Housing Finance in Ethiopia
Overview
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According to 2015 estimates, Ethiopia will have approximately 4 million new urban households by 2027 and 9.7 million by 2037. There will be a demand for 471 000 urban houses per year from 2015 to 2025 and for 486 000 houses per year from 2025 to 2035. However, the housing finance system in Ethiopia is underdeveloped. In terms of access to finance, more than half of the housing market is financed informally through relatives, friends, and savings groups, and only 23% through mortgages.
Ethiopia faces the challenge of not being able to supply sufficient new affordable housing and upgrade existing stock to meet the demand required annually. As a result of the limited access to decent and affordable housing, informal settlements have increased in the main city.
The real estate sector has contributed 12.5% to GDP growth in the past 10 years. The growth has largely been attributed to an 8.9% expansion in real estate and construction. On the supply side, adequate developer financing is lacking. The private sector is neglected, with all efforts devoted to the government housing program. On the demand side, demand for formal housing is high, with the government IHDP units fetching up to five times more than the original auction offer.
Changing working patterns and a growing labour force provide Ethiopia with an opportunity for urban growth. It is estimated that Ethiopian cities contribute 38% of Ethiopia’s GDP. On the climate change front, Ethiopia has yet to fully embrace green building practises due to other social and economic challenges hindering the provision of affordable housing.
Find out more information on the housing finance sector of Ethiopia, including key stakeholders, important policies, and housing affordability:
- Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Legislation
- Opportunities
- Availability of Data on Housing Finance
- Green Applications for Affordable Housing
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2023 edition, which has up-to-date profiles for 55 African countries.
Download yearbookEthiopia
Overview
Based on 2015 estimates,[1] Ethiopia will have approximately four million new urban households by 2027 and approximately 9.7 million by 2037. Demand for urban houses is estimated at 471 000 per year from 2015 to 2025, and 486 000 houses a year from the year 2025 to 2035.[2] Poor land management practices, lack of diversified housing delivery systems, the absence of a robust and affordable housing construction industry and the absence of a diversified housing financing system are some of the factors that continually shape the housing stock supply in Ethiopia.[3]
On a macro level, Ethiopia recorded an average real gross domestic product (GDP) growth rate of 9.5% a year in the last decade and a half, making it one of the fastest growing economies in the world.[4] This has largely been driven by capital accumulation through public infrastructure investments.[5] In 2020 and 2021, Ethiopia’s GDP growth decelerated to an average of 5.9%. This dip was due to effects of the Covid-19 pandemic and exacerbated by debt vulnerabilities, the Northern Ethiopia civil conflict and increased inflation because of the effect of the Russia-Ukraine conflict on food and oil prices. Inflation is expected to reach 32.6% in 2022 and reduce to 24.9% in 2023 on the back of fiscal consolidation strategies and increased tax revenue mobilisation.[6] Still, the African Development Bank (AfDB) projects growth in GDP of 4.8% in 2022 and 5.7% in 2023.[7] Despite the country’s rapid economic expansion, however, it remains one of Africa’s low income countries, with a GDP per capita of Br49 229.12 (US$944) in 2021.[8] Ethiopia aims to become a low middle-income country by 2025.
Ethiopia has diverse landscapes and climates, ranging from rainforests to deserts. This, and its high population growth rate, makes it one of the most vulnerable countries to climate variability and climate change. With its high dependence on rain-fed agriculture, Ethiopia has not developed water resources and road infrastructure to support drought-prone areas.[9] Ethiopia ranked 72 on the Global Climate Resilience Index (GCRI) in 2021 due to effects of climate change such as flooding, desertification, water scarcity, soil erosion, deforestation, drought, land degradation, and loss of biodiversity and wildlife.[10] In a national 10-year plan, the Ethiopian government committed to reducing emissions by 68.8%, which is equivalent to 126.8 metric tons of carbon equivalent (MtCO2) by 2030. Of this, 14% is an unconditional reduction, and 54.8% is dependent on international support.[11] Ethiopia established a National Disaster Management policy in 2013.The policy is aimed at building capacity to deal with disasters over a 10-year period, until 2023.[12] In 2016 Ethiopia submitted its Nationally Determined Contribution to the United Nations Framework Convention on Climate Change (UNFCCC). The contributions are aligned to the development goals in the Growth and Transformation Plan II (GTP II) and the Climate Resilient Green Economy (CRGE) Strategy. As a priority Ethiopia is committed to building green cities, dealing with waste and expanding its physical infrastructure through public investment.[13]
[1] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022) Pg. 39.
[2] Ibid.Pg. 40.
[3] Abraham, M. (2017). The Integrated Housing Development Program: Identifying Strengths and Gaps. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 09 August 2022). Pg. 1
[4] World Bank (2022). Country Overview – Ethiopia. 21 April 2022. https://www.worldbank.org/en/country/ethiopia/overview (Accessed 16 September 2022).
[5] Ibid.
[6] Africa Development Bank Group (2022). Ethiopia Economic Outlook 2022. https://www.afdb.org/en/countries/east-africa/ethiopia/ethiopia-economic-outlook (Accessed 6 September 2022).
[7] Ibid.
[8] World Bank (2021). GDP per capita (current US$) – Ethiopia https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ET (Accessed 6 September 2022).
[9] ReliefWeb (2021) Climate Risk Country Profile – Ethiopia. 7 May 2021. https://reliefweb.int/report/ethiopia/climate-risk-country-profile-ethiopia (Accessed 7 September 2022).
[10] Africa Development Bank Group (2022). Country notes – Ethiopia. https://www.afdb.org/sites/default/files/2022/05/25/aeo22_countrynotes_eng.pdf (Accessed 6 September 2022). Pg. 145.
[11] NDC Partnership. Ethiopia Overview https://ndcpartnership.org/countries-map/country?iso=ETH (Accessed 6 September 2022).
[12] UNDRR Prevention Web (2013). Ethiopia: National Policy and Strategy on Disaster Risk Management. https://www.preventionweb.net/publication/ethiop˙ia-national-policy-and-strategy-disaster-risk-management (Accessed 6 September 2022).
[13] ReliefWeb (2021) Climate Risk Country Profile – Ethiopia. 7 May 2021. https://reliefweb.int/report/ethiopia/climate-risk-country-profile-ethiopia. (Accessed 7 September 2022).
Access to Finance
Ethiopia has an underdeveloped system of housing finance. More than half of the housing markets is financed informally through relatives, friends, and savings groups, and only 23% through mortgages.[1]The low mortgage uptake is linked to high interest rates, regulatory controls, low incomes, credit risk, inadequate supply of affordable housing, and low financial literacy.[2] Other factors too contribute to the weak financial sector, particularly the housing sector. The sector is largely controlled by government, affecting markets and pricing.[3] For example, while banks granted loans in Q3 worth Br7.7 billion (US$147 652 447),[4] the proportion of loans allotted to housing is small, partly due to inadequate clarity on ownership rights. The proportion of loans directed to housing and construction of total loans disbursed was 11%[5] and 7.1%[6] in Q2 and Q3 2022, respectively.
To solve affordability and access to financing specifically on the demand side of the market, the government launched the Housing Development Programme Office (HDPO) in 2006.[7] An agreement was reached with the Commercial Bank of Ethiopia (CBE) to provide low-interest mortgage loans.[8] It established payment plans with down payments of 10%, 20% or 40% of the total housing cost prior to property transfer.[9] This has failed to enlarge access to finance as envisaged. Households suffer from low disposable income and available finance is costly.[10] The programme assumed households could raise up to 40% of the property price as down payment and afford mortgage payments, which is not the case, especially for most lower income earners.[11] Further, the programme has faced serious challenges of leadership and financing, such as threats of insolvency, and cannot build sufficient urban houses to meet demand.[12] Most (59.8%) formal houses are rented in major cities.[13] On the supply side, the programme was subsidised to deliver housing units to the market, mainly in major cities in the country. The subsidy comes in the form of land, bulk infrastructure and cost of material used in the development of the units.[14]
The Addis Ababa City Administration is planning to build 1.4 million units in the next 10 years under the Addis Ababa Structure Plan 2017-2027, at an approximate cost of Br174 billion (US$3.5 million).[15] The development will include other social amenities and infrastructure, and aims at high quality and green compact development.[16] The formal private developers’ supply of units is low at 0.3% across the country and up to 1.3% in Addis Ababa, and mainly targeted at the upper income segment.[17]
[1] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 09 August 2022) Pg. 46.
[2] Ibid.Pg. 46.
[3] Ibid.Pg. 22.
[4] National Bank of Ethiopia (2022). National Bank of Ethiopia Quarterly Bulletin – Third Quarter 2022. https://nbebank.com/wp-content/uploads/2022/08/2021-22%20Third-%20Quarter.pdf (Accessed 6 September 2022). Pg. 35.
[5] National Bank of Ethiopia (2022). National Bank of Ethiopia Quarterly Bulletin – Second Quarter 2021/22. https://nbebank.com/wp-content/uploads/2022/02/Second%20quarter/NBE%202021_22%20No%2038_2nd%20Qrt%20Final%20(1).pdf (Accessed 09 August 2022). Pg. 35.
[6] Ibid.Pg. 35.
[7] Abraham, M. (2017). The Integrated Housing Development Program: Identifying Strengths and Gaps. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 09 August 2022). Pg. 2.
[8] Ibid.Pg. 2.)
[9] Ibid.Pg. 2.)
[10]World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 09 August 2022). Pg. 51.
[11]Ibid.). Pgs. 43-52.
[12] Ibid.Pgs. 43-44.
[13]Ibid. Pg. 42.
[14] Abraham, M. (2017). The Integrated Housing Development Program: Identifying Strengths and Gaps. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 09 August 2022). Pg. 2.
[15] Addis Ababa City Planning Project Office (2017). Addis Ababa City Structure Plan DRAFT FINAL SUMMARY REPORT (2017-2027). https://www.c40.org/wp-content/static/other_uploads/images/2036_Addis_Ababa_Structural_Plan_2017_to_2027.original.pdf?1544193458 (Accessed 09 August 2022). P 292.
[16] Ibid.
[17] World Bank (2019) Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022).
Affordability
Ethiopia faces the challenge of not being able to supply sufficient new affordable housing and upgrade existing stock to meet the demand of the required 471 000 units annually, particularly for households in the lower income brackets.[1] Cooperatives, individuals and private developers cater mainly for the high end of the market,[2] albeit in low quantities.[3] Government is left to fill the deficit. The Government Integrated Housing Development Programme (IHDP) has supplied 280 000 subsidised condominium units between 2004 and 2016.[4] However, because of the high demand for these units, prices have surged between 200% and 300% since the programme launch.[5] Moreover, the programme has only managed to supply 2% of the demand in the market.[6] This all points to a long waiting list for affordable housing in Ethiopia. Terms of financial intermediation and low disposable incomes are to blame for the unaffordability on the demand side, with high cost of development, land, and infrastructure hindering the supply of affordable housing units.[7] The IHDP has had some positive impact, with 53% of IHDP houses being allocated to female-headed households.[8] Effective spatial planning for this programme has reduced environmental degradation, thus improving the quality of life of inhabitants and promoting social and economic activities.[9]
Affordable financing to buy housing is inadequate, due to the high interest rates on mortgages, the low number of mortgage providers and the high collateral requirements to secure financing.[10] Private banks keen to offer mortgages are needed. Salem Bank and Goh Botoch Bank S.C. recently started operations in 2021,[11] and their inclusion could begin to make an impact. However, the affordability gap in the housing market means the low income bracket end up in informal settlements, with government-subsidised housing benefiting only the upper and high end of the market.[12]
To tackle the affordability gap in Ethiopia, policies should target reforms to the IHDP to align to market expectation by providing basic unit options that allow the poor to upgrade with income growth and over time.
[1] Ibid.Pg.40.
[2] Langmaack, H., Scheibstock, P., and Kraubitz, T. (2022) Technical Report 1.3 | Urban Housing and Retrofitting Sustainable Building Materials Exploring green construction options for new housing in Addis Ababa. https://urbanagetaskforce.net/media/pages/addisababa/publications/1-3-addis-abba-perimeter-block/f3a9189210-1657791001/1.3-sustainable-building-materials.pdf (Accessed 2 October 2022). Pg. 4.
[3] World Bank (2022). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study Synthesis Report. https://documents1.worldbank.org/curated/en/549221572382742218/pdf/Unlocking-Ethiopias-Urban-Land-and-Housing-Markets-Synthesis-Report.pdf (Accessed 09 August 2022). Pg. 42.
[4] Ibid.Pg. 43.
[5] Abraham, M. (2017). The Integrated Housing Development Program: Identifying Strengths and Gaps. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 09 August 2022). Pg. 2.
[6] World Bank (2022). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study Synthesis Report. https://documents1.worldbank.org/curated/en/549221572382742218/pdf/Unlocking-Ethiopias-Urban-Land-and-Housing-Markets-Synthesis-Report.pdf (Accessed 09 August 2022). Pg. 43.
[7] World Bank (2022). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study Synthesis Report. https://documents1.worldbank.org/curated/en/549221572382742218/pdf/Unlocking-Ethiopias-Urban-Land-and-Housing-Markets-Synthesis-Report.pdf (Accessed 09 August 2022). Pg. 51.
[8] Abraham, M. (2017). The Integrated Housing Development Program: Identifying Strengths and Gaps. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 09 August 2022). Pg. 2.
[9] Ibid.
[10] UN Habitat-(2017). The State Of Addis Ababa 2017 The Addis Ababa We Want https://unhabitat.org/sites/default/files/download-manager-files/State%20of%20Addis%20Ababa%202017%20Report-web.pdf (Accessed 16 September 2022). Pg. 53.
[11] Ethiopia Monitor (2021). First Private Mortgage Bank Starts Operation in Ethiopia. 25 Oct 2021. https://ethiopianmonitor.com/2021/10/25/first-private-mortgage-bank-starts-operation-in-ethiopia/ (Accessed 18 September 2022).
[12] World Bank (2022). Unlocking Ethiopia’s Urban Land and Housing Markets: Urban Land Supply and Affordable Housing Study Synthesis Report. https://documents1.worldbank.org/curated/en/549221572382742218/pdf/Unlocking-Ethiopias-Urban-Land-and-Housing-Markets-Synthesis-Report.pdf (Accessed 09 August 2022). Pg. 47.
Housing Supply
The Ethiopian government planned to build condominium houses in Addis Ababa and major regional cities to reduce the existing housing shortage, based on the saving capacities of the beneficiaries.[1] Accordingly, it planned to construct 750 000 new residential housing units in urban centers of the country by improving the quality and standard of the units by 30% by 2020.[2] The plan also involved improving existing housing for 25% of the rural community. After identifying the extent of existing slum areas in 2016, huge efforts were made to reduce their coverage by 20%.[3] This has not been achieved. The process was marred by the lack of compensation especially to the untitled, inner city informal dwellers (landlords and sub tenants), who were displaced.[4]
The condominium housing supply initiative launched by the government is not sustainable and has not been able to cope with the demand. The initiative has further caused distortion in the land and housing market.[5] There is a large unmet demand both in numbers and quality, which also has a direct influence on prices.[6] The IHDP’s lottery registration system has been closed to newcomers since 2013, as the waiting list is estimated at 800 000 and some projects have been put on hold.[7]
Limited access to decent and affordable housing has exacerbated growth of informal and squatter settlements in the main city, particularly among the urban poor.[8]
[1] United Nations Ethiopia (2016). Federal Democratic Republic of Ethiopia Growth and Transformation Plan II (GTP II) (2015/16-2019/20) https://ethiopia.un.org/sites/default/files/2019-08/GTPII%20%20English%20Translation%20%20Final%20%20June%2021%202016.pdf (Accessed 06 September 2022). Pg. 159.
[2] Ibid.
[3] United Nations Ethiopia (2016). Federal Democratic Republic of Ethiopia Growth and Transformation Plan II (GTP II) (2015/16-2019/20) https://ethiopia.un.org/sites/default/files/2019-08/GTPII%20%20English%20Translation%20%20Final%20%20June%2021%202016.pdf (Accessed 06 September 2022). Pg. 159.
[4] UN Habitat-(2017). The State Of Addis Ababa 2017 The Addis Ababa We Want. https://unhabitat.org/sites/default/files/download-manager-files/State%20of%20Addis%20Ababa%202017%20Report-web.pdf (Accessed 16 September 2022). Pgs. 57-59.
[5] Haile, M. (2022). Urban Land Policy, Housing, and Real Estate Markets in Urban Ethiopia. Working Paper 2/2022.July 2022. https://eea-et.org/wp-content/uploads/2022/08/Working-Paper-02-2022.pdf (Accessed 9 August 2022).Pg. 8.
[6] Ibid.
[7] Matsumoto, T. and Crook, J. (2021). Sustainable and Inclusive Housing In Ethiopia: A Policy Assessment. https://urbantransitions.global/wp-content/uploads/2021/03/Sustainable-and-Inclusive-Housing-in-Ethiopia_A-policy-assessment_FINAL.pdf (Accessed 9 August 2022) Pg. 40.
[8] Berhane, S. (2017). Ethiopia’s Real Estate Market, Still Under Construction. 1 Apr 2017. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 9 August 2022).
Property Markets
The real-estate sector has contributed 12.5% to GDP growth in the past 10 years.[1] The growth was largely attributed to an 8.9% expansion in real estate and construction (renting and business activities, construction of roads, railways, dams, and residential houses).[2]
On the demand side, demand for formal housing is high, with the government IHDP units fetching up to five times more than the original auction offer. The houses are then put into the rental market by the acquirers.[3] The IHDP is creating market distortion. Intended to cater for the low income bracket, the programme is attracting those with higher level incomes.[4] The rental market is dominant, with owner-occupied units at only 32.6%.[5] There is evidence of up to 19% subletting.[6] Inadequate foreign currency in recent years has prevented much-needed growth, not only in the real estate market but also other sectors of the economy. Nonetheless, pockets of the market like Addis Ababa are thriving, with IHDP developments, mid-market developments by cooperatives, and high end homes built by formal developers.[7]
On the supply side, adequate developer financing is lacking.[8] The private sector is neglected, with all efforts devoted to the government housing program.[9]
Key reforms are needed to help the Ethiopian property market prosper. This includes a market-segment focused policy to cater to all market needs, streamlining housing finance, making property market data available, and developing a new property and housing policy through effective management and a collaboration of stakeholders.[10]
[1]Ibid.
[2] National Bank of Ethiopia (2021). 2020-21 Annual Report. https://nbebank.com/wp-content/uploads/pdf/annualbulletin/Annual%20Report%202020-2021/2020-21%20Annual%20Report.pdf (Accessed 9 August 2022). Pg. 8.
[3] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022). Pg.40.
[4] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022). Pg. 57.
[5] Ibid.Pg. 42.
[6]Ibid.). Pg. 42.
[7] Berhane, S. (2017). Ethiopia’s Real Estate Market, Still Under Construction. 1 Apr 2017. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 9 August 2022).
[8] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022). Pg.51.
[9] Ibid.Pg.45.
[10] Ibid.Pgs.52-54.
Policy and Legislation
Real estate is one of the under-regulated sectors in Ethiopia.[1] For example, disputes often arise when delivery of units to buyers is delayed. To solve this, a law dubbed the “Real Estate Home Developers Proclamation” was initiated to define the rights and obligations of the parties in transactions. However, this law has yet to be approved.[2]
The principal laws that currently govern land and real-estate matters in Ethiopia are: The 1960 Civil Code of Ethiopia; Investment Proclamation No. 769/2012 and its amendment; Ethiopian Building Proclamation No. 624/2009; Building Regulation No. 243/2011 and the Building Directive; Urban Land Lease Holding Proclamation No. 721/2011; Urban Land Lease Holding Regulation No. 49/2012; and the Urban Landholding Registration Proclamation No. 818/2014.[3]
Other laws that relate to urban land administration, regulations, and policies, both at the federal level and local government level, include Proclamation No. 80/1993, related to the urban land lease system, and proclamations No. 271/2002 and No. 721/2011.[4] These proclamations have had a significant positive impact on the sector.
Some of the causes of development problems in urban Ethiopia are land management, governance, and land taxation.[5]
Ethiopia needs to create an enabling environment that fosters private sector delivery of housing.[6] In addition to supportive policy, amenities such as infrastructure have to be provided and proper land pricing ensured as well as development land being made available, supported on the demand side by making sure that buyers have access to finance and general financial inclusion is improved.[7]
[1] Berhane, S. (2017). Ethiopia’s Real Estate Market, Still Under Construction. 1 Apr 2017. https://www.academia.edu/es/36828941/The_Integrated_Housing_Development_Program_Identifying_Strengths_and_Gaps (Accessed 9 August 2022).
[2]Ibid.
[3] Law Ethiopia Portal (2022). Federal Court Case Tracker. https://www.lawethiopia.com/index.php/case-law/court-decisions-by-subject-matter/federal-cassation/civil-cases/property (Accessed 9 August 2022).
[4] Law Ethiopia Portal (2022). Federal Court Case Tracker. https://www.lawethiopia.com/index.php/case-law/court-decisions-by-subject-matter/federal-cassation/civil-cases/property (Accessed 9 August 2022).
[5] Haile, M. (2022). Urban Land Policy, Housing, and Real Estate Markets in Urban Ethiopia. Working Paper 2/2022.July 2022. https://eea-et.org/wp-content/uploads/2022/08/Working-Paper-02-2022.pdf (Accessed 9 August 2022).Pg. 7.
[6] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022). Pg. 51.
[7]Ibid.). Pg. 51.
Opportunities
The opportunities in Ethiopia’s housing sector lie in its demographic profile. Ethiopia has a population of 114.9 million, and an annual growth rate of 2.7%. The percentage of the population under 15 years old in 2021 was 40.6%, compared to the global average of 25.8%,[1] and the urbanisation rate was 5.4%.[2] These statistics suggest a continued rise in demand for housing, which translates to opportunities for housing investment and related infrastructure.
Rapid economic growth generally leads to more housing and real estate investment growth in the country. Ethiopia’s average annual GDP growth rate was 10.4% between 2004 and 2018.[3] While urban inequality (measured by the Gini coefficient) is high, it has declined in recent years, from 0.44 in 2005 to 0.37 in 2011. There are marked differences between the livelihoods of people in rural areas, of whom 25.6% live in poverty, and urban areas, of whom 14.8% live in poverty.[4] This urban advantage and rapid urbanisation can be a catalyst for economic growth through job creation if well managed.[5]
Changing working patterns and a growing labour force also provide Ethiopia with an opportunity for urban growth. It is estimated that Ethiopian cities contribute 38% of Ethiopia’s GDP, through employment of only 15% of the country’s total workforce. Of all new jobs created between 2005 and 2011, 60% were in urban centers,[6] and, as of 2012, rural–urban migration accounted for 24% of urban population growth.[7] It is estimated the labor force will be 82 million by 2030[8] pointing to opportunity for economic development.
[1] World Bank (2021). Worldwide Governance Indicators http://info.worldbank.org/governance/wgi/index.aspx#home (Accessed 9 August 2022).
[2] Matsumoto, T. and Crook, J. (2021). Sustainable and Inclusive Housing In Ethiopia: A Policy Assessment. https://urbantransitions.global/wp-content/uploads/2021/03/Sustainable-and-Inclusive-Housing-in-Ethiopia_A-policy-assessment_FINAL.pdf (Accessed 9 August 2022) Pg. 8.
[3] ibid.Pg. 8.
[4] Matsumoto, T. and Crook, J. (2021). Sustainable and Inclusive Housing In Ethiopia: A Policy Assessment. https://urbantransitions.global/wp-content/uploads/2021/03/Sustainable-and-Inclusive-Housing-in-Ethiopia_A-policy-assessment_FINAL.pdf (Accessed 9 August 2022) Pg. 8.
[5] Alemayehu, A.(2019). Why should Ethiopians care about urbanization? Jobs, infrastructure, and formal land and housing 27 Mar 2019. https://blogs.worldbank.org/africacan/why-should-ethiopians-care-about-urbanization-jobs-infrastructure-and-formal-land-and-housing (Accessed 5 October 2022).
[6]Ibid. Footnote 71. Pg. 9.
[7] Ibid. Footnote 71.Pg. 9.
[8] Ibid. Footnote 72.
Availability of Data on Housing Finance
Housing finance data in Ethiopia is outdated and untimely publication renders it less useful.
Primary sources of data for housing in Ethiopia are the National Bank of Ethiopia (NEB), Central Statistical Agency (CSA), Ethiopian Economic Association (EEA), Ministry of Urban Development and Construction, Addis Ababa City Administration, World Bank Group, and developers such as Flintstone Homes, Gift Real Estate and Noah Real Estate.
On the supply side, data is published periodically and includes cement consumption[1] and sector credit advancement.[2] On the demand side, performance and trends, land and housing supply auction prices by city administration and other regional local governments, household surveys and social economic characteristics, sector reforms and trends and demand and credit trends.[3]
Challenges for data collection include inability to access mortgage loan data from commercial banks and alternative lenders who play an important role in financing the sector.[4] Data is outdated and may not be representative of the time of publication. Data on effective demand is not published and the limited data on the informal sector is not updated regularly. The last population and housing census was done in 2007.[5]
[1] World Highways (2018). Ethiopia’s challenging cement market: consumption stimulation. 26 Jan 2018. https://www.worldhighways.com/wh4/feature/ethiopias-challenging-cement-market-consumption-stimulation (Accessed 9 August 2022).
[2] National Bank of Ethiopia(2021). 2020-21 Annual Report. https://nbebank.com/wp-content/uploads/pdf/annualbulletin/Annual%20Report%202020-2021/2020-21%20Annual%20Report.pdf (Accessed 9 August 2022) Pg. 46.
[3] World Bank (2019). Unlocking Ethiopia’s Urban Land and Housing Markets : Urban Land Supply and Affordable Housing Study. 1 October 2019. https://openknowledge.worldbank.org/handle/10986/32756 (Accessed 9 August 2022). Pg. 19.
[4] Reliefweb (2022). Investigating Barriers towards Access and Usage of Housing Finance in Ethiopia. 26 Sep 2022. https://reliefweb.int/job/3889121/investigating-barriers-towards-access-and-usage-housing-finance-ethiopia (Accessed 2 October 2022).
[5] Central Statistical Agency of Ethiopia (2012) 2007 Population and Housing Census Of Ethiopia. April 2012. https://rise.esmap.org/data/files/library/ethiopia/Documents/Clean%20Cooking/Ethiopia_Census%202007.pdf (Accessed 2 October 2022).
Green Applications for Affordable Housing
According to Climate Watch in 2016, Ethiopia’s construction industry was responsible for approximately 2% of carbon emissions.[1] This is likely to increase with the country’s accelerated growth and the goal of attaining middle-income status by 2025, with construction as a key part of this growth. Sustainable methods and materials are needed to enable carbon reductions on a large scale.
In Implementing Addis Ababa’s Structure Plan the Ababa City Block Project is one of the pilots in achieving green and sustainable development. The concept of the Addis Ababa City Block entails a vertical stack of narrow frontage housing units and horizontally stacked apartments. The development is modelled on Ildefons Cerda’s Barcelona Perimeter Block but adapted to Addis Ababa’s culture and the principles and objectives of the Addis Ababa City Structure Plan (2017-2027).[2] The design aim to “respond to high density requirements and to enhance urbanity through a mix of income groups, social and green spaces.”[3]
Densification and the growing population also result in air pollution. Air pollution increased 62% between 1974 to 2018 mainly due to clearance of vegetation in and around Addis Ababa city.[4] The transport sector also produces hydrocarbons and carbon monoxide.[5] Thus, calling for rethinking green spaces and transport systems in affordable housing projects, Addis City Structure Plan (2017 -2027) proposes to have 2 739ha of green spaces, which will cut air pollution.[6]
Ethiopia has yet to fully embrace green building practices due to other social and economic challenges hindering the provision of affordable housing. However, green building practices that should be considered include building design that is compact and allows for natural lighting and air circulation; use of local materials; and minimisation of imports (e.g. straw in walling, rice husks reinforcing cement).[7]
[1] Langmaack, H., Scheibstock, P., and Kraubitz, T. (2022) Technical Report 1.3 | Urban Housing and Retrofitting Sustainable Building Materials Exploring green construction options for new housing in Addis Ababa. https://urbanagetaskforce.net/media/pages/addisababa/publications/1-3-addis-abba-perimeter-block/f3a9189210-1657791001/1.3-sustainable-building-materials.pdf (Accessed 02 October 2022). Pg. 4.
[2] Ibid.
[3] Ibid.
[4] del Hierro, S., Jácome, D and Temesgen, T.K. (2022) Technical Report 3.2 | Green and Blue Infrastructure – The Social Functions of Green and Blue Infrastructure. International case studies and insights for Addis Ababa. https://urbanagetaskforce.net/media/pages/addisababa/publications/3-2-sgbi-cse-studies/bdcdb7cc4c-1657791084/3.2-the-social-functions-of-green-and-blue-infrastructure.pdf (Accessed 02 October 2022). Pg. 7.
[5]Ibid. Pg. 7.
[6] Ibid.Pg. 8.
[7] Langmaack, H., Scheibstock, P., and Kraubitz, T. (2022) Technical Report 1.3 | Urban Housing and Retrofitting Sustainable Building Materials Exploring green construction options for new housing in Addis Ababa. https://urbanagetaskforce.net/media/pages/addisababa/publications/1-3-addis-abba-perimeter-block/f3a9189210-1657791001/1.3-sustainable-building-materials.pdf (Accessed 02 October 2022). Pg. 14.
Websites
Central Statistical Agency (CSA). www.statsethiopia.gov.et/
National Bank of Ethiopia (NBE) www.nbe.gov.et/
Ethiopian Economic Association (EEA), www.eea-et.org/
Addis Ababa City Administration www.cityaddisababa.gov.et/
Addis Ababa Urban Edge Task Force www.urbanagetaskforce.net/addisababa
The World Bank. www.worldbank.org/en/country/ethiopia
Ethiopian Bankers Association www.ethiopianbankers.com/
Ethiopian Government Electronic Services www.eservices.gov.et/
Federal Housing Corporation www.fhc.gov.et/
