Purpose: The purpose of this paper is to give an analysis of the problems and prospects of housing development in Ethiopia with particular emphasis on the city of Addis Ababa. Design/methodology/approach: The methodology employed here is a descriptive analysis where the source of the data is mainly secondary data. Basic statistical tools are employed in the analyses of the data. Findings: There is a substantial imbalance between the demand for and supply of housing units in Addis Ababa. Accumulated demand for residential housing on the one hand and the low supply of residential land on the other have pushed prices beyond the reach of the majority of the residents in the country including Addis Ababa. Overcoming the housing problem, hence, requires efforts in three main areas: housing demand; housing supply; and institutional framework. Improving the conditions in these areas, in turn, requires the combined efforts of the government of Ethiopia, regional administrations and donor agencies taking the view that overall development of the economy is crucial for the housing development in Ethiopia. Research limitations/implications: The article is limited to discussions on housing developments in Addis Ababa, though a brief introduction is given regarding the housing conditions in other major urban towns in the country. Originality/value: This article specifically discusses the housing problem in Addis Ababa. So far no attempt has been made to link the strategy of the government of Ethiopia with housing problems in Addis Ababa.