Ethiopia Is Struggling to Make Housing Affordable

Ethiopia Is Struggling to Make Housing Affordable File Photo

Poor Ethiopians can no longer afford the flats on public housing offer by the government

ADDIS ABABA (The Economist)―Eleven years ago Elsa, a middle-aged widow, won the lottery. The prize was not cash, but the deed to a spacious, three-bedroom flat in Addis Ababa, the capital of Ethiopia. Today she lives there with her four adult children. The deed, now laminated, hangs proudly on her wall.

Elsa is a beneficiary of Ethiopia’s public housing scheme, one of the most ambitious in Africa. Since it began in 2006, some 250,000 flats have been built and transferred to people in Addis Ababa and other towns. Like Elsa, they are nearly all winners of a computerized lottery, which allocates flats as they become available. The government aims to build 50,000 a year in the capital over the next decade.

In theory, the program should just about pay for itself. All land in Ethiopia is state-owned, which reduces upfront costs. Beneficiaries make a down payment to the government ranging from 10% to 40% of the price of the flat, which is set by the state. They then pay off the rest over a ten- to 20-year period. A state-owned bank holds the mortgage, providing generous terms.

But the prices charged by the government were too low to sustain the program. So it has had to hike them. Now poor Ethiopians cannot afford the down payments for even the most subsidized units. Those who can often struggle to pay their mortgages. Many opt to rent out the flats and move elsewhere.

In the face of this fiscal reality, the government has changed its focus. In 2013 it introduced a scheme explicitly aimed at the middle class—those who could afford down payments of 40%—and announced that people who had saved the whole price of the property would skip the lottery and head to the front of the queue. While waiting, applicants have to keep putting money into a savings account. If they stop, they are tossed off the list, further weeding out the poor.

Tagged as:

Latest news, Addis Ababa, Ethiopia News