Affordable Housing: Ruto Unveils Plan for Ksh5 Million Mortgage Loans for Kenyans Paying Housing Levy
HOMA BAY, KENYA — June 1, 2025 – In a bold move to accelerate homeownership and ease the mortgage burden on Kenyans, President William Ruto has announced a proposed constitutional amendment that would allow citizens to access low-interest home loans of up to Ksh5 million.
Speaking during the 62nd Madaraka Day celebrations held at Homa Bay County Stadium, the Head of State emphasized the urgency of enabling more Kenyans to own decent housing, stating that access to affordable mortgages would be a game-changer in the country’s housing landscape.
“I am pleased to announce today that I shall be proposing to Parliament a reform to the law that will allow any contributor to access an affordable home loan of Ksh5 million at a single-digit interest rate, applicable to any housing unit in the market,” President Ruto said to an applauding crowd.
The proposed facility, he added, will not only benefit first-time homebuyers but also existing mortgage holders who are currently struggling under costly repayment plans. Eligible contributors will be allowed to refinance their mortgages using the new state-backed low-interest facility.
“This initiative will enable contributors to offset existing mortgages, offering greater flexibility in their housing journey and significantly reducing financing costs,” he said.
Building Momentum Behind Affordable Housing
The announcement follows closely on the heels of a significant milestone in the government’s affordable housing program. Just days earlier, 1,080 new homeowners received keys to units at the Mukuru Kwa Reuben estate in Nairobi under a long-term rent-to-own scheme. The project allows tenants to gradually acquire ownership over a 30-year period, representing a departure from traditional, often inaccessible, home purchase models.
President Ruto also revealed that 110 additional housing units had been officially handed over at the Boma Yangu estate in Homa Bay, reinforcing the government’s commitment to expanding access to dignified living spaces across the country.
The affordable housing program is a central pillar of the Kenya Kwanza administration’s socio-economic agenda, aimed at addressing the urban housing deficit while stimulating job creation and economic growth through the construction sector.
Affordable Housing Levy and Tax Relief Measures
In a bid to fund the ambitious housing initiative, the government implemented a mandatory housing levy that came into effect on March 19, 2024. The scheme mandates a 1.5 per cent deduction from each employee’s gross salary, matched by an equal contribution from their employer.
To soften the financial impact, contributors to the Housing Levy are eligible for tax relief equivalent to 15 per cent of their contributions — up to Ksh108,000 per year, or Ksh9,000 per month. This relief aims to reduce the tax burden on salaried workers while encouraging long-term participation in the program.
Further easing the load, recent policy changes now recognize deductions for the Housing Levy, the Social Health Insurance Fund (SHIF), and post-retirement medical funds as allowable expenses when calculating taxable income. The change means these amounts are subtracted from gross pay before determining Pay-As-You-Earn (PAYE) tax, reducing overall tax liability and effectively stopping double taxation on the same income.
Tax experts and financial analysts have lauded the reform, noting that it aligns Kenya’s tax system more closely with global best practices while incentivizing voluntary compliance and saving for housing and health needs.
If approved by Parliament, the proposed legal reform on mortgage access could be rolled out as early as 2026, according to insiders familiar with the plan. Its implementation is expected to empower thousands of Kenyan families previously locked out of the mortgage market due to high interest rates and prohibitive qualification terms.
The broader housing program aims to deliver 250,000 new housing units annually by 2027 — a target the President reaffirmed in his Madaraka Day speech. As the initiative gathers pace, attention will turn to Parliament and regulatory agencies to facilitate legislative support and financial infrastructure necessary to turn this vision into reality.
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Affordable Housing: Ruto Unveils Plan for Ksh5 Million Mortgage Loans for Kenyans Paying Housing Levy