Devoid of Innovations, Housing Projects Continue to Lag

Last week Diriba Kuma, mayor of Addis Abeba, was in attendance for the inauguration of the uncompleted condominiums in Aqaqi-Qality and Lideta districts, meant for the use of people with middle income. The inauguration was for 1,292 units under a housing scheme that allows citizens to raise 40pc of the cost, while the banks cover the remaining 60pc through long-term mortgage.

Officials in the city administration who are responsible for the projects claim that construction works are 98pc completed at these sites. Yet, it is obvious that the houses still need work to make them up to standards and the provisions of public infrastructure remains outstanding.

Thus, little should be surprising to see the Mayor compelled to concede in public that these flats may not be transferred to homebuyers at the earlier scheduled time. It should be unpleasant news to the frustrations of close to 168,000 people registered to buy these flats, of which 16,000 have paid full amount up front. There are also no less than 13,000 Ethiopians residing abroad, that sent hard currency home having pinned their hopes on these projects.

These sites are only a small part of a larger state initiated program to provide massive number of houses to close to a million people currently registered under the different low cost public housing schemes.

Popularly known as “condominium projects”, the policy of housing the urban poor in affordable but suitable conditions is one of the signature polices of the Revolutionary Democrats in Ethiopia. Most certainly, the housing scheme shows their political commitment to social development of a nation with a legacy of poverty and underdevelopment.

Addis Abeba, whose residents often pride themselves for having a political and diplomatic capital of the continent, illustrates such a regrettable legacy. Only a quarter of a century ago, the Revolutionary Democrats inherited a city that was little more than a large village. Infrastructure was limited as the existed ones were in bad shape. Two thirds of housing units were not meeting the basic requirement of urban accommodation, while around 80pc of the city’s population was without toilets.

When the Revolutionary Democrats embarked upon the program of public housing provisions a little over a decade ago, they had couple of other policy objectives than simply meeting the pressing housing demands of close to 800,000 people. It was as much about creating jobs for hundreds of thousands of people; providing business opportunities for tens of thousands of micro, small and medium enterprises; and ensure that there is some sort of wealth transfer between those who have and others with low income but beneficiaries of the program.

It has been 11 years since the launching of this program, and the result is a mixed bag at best. The housing scheme, in 11 rounds, has transferred around 177,000 units to beneficiaries up until now. To their credit, the Revolutionary Democrats have seen the creation of thousands of micro and small enterprises and unarguably far too many poor people have benefited from it.

Nonetheless, the city administration, which is 100pc controlled by the Revolutionary Democrats, has little to show for in terms of the way forward. It has a long way to go before even reaching the half way mark of its target.

On average, the capacity of the construction process is able to deliver 14,500 units a year, an extremely slow pace to meet the demands of the population and to serve the hundreds of thousands waiting in the wings to own these low-cost flats. Prospective homebuyers’ fate is up in the air as they can only hope and pray that these houses will be ready in the near future.

It has been projected that at the rate the city undertakes the program, it will take 68 years to complete and transfer houses to the registered homeowners.

The program is prone to suffer from lack of skilled manpower, inadequate housing industry and limited resources, financial or otherwise. The quality of the houses are also concerning. With a lack of adequate supervision in the construction process, quality control measures are overlooked and building materials that are below standard are under use. Some condominium sites are already starting to show cracks, and are deteriorating. Soon enough, they will need renovations and maintenance.

Buyers waiting in vain are complaining that the housing scheme is becoming unaffordable for the low- and middle-income people it was designed for. Inflation and the rise of prices of building materials is adding the cost on the potential homeowners, which are finding it difficult to keep up with the monthly payments. Many turn to families and friends to help foot the bill.

Sadly, this development betrays the very policy objectives of the housing program.

Despite too many causes and far more incidents exposing the problem, at the heart of the failure is the absence of innovation for solutions by policymakers in the city administration. It is clear that the city administration has bitten off more than it can chew. The plan to build so many blocks of houses in such short time with the limited resources available is overambitious and turning into a failure.

However, the Revolutionary Democrats are deep into this and have invested a lot in their political commitment; a lot more is at stake for them. They cannot simply pull out at this stage with hundreds of thousands of jobs on the line and many more people hoping to be homeowners. They need to be innovative in their approach; and no less should they be creative in developing models of financing.

One such measure could be the creation of a publicly owned share company contracted by the city administration to build, sell and rent low cost housings. It is important to have such a company operate strictly on profit and loss bases; this can be a response to the current management problem in the administration, which tends to be oblivion to how much cost is going up. Its managers are only about completing the condos regardless of how much they cost and how long they take.

Such a public company contracted by the city administration to build over half a million housing units will have an economy of scale to buy building materials – here and abroad – in the most competitive prices. For it has the self-interest to ensure profit is made and dividend is paid to shareholders in the end, it can ensure there is less corruption; designs are developed considering durability and minimum cost; and exercises tight control on contracts management through the construction phase.

However, the whole purpose of building low cost housing is to meet the needs of the under-privileged in society. Such a publicly owned corporation can be allowed to invest in commercial real estate developments and upscale housings both for sale and rent. There can be many other sources of revenues, such as collecting rents from parking, shopping malls and entertainment outlets. The larger revenues earned from these enterprising schemes the more it can cross subsidies its undertakings in the low cost housing front, while still ensuring that the balance-sheet of the corporation is positive.

The federal parliament can pass a new legislation to create a sort of provident fund for housing, requiring all employed individuals to contribute money to this fund, and their employers chip in as well. The fund administrators can invest such liquid money in treasury bills and bonds, which can help the fund earn interests that can be tax exempted. It is a viable way of subsidizing the construction of low cost houses.

These approaches can help the bureaucracy and the city administration free themselves up to focus where it matters most. The provisions of massive, affordable and durable public housing is about monitoring the adaptation of technology; efficiency in contract administrations; and seeing through labour and material costs are not escalating to the level they undermine the very policy objective. That should be where policymakers rightfully spend their time and energy.

Published on Mar 18,2017 [ Vol 17 ,No 880]



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