Assessment of affordability of private residential developments in Addis Ababa

Type Thesis or Dissertation - Master's thesis
Title Assessment of affordability of private residential developments in Addis Ababa
Publication (Day/Month/Year) 2012
URL MBL3 Research Report TM Sisay.pdf?sequence=1
Housing affordability is not researched well in Ethiopia. However, the topic is
important due the fact that__________. This research report assesses the
affordability of private residential developments in Addis Ababa and delineates
factors that contribute to their affordability. Literatures related to concepts of housing
affordability; household income levels; housing prices and mortgage financing, etc
are reviewed.
The research studies examined revealed that the combination of high population and
high urban growth rates coupled with a high prevalence of urban poverty have placed
massive strain on Ethiopian cites. Accordingly, the critical urban issue is: lack of
healthy, affordable housing for all sectors of the urban population. This is especially
true in Addis Ababa as it has a share of 23% of the country’s urban population.
In Addis Ababa, there is strong housing demand as supply lags behind demand;
conditions of existing houses worsen and the population is increasing. To date, the
government housing program has only managed to build only about half of the
demanded units. It has, therefore, became increasingly imperative that the
government should concentrate on reforming and managing the policy and legal
framework in such a way as to create an environment for the private sector to provide
However, private developers are motivated by profit; so what is the rationale for them
to provide what is essentially a welfare service? The argument is that there are good
business justifications for the private sector to be involved in the provision of
affordable housing.
The data gathered and analyses made by the researcher allow the basic conclusion
that the vast majority of private residential developments in Addis Ababa are not
within reach of middle and low-income families. Generally speaking, housing
affordability in the Addis Ababa is extremely low. That is, private residential developments are unaffordable to people of modest means; and the results of this
survey validate this perception to a large degree.
While free-market approaches to affordability are within the realm of possibilities, the
supply of developers who pursue a multi-pronged strategy composed of creative
financing, innovation and government support is limited. Certain level of affordability
was, however, maintained by one developer, notably, Flintstone Homes. According to
the survey, the main reasons why these developments have managed to retain some
level of affordability are: efficient design, and marketing and operational excellence.
According to the findings of this research, housing affordability can be improved by
the use of cost-effective building materials, or efficiencies that reduce costs, but the
most important approach to designing affordability is the reduction of size—small lots
and small housing units. Infrastructure costs generally decline as housing density
increases; land costs also decline as the number of housing units is increased as
government provides lease free 50m2 per household. Therefore, the design of
denser housing units with a greater mix of attached and multi-family units should be
practiced by developers to substantially reduce housing prices.

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