The Rent Law's Missing Renewal Right

The Rent Law's Missing Renewal Right

Jul 25 , 2026. By Mihret Alemayehu ( Mihret Alemayehu (Mihret.Alemayehu@dadimoshaile.com) is a partner at Dadimos & Partners LLP. )

Two years on, the rent-control regime is undone less by its design than by the regulator's delay and misapplication. Without timely reform and disciplined enforcement, its promise of tenant protection will unravel.

When legislators enacted a law to control and administer rent, it was welcomed as a milestone reform. The law promised stable leases, tenant protection, and predictability in a volatile rental market. The Addis Abeba City Government's recent 11.5pc rent adjustment seemed to signal that the system was maturing.

However, two years after its introduction, the regime finds itself at a precarious crossroads. Regulatory inaction, delayed announcements and misapplications threaten to erode public confidence and expose the fragility of a system designed to be a cornerstone of tenant protection.

The law entered into force in April 2024, following parliamentary approval. Implementation began in Addis Abeba after the City Government Housing Development & Administration Bureau issued a directive in the same year. District housing offices registered rental agreements over the summer that followed.

The law was expected to relieve the housing pressures of the capital, where sudden rent increases and displacement have long undermined the tenure security of countless families. I am not aware of comparable steps having been taken outside Addis Abeba, thereby confining assessment of implementation to the capital.

If properly enforced, the law could shield tenants from sudden displacement and secure better tenure. But enforcement requires diligence from the regulatory body. Confusion has arisen over the law's application after July 7, 2026, with public debate wrongly suggesting that the regime expires on that date, and even calling for a new one to prevent rent increases and evictions. In truth, the regime is indefinite, introduced by a proclamation with no fixed term. Rather, the first rental term for many units registered in 2024 did.

At the heart of the debate sit two features of the law, rental terms and rent increments.

The law sets a mandatory minimum rental term of two years. Longer terms are allowed shorter ones are prohibited. During the lease, property owners cannot terminate agreements or evict tenants except in cases of lawful property transfer, such as sale, inheritance or other means excluding donation. Even then, six months' prior notice is required.

Once a lease expires, however, lessors are not obliged to renew. Renewal is optional, and a property owner may evict a tenant and let to someone new. This stands in sharp contrast to the laws of Germany and New York, where tenants enjoy statutory renewal rights that secure their tenure. Ethiopia's framework is markedly deficient. Tenants have no guaranteed right to extend their occupancy beyond the agreed term, leaving them exposed at lease expiry.

Officials of the Addis Abeba Housing Bureau have tried to close that gap by declaring that lessors may not refuse renewals under the pretext of personal or close family use. The Bureau's motivation is understandable, but it misapplies a law that imposes no obligation to renew, and it creates confusion. The limitation stems from the design of the statute and should be addressed through proper legislative reform. Whether the regulatory body can enforce mandatory renewal without statutory authority remains to be seen.

While property owners keep discretion over renewals, the rent charged to a new tenant should match the rent applied on renewal. This restriction ensures a lessor gains no financial advantage from eviction, and indirectly discourages displacement. Renewals are governed by the same rules as initial agreements, with rents adjusted annually.

Ethiopia's uniform rent adjustment, applied both on renewal and to new tenancies, stands in sharp contrast to the systems of Germany, the United Kingdom (UK), Belgium, Switzerland, Spain, Italy, Kenya, South Africa, Nigeria and Botswana, where rents reset to prevailing market rates between tenancies. The dominant model combines indefinite tenure security, subject to limited exceptions for owner or close-family occupancy, with regulated rents during the tenancy, while allowing property owners to realign rents with the market once a tenancy ends.

By extending rent regulation across successive tenancies despite two-year terms, Ethiopia's approach strengthens tenant protection but risks suppressing rental values, discouraging investment and weakening the incentive to maintain property. A lessor's right to terminate at the end of the two-year term may also give rise to side agreements with existing tenants who are desperate to say or, incoming tenants exposing them to a rent higher than the permitted one.

The legal framework tries to balance lessor discretion against tenant protection. Property owners may decline renewals, yet they can charge new tenants only the rent applicable to existing ones, which discourages needless displacement at the end of a lease. Time will ultimately reveal whether the right balance has been struck. It does not appear so for now.

During the lease, rent may be increased only once a year and solely in line with the regulatory body's determination. The law requires that body to announce adjustments on June 8 each year, effective for the next fiscal year. No such determination or announcement for the 2025/26 fiscal year could be found. Officials claimed rent levels were unchanged. Even so, the law required a formal pronouncement to that effect. The omission compromised property owners' right to adjust rents in a volatile market and created uncertainty about baseline rents.

The latest adjustment was issued on July 6, 2026, missing the mandated timeline by nearly a month. The rate was set at 11.5pc, calculated against the 2025 baseline, thereby disadvantaging property owners. The announcement is nonetheless a notable development. The delay, together with last year's missed determination, fuelled the mistaken belief that the regime itself would expire on July 7, 2026. It also undermined confidence in the regulatory body's ability to administer adjustments predictably and credibly.

The law's deficiencies are plain. Tenants lack renewal rights and are exposed at lease expiry. Lessors face suppressed rental values that could discourage investment and maintenance. Over time, these dynamics could distort the housing market, breeding inefficiency and eroding quality. Timely legislative intervention may be imperative to preserve the regime's integrity. Beyond that, the failure to announce schedule adjustments, the misapplication of renewal provisions, and the silence amid public uncertainty have all worked against the law's objectives. To restore confidence, the regulatory body has to act with clarity, on time and in the open.

Rent control was introduced to stabilise leases and protect families from displacement. Should the law fail to ensure this and enforcement falter, the promise of tenant protection will unravel, leaving the legal regime irrelevant. The housing market, already under pressure, cannot afford such uncertainty. At this juncture, the choice is clear between disciplined enforcement and the necessary reform, or systemic collapse.

The future of rent control and the stability of countless households across the capital depend on which path the country takes.

PUBLISHED ON Jul 25,2026 [ VOL 27 , NO 1369]