Treasury Cabinet Secretary John Mbadi has announced that the government is undertaking a restructuring of the controversial Housing Levy, acknowledging widespread discontent among salaried workers whose payslips have borne the brunt of the policy.
Speaking during a session before the Senate on Wednesday, May 4, 2025, Mbadi said the changes aim to balance the levy’s benefits against the concerns raised by employed Kenyans.
“On Housing Levy, I think there is a discussion around seeing how to restructure it because again it has serious benefits in my view, quite a number of projects are coming up.
“But at the same time the individual employees, those with payslips, have complains which you cannot ignore. So a lot of restructuring is going on and I am sure more pronouncements will come in due course,” Mbadi said.
The Housing Levy, a key component of the government’s affordable housing initiative, has drawn criticism from formal sector workers who say it eats into their net income with little immediate return.
Salaried Kenyans have voiced growing concerns over the mandatory Housing Levy deductions, citing a lack of transparency and fairness in the allocation of government-built houses.
Many complain that despite consistent contributions, they are not prioritised in housing allocations.
Others argue that they already own homes and therefore see no justification for the continued deductions, terming the policy as burdensome and misaligned with their personal housing needs.
Mbadi’s remarks on the Housing Levy indicate a potential softening of the government’s stance and a willingness to engage with stakeholders.
During the session, Mbadi also addressed broader concerns around income taxation, specifically the Pay As You Earn (PAYE) system.
He acknowledged that although adjustments were considered in the current financial year, they were deferred due to the Kenya Revenue Authority’s (KRA) failure to meet its revenue collection targets.
“On the issue of PAYE, again we are looking. Actually, this financial year, when we were preparing the Finance Bill, we even did some simulations on how to reduce Pay As You Earn.
“What stopped us from implementing it with this financial year, and I think we are going to consider it in the next Finance Bill, alongside the deductions of corporation tax/corporate tax from 30 per cent to 28 per cent – we considered reducing it to 28 per cent. It was the failure of KRA to meet its revenue target so we thought as we carry along with the reforms at KRA, we should not be doing too many things.
“First, let us see what the reforms at KRA in terms of automation and in terms of making it efficient is yielding to us, then we can now move to the next stage of reducing the tax rate to increase disposable income,” he explained.
Mbadi emphasised that the upcoming Finance Bill would reflect the government’s commitment to easing the tax burden on ordinary Kenyans, stating that the goal is to increase disposable income once KRA demonstrates improvements in revenue collection through ongoing reforms.
The CS also pushed back on claims that the mass youth-led protests in 2024, which contributed to the shelving of the Finance Bill 2024, were the sole reason behind the government’s current tax policy approach.
Nairobi Senator Edwin Sifuna had earlier suggested that the Gen Z movement was the primary driver of the tax adjustments.
“It is true that we have not made major changes in taxes that will disadvantage the taxpayer or individual taxpayer in terms of reducing their disposable income. Yes, I know Senator Sifuna is attributing it exclusively to Gen Z – partly true, partly not true.
“Honourable senator Sifuna very well knows my stand on taxes, even before I joined the cabinet or the executive, I am one person who does not believe that higher taxes leads to more revenue or higher tax rates and that is my stand.
“I have spoken about it. Maybe we share that idea with Gen Zs but it cannot be exclusively be Gen Z’s idea. I think the government is also sold to the idea that now where we have reached we cannot go further to reduce disposable income,” Mbadi said.
His comments reflect a government attempting to recalibrate its fiscal strategy amid public pressure, revenue challenges, and a shifting political climate.
As the Treasury prepares the next Finance Bill, stakeholders across the board will be watching closely to see whether promised reforms will bring relief to Kenyan workers.
Martin Oduor
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