Billions in interest from housing levy missing in budget, MPs warn

Lawmakers have demanded answers from the government over Sh4.2 billion in interest income earned from housing levy funds invested in Treasury Bills but not included in the 2025/26 budget estimates.

According to the Budget and Appropriations Committee, the State Department for Housing and Urban Development invested Sh46 billion collected from the housing levy into Treasury Bills and earned interest.

The committee expressed concern that this amount was not reflected in the current budget, raising questions over who might be benefiting from it.

“The State Department for Housing and Development reported earning Sh4.2 billion in interest income from funds invested in Treasury Bills, however, this has not been factored into the 2025/26 budget estimates,” said committee chair Samuel Atandi.

The revelation has added fuel to public criticism over the management of the controversial housing levy, with many Kenyans saying the funds should go directly into construction of homes and not into Treasury investments.

The committee has also flagged the growing amount of unspent levy funds, which is expected to rise by Sh30.3 billion in the next year due to carryovers from the current financial year.

This trend has led to concerns about poor planning and low capacity to use the funds as intended, despite heavy collections. So far, Sh88 billion has been collected over the current financial year, with the Treasury projecting Sh96 billion for the 2025/26 period.

Kenyans have questioned why the money is not being used to build homes and who is collecting the returns from investing the levy in government securities. The funds have grown faster than expected, yet key housing projects remain underfunded or stalled.

Some developers are on the verge of abandoning projects, while donor-funded housing programmes have suffered due to lack of government counterpart funding. The Kenya Urban Support Programme, Kenya Informal Settlements Improvement Project, and Kenya Informal Settlements Redevelopment Project are among those affected.

The World Bank has noted that the government has only allocated Sh34 million towards projects that require Sh890 million in total contributions, calling for improved exchequer support.

In response to growing public pressure, Treasury Cabinet Secretary John Mbadi has said the government is considering changes to the levy.

“There is a discussion to restructure it because it has serious benefits and quite a number of projects are coming up, but at the same time, the individual employees have complaints which you cannot ignore. A lot of restructuring is going on and there will be pronouncements in due course,” he said.

The World Bank has also proposed exempting workers earning below Sh32,000 a year from the levy, arguing it would have minimal revenue impact but would make the tax system fairer for low-income earners.