Government ends housing levy cash parking in Treasury bills as project spending rises

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President William Ruto’s administration has ended the practice of parking workers’ housing levy deductions in short-term Treasury bills, signalling accelerated execution of the project and improved absorption of funds.

Housing Principal Secretary Charles Hinga told the Nation that the Affordable Housing Fund currently has no money invested in Treasury bills, marking a turnaround from the programme’s early years.

“There’s currently zero money in T-bills from the Fund,” Mr Hinga said, attributing the change to stronger budget absorption and earlier procurement planning that has accelerated implementation of housing projects.

The housing levy was introduced in July 2023 through the Finance Act and later entrenched under the Affordable Housing Act, 2024.

The law requires employers to deduct 1.5 percent of employees’ gross monthly pay and make a matching contribution, creating a dedicated funding stream for State-backed housing projects.

For the first two years, collections repeatedly outpaced spending, prompting the government to invest surplus cash in three-month Treasury bills rather than leave it idle.

The investments generated billions of shillings in additional income. In June 2025, for instance, the State Department for Housing and Urban Development told the National Assembly’s Budget and Appropriations Committee that it had earned Sh4.2 billion in interest from housing levy funds invested in Treasury bills.

Reports from the Affordable Housing Board had previously indicated that at least a third of housing levy collections were not immediately deployed to projects, despite being ring-fenced for the programme.

About Sh46 billion of housing levy cash was sitting in Treasury bills in February last year.

The Board defended the investments as prudent cash management, arguing that leaving large balances idle would have been wasteful while projects awaited procurement and construction.

Mr Hinga said the investments were mainly a consequence of procurement timelines rather than a lack of projects to finance.

“The reason why we kept the money in the 91-day T-bills is that procurement and tendering processes take time, usually four to six months,” he said.

The government continued receiving levy payments while procurement was underway and contractors prepared to start work after tenders were awarded.

Mr Hinga added that public finance procedures also delayed access to funds because withdrawals could not begin until accounting officers had been formally appointed by the National Treasury.

“Processes usually delay the start of projects until September. So there’s a two-month disruption from the beginning of the financial year [in July],” he said.

The latest spending figures indicate that the mismatch between collections and expenditure has narrowed substantially, a development the government attributes to moving procurement earlier.

National Treasury data for the year ended June 2026 shows the State Department for Housing and Urban Development spent Sh129.96 billion against a target of Sh140.99 billion under the development vote.

This represented an absorption rate of 92.18 percent, steeply higher than during the programme’s early phase, when procurement delays left large amounts unspent.

According to the Economic Survey 2026, absorption of housing levy funds jumped to 96.3 percent of the Sh79.03 billion budget in the year ended June 2025.

That compared with 32.6 percent of the Sh78.18 billion allocation a year earlier in 2023/24, underlining the rapid improvement in the programme’s ability to deploy funds.

Actual spending on housing has surged more than five times to Sh129.96 billion from Sh25.49 billion, reflecting the rapid scaling up of affordable housing projects.

Mr Hinga said the improvement reflected lessons learnt during the programme’s initial rollout, particularly the need to begin procurement earlier.

“The reason absorption has improved is that we are now able to start the tendering processes earlier based on lessons from the past years,” he said.

The faster deployment comes as the housing levy has become a significant source of dedicated payroll-supported funding, with collections exceeding Sh206 billion since its introduction in July 2023.

Over three financial years, the levy raised Sh206.46 billion, falling Sh6.32 billion short of the Treasury’s cumulative target of Sh212.78 billion.

In the first year, collections reached Sh54.16 billion against a Sh54.58 billion target, while collections rose 35.16 percent to Sh73.20 billion in financial year 2024/25.

The 2024/25 collections exceeded the Sh63.20 billion target by Sh10 billion, providing a critical boost to the fund’s resources.

The Treasury then raised the collection target sharply to Sh95 billion for the year ended June 2026.

Actual collections reached Sh79.10 billion, leaving an apparent Sh15.90 billion gap against the revised target.

Mr Hinga rejected the characterisation of the latest figure as a revenue shortfall, saying the higher target incorporated Sh25 billion carried forward from the previous financial year.

“There is no shortfall in collection. At the start of the year [2025/26], the target amount of levy to be collected was Sh73 billion,” he said.

“However, there was Sh25 billion not utilised from the previous year,” Mr Hinga added.

He said the government sought a supplementary budget increase to Sh95 billion so it could spend the carried-over funds alongside fresh collections.

“Based on this, the actual estimated levy to be collected was surpassed as we ended FY2025/2026 at Sh79.1 billion realised,” the PS said.

The end of Treasury-bill parking means the housing levy is increasingly functioning as a direct construction fund rather than temporarily serving as a source of short-term government financing.

Reporting originally appeared via Nation Africa. Read the full source for additional context.