A City Between the Market and the Rules

Jul 4 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER ) , FITSUM TADESSE ( FORTUNE STAFF WRITER )

Beneath the policy debates and individual struggles lies a staggering reality, where Addis Abeba faces a housing deficit exceeding one million units, with projections that 60pc of city households would be renters last year. Experts assert that administrative price caps fail to address the root causes of the crisis. The continuous influx of migrants to the capital guarantees that demand will chronically outpace supply, keeping tenants and property owners locked in a perpetual cycle of financial stress, report NAHOM AYELE & FITSUM TADESSE, FORTUNE STAFF WRITERS

July has arrived with the heaviest rains of the winter, dark clouds and mist blanketing Addis Abeba each morning. This year, the weather is not the only thing hanging over the capital.

Property owners and tenants are waiting for the Addis Abeba City Administration to announce how much house rents may rise in the new fiscal year. Hundreds of thousands who rent, and a far smaller number who own the properties they let, are waiting on the City Administration's annual decision under the country's rent-control laws, which will determine whether rents will climb in the coming lease cycle and by how much. The uncertainty has left both sides in an uneasy position despite their opposing interests.

Property owners, whose rental income has barely moved for nearly two years while living costs climb, want increases. Tenants, already handing over a large share of their earnings for shelter, fear a heavier load.

For Tsehay Abera, 75, a widow who lives on Guinea-Bissau Road in the Mekanisa Abo area, the debate is not abstract. She lives on a modest pension from her late husband's service at the Commercial Bank of Ethiopia (CBE) and on rental earnings from three small units in her compound. Her expenses, particularly for medical care and daily help, have risen steadily, yet the income from those units has not moved under the existing legal framework.

The law requires her to honour existing leases for their full term, barring her from raising rents or changing tenants even when the market would warrant it. In her neighbourhood, comparable modest houses are let for between 5,000 Br and 10,000 Br. Her returns sit below this.

Tsehay also pointed to growing problems in managing her property. Some tenants delay rent or misuse utilities, leaving her unsure how to respond within the law.

"I don't know the law well," she said. "I don't have anyone to guide me. Sometimes, I feel people take advantage of my age and my condition."

While property owners like Tsehay feel controls have squeezed their income, tenants describe the other side of the same market, defined by rising costs and uncertainty about the adjustment.

The pressure reaches well beyond single households. A two-year-old study by EthioData found that high and volatile rents, frequent increases, and widespread tenant insecurity define the private rental market, with many agreements still verbal, leaving room for abrupt adjustments and evictions. A large share of households spend more than 30pc of their income on rent, and a substantial minority more than half. Price data from the Ethiopian Property Centre in early 2026 put the average monthly rent for a city-centre studio at 45,000 Br, ranging from 35,000 Br to 65,000 Br by location, with Bole, Casanchis and Old Airport commanding premiums due to demand from expatriates.

For Negash Tolosa, 40, the pressures are measured not in policy but in monthly survival. He lives in the Lebu Medhanialem area and works at a fuel station near the Haile Garment Ring Road to support a household of five. His wife, Bekelu Fantahun, works at a milk plant in Sebeta. Together they earn about 32,000 Br a month, one-third earned by his wife.

On teh surface, the income looks stable. In daily life, nearly every Birr is spoken for before the month starts. The largest claim is rent, currently 12,000 Br for a two-room house, on top of school fees for three children, groceries, transport, electricity, water and healthcare. Rent alone takes more than a third of what they earn, leaving little for the unexpected.

"There are months when we simply pray that no one gets sick," Negash said.

Financial pressure has reshaped the family's days. Social outings and small treats have gone, replaced by tight budgeting on essentials, and invitations are declined when even minor spending can threaten next month's rent or food. The pressure intensified when his landlord told him that once the lease expired, the rent would jump by 42pc. With the new school year near, Negash has decided to move his three children from a private school to a public one, a step he never imagined taking.

"I've no choice," he said. "Keeping a roof over our heads and food on the table has to come first."

For Negash, the law has formalised the paperwork but done little to ease the pressure beneath it.

Those tensions trace back to the law that governs rent control and administration, introduced two years ago, which turned a market long run on informal agreements into the legal arena. Its passage was contentious. The drafting and the speed of ratification drew criticism, with those impacted arguing it was rushed through Parliament.

The law was built to regulate annual rent increases for residential housing nationwide. It established regulatory bodies in Addis Abeba, Dire Dawa, and the regional states to set permissible adjustments to inflation and the cost of living. It also introduced tenancy protections, including a minimum two-year lease and eviction only on legally specified grounds. Supporters saw a state intervention in a market where most urban residents rent, meant to cool an overheated market and shield tenants from sudden increases. Critics argued from the start that it hemmed in owners, limiting their control over their own assets.

City administrations moved quickly. Addis Abeba was among the first to require lessors and tenants to register properties through wereda-level approval, a process that captured close to half a million units. Even so, implementation has stayed uneven. The law promised stability. In practice, many say the system still runs on a mix of formal contracts and informal arrangements, opening a gap between regulation and reality. As lease-renewal cycles come round each year, those tensions return, from a system meant to govern prices but struggling to control how they are applied.

The City Administration has leaned on a recent study to guide its policy for the coming year. The research, by a team from the City Leadership Academy, assessed the market and the effect of regulation on pricing. It found that inflation and demand were identified as the principal drivers, while house size, standard, utilities, and location set the levels. Annual rental increases, it found, had slowed from 28.76pc two years earlier to 20.58pc last year, a moderating trend. The authors of the study urged that keeping annual inflation below 10pc could steady rental growth at about 11.24pc, easing the need for heavier controls.

Officials of teh Bureau that is in charge of the city's Housing Development & Administration, led by Kidist Weldegiorgis, cite the study as the basis for the revised framework, arguing that the proposed adjustment of about 11.24pc rests on evidence rather than discretion. According to Kidist, the policy seeks to balance affordability for tenants with lessors' financial sustainability while preventing sharp increases, with renewal support from administrative structures meant to ensure compliance and reduce disputes.

Experts are divided over whether intervention is the right answer.

Nurahun Andargie (PhD), a lead researcher at the Addis Abeba Leadership Academy and a co-author of the study, firmly backs it, arguing that rental regulation is neither unusual nor unique to Ethiopia.

"Rental controls have cushioned households from steep increases in many countries, though the ceiling's success depends on one condition, keeping annual inflation below 10pc," he told Fortune, arguing that regulatory intervention is unavoidable for now. "If we allow landlords to set prices unchecked, the vast majority of people, particularly salaried workers, the middle class and the poor, will be pushed onto the streets."

Not everyone agrees. Atlaw Alemu (PhD), an economist at Addis Abeba University's Department of Business & Economics, questioned the case for regulatory intervention, arguing rents should be set by the market.

"The crisis comes from supply constraints rather than high prices, driven by soaring construction costs and the demolitions of the past two years that tightened an already limited supply," he said.

Atlaw would want to see a policy of fewer controls and a greater focus on replacing demolished housing, speeding up the delivery of affordable units, and expanding supply.

"Ultimately, this will end up harming both landlords and tenants alike," he said, criticising a development drive "tilted towards high-end projects beyond most residents' reach."

That double bind is embodied in Tewabech Hailu, 44, who rents out a one-bedroom condominium in the Bole Arabsa area for 8,500 Br while paying 4,000 Br for the house she lives in, property owner and tenant at once. She saw a government that believes the proposed adjustment is a "balanced rate that can cool the market", but does not reflect what owners face. With the city officials signalling rental increases should not top 11pc, uncertainty runs high, tenants bracing for higher charges, and lessors unclear how the policy will work.

Underneath sits a housing deficit estimated at more than one million units. Rapid urbanisation and household formation continue to widen the gap between demand and supply, according to studies by the Ethiopian Statistical Service and the United Nations. No national census has been held since 2007, when the Population & Housing Census recorded more than two million renters in Addis Abeba, over 1.2 million of whom were in privately rented homes. A 2016 review found that rental housing accounted for 54pc of urban residences nationwide and more than 61pc in the capital. By 2025, projections put at least 60pc of the city's households in rental arrangements as tenants or owners.

For Negash, any rise, even within the ceiling, bites.

"It will drain my pocket," he told Fortune.

Manalush Alemu, a veteran urban planner and former head of the Land & Development Bureau in Lideta District, echoed Atlaw while urging a longer view. Rather than administrative controls, she pressed the government to tackle the roots of the shortage by accelerating public housing, promoting satellite cities, and drawing private investment into housing through finance, serviced land, and incentives.

"The recent adjustment is unfair to both landlords and tenants," Manalush told Fortune. "The proposed adjustment would neither be fair nor sustainable. The government should act as a facilitator, not a price setter."

Manalush sees a capital that continues to attract migrants with its more robust infrastructure, security, and opportunities, while other centres cannot compete.

"If Ethiopia had several competitive urban centres, demand for housing in Addis Abeba would be lower," she said.

Excessive intervention, she warned, has historically discouraged investment and weakened the incentive to maintain property.

For now, the market sits where it began, between forces that pull against each other. Tsehay waits on her property for a decision that may or may not allow her to ask what her neighbours do. Negash waits in Lebu for one that could push a rise onto a budget with no more give. The system is still searching for an equilibrium between the market and the rules, without yet satisfying either side.

PUBLISHED ON Jul 04,2026 [ VOL 27 , NO 1366]