The Kenyan middle class is being taxed out of its future. The dream of owning a home is rapidly evaporating, not because of property prices, but because the government is shrinking the payslip.

A sobering new analysis by AIS Capital Advisors reveals that the aggressive hike in statutory deductions—specifically the Housing Levy, the new Social Health Insurance Fund (SHIF) rates, and increased NSSF contributions—has drastically reduced the disposable income of salaried workers. The direct casualty? Their ability to qualify for mortgages. Banks determine loan eligibility based on the "take-home" pay, and that figure is in freefall.

The Mathematics of Exclusion

The math is brutal. With the government taking a larger slice of the gross salary, the "one-third rule"—which dictates that an employee must retain at least a third of their salary after all deductions—is being breached or reached much faster. This lowers the ceiling for the maximum loan amount a worker can service. A salary that qualified for a 5 million shilling mortgage two years ago might now only support a 3.5 million shilling loan. In the current real estate market, that difference is the gap between a home and a pipe dream.

Real estate developers are already feeling the chill. Pre-sales are stalling as potential buyers fail the new affordability tests. The irony is palpable: the Housing Levy, ostensibly designed to build affordable homes, is actively preventing Kenyans from buying them.

• The Triple Whammy: The convergence of the 1.5% Housing Levy, the 2.75% SHIF deduction, and the tiered NSSF rates has created a perfect storm for the salaried class, who are the primary target for mortgage products.
• The Interest Rate trap: This reduction in borrowing power coincides with high interest rates, making mortgages doubly expensive. The monthly repayment burden is rising while the capacity to pay is falling.
• The Rental Reality: As homeownership becomes elusive, more Kenyans are forced to remain in the rental market for longer, driving up rents and further squeezing household budgets.

A Policy Mismatch

The government’s fiscal policy is working at cross-purposes with its development agenda. You cannot tax a population into prosperity, and you certainly cannot build a nation of homeowners by eroding their purchasing power. The AIS report should be a red flag for the Treasury.

Unless there is a rethink on the cumulative impact of these deductions, the mortgage market faces a deep freeze. We are creating a generation of "working poor" who earn decent gross salaries but take home barely enough to survive, let alone invest. The ladder to the middle class is being pulled up, rung by rung, by the very state that promised to secure it.