0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

10

20

30

40

50

60

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

203

6

203

7

% urban

Urban population (millions)

The lack of sufficient supply of affordable, serviced land contributes to high level of slum housing

◦ 78% of urban HH living in slums (MoFED)

Source: World Bank Enterprise Surveys, various years.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

% of surveyed firms who rate access to land as a major or severe constraint to doing business

0%

5%

10%

15%

20%

25%

30%

35%

40%

Ma

nha

tta

n

Ho

ng

Kon

g

Barc

elo

na

Pari

s

Am

ste

rda

m

Ath

ens

Gua

dala

jara

Me

delli

n

Bru

ssels

To

kyo

Hels

inki

Beiji

ng

Cope

nha

gen

St. P

ete

rsburg

Sin

ga

po

re

Bra

zili

a

Auckla

nd

Ban

gkok

Kig

ali

Chan

dig

arn

Kolk

ata

Abu

ja

Oua

gad

oug

ou

Dakar

Add

is A

ba

ba

Geo

rge

tow

n

Nairob

i

Accra

Yera

va

n

Ban

gui

Urban land allocated to streets

Source: UN HABITAT, “The relevance of street patterns and public space in urban areas,” Working Paper (April 2013)

The Government of Ethiopia is

the sole supplier of formal

urban land

◦ Mostly through allocations, which

are inefficient, discretionary and

not transparent

◦ Plus some auctions (<5%)

6.3%

3.6%

2.9%

2.3%

0% 2% 4% 6% 8% 10%

Addis Ababa

Mekelle

Bahir Dar

Kombolcha

Auctions as percent of total land allocations

Source: Kaganova and Zenebe (2014).

The pricing mechanisms used in land allocations are not financially sustainable, because they do

not recover costs.

◦ Cost of supplying urban land = compensation for expropriation + provision of required infrastructure services

◦ In all cities there is a significant gap between costs to supply land and revenues from land allocation. The gap is

paid for out of local government budgets, and is not affordable.

Limited local institutional capacity

There are three key consequences of the (i) cost recovery gap and (ii) limited institutional capacity

at the local level:

◦ Insufficient supply of formal urban land

◦ Insufficient physical infrastructure coverage and basic service provision

◦ Low density, spatially fragmented development

Private holders of urban land receive large windfall subsidies

1. Insufficient supply of formal, serviced urban land

◦ Up to 20 bidders per auction plot

◦ Informal settlements account for up to 80% housing in some urban areas

2. Insufficient infrastructure coverage and basic service provision

3. Lack of incentives for high utilization of formal land, resulting in low-density, spatially

fragmented development and limited mixed use development

◦ Exacerbated by Urban Land Development and Management Policy and Strategy requiring 60%

of land allocation for public uses, which is incorporated in the Addis Ababa draft masterplan

• falling density of

built-up areas

• larger urban extent

• fragmented

development

2.1

2.7

3.2

4.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1994 2007 2014 2028

millionsPopulation

180215

325 406

371

0

100

200

300

400

500

600

700

800

900

1995 2006 2013 2028

square kilometers

Land Area

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Land area (hectares) within a 1-kim wide ring

Distance from the city center (km)

Available: Akaki - Kalit

Available: Kolfe - Keran

Available: Addis Ketema

Available: Nefas Silk

Available: Gulele

Available: Yeka

Available: Bole

Available: Lideta

Available: Arada

Available: Kirkos

Built-up: all woreda

Source: United Nations, “Millennium Development Goals Indicators” (2014)

EGYPT

Universally practiced land allocation at low administrative prices or for free.

For example, serviced industrial land in two new towns:

◦ Administrative price (at which land is sold): LE 95/m2

◦ Infrastructure cost alone: LE 180/m2

◦ Market value: LE 400-500/m2

1. For each m2, the government must cover the cost gap of LE 85 / m2

2. Forgoing at least 300-400/m2 in revenues

Sources: Wahba et al. (2005).

MUMBAI PORT TRUST, INDIA

The Mumbai Port Trust holds 809 hectares of land in a prime location.

◦ Only 52% is used for port operations

◦ The rest is either vacant or abandoned, or leased out on at hoc basis, often at rental rates that

are outdated and dramatically below the market level.

◦ The Trust’s land operations are not transparent.

If this land were managed for its economic value, it could help finance important parts of

Mumbai’s needed infrastructure.

◦ 200 hectares alone have a value of roughly US $25 billion

Sources: Peterson and Thawakar (2013)

ULAANBAATAR, MONGOLIA

About 69 percent of the entire built up area of low-density “ger” (individual homes) area

development

Plots for individual housing average, 580 m2 of land, and were often allocated without

infrastructure or enough space for public uses.

The cost of providing modern infrastructure is prohibitively high, especially since land

was allocated for free and practically is not taxed

Sources: Brhane at al. (2015)

TURKEY

Tenure granted to squatters on urban public land, prompting investment in dwellings and infrastructure

Private sector development

Subsidies to localities for expanding basic services

Market-based pricing for municipal services, resulting in private investment and partnerships

CHINA

Diversified prices for urban land

Competitive allocation of urban land

Reform of rural-urban land tenure on policy agenda

POLAND

Urban planners must estimate costs of infrastructure for urban development plans

Sources: World Bank, “Turkey Urbanization Review: Rise of the Anatolian Tigers” (2014); World Bank, “Urban China” (2014); Kaganova and Buczek (2010)

EXPROPRIATION

• In all countries, to varying degrees, for very specific and narrow public purposes only

VOLUNTARY PURCHASE

(the preferred method)

•Eastern Europe

•Canada

•Sweden

•United States

LAND READJUSTMENT

•Australia

•France

•Germany

•Hong Kong SAR, China

• India

• Israel

•Japan

•Netherlands

•Republic of Korea

•Taiwan, China

The acute housing deficit in urban areas in Ethiopia is characterized by large number of households living in very poor conditions:◦ very poor quality structures (78% in slums according to MoFED, 66% with dirt floors

according to CSA)

◦ lack of basic infrastructure

There is also a high share of urban households living in housing not recognized by the government

The majority of urban households are renters, mostly from private individuals

1. Low household incomes

2. Insufficient supply of serviced land

3. Unrealistically high and costly standards

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

203

6

203

7

Tigray (avg 25k)

Afar (avg 11k)

Amhara (avg 94k)

Oromia (avg 149k)

Somali (avg 4k)

BG (avg 10k)

SNNP (avg 55k)

Gambella (avg 3k)

Harari (avg 3k)

AA (avg 21k)

Dire Dawa (avg 6k)

New urban households by region

Government of Ethiopia acknowledges this important issue◦ Local governments: Land allocation for housing

◦ Federal response: Integrated Housing Development Program

Government programs have resulted in an increase in the total housing supply in urban areas, and improved access to housing

IHDP provides large subsidies to a small portion of the urban population

◦ Does not address widespread housing needs, particularly of low income groups; only meets

10% of estimated need (40k units per annum vs. 400k needed)

◦ Financially unsustainable for government (estimated 50% subsidy per unit)

Local government land allocations:

◦ Land lease revenues are far below cost of providing serviced land, which results in a significant

undersupply of residential land

◦ Oriented only to individual home ownership, while low income people can only afford rental

housing

◦ Limited local government capacity to deliver land

In sum, current policies and programs do not adequately address urban housing needs.

Ren

t

Ren

t

40

/60

40

/60

40

/60

40

/60

20

/80

20

/80

20

/80

10

/90

0

100

200

300

400

500

600

700

800

900

1,000

Kebele Private Rental Studio 1BR 2 BR 3 BR

Mo

nth

ly P

aym

en

t (E

TB

)

Rent 40/60 20/80 10/90

30th

50th

Max. affordability

threshold by

HH percentile*

10th

*Based on 30%

pmt-income ratio

CHINA

“Urban villages” built informally by former farmers, as a market response to the need for affordable rental housing

The duality of rural/urban land rights is considered “the most damaging structural flaw in China’s entire housing and urban system.” (Renaud, 2014)

GREATER CAIRO, EGYPT

At least 63 percent of population lives in informal settlements

The housing remains informal, but over time utility authorities provide basic services

BALKAN COUNTRIES

Informal housing accounts for 25% (Croatia) to 40% (Albania, Serbia) of total stock.

Informal construction was caused mainly by:

◦ Effective absence of urban planning and construction permit systems

◦ Over-demanding land use and building norms

Sources: Yan Song (2007); Urban China (2014); Renaud (2014); Sims (2010); NALAS (2011).

VIETNAM

Government “accepts” customary and affordable housing development

• Tolerance of small lot sizes, trading location for floor space (as small as 25m2 in many cases)

• Permissive attitude toward floor-to-area ratio increases

• Incorporating and densifying peri-urban villages into the urban fabric.

• Investment in primary/trunk infrastructure near these urbanizing villages, as communities invest in incremental improvements in the village

Innovative small-scale private housing construction and rental sector

• Dynamism of efficient and entrepreneurial low-cost, self-help, small-contractor construction.

Source: World Bank, “Chapter 3: Urban Expansion and Spatial Development in Vietnam’s Cities” in Vietnam Urbanization Review (2011).

Land management policies and systems

Substantially simplify the urban land leasing system, with the purpose of making lease rights fully and freely tradable, investment-friendly for private holders, and easily manageable for local governments

Substantially modify and modernize the system of urban spatial and land use planning, along with building standards for small-scale housing

Establish a system for registering property rights of urban holders (a legal cadaster) developed within a unified minimum set of requirements and made simple enough to secure long-term operational sustainability

Better coordinate infrastructure planning and delivery with land use planning

Recognize the market value of land and help create a market-based land valuation and compensation system

Institutional

Establish an inter-ministerial task force to bring together urban and rural ministries

and different levels of government to define the policy principles of land management

and land administration reform, as well as an action plan for implementation

Public land use

Inventory/audit government used land, identify under-used and surplus land, and

reallocate it for development and redevelopment

Moderate land consumption by government entities

Expropriation

Introduce incentives to reduce the expropriation of rural land for urban use and the informal development

of land

Reduce expropriation to bare minimum needed

Revise rural and urban land rights in a way that harmonizes them and makes rural rights legally convertible

into urban rights without expropriation, particularly in territories subject to rural-to-urban conversion

Clarify and narrow justifications for government expropriation of land; in particular, determine in laws and

regulations what constitutes a valid public purpose for which land can be expropriated, and improve the

procedural elements

Land allocation mechanisms

Use multiple land allocation mechanisms and diversified pricing of land to increase cost recovery overall and reduce costs to government

Make land rights fully marketable and transferable, even if the land is owned by the state

Land supply for private development

Engage private sector in land development, including voluntary purchases of land from legitimate holders

Introduce rules that would allow legal holders of land in cities and at the periphery to initiate and benefit

from development (or redevelopment) of their land, within established guidelines

Programs such as land readjustment or land pooling have been shown in other places to be effective for

increasing private sector involvement in land redevelopment

Capacity building

Start and continue capacity building at local governments and local consulting entities on land economics,

land management, and urban planning

Encourage and support local experiments, and publicize successful experiences

Professional associations or by promoting advantages of multiple listing services

Street

Open auction

Limited auction

At cost-recovery

Below cost-recovery

Public use & open space

Diagram of urban blocks by allocation type

Housing

Independent technical evaluation of IHDP

Develop a sound housing policy to support and enable private delivery of affordable

housing at scale, and the private rental sector

Focus available fiscal resources on provision of land and infrastructure for low-income

groups and informal settlement upgrading

Improve security of tenure in informal settlements

Support affordable housing delivery and household investment in dwellings through relaxing

housing standards and allowing informal housing consolidation