A recent report by SASRA, KMRC, and FSD Kenya highlights how rising taxes and statutory deductions are squeezing Kenyan households and affecting access to housing finance through SACCOs. Titled Leveraging SACCO Data and Research to Strengthen the Financing of the Affordable Housing Value Chain, the study shows that many Kenyans are being pushed out of formal mortgage products.
The report notes that statutory deductions including the Affordable Housing Levy (AHL), increased National Social Security Fund (NSSF) contributions, and new SHIF charges have significantly reduced disposable incomes. For example, a SACCO member earning a gross monthly income of Ksh200,000 now has approximately Ksh340,000 less in eligible loan amounts than in April 2022.
With over 70% of borrowers earning Ksh100,000 or less monthly, even small reductions in disposable income can determine mortgage eligibility. This financial squeeze forces many borrowers to either compromise on home size and quality or delay homeownership altogether.
Another challenge is high and opaque closing costs, including legal fees, valuation charges, and property transfer costs, which can total 9–10% of the loan value. Such costs discourage qualified members from taking formal mortgages, despite government refinancing via KMRC.
As a result, many Kenyans are opting for general development loans with higher interest rates (10–16%) and shorter repayment periods (2–8 years). These loans allow gradual home construction but are costlier in the long term. SACCOs, meanwhile, face the challenge of locking funds in long-term, low-interest mortgages rather than issuing shorter, higher-return development loans.
The report proposes solutions, including establishing a pre-financing or bridge facility to cover gaps between SACCO loan disbursement and KMRC refinancing. It also recommends that a portion of AHL revenue be redirected to support SACCOs, ensuring the levy contributes to, rather than restricts, access to housing finance.
Without such measures, the dream of affordable, formal homeownership for many Kenyans may remain out of reach.
