Workers, traders and employers who fail to pay the Housing Levy now face bank account freezes, asset seizures and PIN deactivation, after legal changes that took effect on July 1 handed the Kenya Revenue Authority (KRA) the enforcement powers it previously lacked to pursue defaulters.
KRA has been collecting the levy, set at 1.5 per cent of gross pay or income, since July 2024, but had no legal basis to go after those who failed to remit it, leaving thousands of workers and firms to evade payment.
The Finance Act 2026 closed that gap and increased the commission KRA earns on housing levy collections, which totalled Sh79.9 billion in the year to June.
Housing Principal Secretary Charles Hinga said the government now expects “greater bite” from KRA, after the authority had insisted it needed explicit legal backing before it could pursue employers who deducted the levy from workers’ pay without passing it on.
“KRA said they needed explicit powers to recover unremitted or unpaid amounts,” Hinga said on Friday, signalling that enforcement is now expected to tighten considerably.
An audit of the Affordable Housing Fund, which oversees the billions of shillings raised through the levy, found that thousands of taxpayers were paying other taxes while skipping the housing levy altogether.
Default rates were highest in the informal sector, where small businesses such as corner shops, salons and bars were not remitting the deductions taken from their staff’s pay.
The Auditor-General’s review found 6,390 companies that remit Pay As You Earn (PAYE), but ignored the housing levy entirely.
Hinga said KRA would now carry out internal reconciliations to establish exactly who owes what before moving to recover the money. “They are now able to assess, evaluate and prosecute taxpayers who have not remitted. Internally, they [KRA] are going to do reconciliations and do what they need to do,” he said.
The levy was introduced in 2024 to help fund the construction of affordable housing, but has faced sustained criticism from the opposition and large sections of the public, who see it as one burden too many among a wave of new taxes.
Its rollout was also legally rocky from the start: an earlier version of the law excluded informal-sector workers, prompting accusations that it unfairly targeted the formally employed.
The High Court agreed, ruling the levy unconstitutional on those grounds and suspending its collection for three months. Parliament responded by passing the Affordable Housing Act, 2024, widening the law to bring in workers from the informal, or jua kali, sector, allowing collection to resume from March 2024.
The Finance Act 2026 introduced Section 39B of the Tax Procedures Act, giving the KRA Commissioner-General the power to recover unpaid levies, fees and charges in exactly the same way as unpaid taxes.
This extends KRA’s enforcement reach well beyond ordinary tax collection, allowing it to use the same recovery tools it deploys against tax defaulters more broadly.
That authority draws on Section 42 of the Tax Procedures Act, which allows KRA to deactivate PINs, impose travel bans, recover funds directly from a defaulter’s bank or suppliers, and freeze assets.
Under what are known as garnishee orders, KRA can compel third parties such as banks holding a defaulter’s money, to hand over funds directly to cover what is owed.
Businesses and individuals who fail to comply also risk having their KRA PIN suspended or deactivated altogether, which would halt normal business operations, while KRA can further place restrictions or claims on property and land to recover outstanding amounts. Sums of Sh100,000 or less may be recovered through simplified, summary procedures.
Before these amendments, KRA maintained that enforcing the unpaid housing levy fell outside its legal mandate, even though it remained responsible for collecting the levy in the first place.
The Affordable Housing Fund Board made the same point in submissions to the National Assembly’s Finance and National Planning Committee in June, arguing that KRA needed explicit legal authority before it could act.
“KRA itself has acknowledged the limitation, confirming that although it is mandated to collect the levy, enforcement falls outside its legal mandate,” the board told the committee, adding: “We are currently engaging with the KRA, which is keen to assist us in recovering all the outstanding levy that has not been remitted.”
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