Ethiopian Business Review

In the past, house rents in Addis Ababa have increased chiefly because of the critical housing shortage and the surge in demand for apartments and houses. 

Over the past three months, however, rental prices have risen at an alarming rate, because of the rise in the number of Eritrean migrants, among other factors. EBR’s Ashenafi Endale investigates the matter.

Due to the mismatch between the demand for and supply of houses, it is common to see rents climbing in Addis Ababa. In fact, the residents of the city, especially low and middle income families, have been suffering as a tightening market pushes rents up faster. Yet, a troubling housing crisis has started to spread since September 2018. Even though scarcity of property and rising rents are not new, house brokers say the current situation is nothing like the past.

The main reason, according to Melese Gesese, a broker at the Mebrat Hail Condominium Site located in Nifas Silk district, is the influx of Eritrean citizens to Addis Ababa, following the peace agreement signed between the two countries, putting an end to two decades of ‘no war no peace’. “Since the opening of the border, it has been difficult to find free units at condominium sites. I used to broker at least five condo units before August 2018, but in October 2018 it reduced to two,” Melese told EBR.  “I remember when Eritreans would arrive in five buses in a day.”

In fact, ever since the opening of the border between Eritrea and Ethiopia, more than 200 Eritreans have cross the border every day, according to the United Nations High Commission for Refugees(UNHCR). While a few are at refugee camps, some live with relatives, and the rest, the majority of whom are supported by their relatives abroad, rent apartments in Addis until they can secure asylum via UNHCR. Within the last two months, rent for a studio apartment has increased from ETB3,000 to ETB4000, and rent for a one bedroom apartment goes from ETB4,000 to as high as ETB6000, at the Mebrat Hayl Condominium Site. 

Those living in Mebrat Hayl are not the only ones grappling with higher rents due to growing demand. At the Gotera Condominium site, rents for one  and two bedroom units, and single rooms have been on the rise. The rent for a small studio has increased from ETB4000 to ETB4500, a big studio from ETB4500 to ETB5500, a one bedroom unit from ETB5000 to ETB6500, a two bedroom from ETB7000 to ETB10,000 and three bedroom from ETB8500 to 11,000, at Gotera. “Most of the people who rent here are guests,” explains Gezahegn Zeleke, a broker who has worked in Gotera for seven years. The same trend holds true at the Balderas Condominium Site, near Megenagna.

A two bedroom unit at the Balderas site is rented for up to ETB11,000, because there are no units with three bedrooms. The reason for that is the same as in Mebrat Hayl site: there is a huge demand because of the influx of Eritreans. Prices at condo sites in Mekanisa, Summit, and Gerji have also increase, in addition to rents for small one room houses, according to brokers.

The rising rents have also impacted the cost of buying condominium apartments across the capital. An example is the situation in Mebrat Hayl, where the price for a one bedroom condo has increased from ETB900,000 to ETB1.05 million, while a three bedroom condominium costs around two million Birr. Melese points the finger at the migrants. “Their willingness to pay higher rents to landlords has hugely impacted the cost of apartments,” he said. 

Apparently, the increase is not only in condominium apartments, but also in the rents for guest houses, which are rented by short term guests. In particular, two room guesthouse units have increased in rent from ETB13,000 to ETB18,000, while three room guest house run from ETB20,000 to ETB25,000, according to Melese, who has been a broker for the last six years. 

Atakilti Aregawi is an Eritrean awaiting cancer treatment at Tikur Anbessa Hospital. “I rented a three room guest house around the Mebrat Hyle condominium site for ETB22,000,” Atakilti told EBR. 

Although brokers attribute the hike in rent to the influx of Eritreans, Melkam Aschalew, a lawyer and founder of MA Business Solutions, which focuses on employment, human resource consulting and brokering, differs. “Many house owners in Addis Ababa are increasing rents because they hear that many Eritreans are coming to the capital. The fact that there is no supply of new houses has an impact. But most landlords are using that as a reason to increase prices. Brokers are also manipulating the confusion to get more revenue from commissions.” 

Another reason for the rent hike in Addis Ababa is subletting: people rent whole compounds from landlords, and sublet either rooms or the whole house at a profit.  “Many people are joining this business. A woman I know rented two houses in 22 Mazoria in Yeka District. She rented a compound with a small unit at the back for ETB20,000. She moved into one of the back rooms and rented the others for a total of ETB25,000. She lives for free and earns a profit of ETB5000. The second house she rented is a four storey house, which she rents out as a pension for a large profit,” says Melkam.  

Melese is also aware of this situation. “The rent for a full compound has increased from ETB15,000 to ETB25,000 since the subletters started coming around. As the result, rents for small rooms also increased by at least ETB500.”

Liya Agegnehu is one of the people who benefited from such an arrangement.  She rented a compound for ETB6,000, around Gerji in Bole District two years ago. She renovated everything, with paints ordered from factories, and special finishing experts.  Then she subletted it for a good price. “I rented it from representatives and when the owners came from abroad, they were amazed. I expected that they would be grateful. Instead, they increased the rent to ETB15,000, from ETB6,000.” She moved to Goro in Bole District, where she rented a compound for ETB7,500, but this time with a one year contract agreement.

But as soon as the contract was up, they increased the rent to ETB16,000. The owner also made her buy materials worth ETB10,000 to replace old materials in the house, among other things. “I moved  further out to the outskirts, because now rent is on fire in the center of Addis. Currently, I am living in a one storey house in Akaki Kaliti District. I rented it for ETB8,000, with three months down payment. Before me, the owner of this house was queried by other renters, who offered ETB10,000 with six months’ down payment. But when the owners checked their background, they were known for renting compounds, partitioning them, and subletting to people who use them for drug purposes, like shisha houses.”

Liya, 30, says a binding law is necessary to address the increasing disagreements between landlords and tenants, especially in the capital. “House owners in the city are almost like land barons. They do too much injustice to people who rent.”

Realizing the situation, the government formulated a regulation to solve irregularities around house rentals, which was submitted to the Council of Ministers in 2015/16. However, it has still not been ratified, according to Ethiopia Bedecha, director of the Communications Directorate at the newly reformed Ministry of Urban Development, Housing and Construction (MoUDHC). “It was sent back to the Ministry for minor fixes. But it is still awaiting approval.”

Experts say that even with the introduction of rent control, there might be no change as the demand is still higher than the supply. As of now, it is estimated that more than a million people have registered for condominiums from the government. But since the scheme first launched in 2005, only some 176,000 housing units have been transferred. Currently, 62,000 houses are under construction, of which only 35,000 were started in the second phase of Growth and Transformation Plan (GTP II) period in 2015/16, while the rest are unfinished projects started in 2010/11.

Out of 430,000 houses planned in the GTP II period, of which 250,000 are in Addis Ababa, construction has started on only 31,000, according to data from the Ministry. “There is a big problem. Projects usually get stuck due to contractors’ irresponsibility, an absence of progress-based finance release, delays in availing finance, and an absence of local construction materials,” stress Jantrar Abay, Minister of MouDHC. 

Takele Uma, the mayor of Addis Ababa shares his concerns. “Only one year and eight months are left until the end of the GTP II period, but, most of the targets are far behind achievement. We need new coordination and synergy with the ministry,” said Takele, when his office met with the Ministry on November 1, 2018.

Because rural to urban migration is rising in the capital, the city administration is expected to supply 40,000 new houses each year, at least. Houses at new condominium sites like Kilinto, Bole Arabasa, Koye Feche and Tulu Dimti, all of which have been recently finalized on the outskirts of Addis Ababa, are being occupied quickly, with relatively high rents, according to Melkam. “In the old days, condo houses would be occupied long after they were finalized because the infrastructure takes time. But now, people don’t care about the absence of infrastructure or distance from the city centre. That is why prices are already inflating even in the outskirts.”


7th Year • Nov.16 - Dec. 15 2018 • No. 68


 

 

Leave a comment

Make sure you enter the (*) required information where indicated.Basic HTML code is allowed.