Addis Ababa: Housing Boom and Government Land Grab

By IndepthAfrica
In Article
Sep 26th, 2013
4 Comments
298 Views

Dr. Daniel Teferra*

I just returned from Addis Ababa after giving a paper at an international conference on development in Ethiopia. The Conference was organized by Forum for Social Studies (FSS), a domestic think-tank, the only one of its kind, and Friedrich Ebert Stiftung (FES), a German NGO. While in Addis, I was able to observe, among other things, the housing boom. I would like to put my observation in a historical perspective.
When Mengistu Hailemariam took state power from the imperial regime, he unleashed his “proletariats” on Addis Ababa to grab “extra” houses and “extra” land–never mind whether they were legally owned or not. Then his “proletariats” became Mengistu’s cadres and paid him back well for his “generosity” when he launched the Red Terror campaign against his political foes.
When the late Meles Zenawi took state power in 1991, he returned confiscated houses and land to their original owners in Mekele but not in Addis Ababa. He had another plan for the city. He introduced a land lease system that turned out to be a lucrative real estate business for his government. A square meter of land in Addis Ababa today easily fetches as much as 40,000 birr in lease price. The government allowed each household up to 500 square meters of land and anything above that was to be confiscated and leased. Some people were forced to lease back their own land or completely relinquish ownership to the government without any compensation.
Zenawi came up yet with another plan for his Addis Ababa. He wanted to build new roads and sky scrapers for the city. So, he relocated the shack dwellers, some of them Mengistu’s former “proletariats”, to the outskirt of the city thereby opening up the land for the government’s land leasing business. People residing near the main roads were ordered to build two- to four-story houses or give up their ownership or use right. Those who could not afford to build multi-story houses lost everything.
Zenawi built some condominiums on the city’s outskirt, but those who were forced out of the city could not afford to buy or rent them. The average wage of a household in Addis Ababa today is about 1,000 birr ($53) a month. Prices of essential goods have gone through the roof. The government collects a back-breaking 15% value added tax (VAT) imposed on the selling price at each stage of production. A greater share of the VAT burden falls on buyers of essential goods; the low income and the poor who spend 80% of their incomes on necessities. Life is a living hell for the vast majority of people in Addis Ababa.
A market for land use right is booming in Addis Ababa. Land use right was supposed to be inherited, but it is being traded now. There is also an underground market for land. In some cases, government officials themselves purposely approve for lease more land than what is requested. They then sell the extra land through brokers. As long as the government is in the leasing business and there is an insatiable demand for construction in Addis Ababa, government land grab will continue and many more people will be dispossessed.

*(Professor of Economics, Emeritus at FSU, currently at UW-Whitewater)

This post has already been read 3 times!