Stocktaking of the Housing Sector in Sub‐Saharan Africa - Part 3: Ethiopia

         Ethiopia’s history and current landscape of housing delivery is rather unique among Sub‐Saharan countries. The former Marxist‐government’s nationalization of housing in 1975 has led to the condition in Ethiopia that the poorest‐constructed neighborhoods in cities are largely under local authority control. The current “developmental state” has inherited what is probably the only stock of public rental housing in the region that was informally1 built by individual owners– named kebele housing – and now in generally very poor condition. This public informal housing stock has been the major feature of all urban housing in Ethiopia for the last fifty years. Mainly built of wood and earth, and roofed in corrugated iron sheets, it has deteriorated over time.


    The large stock of kebele housing contrasts with the government’s view of Addis Ababa as the diplomatic capital of Africa. In order to advance a clean, modern city paradigm in the capital, the Ethiopian government has been keen to replace the ramshackle kebele dwellings with new buildings.


      As the keystone intervention in this effort, the government started the Integrated Housing Development Programme (IHDP) in 2004. It has quickly become the country’s dominant housing program. This program turns the Ethiopian government from an enabler to a direct provider, despite the current international view that eschews the idea of governments as providers because of their relative inefficiency. However, according to government officials, this program has been successful in increasing housing supply: in 2011, the IHDP generated dwellings at a rate of 2,850 per month, created 176,000 new jobs, and contributed to a GDP growth rate of 11.5%. 240,000 units have been completed in Addis Ababa under the first phase, and the second phase aims to build 50,000 apartments a year in the city over the next ten years.


      Targeted mainly towards the low and middle-income population, the IHDP’s model involves building large developments of condominium apartments in walk‐up blocks. The overnment‐owned Commercial Bank of Ethiopia (CBE), the largest of its kind in Ethiopia, provides front‐end and end‐user finance with risks underwritten by a Federal Bank guarantee. The CBE’s loans are utilized in a financing scheme where a household saves up a specified deposit in order to qualify for a loan to cover the remaining amount (i.e. 20% deposit, 80% CBE loan).


      Despite its scale and intentions, the IHDP has thus far failed to significantly improve access to affordable housing for low and middle-income households. The cost to consumers of the first phase condominiums has been estimated at ETB 3,142 (US $162) per m2, which is between one‐fourth and one‐sixth of the cost of private real estate, but this significantly subsidized end‐user price still lies beyond the reach of the average Ethiopian household. A large proportion of these excluded households have instead opted to rent out their allotted condominiums on the market, capitalize on the price differential to make money, and own the unit once the full cost is paid off.


      Outside of the IHDP, the current urban housing stock is dominated by three forms of provision: individual self‐build in the informal sector, individual self‐build in the formal sector, and co‐operative housing. Real estate development is a relatively small provider. The two most common tenures are private rentals and owner‐occupation, the latter often in the informal sector.


      Ethiopia is still a predominantly rural country, with only about one fifth of its people living in urban are as in 2014. The urban population is concentrated quite heavily in the centrally located regions around Addis Ababa. Most urban households occupy one or two rooms, often in single story multi‐occupied housing, in which rooms are built around a courtyard. Plots are smaller in urban Ethiopia than is common in Sub‐Saharan Africa, and densities within plots are quite high as several households may share a plot within the compound housing form. Thus, although cities seem to be expanding quickly, small plot standards mean that there is the potential to limit sprawl within the current plot regulations, unlike elsewhere in the region. Furthermore, the housing shortfall is mainly one of quality rather than quantity: shortfall estimates of around one million are usually cited, but they are not based on detailed analysis of the current housing stock.


      Housing finance, on both the supply and demand side, is underdeveloped. Consequently, the private sector is minimally involved in either value chain. Past attempts at partnering with the private sector have generally failed and led to distrust between both parties. Housing policies and programs are thus state‐dominated, which continues to disincentivize private sector participation.