, the judges rejected survey data from Trends and Insights Africa (TIFA) which indicated that seven out of 10 Kenyans were opposed to the levy.

“Speaking for ourselves, we are unable to determine how authoritative this research is and how the entity that conducted the research arrived at its findings. We cannot therefore find, based on the evidence referred to, that the views of the public were overwhelmingly against the levy... Having considered the submissions made, we find no merit in this appeal which we hereby dismiss,” the five judges decreed.

In the appeal, Dr Gikenyi Magare argued that the project was a Ponzi scheme because those contributing to the levy are not guaranteed to be the beneficiaries.

He asserted that despite Kenya being a capitalist nation, the government had anchored the project in socialism by forcing working citizens to fund it. He added that labor laws and the Constitution treat a salary as private property, which cannot be taken away without justification.

“This is a Ponzi scheme where people pay while others get the houses. In the housing levy, someone gets deducted, and someone else gets the house. It means that employee X suffers while person Y receives the house. It is worse because it is mandatory in nature.”

“There is no role of communism in Kenya. This has been disguised as a mandatory savings scheme, whereas the Constitution allows individuals to make their own decisions. The salary is a property because someone has earned it, and it cannot be deprived arbitrarily,” argued Magare.

Magare further argued that it was unfair for a contributor to purchase a house but be barred from selling it, adding that the Housing Board has no role after ownership is transferred and that using public land for private development is illegal.

Supporting Magare’s application, lawyer Bernhard Ng’etich argued that the government's affidavit effectively asked the judiciary to give politicians free rein by turning a blind eye to legal gaps.

“Court of Appeal rules should not be used to seal gaps in an appeal. What is in the affidavit of the Principal Secretary is that the Act has been implemented, and the judiciary should turn a blind eye and allow the project to be completed,” he argued.

Ng’etich described the initiative as political rhetoric, noting that both the law and its implementation were vague. He stated that nowhere in the Act does the ruling coalition demonstrate how the funds collected would directly benefit the counties, adding that the levy unfairly targeted salaried employees and shared only a cosmetic relationship with Article 31 of the Constitution.

“This Act was not meant to provide houses to anybody. Let this money be refunded, as it was an experiment on Kenyans. Houses were built before. Our 4 trillion budget can support building after it is known where,” he added.

Katiba Institute also challenged the programme, arguing that the Affordable Housing Board lacked adequate oversight mechanisms. Lawyers Dr. Paul Gichana, Ray Odanga, and Joshua Malidzo pointed out that the board only reports to the Cabinet Secretary despite utilizing public land and resources. They further argued that the board's functions duplicate those of the National Housing Corporation (NHC).

“You are being forced to pay for the house through a tax, and when you want one, you are again required to buy it. This means that only the haves who will get it,” said Malidzo.

On the other hand, Senior Counsel Prof. Githu Muigai, Kiragu Kimani, Mahat Somane, and Deputy Solicitor General Charles Mutinda defended the programme, arguing that the government was acting in line with a Supreme Court judgment affirming the constitutional right to housing.

Kiragu Kimani cautioned that halting the project would cause allocation disputes and destabilize families who have already occupied completed units. He argued that while courts must uphold public interest, they also have a duty not to scuttle economic and social gains, maintaining that the levy applies to income irrespective of how it is generated rather than acting as a targeted tax.

Meanwhile, Somane explained that following a previous judgment by Justice Majanja, the government amended the law to incorporate the informal sector. He emphasized that taxes are non-refundable, are not inherently linked to a direct individual benefit, and that contributing to public housing is a civic duty rather than forced labor.

Somane rejected claims that salaried workers were being discriminated against, stating that the government’s initial focus on payroll earners before integrating the informal sector was a matter of practical policy execution.

“Housing levy was a policy choice. Taxes generally can be discriminatory to certain groups of people. Therefore, almost everyone could make an argument against tax legislation. By their nature, taxes differentiate between parties. To tax those who are salaried and leave out non salaried one is a choice left to the policy maker to decide,” argued Somane.

Lawyers representing Parliament maintained that public participation was sufficient, with counsel Christine Mwaura noting that the Senate committee had gathered adequate feedback and proposed necessary amendments.

Lawyer Gaya Ochieng, representing the Kenya Revenue Authority, concluded that taxation is a legitimate instrument through which the government executes social projects, making the levy constitutional.