Govt Reverses Use of Housing Levy Funds & Slashes Down Payment for Houses

Hello and welcome to the Money News Roundup newsletter. Today, we’re covering President William Ruto’s new deal with COTU to refund housing levy funds, prioritise affordable housing, and cut down payment requirements by half. We’re also highlighting the Ksh415 billion boost for counties.

Refunding the Housing Levy

Salaried workers will now be prioritised for affordable housing ownership following a deal reached between President William Ruto and Central Organization of Trade Unions (COTU) Secretary General Francis Atwoli.

The two leaders, along with their delegations, held a closed-door meeting at the State House on Wednesday, aimed at shielding the Housing Levy Fund from being diverted to unrelated projects.

Why this matters: Previously, Atwoli had criticised the government for failing to consult COTU before redirecting Housing Levy funds—mandatorily deducted from salaried Kenyans’ payslips—toward the construction of 400 markets across the country.

What Was Agreed

• Refund: All funds already allocated to the construction of the 400 planned markets will be refunded and redirected toward the development of affordable housing units.

“Moving forward, all associated physical and social infrastructure will be constructed in locations where affordable housing projects are situated. In exceptional cases where essential facilities—such as schools, clinics, or other public utilities—cannot be developed, the Government may instead upgrade or improve nearby facilities to ensure service delivery in line with the objectives of the Fund.”

• Prioritising Workers: Going forward, salaried workers who contribute to the Housing Levy Fund will be given priority in the allocation of affordable houses—excluding units under the social housing category.
  
  
• Slashing the Down Payment: According to Atwoli, the required deposit for allocated units has been reduced from 10% to 5% of the home’s purchase price to improve affordability and access.
  
  
• Oversight Committee Established: A special committee will be formed under the Affordable Housing Board to oversee the implementation and adjustment of the market development programme. The committee will also ensure that any revenue or cost recoveries from market construction are reinvested into affordable housing delivery.

Catch Up Quick: Last Friday, COTU issued a strongly worded letter warning that workers’ funds risked being misused under the current Housing Levy model. The union urged President Ruto to ensure the funds are strictly used for building affordable houses.

Here are top stories this morning

Counties to Get Ksh415 Billion After Revenue Talks Deal

Senators and MPs have agreed to allocate Ksh415 billion to counties for the 2025/26 financial year, ending weeks of mediation stalemate, Capital FM reported. Senators had initially pushed for Ksh465 billion, citing the rising cost of devolved services, while the National Assembly supported the Treasury’s lower Ksh405 billion offer. After intense negotiations and a compromise from both sides, Senate Finance Committee Chair Ali Roba confirmed the deal, noting that pushing further risked paralyzing county operations.

The agreement comes amid criticism from governors, who had demanded Ksh526 billion and accused Parliament of sidelining their input in the Division of Revenue process. Though the proposed allocation reflects a Ksh17.6 billion increase from the current year’s Ksh387.4 billion, many county leaders argue the increment still falls short of funding needs. The final figure is now captured in the Division of Revenue Bill 2025, which outlines revenue sharing between the national and county governments.

Govt Contracts Worth Sh2 Trillion to Be Made Public from July

Starting July 1, 2025, all contracts signed by national and county government agencies will be publicly accessible, following a new directive mandating the integration of the digital procurement system with the Public Procurement Information Portal (PPIP).

Business Daily reported that the move is aimed at enhancing transparency and holding public institutions accountable, especially those that have historically failed to publish contract details. Public contracts worth an estimated Ksh2 trillion for the upcoming financial year are expected to be uploaded to the PPIP for public viewing.

MPs Block Treasury’s Bid to Cut Export Levy on Iron and Steel

Parliament has shot down a proposal by the National Treasury to slash the export promotion and investment levy on select goods, including iron and steel, in an effort to shield local manufacturers, according to Business Daily.

The Treasury had sought to lower the levy on the customs value of semi-finished iron and non-alloy steel products with carbon content below 0.25%—from the current 17.5% to 10%. However, lawmakers opposed the move, citing the need to protect domestic industries from cheaper imports.

Kenya’s Public Debt Hits Ksh11.5 Trillion as Borrowing Persists

Kenya’s public debt climbed to Ksh11.5 trillion by April 2025, up from Ksh11.36 trillion in March, with the government borrowing around Ksh100 billion monthly. According to the Controller of Budget, 46% of the debt is external while 54% is domestic. Debt servicing for FY 2024/25 stands at Ksh2.04 trillion, with Ksh1.2 trillion already spent.

Treasury CS John Mbadi has raised concerns over the growing debt, calling for strict financial discipline. The report also shows the government used an overdraft facility from the Central Bank, costing Ksh5.2 billion in the first nine months of the fiscal year. Read more on People Daily.

KRA Targets VAT as Top Revenue Source Through eTIMS Rollout

The Kenya Revenue Authority (KRA) plans to make Value Added Tax (VAT) the country’s top revenue earner by leveraging its new electronic Tax Invoice Management System (eTIMS), the Standard reports. Speaking at the AfDB VAT Digitisation Seminar in Nairobi, KRA’s Commissioner George Obell said the system has already boosted VAT revenue by 28% by blocking fraud, simplifying returns, and enhancing oversight.

Obell highlighted that eTIMS accommodates all taxpayer segments—from large corporations linking directly to KRA systems to informal traders using USSD codes. He said the reforms aim to build a fairer and more efficient tax system and called on other African nations to embrace digital tax transformation as a critical structural reform.