Affordable housing in Ethiopia
Introduction
Ethiopia, the second most populous country in Africa, is experiencing rapid urbanization, which is putting significant pressure on the housing sector. The demand for affordable housing far outstrips the current supply, leading to a range of challenges from substandard living conditions to high rental costs. This document explores the complexities of the Ethiopian housing market, examining the factors contributing to the housing crisis and potential solutions being implemented by stakeholders.
Ethiopia’s population, estimated at 123 million in 2022, is growing rapidly, with a significant proportion migrating to urban areas. It is estimated that 30% of the population will reside in urban areas by 2028, increasing to an estimated 42.3 million people by 2037. This rapid urbanization has led to a surge in demand for housing, with projections indicating a need for 471,000 new houses per year from 2015 to 2025, and 486,000 new houses per year from 2025 to 2035. However, the annual housing supply, which was approximately 165,000 units between 2007 and 2013, has failed to meet this demand, leaving a substantial housing deficit. The private sector mainly focuses on high-end housing, leaving a gap in the market for affordable options, and informal construction dominates the landscape.
The housing situation in Ethiopia
The housing situation in Ethiopia is characterized by a stark urban-rural divide4. In urban centers, housing options range from government-sponsored condominiums to informal settlements with substandard living conditions, as well as luxury flats and villas4. In rural areas, housing predominantly consists of traditional dwellings made from local materials like mud, wood, and thatch, often lacking modern amenities. Approximately 70% of the existing housing stock requires complete replacement, is overcrowded, and lacks adequate amenities. This disparity highlights the urgent need for improvements in housing standards across the country.
Several factors contribute to the housing crisis in Ethiopia. A significant challenge is the lack of access to affordable financing. The mortgage market is underdeveloped, with only two banks offering mortgages6. High interest rates, averaging 5.48% between 1995 and 2023, and stringent collateral requirements make it difficult for many to secure loans. A majority of housing purchases, about 77%, are financed informally, often through relatives, friends, or savings groups6. Additionally, the high cost of construction materials and land prices further exacerbate the issue. Shortages of essential raw materials such as cement and rebar, coupled with high costs and supply chain disruptions, hinder construction and drive-up housing prices. Inflation and foreign currency shortages also contribute to these problems, making it harder to import construction materials. The construction industry is expected to grow by more than 8% annually until 2026, further increasing demand8.
Current affordable housing delivery approaches
In addition to these challenges, the current housing delivery approaches do not adequately address the needs of low and middle-income individuals and families. Many affordable housing developments lack adequate infrastructure and services such as roads, water supply, and sanitation, reducing their overall quality. The lack of standardised practices and skills in the construction sector also compromises the safety and durability of houses10. This is further complicated by inefficient government policy implementation and limited capacity.
Despite these challenges, there are numerous opportunities for improvement and private sector involvement in the Ethiopian housing market. Several initiatives and projects aim to provide more affordable housing options. The government’s 10-Year Perspective Plan (2020/21–2029/30) and the Addis Ababa Housing Project plan to build millions of new homes, focusing on sustainable development, green design, and the provision of social amenities. The Micro and Small Enterprise Housing Project supports affordable homeownership by providing financial and technical assistance to families building their own homes.
Innovative solutions for affordable housing
Innovative solutions are being explored to overcome the challenges. These include:
- Local Manufacturing of Building Materials: Prefabricated building materials, such as wall panels and floor slabs, can reduce construction time and costs. Reusing formwork and molds can reduce waste and environmental impact. Recycling plastic waste into building products such as bricks and tiles offers a sustainable alternative, addressing both waste management and material costs. Bamboo, which is abundant in Ethiopia, can also be used for various building elements, which would also reduce CO2 emissions.
- Training and Licensing Programmes: Collaborations between construction companies, TVETs, and local workers can offer specialised training and consultancy programs, fostering workforce development, safety, sustainable construction, and project management.
- Biobased Building Materials Co-funded by Carbon Credits: Utilizing locally cultivated fibres like bamboo and sisal can reduce carbon emissions, promote sustainable practices, and potentially earn carbon credits. This can boost economic growth through cost savings and job creation.
- Construction and Engineering Consultancy: Introducing modular housing and prefabrication and integrating green technologies and energy-efficient designs can improve efficiency and promote environmentally friendly solutions.
- Sustainable WASH Solutions: Implementing eco-friendly designs, greywater recycling, rainwater harvesting, solar power, and other sustainable WASH solutions can tackle water scarcity, cut costs, and improve living conditions.
Key stakeholders in the Ethiopian housing sector include government entities and policymakers, local NGOs and agencies, the private sector, and financial institutions. These stakeholders collaborate on various initiatives, with local NGOs aligning housing initiatives with government policies and the private sector tackling market dynamics and regulatory challenges. Financial institutions play a vital role in providing funding, balancing risk, and accessibility for underserved populations.
Conclusion
In conclusion, the Ethiopian housing sector faces significant challenges due to rapid urbanization, limited access to finance, high construction costs, and inadequate infrastructure1…. However, there is a concerted effort by various stakeholders to address these issues through a combination of policy initiatives, innovative construction techniques, and sustainable practices13…. By focusing on local manufacturing, skills training, and sustainable solutions, Ethiopia can potentially bridge the housing gap and improve the living conditions of its growing population.
For further reading:
Affordable housing in Ethiopia – TRAIDE
Transforming Ethiopia’s Housing Landscape: …