AFFORDABLE

HOUSING
Practices and Prospects of House Supply
in Addis Ababa, Ethiopia

ESRAEL WOLDEEYESUS
MOHAMMED
AFFORDABLE HOUSING: PRACTICES AND
PROSPECTS OF HOUSE SUPPLY IN ADDIS ABABA,
ETHIOPIA

This paper is presented at “ECAS7: 7th European Conference on African Studies” which is held
from June 29 to July 01, 2017 in Basel, Switzerland.

Author
Esrael Woldeeyesus Mohammed (MBA)

E-mail: [email protected]

Mobile: +251 919 312 500

Copyright © Author 2017. All rights reserved.

Abstract
The city of Addis Ababa is burdened with both political and socio-economic activities of the
country. People are flooding from all over the nation for employment, education, business and
other reasons. Providing affordable houses for the rapidly increasing demand has become a
challenge. It is demanding a solution more than building houses in the city. Even building houses
by itself has its own bottlenecks such as gaps in project management and financial access. The
integrated housing development program has brought some important insights. It was successful
to some extent of its objectives. However, it lags far behind from the soaring demand of Addis
Ababa residents for affordable housing. If continues in the same way or worse, the program
won’t be relevant anymore to benefit the poor and even the middle-income community members.

The heavy burden of affordable housing provision can never be alleviated by whatever good
done in the city. In contrary, the investment in the city is attracting more people and hence more
demand, for the vicious circle to continue. Thus, all stakeholders need to assume their
responsibility for robust, integrated and nationwide effort, so as to guide urbanization for its
optimal benefit. This paper analyzes the practices and prospects of affordable housing in Addis
Ababa, Ethiopia. At the end, it proposed recommendations that are drawn from the research
findings.

Keywords: Addis Ababa, affordable housing, rural-urban migration, urbanization

I
Acknowledgement

First and foremost, all the praise and glory be to my beloved redeemer Jesus Christ who died for
me and give me hope.

Second, I want to use this opportunity to express my love to my Godly wife Loza Abdu and my
beloved son Eliel. Thanks for your support and understanding, especially on the days I dedicated
most of my time to write and edit this paper.

I also want to express my deepest gratitude to Bonson Alemu (Assistant Professor) for his
constructive comments to improve my paper. I am sincerely grateful to Lideta Melso Malmat
and Yeka Ayat 3 condominium houses residents for their welcoming face and giving me their
time to respond to my questions. I am also very thankful to all professionals and managers for
trusting my research is worthy of their full collaboration. Specifically, I want to thank staffs of
Addis Ababa City Administration, MUCDO, CBE, GIZ, MH Engineering, Debub Global Bank
and United Bank.

II
Table of Contents
Abstract .......................................................................................................................................................... I
Acknowledgement ....................................................................................................................................... II
List of Figures .............................................................................................................................................. V
List of Tables ............................................................................................................................................... V
Acronyms .................................................................................................................................................... VI
CHAPTER ONE: INTRODUCTION ........................................................................................................... 1
1.1. Background of the Study............................................................................................................... 1
1.2. Statement of the Problem .............................................................................................................. 3
1.3. Objectives of the Study ................................................................................................................. 4
1.4. Basic Research Questions ............................................................................................................. 4
1.5. Scope of the Study ........................................................................................................................ 5
1.6. Significance of the Study .............................................................................................................. 5
1.7. Ethical Consideration .................................................................................................................... 5
1.8. Organization of the Paper ............................................................................................................. 6
CHAPTER TWO: LITERATURE REVIEW ............................................................................................... 7
2.1. Urbanization.................................................................................................................................. 8
2.2. Population Growth ...................................................................................................................... 10
2.3. Inflation ....................................................................................................................................... 11
2.4. Informal Settlement .................................................................................................................... 13
2.5. Common Problems of Affordable Housing Provision in Developing Countries and the Widely
Practiced Wrong Solutions ..................................................................................................................... 14
2.6. Ethiopian Government Effort and Birth of IHDP ....................................................................... 15
2.7. Key Players in the IHDP ............................................................................................................. 16
CHAPTER THREE: RESEARCH METHODOLOGY.............................................................................. 17
3.1. Research Design.......................................................................................................................... 17
3.2. Sampling Design ......................................................................................................................... 17
3.3. Method of Data Analysis ............................................................................................................ 19
3.4. Problems and Limitations ........................................................................................................... 19
CHAPTER FOUR: FINDINGS AND ANALYSIS .................................................................................... 20
4.1. Residents of the IHDP Built Houses ........................................................................................... 20
4.1.1. General Information ............................................................................................................ 20
4.1.2. Migration............................................................................................................................. 20

III
 4.1.3. IHDP (Condominium) House Affordability ....................................................................... 22
4.1.4. Condominium Houses Adequacy........................................................................................ 23
4.1.5. Condominium Houses Prospect .......................................................................................... 23
4.2. Perspectives of Key informants on IHDP and Low-cost Housing in Addis Ababa .................... 25
4.2.1. General Information ............................................................................................................ 26
4.2.2. IHDP Effectiveness ............................................................................................................. 26
4.2.3. IHDP (Condominium Housing) Practices and Prospects .................................................... 26
4.2.3.1. Policy Situation ............................................................................................................... 26
4.2.3.2. Private Sector Participation ............................................................................................. 27
4.2.3.3. Other Options to Provide Affordable Housing ............................................................... 29
CHAPTER FIVE: SUMMARY, CONCLUSION, AND RECOMMENDATION .................................... 31
5.1. Summary ..................................................................................................................................... 31
5.2. Conclusion .................................................................................................................................. 32
5.3. Recommendation ........................................................................................................................ 33
Bibliography ................................................................................................................................................. a
Appendix ....................................................................................................................................................... d

IV
List of Figures
Figure 1 2015 World Urbanization percentage from total ............................................................................ 9
Figure 2 Residents by reason of migration ................................................................................................. 22
Figure 3 Opportunity for private sector (real-estate and financial institutions) to engage in low-cost
housing ........................................................................................................................................................ 28
Figure 4 Agro-ecological Zones of Ethiopia............................................................................................... 35

List of Tables

Table 1 Number of sample respondents ...................................................................................................... 18

Table 2 Household heads by age category .................................................................................................. 20
Table 3 Household heads by their origin .................................................................................................... 21
Table 4 Rent and mortgage payment burden .............................................................................................. 23
Table 5 Condominium Houses residents feeling about their current situation ........................................... 24
Table 6 Households feeling regarding living in condominium houses as compared to renting in someone's
compound.................................................................................................................................................... 25
Table 7 Key informants by Employers type ............................................................................................... 26
Table 8 IHDP houses first and periodic payment affordability .................................................................. 26
Table 9 Housing policy effectiveness in providing low-cost housing ........................................................ 27
Table 10 Private sector engagement to provide/assist low-cost housing .................................................... 27

V
Acronyms
AU Africa Union
CBE Commercial Bank of Ethiopia
CSA Central Statistics Authority
EPRDF Ethiopian People's Revolutionary Democratic Front
ETB Ethiopian Birr
GC Gregorian Calendar
GDP Gross Domestic Product
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
GTZ German Technical Corporation
HDPO Housing Development Project Offices
IHDP Integrated Housing Development Program
MBA Masters of Business Administration
MHE MH Engineering
MUDHCO Ministry of Urban Development, Housing & Construction
MWUD Ministry of Works and Urban Development
R&D Research and Development
SNNPR Southern Nations Nationalities and Peoples Region
SRS Simple Random Sampling
UN United Nation
UNDP United Nations Development Program
UNHCR United Nations High Commissioner for Refugees
US United States
USA United States of America

VI
CHAPTER ONE: INTRODUCTION

1.1. Background of the Study

We, humans, need shelter which is basic for our health and protection. It is central to our
development and also to ensure its sustainability. It is our comfort zone to raise our kids, to take
rest from our busy days and to recover from our illnesses. It is a very terrible thing to have no
house or to lose it. According to Universal Declaration of Human Rights article 25, “Everyone
has the right to a standard of living adequate for the health and well-being of himself and of his
family, including food, clothing, housing…” But due to resource constraints, policy barriers and
ill management, many people are not able to construct their houses. The same challenge is true
for house providers, especially in developing countries. As a result, one quarter of the world’s
urban population is living in slums and informal settlements (UN Habitat, 2015:2).

Urbanization and increase in population are raising the need for affordable and adequate housing.
Estimates concerning total housing needs in Africa have been set at around 4 million units per
year (UN-Habitat, (n.d.)). Currently, about 40% of the continent’s one billion people live in
cities and towns; and it is estimated that in the next few years, some African cities will be home
to as much as 85% of their country’s population. In the case of Ethiopia, the lion share of the
youth population (50% under age 18) coupled with a population growth rate put pressure on the
demand for housing. It is not just the construction of new houses which burdens Ethiopia but
also due to only 30% of the country’s total housing stock is in fair condition which the remaining
needs replacement. It is good to note that access to affordable and adequate house is beyond
living in a box of floor, walls, and roof. The Center for Affordable Housing in Africa 2013 year
book by referring a 2007 survey stated that “in Addis Ababa alone, the demand was between
35,000 and 45,000 housing units to be supplied annually for 10 years to replace the existing
(70%) dilapidated stock as well as cater for new household formation. At the current rate of
supply, even with the progress of government housing programs, this is unlikely to be met,
especially in the middle to lower income bands (Kecia Rust and Lucille Gavera, (ed.), 2013).

1
The problem is complex

Ethiopia is the victim of corruption. According to 2016 Corruption Perception index, Ethiopia is
the 108th least corrupt nations out of 176 countries (Transparency International, 2016).
Corruption hinders access to affordable and adequate house-especially for the middle and low-
income group. Its effect on land management is also crucial which weakens the implementation
of policies. “Under Ethiopia's constitution, the state owns all land and provides long-term leases
to tenants. Title rights in urban areas, particularly Addis Ababa, are poorly regulated, and subject
to corruption.” (CIA, (n.d))

Providing affordable and adequate housing needs huge investment and human resource which
unfortunately the country could not provide. Even if it can cover the cost and provide the
necessary human resource, urbanization effect on the farmland and on the farmers’ fate is
another dimension that needs critical assessment. Hence, building houses have to consider
economic, social, cultural, political and environmental aspects.

The Opportunity is wide

The demand is very huge. It needs determined government, critical-thinkers, researchers and
innovative entrepreneurs for adequate supply. It requires governments to intentionally organize
itself and manage its cities in a planned manner. The demand for housing is looking for efficient
and effective urban land management policy implementation. Researches have to be made and
entrepreneurs have to come with solutions so as affordable and adequate housing become
possible.

The government of Ethiopia is implementing Integrated Housing Development Program (IHDP)

since 2005 (World Bank, 2015:34). But it has been criticized regarding its effectiveness in terms
of affordability and others aspects. This proposal is to assess the practices and prospects of low-
cost housing in Addis Ababa, Ethiopia. The thesis will dig out the challenges and opportunities
the city has so as to propose different options and business ideas.

2
1.2. Statement of the Problem

Addis Ababa, the city of Ethiopia and the center of AU is ‘one of the fastest urban centers in the
world’. The city ‘is the sole political, economic and cultural center of the country’ (Hailu, 2016).
‘Addis Ababa had a population in 2008 of 3,147,000…and an eight percent annual growth rate.
The city is home to 23.8 percent of all urban dwellers in Ethiopia, and has an estimated density
of 5936.2 per square kilometer.’ (New World Encyclopedia, 2016). The population of Addis
Ababa will rise to 12 million in 2024 (UN-HABITAT, 2008).

The UN-Habitat publication on 2011 about “Affordable Land and Housing in Africa” put
Ethiopia as a prominent example for the challenge of insufficient affordable urban land and
housing provision to accommodate thousands of new urban dwellers who move to cities in
search of the greater opportunities cities can provide. It states that:

‘Ethiopia currently has a relatively small urban population (16.6 percent in 2010), yet its
expected urbanization growth rates are above 3.76 percent for the coming 15 years (2010-2025).
Such growth will place additional housing pressure on Ethiopian cities, such as Addis Ababa;
that already have serious housing problems, evidenced by the current high proportion of urban
slum dwellers, 79.1 per cent.’ (UN Habitat, 2011:4).

The high percentage of urban slum dwellers coupled with eight percent population growth bring
a significant challenge for Addis Ababa in providing affordable & adequate housing. This is due
to the pressure it creates on the availability of affordable land & construction materials, access to
finance and urban management.

UN-HABITAT publication in 2008 expressed the severity of the problem Addis Ababa faced
saying: “Its geographic location, combined with its political and socio-economic status have
made it a melting pot to hundreds of thousands of people coming from all corners of the country
in search of employment opportunities and services. High rate of unemployment (31%),
concentration of slum dwellings, and poor housing, infrastructure and sanitary development,
characterize Addis Ababa more than the few good features it possesses. The challenge is not only
to reverse current situation through balancing the economic growth with the population increase,
but also to catch up with decades of neglect.”
3
1.3. Objectives of the Study

It is difficult to get land or house in Addis Ababa. The price of rent is also dramatically
increasing. It needs a system that deals with the case that, “affordable housing is inadequate and
adequate housing is unaffordable” (UN Habitat, 2015). But this has to be done with
consideration of interrelated factors from economic, political, social and other aspects. Hence,
continuous and informative research is important for government and stakeholders who are
dealing with the complex problem of Addis Ababa.

The general purpose of the thesis is to assess the practices and prospects of low cost (affordable
and adequate) housing in Addis Ababa, Ethiopia. The specific objectives are:

1. To assess the extent of the use of condominium houses by those who are direct
beneficiaries of IHDP.
2. To discuss on the likelihood of effectiveness and sustainability of the government
housing program (Integrated Housing Development Program).
3. To assess some factors that can influence the provision of affordable housing.

1.4. Basic Research Questions

By doing this research it is intended to answer the following basic questions.

1. What proportion of the residents of condominium houses are those who directly
benefited from the IHDP?
2. What percentage of the monthly income of the household is spent for rent/mortgage of
condominium houses?
3. What proportion of the residents who live in condominium lived in Addis Ababa before
2005 (start date of IHDP)?
4. Are the policies put in place by government addressing the issue of affordable and
adequate housing?
5. What is the level of participation of private sector (real estate and financial institution)
in providing low-cost housing?

4
1.5. Scope of the Study

In Addis Ababa, the government is the key player by providing low-cost housing. Hence, the
study will focus on government subsidy program called IHDP (Integrated Housing Development
Program). In the study, the selected Addis Ababa residents in the sampled condominium sites1 of
the program are covered. Two clusters are randomly selected from the list of most relevant and
recent condominium houses distribution round. The quantitative data gathered from IHDP
houses residents is organized from the two clusters while the qualitative data and literature
review mainly shows the general perspective of IHDP built houses affordability in Addis Ababa.
The main issues discussed are the practices and prospects of the program towards providing
affordable and adequate housing for the city inhabitants. However, the development partners of
the Ethiopian government and private sector participation is also assessed to some extent.

1.6. Significance of the Study

The government of Ethiopia is implementing Integrated Housing Development Program (IHDP)

since 2005 (World Bank, 2015:34). But it has been criticizing on its effectiveness in terms of
affordability and others aspects. This study assesses the practices and prospects of low-cost
housing in Addis Ababa, Ethiopia. The paper analyses the challenges and opportunities the city
has and the effectiveness of IHDP. Finally, the study recommends other options based on the
research findings.

1.7. Ethical Consideration

Data or information taken from other sources is properly cited in the study report by using
Harvard style and at the bibliography part of the paper. During the time of primary data
collection: the interviewer/researcher explained the purpose of the research for respondents
before the information is gathered. Respondents were assured regarding the confidentiality of the
information as it will be coded and could not be traced to specific renters, homeowners or key

1
Please refer chapter three for the methodology

5
informants. As a result, the data is gathered only after the respondents expressed their
willingness to participate.

1.8. Organization of the Paper

The research report has five chapters. The first chapter is Introduction which gives an overview
of the thesis. It includes the background, statement of the problem, objective of the study, basic
research questions, scope of the study, significance of the study, ethical considerations, and
organization of the paper. Chapter Two presents the relevant literature reviewed. The literate
review organized under subsections of urbanization, population growth, inflation, informal
settlement, developing countries common problems, government effort & birth of IHDP, and key
players in the IHDP. Under Chapter three (Research Methodology): research design, sampling
design, method of data analysis, and problems & limitations in doing the research are discussed.
Chapter Four focused on the findings and analysis of the data obtained from field. Chapter five,
the final chapter, provides summary, conclusion and recommendations that are derived from the
research findings.

6
CHAPTER TWO: LITERATURE REVIEW
There are a number of publications on affordable housing which are done by different non-
governmental and governmental organizations, and individual researchers. However, most of the
researches focused on broad perspectives of developing countries or sub-Saharan Africa. Though
there is information on the urban context of Ethiopia, researches done are very limited in
number.

It is difficult to find common and detailed definition of affordable housing that works for all.
This is due to the context of countries which is different and the difference they had is wide. The
income of the people, the development level of the country, and cost of living are some of the
factors. For instance in USA, housing is usually considered affordable if it costs less than 30% of
gross household income (Center for Affordable Housing, (n.d.)). The US Department of Housing
and Urban Development states that “Families who pay more than 30 percent of their income for
housing are considered cost burdened and may have difficulty affording necessities such as food,
clothing, transportation and medical care.” But some general definitions can be found. Scottish
Planning Policy officially defines affordable housing as:

“housing of a reasonable quality that is affordable to people on modest incomes… affordable

housing may be in the form of social rented accommodation, mid-market rented accommodation,
shared ownership, shared equity, discounted low-cost housing for sale including plots for self-
build, and low-cost housing without subsidy.’ (Development Trusts Association Scotland, (n.d.))

A paper presented at 2016 World Bank Conference on Land and Poverty puts the UN-Habitat
general definition as affordable housing is “adequate in quality and location and does not cost so
much that it prohibits its occupants meeting other basic living costs or threatens their enjoyment
of basic human rights” (Weldesilassie et al. 2016, pg 7)

By referring Milligan, Professor Phillip O’Neill expressed that “Practical definitions of what
constitutes affordable housing are usually specific to the policy and program context in which
they are used. Typically, however, they have common features, such as a notion of what
comprises affordability and a reference to the target group(s) for whom they are intended”
(O’Neill 2008, pg 8).

7
Rapid urbanization, increasing population growth, inflation, and the increase in the informal
settlement are making urban the focus of policy makers and researchers.

2.1. Urbanization

Urbanization is soaring; cities are becoming the drivers of economy, and rural-urban migration is
accelerating. Cities are generating more than 80% of global GDP (World Bank, 2017). It was
only 3% and 14% of the world’s population resided in urban areas in 1800 and 1900 respectively
(Barkan, 2012). In the past 50 years, urban population has increased dramatically and this trend
will continue for at least 30 years due to the fact that increasing people that born in cities and
rural-urban displacement (UN-HABITAT, 2003). Today, more than half (54%) of the world
population resides in urban areas (UN-HABITAT, 2016). Referring Todaro (2000), Mediel
Hove, expressed that about sixty percent of the Sub-Saharan African countries urban population
is accounted by migration from rural areas and it increases to 75% for some exceptions. The
same article states that the main factors of the rural-urban migration in these countries are two.
The first one is poverty in rural areas. This is due to low agricultural productivity, aggravated by
demographic growth. The second factor is neglect of rural areas in terms of resource allocation
which make them under-served in terms of physical, financial, social and economic
infrastructure (Hove, 2013).

8
 Figure 1 2015 World Urbanization percentage from total

Source: Wikipedia, https://commons.wikimedia.org/wiki/File:2015_World_Urbanization_Map.png

Though urbanization is higher in the developed countries, its growth rate is much faster in the
least developed parts of the world with Africa being the most rapidly urbanizing. Africa urban
growth rate is 11 times more rapid than the growth rate of Europe (UN-HABITAT, 2016).
Urbanization comes with its pros and cons that are reflected in both urban and rural life. The
rapid urbanization problems include of inadequate affordable housing, unavailability of basic
infrastructure, complex urban management, and environmental pollution. Cities generate 70% of
global carbon dioxide emissions. According to UN Habitat, 40 percent of the world’s population
will need proper housing by 2030 and this means our world have to complete and provide 96,150
housing units per day (UN-Habitat, (n.d.)). Though providing such houses is more challenging
for developing countries, Africa and Asia are urbanizing faster than the other regions. By 2050,
these regions are projected to become 56 and 64 percent urban respectively (United Nations,
2014:1). The same is true for Ethiopia. A (World Bank, Ethiopian government, and Cities
Alliance-core study team, 2015) analytical study kept the Ethiopian urban population growth as
it will triple to 42.3 million in 2037 from 15.2 million in 2012. Referring CSA data, the study
also kept the estimation that rate of urbanization will grow from 3.8 to 5.4 percent a year which
makes the growth of urban population to be triple even earlier.

9
2.2. Population Growth

Thomas Malthus (1766-1834) was pessimistic regarding higher population growth rate. He
described that people become starved when population growth is above the growth of food
supply. However, he also believed that increasing living standard accelerates the increase in
population growth rate which reverses these gains. As Kuznets (1930) described population
growth can be resulted from immigration or increasing natural birth rate due to favorable
economic circumstances. Regardless of its cause, population growth leads to higher demand for
customer goods, especially for more and durable housing. The increase in population growth
results for an increase in demand and the demand attracts more investment which leads to
economic growth. This enables to take the advantage of the economies of scale. However, the
more the number of people joined the labor force, the lower the wage become. And the decrease
in wages minimizes spending and investment which starts the downward phase of the economic
cycle (Pressman, 2006).

As Abel described, “In many developing countries a higher rate of population growth is
considered to be a major problem and reducing it is a primary policy goal.” The Solow growth
model shows the relationship between population growth and a country’s level of development.
The model described the increase in the workforce reduces the capital-labor ratio. Which means
the new steady-state output per worker and consumption per worker will diminish as well. As a
result, the model justifies population growth decreases living standard since lower level of
capital per worker results lower level of income. It suggests policies that control population
growth will lead to better living standard (Abel, 2008). According to the Solow model countries
with higher population will have lower level of GDP per person. Countries with higher
population growth rate are poorer than those of with lower population growth rate (Mankiw,
2010).

The main demographic issue of 20th century was population growth and it remains to be the
focus of attention for the developing world. Population growth is increasing but by diminishing

10
rate. Recently, increment to urban population is exceeding the increment to total population
(UN-HABITAT, 2003).

“During 2015-2050, half of the world’s population growth is expected to be concentrated in nine
countries” which includes Ethiopia (UN, 2015). The projected figure of Ethiopia population for
the year 2015 is 90,078,005 and specifically for Addis Ababa, it is 3,273,000 (CSA, 2007/2015).
Based on Worldatlas most populated countries list, Ethiopia is the 13th most populated country in
the world and the 2nd in Africa (next to Nigeria) (Worldatlas, 2017) . According to Worldometer
(2016) referring the recent UN estimate, Ethiopia population is more than 102 million and the
growth rate is 2.48%. Accordingly, the urban population coverage increased from 5.4% in 1955
to 19.8% in 2016. Since more than 50% of Ethiopian population is youth, there is no doubt about
the future increase of natural population growth and rural-urban migration. This adds additional
demand for affordable housing.

One problem that needs to be considered here is: regardless of the current decentralized
government power system which gives other cities the opportunity to grow, cities are still very
small compared to Addis Ababa. “Addis Ababa is a true primate city, with More than 3 million
people, which is 14 times bigger than Mekelle, the second largest city in the country.”
(MUDHCo, 2014). According to CSA Population projection values of 2017, Addis Ababa alone
has greater population (3,434,000) than any country’s region total urban population, except
Oromia and Amhara which has 5,354,000 and 3,682,000 urban dwellers respectively. The sum of
urban population which resides in cities of Bahir Dar, Hawassa, Adama, Mekele, Dessie, Arba
Minch, Dire Dawa, Gambela, Assosa, and Jijiga is equal to only 68% of the population in Addis
Ababa (CSA, 2013). This shows that the heavy burden of the country’s urban population demand
for livelihood is dumped on one city.

2.3. Inflation

As Andrew B. Abel (2008) described, the economy is said to be experiencing inflation when the
prices of most goods and services are rising over time. Irving Fisher (1867–1947) simply
expressed inflation as a change in prices faced by a typical family. According to Hayek (1945),
inflation reduces the economic efficiency and thus the standard of living for the nation. He also

11
stated that using income policies as a tool to combat inflation is ignoring the real cause of
inflation- too much money. “Governments are tempted to print money and create inflation in
order to repay borrowed money with money that is worth much less because it can purchase
fewer goods” (Pressman, 2006). The quantity theory of money states that the central bank has an
ultimate control over rate of inflation. Whenever the money supply increases rapidly the price
level increases as well and whenever the money supply is constant the price level stays constant.
The quantity theory of money and the Fisher equation (𝑖 = 𝑟 + 𝜋) shows how money growth
affects the nominal interest rate.2 “According to the quantity theory, an increase in the rate of
money growth of 1 percent causes a 1 percent increase in the rate of inflation. According to the
Fisher equation, a 1 percent increase in the rate of inflation in turn causes a 1 percent increase in
the nominal interest rate.” The extent of the cost of inflation can vary depending on its
expectedness. Unexpected cost of inflation is much evil than the expected one. If inflation is
higher than expected the debtor wins and the creditor loses. It also hurts individuals on fixed
pension (Mankiw, 2010).

Inflation makes the provision of affordable housing difficult. The housing sector is affected by
not only the construction material inflation but also by others, like food price increase. It is due
to the household consumption increase that in turn decreases their ability for saving in order to
spend in the future. In 2008, Ethiopia’s inflation was reached 64% due to major causes which are
high fuel and food prices shocks, weaker foreign exchange earnings, and rising demand for
imports that depleted international reserves of the country. Even from the major causes, the
highest increase was observed in food, housing, fuel, and transport services. Though UNDP kept
it the causes separately; it is obvious that all the prices increase are burdening the household
income which makes households opportunity cost high and saving amount low. The highest price
increase was observed in food, housing, fuel and transport services, making the urban poor the
most vulnerable to the impacts of inflation. The inflation rate somehow decreased to 40% in
2012 and 7.8 % in 2014. However, it is good to keep in mind that the decreased inflation rate
doesn’t mean the prices fall down to where they were. The increased prices are still on their peak
mountain and they are still increasing though at a lower rate (UNDP, 2014).

2
The interest rate that the bank pays is called the nominal interest rate (i), and the increase in your purchasing power
is called the real interest rate (r). And p denotes the rate of inflation.

12
2.4. Informal Settlement

The formal sector is unable to provide affordable houses due to administrative and regulatory
burdens it has. As a result, the informal economy is the best choice of many people in the
developing world. This leads people to live in dangerous and poorly constructed houses.
According to Karol Boudreaux (2008), different African government involvements in the
housing sector make houses unaffordable. This is through monetary policies that raised inflation,
through fiscal policies that increased interest and though land policies that nationalized land. “In
most large cities in the developing world, the formal market for land and housing serves only a
minority of the population. It is estimated that between 30 and 70% live in ‘irregular’ settlements
and that up to 85% of the new housing stock is produced in an extralegal manner, with severe
social and environmental consequences.” (Berner, 2007)

Similarly, the formal sector is not able to provide the housing need in Ethiopia. Housing
Shortage Estimates for Ethiopia for 2013 is 1,000,000 which mean the country needs additional
225,000 backlog/year (World Bank, 2015). In Ethiopia, Informal unplanned housing provision
constitutes a considerable proportion of the total housing supply. Informal housing is especially
prevalent in Addis Ababa, accounting for 34.1 percent of total housing supply between 1996 and
2003, and it is the fastest growing supply method (UN Habitat, 2011). This makes the Addis
Ababa population to live in overcrowded houses which cover more than 40 percent of the city
population (UN Habitat, 2011:21).

As the informal sector is playing a significant role in providing houses, increasing number of
people are living in slums. In 2003 UN-HABITAT report on the Challenge of Slum states that:
“In 2001, 924 million people, or 31.6 percent of the world’s urban population, lived in slums.
The majority of them were in the developing regions, accounting for 43 percent of the urban
population, in contrast to 6 percent in more developed regions. Within the developing regions,
sub-Saharan Africa had the largest proportion of the urban population resident in slums in 2001
(71.9 percent) and Oceania had the lowest (24.1 percent). In between these were South-central
Asia (58 per cent), Eastern Asia (36.4 per cent), Western Asia (33.1 per cent), Latin America and
the Caribbean (31.9 percent), Northern Africa (28.2 percent) and Southeast Asia (28 percent)…
It is almost certain that slum dwellers increased substantially during the 1990s. It is further
13
projected that in the next 30 years, the global number of slum dwellers will increase to about 2
billion, if no firm and concrete action is taken.”

2.5. Common Problems of Affordable Housing Provision in Developing Countries

and the Widely Practiced Wrong Solutions

Stephen Malpezzi (1987) said, “Housing policies in many developing countries are inefficient
and inequitable and the wrong solutions are often applied to the problems.” One of the problems
he mentioned is the perceived shortage of housing. However, many come with the common
solution, which is usually wrong. This is for government to build houses. He argues that housing
shortage is the result of fast growth in demand and of impediments to the supply of housing. As a
result, he recommends government to mitigate or remove market imperfections as the private
sector can respond faster or more efficiently than government. The other problem is poor quality
of housing. The common solution, yet often wrong, is to raise standards through stricter building
codes and better enforcement. However, many current standards, based on western codes, have
little to do with basic structural soundness or hygiene and it just makes the price unaffordable.
He recommends for standards and codes to focus on basic requirement for safety and health. The
third problem that is commonly responded with wrong solution is the existence of too many
squatters. The common solution that is being applied is to clear the squatters. However, it is
wrong for many reasons. This retards development as far as slum housing constitutes large part
of the poor’s capital stock. According to him, improving conditions more cheaply and for more
people is better than clearance programs. The other developing countries problem he mentioned
is high price of housing for many families. The common solution and yet wrong one is to control
rents and the price of land and building materials. When price of housing increases faster than
general prices, it is the indication of the market to produce more housing relative to other goods
and services. As a result, it is better to deal directly with the causes of rising costs rather than to
shift the problem to landlords. Otherwise, such solution will worsen the problem by reducing the
quantity of houses and land for rent.

14
2.6. Ethiopian Government Effort and Birth of IHDP

Since the overthrow of ‘Derg’ by Ethiopian People’s Revolutionary Democratic Front (EPRDF),
it was at 1994 that Addis Ababa implemented its first housing policy. It was assumed that the
housing market can meet the housing demand for the city low-income population. However,
despite the intense subsidies and land provided the private sector was failed to meet the
expectation. “In 2005, the Council of Ministers of the Federal Democratic Republic of Ethiopia
formulated and approved a consolidated Urban Development Policy to link together the small-
scale efforts made by regional governments and cities since 2000.” Also, the national Ministry of
Works and Urban Development (MWUD) was created with the objective to lead the country
urbanization and research its pattern. (UN Habitat, 2011)

In 2004 the Integrated Housing Development Programme (IHDP) was launched and started its
implementation in 2005 based on the proposal prepared by former State Minister Oqubay Arkebe
which was submitted to German Technical Corporation (GTZ). The program is “a government-
led and financed housing provision programme for low-and-middle-income households in
Ethiopia.” In addition to constructing 400,000 condominium units, the program initial objectives
were to promote homeownership for low-income households, to create 200,000 jobs, to enhance
the capacity of the construction sector, and to promote the development of 10,000 micro and
small enterprises. (UN Habitat, 2011)

The program provides houses through three schemes which are 10/90, 20/80, and 40/60 based on
the down payment required to obtain the house. Upon the owning of the houses constructed
under 10/90, 20/80 and 40/60 program schemes, beneficiaries will pay the 10%, 20% and 40% of
the house price and the rest will be paid in 25 years for 10/90 scheme and in 15 years for other
schemes except for studio under 20/80 years which is 20 years. While 10/90 scheme has only a
studio, other schemes comprise studio, one bedroom, two bedroom and three bedrooms units.
Studio houses target those beneficiaries with avege monthely income of 0-300 ETB. One
bedroom houses targeted those with average monthly income of 301-600 ETB while 2 bedrooms
and 3 bedrooms targeted beneficiaries with average monthly income of 601-1200 ETB and
>1200 ETB respectively. “In terms of income groups, the program is intended to benefit
residents of the city mainly in the following income groups. The extremely low income groups,
15
who earns monthly income of below Birr 300 (equivalent to 23 USD at the time of the start of
the program), constitute 50% of the residents of the city. The very low income group, (Birr 300 –
600), low income group (Birr 600 – 1200), medium income group (Birr 1200 – 1800) and lower
middle income (above Birr 1800) constitute 30%, 10%, 6% and 4% of the city, respectively.
Accordingly, of the total houses planned to be constructed, 40%, 30%, and 20% are designed for
Studio, one-bedroom, two – or three – bedrooms. Such arrangement targets with the assumption
that the houses are transferred to extremely low income group, very low – income, and low
middle – income groups, respectively. The remaining 10% are designed for commercial
purposes.” (Weldesilassie et al., 2016)

Though the program had not met all of its objectives, it has also important contributions. For
instance, these positive contributions are manifested on 11.5 % growth rate of GDP, and 176,000
jobs are created. However, it was unfortunate for the program was unable to provide affordable
housing for ‘poorest of the poor’ or low-income community due to their inability to afford the
initial down-payment and monthly service payments. (UN Habitat, 2011)

2.7. Key Players in the IHDP

Under the umbrella of the EPRDF, Ministry of Works and Urban Development (MWUD), Addis
Ababa City Administration, The Housing Development Project Offices (HDPOs) and
Commercial Bank of Ethiopia (CBE) are important actors of the program. Whilst MWUD
provides support and direction at national level, the city Administration was managing agency of
the program. HDPOs were responsible for ensuring successful delivery of design, construction,
and housing transfer & administration. CBE finances the implementation of the IHDP. (UN
Habitat, 2011)

Besides the government which was leading the program, there were private and NGO
stakeholders with significant contributions. These are German Technical Corporation (GTZ) and
MH Engineering (MHE). GTZ was implementing body and also administers the financial and
construction aspect of the program. The “large Ethiopian architecture firm”, MH Engineering,
was taking the role of preparing the concept design for the first condominium project in Ethiopia.
(UN Habitat, 2011)

16
CHAPTER THREE: RESEARCH METHODOLOGY
The first step of conducting the research is literature review. The data on the selected
publications are analyzed and re-interpreted in order to show the practices and prospects of
affordable housing in Addis Ababa, Ethiopia. The next step taken was gathering data based on
the research and sampling design as presented below. After field work is completed, the gathered
data is analyzed using IBM SPSS Statistics version 20.0.

3.1. Research Design

The researcher gathered both qualitative and quantitative data. A qualitative approach is used
during key informant interviews through a questionnaire which includes open-ended questions.
Key informants are identified from construction companies, government offices, NGOs, Inter-
governmental and financial institutions. Quantitative method is employed to gather the required
data from those who are living in the houses that are built by IHDP.

3.2. Sampling Design

Over the past ten years, Addis Ababa City Administration built and transferred 136,000
residential houses (Ethiopian News Agency, 2016). Since one of the purposes of the research is
to find out who owns the IHDP built houses, the researcher purposively selected recent
condominium distribution round. As a result, 10th round distribution is selected. In this round
33,585 HHs won the lottery under 20:80 scheme. The older distribution lists/rounds are not
preferred for sampling due to the fact that winners can sell their houses after completing
mortgage payment or changing residence area over the long years. The most recent one (11th
round) is not also suitable since households may not start residing in the houses due to taking
time for some finishing works or other reasons. But using the 10th distribution round can
minimize these variables and make the conclusion more reliable. From the three schemes of the
IHDP, 20:80 is selected for this study. The 10:90 scheme is not selected as its focus is only on

17
the affordability than adequacy. It is intended to provide studio units3 for the lowest income
group with average monthly income of 300 ETB (Weldesilassie et al. 2016). This is done
regardless of their family size. As a result studying the affordability of low cost houses that
undermine adequacy might lead to wrong conclusion. The other scheme which is 40:80 is left out
from this study since these house units’ distribution is not yet started.

In the first phase of the research, the researcher used two-stage cluster sampling to gather
quantitative data from HHs. First, all 23 valid4 clusters in the population are listed. Considering
the time and budget constraint, 2 clusters are selected using simple random sampling (SRS). The
selected clusters are Lideta Melso Malmat and Yeka Ayat 3 which has 393 and 142 beneficiaries
respectively. Second, 25 households from each cluster are selected using systematic random
sampling. The principle is that, the house distribution list shows all the condominium house
winners in each sampled cluster from 1-N. The interval size is K=N/n, where n is sample size (25
households) and K is sample interval. Then the researcher took every Kth unit by adding on the
randomly selected integer which is between 1-K.

In the second phase of the research, quantitative and qualitative data were gathered from
companies and key informants that were selected purposively. This was done considering the
companies and employees relatedness for the study. 26 key informants are selected purposively
in regard to their work-relatedness to the study. The companies are real estate
developer/construction industry (2 key informants), government offices (10 key informants),
financial institutions (10 key informants) and NGOs/Inter-governmental Organizations (4) that
have experience on housing development in Addis Ababa Ethiopia.

Table 1 Number of sample respondents

S.N Type of sample Respondents # of sample respondents

1 HHs who live in Condominium (2 clusters) 50
2 Key Informants 26
Total 76

3 2
The recommended size of the studio is 25 M
4
A cluster with at least 25 HHs (Houses) is valid for the research.

18
 3.3. Method of Data Analysis

After the field work is completed, all the questions in the questionnaires were coded and data is
analyzed using IBM SPSS Statics 20.0. Descriptive analysis is used to analyze the results.
Responses for the qualitative questions are coded and included under the findings of the study.
Recommendations and related responses of interviewed professionals are also presented in the
paper.

3.4. Problems and Limitations

Time and budget are among the main constraints especially for the field work which limited the
number of respondents in the sampling size. The researcher personally gathered the data in order
to ensure that the data collection is done with quality and within budget. Initially, it was intended
to include more number of key informants including UN-HABITAT and other real-estate
developers. However, UN-HABITAT did not respond to the survey questions emailed with an
online link. Only MH Engineering5 is interviewed from construction companies due to the time
constraint. Regarding HH survey, very few HHs were not available in their residences though
checked two to three times. As a result, those absent HHs are replaced by their immediate
neighbors based on the order of the HH list used for sampling.

5
“MH Engineering is a large Ethiopian architecture firm. The firm’s initial designs for cost-efficient condominiums in Addis Ababa stemmed
from their collaboration with the Low-Cost Housing Project at GTZ, where they introduced the Cost-Efficient Methodology (LCH-MH system)
of utilising pre-cast concrete elements in building design.” (UN HABITAT, 2011)

19
CHAPTER FOUR: FINDINGS AND ANALYSIS

This chapter discusses the findings gathered from the field. The first part summarizes and
analysis the IHDP residents response. The respondents are sampled from 10th round
condominium houses distribution. The sampled clusters are Lideta Melso Malmat and Yeka Ayat
3. Households and clusters are selected based on the sampling methods discussed above. The
second part discusses the views and recommendations of Key Informants from different relevant
sectors.

4.1. Residents of the IHDP Built Houses

4.1.1. General Information

Most of the sampled IHDP houses residents fall under the age group of 26-35 and 36-45. These
groups cover 74% of the respondents. All resident household heads were between the ages of 18
and 65. Among the households, 74% are male headed and the remaining 26% are female-headed
households.

Table 2 Household heads by age category

HH Head Age Frequency Percent Valid Percent Cumulative

Percent

18-25 3 6.0 6.0 6.0

26-35 22 44.0 44.0 50.0

36-45 15 30.0 30.0 80.0

Valid
46-55 4 8.0 8.0 88.0

56-65 6 12.0 12.0 100.0

Total 50 100.0 100.0

4.1.2. Migration
In the research context, the Rural-Urban migration is higher for the period after 2005 G.C which
is 53.6%. Only 44% of condominium houses residents are those who were born in Addis Ababa.
All other residents came from different regions of the country. Tigray region took the highest
percentage of migration which is 16% and SNNPR is the region with the second largest migrants

20
which is 14%. There are also Eritrean refugees who covered 4% of the sampled condominium
resident households.

Table 3 Household heads by their origin

Region Frequency Percent Valid Percent Cumulative

Percent

Amhara 5 10.0 10.0 10.0

Oromia 6 12.0 12.0 22.0

Tigray 8 16.0 16.0 38.0

Valid SNNPR 7 14.0 14.0 52.0

Eritrea 2 4.0 4.0 56.0

Addis Ababa 22 44.0 44.0 100.0

Total 50 100.0 100.0

Except for these Eritrean refugees who came to Addis Ababa due to conflict, all Ethiopian
migrants were moving to Addis Ababa due to different pull factors. Among these factors, 39.3%
of migrants were attracted by employment opportunity in Addis Ababa. Education attracted 25%
of respondents as a primary reason to come to the capital city. Others came either for business or
to live closer to other family members. The majority of the respondents, which covers 70.4%,
expressed their interest in staying in Addis Ababa even if similar opportunities can be created in
their regions or birth places.

21
 Figure 2 Residents by reason of migration

4.1.3. IHDP (Condominium) House Affordability

According to the research finding, only 36% of those who reside in the IHDP house are
homeowners while 64% are renters. Among the homeowners, 72.2 % are direct beneficiaries of
the IHDP. The remaining 16.7% respondents bought it from someone else and 11.1% of
respondents got the house from relatives who were the program beneficiaries. The research result
shows that 48% of the residents are self-employed, 24% are government employees, 16% are
private company employees, 4% are retired and 8% are unemployed. During the interview, the
two unemployed people expressed that their relatives (especially their children) are supporting
them. The other two Eritrean respondents cover their expenses using the money they are getting
from UNHCR. Half of the residents expressed that the household head is not the only person
who bring all the household income but there are other members, especially spouses, who have a
contribution. Despite this, 38.9% homeowners and 37.5% renters expressed that they are paying
more than 50% of their income for mortgage and rent respectively. And in the case of those who
are paying 31%-40% and 41%-50% of their income (after tax), renters cover 37.4% of
respondents while homeowners are 5.6%.

22
 Table 4 Rent and mortgage payment burden

Percentage of rent or mortgage payment from Ownership status Total

total household monthly income (after tax) Own Rent

Count % within Count % within Count % within

Ownership Ownership Ownership
status status status

<20% 2 11.1% 2 6.2% 4 8.0%

21-30% 5 27.8% 6 18.8% 11 22.0%

31-40% 0 0.0% 2 6.2% 2 4.0%

41-50% 1 5.6% 10 31.2% 11 22.0%

>50% 7 38.9% 12 37.5% 19 38.0%

Payment
3 16.7% 0 0.0% 3 6.0%
completed
Total 18 100.0% 32 100.0% 50 100.0%

4.1.4. Condominium Houses Adequacy

The respondents have family members ranged from one to seven. One bedroom house is where
64% of respondents live. The research result indicates 62% of residents feel that the number of
rooms is sufficient for their family members. This means 38% of residents are living in the
inadequate number of rooms. However, half of the renters who are living in the inadequate
number of rooms still preferred to live in the same house due to its accessibility to their
workplace. The other half preferred it for its affordability. Necessary infrastructures (electric,
water, road…) are fully available for 88% of residents and the remaining 12% are those who
have the facilities partially. Water is the main thing that they expressed as it is not available
constantly. All respondents agreed that the houses are not built with emergency exist.

4.1.5. Condominium Houses Prospect

Considering the cost of living, price trend (e.g. food inflation) and income, only 20% of residents
are optimistic regarding their ability to continue rent/mortgage payment without compromising
to meet the needs of their household. This shows that 44% of respondents are very pessimistic
and 34% are somewhat pessimistic. The remaining 2% are those who are not sure. When the data

23
is segregated to homeowners and renters, 61.1% of homeowners are pessimistic about their
future ability to pay the mortgage. The figure increases for renters to 87.5%.

According to 76% of respondents’ observation on the price trend and other factors, they are
pessimistic about the future possibility of low-income community members to own
condominium houses. Others are somewhat optimistic (12%) whilst the remaining 12% are not
sure.

Regarding the current housing (living) situation, 38% of respondents expressed that they are very
stable and secure. But it is important to note that 77.8% of those who are very stable and secure
are homeowners, not renters. Among the renters, 34.4% of them are very unstable and insecure
due to increasing rent payment and uncertainty on the decision of the owners on their stay in the
house. In a nutshell, it can be said that half of the renters feel unstable and insecure regarding
their current housing situation. The main reasons are: increase in rent price and renters limited
ability to decide for how long they should stay in the house. Therefore, only 5.6% of owners feel
instability and insecurity due to relatively fair mortgage price as compared to the rent. In
addition, their sole decision-making ability on their stay also contributes for more homeowners
to be stable and secure.

Table 5 Condominium Houses residents feeling about their current situation

Feeling about current housing situation Ownership status Total

Own Rent
Count % within Count % within Count % within
Ownership Ownership Ownership
status status status

Very stable and secure 14 77.8% 5 15.6% 19 38.0%

Fairly stable and secure 2 11.1% 4 12.5% 6 12.0%

Just somewhat stable

1 5.6% 7 21.9% 8 16.0%
and secure

Fairly unstable and

1 5.6% 5 15.6% 6 12.0%
insecure

Very unstable and

0 0.0% 11 34.4% 11 22.0%
insecure
Total 18 100.0% 32 100.0% 50 100.0%

24
In both categories of homeowners and renters, residents feel that they are more stable and secure
by living in condominium houses as compared to renting rooms in someone’s compound.
Though this percentage is high (77.8%) in the case of homeowners, it is also significant for
renters that cover 65.6%. Those who feel indifferent in both living conditions are 5.6% and 6.2%
for owners and renters respectively. The remaining 24% of respondents feel that they are less
stable and less secure for being in condominium houses.

Table 6 Households feeling regarding living in condominium houses as compared to renting in someone's compound

Ownership status Comparison between current and non-condominium Total

housing situation that respondents used to live

More stable and About the same Less stable and

secure level secure

Count 14 1 3 18
Own
% within Ownership status 77.8% 5.6% 16.7% 100.0%

Count 21 2 9 32
Rent
% within Ownership status 65.6% 6.2% 28.1% 100.0%
Count 35 3 12 50
Total
% within Ownership status 70.0% 6.0% 24.0% 100.0%

4.2. Perspectives of Key informants on IHDP and Low-cost Housing in

Addis Ababa
This section discusses the perspectives and recommendations of different professionals from
organizations which were involved since the inception of IHDP. These are government
organizations (Addis Ababa City Administration, MUCDO and CBE), NGO (GIZ) and Private
Company (MH Engineering). In addition, the analysis contains the view of other professionals
from the financial sector which are Debub Global and United Bank.

25
 4.2.1. General Information
Most of the respondents are from IHDP implementing government offices which cover 52.2%.
Others are from NGO, Financial Institutions, and a private company.

Table 7 Key informants by Employers type

Institution Frequency Percent Valid Percent Cumulative Percent

Government Organization 12 52.2 52.2 52.2

NGO 2 8.7 8.7 60.9

Valid Financial Institution 7 30.4 30.4 91.3

Private Company 2 8.7 8.7 100.0

Total 23 100.0 100.0

4.2.2. IHDP Effectiveness

As 60.9% of respondents agreed, it is partially that condominium houses are being used by low-
income IHDP target beneficiaries. This means some of the houses are either sold or being used
for rent. According to 87% of key informants, first and periodic payment is not affordable for
low-income community members.

Table 8 IHDP houses first and periodic payment affordability

Affordability Frequency Percent Valid Percent Cumulative

Percent

Yes 2 8.7 8.7 8.7

No 20 87.0 87.0 95.7
Valid
Don't know 1 4.3 4.3 100.0

Total 23 100.0 100.0

4.2.3. IHDP (Condominium Housing) Practices and Prospects

4.2.3.1. Policy Situation

Whilst 47.8% of respondents conclude that Housing policy is not effective to provide low-cost
housing, 39.1% agrees on its effectiveness to some extent. As per the response of 40.9%, the
effect of land policy on providing affordable housing is positive. However, 36.4% of key
informants disagree with that. Others (22.7%) are not sure of the effect. More than half (54.5%)

26
of the respondents condemned the finance policy that the poorest segments of the society has no
access to credit which is discouraging affordable housing and homeownership.

Table 9 Housing policy effectiveness in providing low-cost housing

IHDP Effectiveness Frequency Percent Valid Percent Cumulative

Percent

Yes 2 8.7 8.7 8.7

No 11 47.8 47.8 56.5

Valid Partially 9 39.1 39.1 95.7

Don't know 1 4.3 4.3 100.0

Total 23 100.0 100.0

4.2.3.2. Private Sector Participation

According to 87% key informants, the private sector is not engaged to provide/assist low-cost
housing. The key informants identified the major reasons for the private sector being inactive or
partially active. Among the reasons, 42.1% of the respondents agreed on the targets of the private
sector (real-estate and financial sectors) which is high-income community members and luxury
homes, not affordability by the poor. Other factors mentioned are high cost of land, undeveloped
technology, low R&D practice, low financial access, lack of appropriate regulation,
unavailability of international banks, extreme profit orientation, and high cost of serving the
poor.

Table 10 Private sector engagement to provide/assist low-cost housing

Private Sector Engagement Frequency Percent Valid Percent Cumulative

Percent

Fully active 1 4.3 4.3 4.3

Partially active 2 8.7 8.7 13.0

Valid
Inactive 20 87.0 87.0 100.0
Total 23 100.0 100.0

27
The majority of key informants (45.5%) agreed that there is limited opportunity for private real
estates and financial institutions to engage in low-cost housing. The remaining respondents
which cover 13.6% concluded that there is full opportunity whereas 40.9% key informants say
zero opportunity. After the interviewed professionals examined relevant policies, market and
potential for innovation, eighty-seven percent of interviewed professionals recommended for
other companies to engage in Ethiopia and provide low-cost housing. NGO engagement is
considered inactive by 60.9% of key informants and partially inactive by 26.1%. The reasons
mentioned are:

 The existing environment (e.g. policy and government interest) is not inviting
 The sector is dominated by the government
 NGOs give low priority for housing
 The government is not willing to spend extra money and work with NGOs that
were previously engaged in the sector
 NGOs lack commitment

Figure 3 Opportunity for private sector (real-estate and financial institutions) to engage in low-cost housing

28
 4.2.3.3. Other Options to Provide Affordable Housing
More than 77% of different professionals agreed that housing programs (e.g. IHDP) alone will
not solve the housing problem in Addis Ababa. In order to improve urban life and manage rural-
urban migration different recommendations are provided. Accordingly, 65% of professionals
considered developing the existing regional cities is a better option while 20% preferred to build
new cities.

Regarding the construction method, 60.9% of key informants expressed their belief that Ethiopia
needs other methods of building houses so as to make houses affordable. The suggested methods
include:

 Modernize traditional houses using homemade finishing materials such as waste

woods
 Conduct research and encourage R&D in the housing sector
 Expand industries (e.g. steel & cement) so as to increase production, decrease
shortage, and decrease price
 Use cheaper partition and finishing materials
 Engage private sectors and improve land policy
 Outsource the provision of affordable housing to (international) companies that work
on low-cost housing

The professionals expressed that they have worries regarding low-cost housing provision in
Addis Ababa. These include:

 The increasing price of land and land scarcity

 Low quality/strength of condominium buildings which will undermine their life span
 Small size of condominium blocks. They expressed that, though the demand for
affordable housing is soaring, the current condominium blocks are not big enough to
accommodate more number of households. The professionals expect that in the near
future (20-30 years) the demand for the high-rising building will become evident. And
this had to be put into consideration early before or at least at this time.
 Low practice of R&D and unavailability of technology that can support the sector
 Gap in the project management of affordable housing provision

29
  Insignificant participation of the private sector
 Financial institutions, contractors and consultants capacity gap which is affecting both
time and quality
 Negative effect of the existing land policy
 Existed corruption in different modalities
 Increment of jobless youths in the city who most likely cannot afford whatever cheap
houses can be provided
 Increasing labor and material cost
 Increasing income difference

The major change areas that the interviewed professionals indicated are to:

 build low-cost houses in selected residence areas than in the city centers
 improve the R&D practice and encourage such institutions
 reduce the cost of land
 provide land and engage private real estate developers in the program to speed up the
construction
 improve the project management practices of affordable housing provision
 minimize interest for mortgage payers
 improve policies to engage private sectors
 enable youths to become self-sufficient and generate income for their livelihood
 improving/changing the design of affordable houses and the materials they are built from
 be intentional to practice the right for decent and affordable house

30
CHAPTER FIVE: SUMMARY, CONCLUSION, AND RECOMMENDATION

5.1. Summary

Initially, IHDP was developed and financed with the objective to bring affordable houses for
low- and middle-income households. Despite its successes on some other aspects, for instance
job creation, it was unfortunate that the program could not provide affordable house for the poor
and even middle-income segments of the city inhabitants. Referring the case of most of residents,
neither the renters nor homeowners are enjoying affordable houses. According to the research
finding, 60% of residents expressed that they are paying more than 41% of their income (after
tax) for mortgage or rent. Considering the cost of living, price trend (e.g. food inflation) and
income, only 20% of residents are optimistic regarding their ability to continue rent/mortgage
payment without compromising to meet the needs of their household. This shades affordability
of IHDP houses. In addition, the research finding shows that, only 36% of those who reside in
the IHDP house are homeowners while 64% are renters. It means most of the IHDP houses are
used for renting which clicks another research question on the why. This indicated that
continuing the same program, in the same way, may not bring any better result but depletion of
resources for those who are better off.

It is evident that Addis Ababa is shouldered the heavy political and socio-economic activities of
the country. As a result provision of affordable housing is not simply about constructing cheaper
houses in the city. Also, it does not mean building low-quality houses. Affordable housing
provision needs more integrated action beyond that. Otherwise, whatever good that can be done
in Addis Ababa will attract additional population pressure to the city. This additional population
will come with additional demand which depletes the city capacity to respond for its increasing
inhabitants. Due to this, the vicious circle continues. This will make the problem even more
complex. The city minded solution leads to an unbalanced resource distribution in the country,
and brings economic and environmental pressure on the surrounding community. Therefore,
amendment of relevant policies, proportional development of other cities, deployment of
attracting incentives for people to migrate to other cities, splitting the capital city, investing on

31
research and development, and improving private sector engagement are some of the important
alternatives to alleviate the city from its heavy burden.

5.2. Conclusion

According to the research finding, only 44% of condominium houses residents are those who
were born in Addis Ababa. This implies that Addis Ababa is flooded by high number of migrants
that are attracted by employment and other opportunities in the city. Most of the residents (64%)
who are living in the IHDP built houses are not the program targets but renters. Among the 36%
homeowners 72.2% are program beneficiaries. Other program beneficiaries either sold their
houses or they are living in other places. It is observed that both the renters and homeowners are
burdened with rent and mortgage respectively. Whilst 62% of residents feel that the houses are
adequate for their family size, those who live in the inadequate houses still prefer it for its
affordability and/or accessibility.

Considering the cost of living, price trend (e.g. food inflation) and income, only 20% of residents
are optimistic regarding their ability to continue rent/mortgage payment without compromising
to meet the needs of their households. According to 76% of respondents’ observation on the
price trend and other factors, they are pessimistic about the future possibility of low-income
community members to own condominium houses.

Regarding the current housing (living) situation, 38% of respondents expressed that they are very
stable and secure. Among these, 77.8% are homeowners. In both categories of homeowners and
renters, residents feel that they are more stable and secure by living in condominium houses as
compared to renting rooms in someone’s compound.

In both interviewed condominium house residents and professionals’ response, similarity is

observed. For instance, 60.9% of key informants observed that it is partially that condominium
houses are being used by IHDP target beneficiaries. Eighty-seven percent of key informants also
expressed the condominium houses are not affordable for low-income community members.

Though 47% of professionals conclude that the housing policy is not effective, 40.9% of them
considered that the effect of land policy on affordable housing is positive. Eighty-seven percent

32
of key informants categorized the private sector (real estate and financial sector) as inactive to
provide low-cost housing. More than 60% of interviewed professionals expressed their belief
that Ethiopia needs to research and find other methods of building houses so as to make houses
affordable. They also suggested some methods and expressed their worries regarding the
provision of affordable housing in the capital city.

5.3. Recommendation

Rather than jumping in to a quick fix, for instance letting the government to build more houses, it
is good to examine a wider perspective of the nation to make affordable housing affordable.
Especially for a poor country like Ethiopia with constraints of resources like money and skilled
man power, dumping all the solution to the government can never be the rewarding option. But
the government has to play its own role while the stakeholders do the same. Concluding the cost
of house as caused by only due to the construction materials would be wrong. It is important to
examine the community ability, focus on R&D and make use of any available resource for
affordable housing provision. To the context of Ethiopia, specifically Addis Ababa, considering
the below points would help for a better Affordable Housing Provision.

 Distributing the Country’s Resource to encourage the development of other cities:

Investments of a country affects where people have to be located. The economic and
political role of Addis Ababa makes the city to provide: higher employment opportunity,
better access to quality education, higher supply and demand for doing business, massive
roads, more public houses, better telecom services, only international airport, and many
more privileges that other cities couldn’t compete with. These pull factors of migration
have to be evenly distributed to different existing and/or new secondary and tertiary cities
of the country. It is important to ensure that the growth of cities is in a balanced way so as
the population and the countries resource is evenly distributed as much as possible. This
will help to monitor the growth of population in Addis Ababa for a better urban center
development and for other cities to share the burden of increasing urbanization.
 Understanding the limit of the city: It is very important to know the limit of the city
and existing constraints. The people should not be more than the city can provide for their
demand. Splitting the economic and political city is one option that can significantly
33
 decrease the burden which is rocketing in Addis Ababa. This option can improve the
Addis Ababa dwellers living condition if implemented in a well-planned manner. Its
effect can be manifested on the scarcity of land, inflation, population density, high road
traffic and like. This is also a good opportunity to minimize slums and population
pressure so as to make the city well designed for its diplomatic status, for international
organization offices and gatherings, if selected as a political city. This will also help to
alleviate unmanaged and growing burden of the city expansion on the surrounding
community that is causing conflict.
 Deployment of Incentives: In addition to the cities expansion that the government is
implementing, attracting incentives have to be employed for cities that need to be
favored. These incentives should help to guide the rural-urban migration by diverting its
path from Addis Ababa to other cities that have better and untapped capacity to respond
for the increasing demand for land and house. Attracting mechanisms might include
deployment of rewarding policies. For instance minimized tax rates can be used to attract
people to dwell in cities other than Addis Ababa.
 Maximizing the benefit of rural-urban interaction: It is important to note that, planned
urbanization can assist to decide where to build cities and where to left the land for farm.
It helps to preserve the green and ensure environmental sustainability. It is critical to be
aware of the interaction between rural and urban areas of the country. Rather than having
uncontrolled and overcrowded cities, planned and monitored urbanization can benefit
both the urban and the rural population. This is true when the concentrated labor force in
the cities can be equipped and used for industrial production while the decreasing
population density in the rural areas can come up with more land size6 for agricultural
production. In the other side, the increase in the urban population increases the demand
for food items. This will benefit the decreased number of Ethiopian farmers to access
sufficient market and grasp their fair-share in the Economy. It can have positive impact
on the country’s struggle to ensure Food Security since it is logical to equip small number
of farmers to feed many than to equip many in order to feed small. This is due to the
reason that, the insufficient market can hamper the production which makes poor farmers
6
The increase in the land size can happen when used places (e.g. to construct houses) are left empty and
transferred/sold for farmers who remain in the area. On the other hand, the land holding size per farmer will
increase even for the same land size due to the decrease in the number of farmers.

34
poorer. When the farmers are unable to produce more and become poorer, it increases the
food price. It negatively affects the urban life including their ability to pay rent or save
for future home ownership.

It is very critical to study the effect of cities expansion on the country’s food security. If
cities are taking the best fertile and productive land that the country has, it means cities
are being horizontally growing at the cost of the countries agricultural production. For
instance, the World Bank urbanization projection indicates that by 2035 about 40% of the
Ethiopian population will dwell in urban areas. By that time the seven major cities out of
ten will expand on the “Productive” geographic area of the country. These seven major
cities are Addis Ababa, Bahir Dar, Adama, Gonder, Hawassa, Jimma and Shashemene.
Only Mekelle, Dire Dawa and Jijiga will expand on the other two agro ecological zones
of Ethiopia which are “Food Insecure” and “Pastoral” Ethiopia (Egis, 2015). Relatively,
the “Productive” agro ecological zone of Ethiopia is characterized by High rainfall, fertile
soils, predictable climate, larger landholdings, crop, vegetable, and dairy production
(USAID, 2011). As a result cities found in this agro ecological zone better grow
vertically with tourism, service and selected industries that support the surrounding
agricultural activity.

Figure 4 Agro-ecological Zones of Ethiopia

35
 Source: USAID-Feed the Future, https://www.usaid.gov/ethiopia/agriculture-and-food-
security/feed-future
 Understanding urbanization for efficient service delivery: Access for government and
private services are essential to say a house is affordable and decent. Urbanization helps
government and service givers to deliver their service efficiently since the people in the
cities live closer to each other. Similarly, the decrease in the rural population will help
government and its partners to focus the limited resource on the smaller number of
farmers to intensively teach them, guide them and modernize their farming system. In
whatever the cases, the good of urbanization will come only when planners are faster
than the rate of migration. It is the planners that must lead the urbanization not the
urbanization that have to lead the planners. As a result, no matter what is planned for one
city, the positive or negative effect of the plan for the other smaller cities and rural areas
has to be considered. These considerations will guide our policies, priorities, planning
and budgeting.
 Policies Amendment: Affordable housing needs the support of policies. The land,
financial and housing policies have to be tailored in a way that can cultivate the provision
of affordable housing for low-and middle-income Ethiopians. Policies have to be devised
in a way to increase the supply of land, to create accessible and sustainable financial
resource, and to make house construction cheaper.
 Improving private sector participation: Rules and regulations have to be in place that
drives the private sector to play its role and progressively take over the housing sector
from the government. Opportunities have to be opened and their capacity has to be
developed in order to make the effort successful and long lasting. Opening doors for
capable international companies and encouraging them to be involved in financial,
research, manufacturing and real estates development can accelerate the provision of low-
cost housing.
 Research and Development (R&D): Institutes of Research and Development have to be
installed and encouraged. Customary methods of construction have to be studied and
improved consistently. Cheaper building materials have to be produced in indigenous
industries and through Foreign Direct Investment (FDI). This pushes Ethiopia to look at
its effort for integrated afforestation, industrialization, and education. Even if cement

36
 companies are increasing, it is not wise to solely depend on cement to meet the increasing
demand for construction materials. Ethiopia has to come to more efficient methods of
construction that minimizes the cost of money, material and time. The development and
use of technology (e.g. software and database) that can support the housing management
through planning, construction and distribution is also mandatory.

In addition, the start of studying the country’s urbanization prospects for instance by
developing different scenarios can support informed decision making process and should
have to continue. Such studies would be much helpful if includes the analysis of the
effect of cities on the agriculture production.
 Creating job opportunities: As the current practice is also manifesting, creating
employment opportunity has to be the central objective of affordable houses provision
due to the fact that unemployed people can hardly afford even houses that are considered
cheaper. As a result, unemployed youths have to be the major participants of housing
development and related industries.
 Managing the effect of inflation and devaluation: However, doing whatever efforts
without controlling inflation and devaluation might neutralize the effort of cheaper
houses provision. Hence, the country needs to work on increasing its production. For
instance, increasing food production and managing its distribution can help to minimize
the food inflation. This will enable households to save more and plan for their house.
Production of different housing materials and processed goods can assist the country to
meet the domestic need and to export abroad. This fills the gap for the hard currency
needed to finance the housing sector and minimize the effect of devaluation on the
imported products. As a result industrialization is the best way towards planned
urbanization.
 Further Research Need Area: This study doesn’t include IHDP beneficiaries who are
not currently living in the program built houses. But more findings can be found
regarding why those beneficiaries sold or rented the program house. In addition, it can
provide information regarding their current housing condition. As a result a research with
a wider scope is necessary. Studying affordable houses in other cities can also give a
nationwide perspective.

37
In a nutshell, it is important to note that provision of affordable housing is not about building
low-quality houses but it is making houses purchasable by the city inhabitants. However, this
cannot be achieved by government or private sectors alone. As far as affordable housing
provision is concerned the development of agriculture, industry and service is very critical.
These sectors have to generate sufficient jobs and income. Besides, for the low cost house to be
affordable, residents have to spend their income on these sectors product fairly. In other words,
the needs of the city residents which are other than house have to be met with fair price in order
to be able to pay rent/mortgage or save for future home ownership. In addition, it is highly
unlikely to think that affordable housing is possible whilst the integration with other sectors is
loose. As a result, an integrated development of agriculture, industry and service is vital to build
healthy cities.

38
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c
 Appendix

1. Questionnaire for IHDP house residents

LEADSTAR COLLEGE OF MANAGEMENT AND LEADERSHIP
GRADUATE PORGRAM-MBA
Topic: Questionnaire for IHDP house residents

My name is Esrael Woldeeyesus-MBA student at Leadstar College of Management and

Leadership. The objective of this study is to assess Affordable (condominium) Housing
Practices and Prospects in Addis Ababa, Ethiopia. Please be aware that the purpose of the
study is purely academic. I would appreciate your taking the time to complete the following
questionnaire. It should take about five minutes of your time. Your responses are voluntary
and will be confidential. Responses will not be identified by individual. All responses will be
compiled together and analyzed as a group.

General Information (HH Head): Please tick the box or answer on the space provided
1. Age: 18-25 26-35 36-45 46-55 56-65 65>
2. Sex: Male Female

Migration

3. Place of birth _______________________ Region____________

4. When did you moved to Addis Ababa?
Before 1998E.C/2005G.C After or in 1998E.C/2005G.C
5. Why you moved to Addis Ababa?
Pull factor: Employment Education Business Marriage Family
Push factor: Conflict Disease Drought Divorce low-income/Unemployment
other specify________________________________________
6. Are you willing to move back if what you got here is available around where you were?
Or if the problems solved? Yes No

d
Condominium House Affordability

7. Do you own or rent your current residence? Own Rent

8. If you are the owner, how did you own it?
Bought from someone else
Received from relative
Received from Government (beneficiary)
9. Household Head Employment type:
A. Self-employed/entrepreneur B. Government employee
C. NGO (Humanitarian) employee D. Private company employee
E. Contract employee F. Have more than one job
G. Unemployed H. Retired
10. Is there anyone else (e.g. spouse) in your household who contribute for the HH monthly
income? Yes No
11. Approximately what percentage of your total household monthly income would you say
you spend on your rent or mortgage payment? (if the respondent is not sure ask the
payment and divide by HH monthly income(after tax))

<20% 21-30% 31-40% 41-50% >50% Payment completed

Condominium House Adequacy

12. What is the number of your house hold members (including parents and anyone who is
permanently living with you)? ____________
13. What type of house you’re living in? Studio 1 bedroom 2 bedroom 3 bedroom
14. Do you think the house has enough rooms for your family? Yes No
15. If no, why you don’t live in another adequate house?
Accessibility Affordability Other Specify_____________________________
16. Do you think the house has all necessary infrastructures (electric, water, road…)?
Yes Fully Partially Not at all
17. Does your house have emergency exit? Yes No

e
 Condominium House Prospect
18. Considering the cost of living, price trend (e.g. food inflation) and your income, how
optimistic you are that you will continue your rent/mortgage payment without
compromising meeting the basic needs of your house hold? Very optimistic
somewhat optimistic somewhat pessimistic very pessimistic not sure

19. Considering the price trend and other situations you think that matter, how optimist you
are about low income community members’ opportunity to own condominium houses?
Very optimistic somewhat optimistic somewhat pessimistic very pessimistic
not sure
20. How do you feel about your current housing situation?
Very stable and secure fairly stable and secure just somewhat stable and secure
Fairly unstable and insecure Very unstable and insecure
21. Compared to your housing situation before moving to condominium, would you say that
now you feel more stable and secure, less stable and secure, or about the same level of
stability and security in your housing situation?

More stable and secure about the same level less stable and secure

f
2. Questionnaire for Key informants from GO,NGO,FI, Private companies &Inter-
governmental Org
LEADSTAR COLLEGE OF MANAGEMENT AND LEADERSHIP
GRADUATE PORGRAM-MBA
Topic: Questionnaire for Key informants from GO,NGO,FI&Inter-governmental
organization

My name is Esrael Woldeeyesus-MBA student at Leadstar College of Management and

Leadership. The objective of this study is to assess Affordable (condominium) Housing
Practices and Prospects in Addis Ababa, Ethiopia. Please be aware that the purpose of the
study is purely academic. I would appreciate your taking the time to complete the following
questionnaire. It should take about ten minutes of your time. Your responses are voluntary
and will be confidential. Responses will not be identified by individual. All responses will be
compiled together and analyzed as a group.

Please tick the box or answer on the space provided

General Information
1. What is the type of organization you are working in?
Government Organization NGO Inter-governmental organization Financial
Institution Private Company

IHDP (Condominium Housing) effectiveness

2. Do you think those who are living in houses built by Integrated Housing
Development Program (Condominium Housing) are those, targeted, low income
beneficiaries? Fully Partially Not at all Don’t know
3. Do you think first and periodic payment of condominium house is affordable for low
income community of Addis Ababa? Yes No Don’t know

g
IHDP (Condominium Housing) practices and prospects

Policy Situation

4. Do you get the housing policy effective in providing low cost housing? Yes No
Partially Don’t know
5. How do you see the effect of land policy on providing low cost housing? Positive
Negative Don’t know
6. Is Ethiopia promoting finance policies or programs aiming to enable access to
homeownership and/or other affordable housing by the poorest segments of society,
by providing credit through financial institutions (public, private or quasi-private)?
Yes Public Yes Private Yes quasi-private No

Participation of Private sector

7. Do you think the private sector (real estate/financial institution) is active? Fully active
Partially active Inactive
8. If your answer for question 7 is partially active or inactive, what are the reasons?
_____________________________________________________________________
__________________________________________________________________
9. Do you think opportunities are available for private sector (real estate/financial
institution) to engage in provision of low cost housing in Addis Ababa? Fully
available partially available not available
10. Considering related policies, market and potential for innovative way of building
houses, Do you recommend other business companies to engage in providing low
cost housing in Addis Ababa, Ethiopia?
Yes, I recommend No, I don’t recommend
11. Do you think the local and international non-governmental organizations are active to
provide/assist low cost housing in Addis Ababa? Fully active Partially active
Inactive
12. If your answer for question 11 is partially active or inactive, what are the reasons?
_____________________________________________________________________
_____________________________________________________________________

h
 Options to be considered
13. Considering the rural-urban migration and population growth trend, do you think
housing problem in Addis Ababa will be solved by housing programs (like IHDP)
only? Yes No Don’t know
14. Do you believe Ethiopia needs to develop the existing regional cities or build new
city in order to improve urban life and manage rural-urban migration?
A. Develop the existing regional cities
B. Build new cities
C. Comfortable with the current situation
D. Other
Specify___________________________________________________________
_________________________________________________________________
15. Considering the cost of construction, do you think Ethiopia (Addis Ababa) needs to
find other methods of building houses? Yes No
16. If your answer for question 15 is yes, what do you suggest?
_____________________________________________________________________
___________________________________________________________________
17. What are your biggest worries to provide low cost housing in Addis Ababa (if any)?
_____________________________________________________________________
_____________________________________________________________________
__________________________________________________________________
18. What changes would you like to see as far as provision of low cost housing in Addis
Ababa is concerned (if any)?

________________________________________________________________________
________________________________________________________________________
__________________________________________________