NAIROBI, Kenya, Dec 31 — In 2025, the average Kenyan household has grappling with a cost-of-living crisis that goes beyond headline inflation figures.Rising costs in food, transport, and housing, combined with shrinking disposable incomes from statutory deductions like the Housing Levy, have left workers with less to spend on essentials. For many, the year has brought a frustrating reality: higher deductions at source and fewer shillings for basic needs. In the formal sector, the 1.5 per cent housing levy, matched by employers, has been criticized for reducing take-home pay even as prices of basic goods continue to climb.Official data from the Kenya National Bureau of Statistics (KNBS) shows that prices across key categories rose steadily in 2025. The main drivers were food and non-alcoholic beverages (+7.7 per cent), transport (+5.1 per cent), and housing, water, electricity, gas, and other fuels (+1.9 per cent).“Annual consumer price inflation as measured by the Consumer Price Index (CPI) was 4.5 per cent in November 2025,” KNBS reported, noting that while within the Central Bank’s target range, it masks deeper pressures on households.Food prices, the largest single expenditure for most Kenyans, have climbed sharply, forcing many to reduce meal frequency or substitute staples for cheaper alternatives. Beyond inflation, real wages—income adjusted for price increases—have been under pressure.The Housing Levy, introduced under the 2023 Finance Act, deducts 1.5 per cent of gross monthly pay, with employers matching the contribution. Critics argue this reduces disposable income at a time when costs for essentials continue to climb. The National Treasury projects levy collections to reach Sh95.8 billion in 2025/26, up nearly 46 per cent from the previous year, underscoring the growing fiscal bite on workers.Real-life hardships For Nairobi’s everyday earners, these economic dynamics translate into real-life hardships. In Umoja Estate, John Oiti, a private-sector employee, says,“Last year, you could still plan comfortably. This year, food alone has changed everything. What I used to buy with Sh3,000 now needs almost Sh4,000, and deductions like the housing levy leave me with less for basics.”“We now buy food day by day. You can no longer shop for the week. Vegetables and cooking oil are very expensive compared to last year,” Mebo Mwoshi in Kayole, Nairobi, notes.Outside the city, in Mwamba Village, Homa Bay, small-scale farmer Mary Akoth explains the economic tension had taken a big shift.“Even if you farm, you still need to buy cooking oil, sugar, and pay transport to the market. Everything is more expensive than last year.”The Housing Levy has sparked debate. While the government argues it is essential for affordable housing, critics contend it unfairly targets workers already struggling with inflation and other statutory charges with some families have even cutting insurance and non-essential services to cope.Households adjusted spending, cut costs, and sought extra income, but analysts warn that without income growth or targeted fiscal relief, the benefits of macroeconomic stability will fail to translate into better living standards. As 2026 approaches, many households face an even tighter squeeze, balancing rising costs with statutory deductions while striving to maintain financial dignity.