Urban infrastructure in Sub-Saharan Africa

Harnessing land values, housing and transport

Presented by: Abebe Zeluel Research by Tsigereda Tafisse, Brendon van Niekerk, Abebe Zuluel and Ian Palmer

21 July 2015

Addis Ababa: a case study on land leasing

Addis Ababa city

Skyscrapercity.com Ayyaantuu.com

3.5 million people

Population growing at 3.8% p.a.

Economy growing more than at

8.7% p.a.

One of the fast growing cities in the World

Inter-governmental relations

• Federal System

• Addis has special status as a City (along with one other)

• Substantial range of functions devolved to City:

• Water supply and sanitation

• Local roads

• Waste management

• Health care and education

• Also the right to collect and use same usually known national taxes: like , income tax and tax on certain businesses.

Land ownership in Ethiopia

• Until the advent of the military (Derg) regime in 1974, all land in Ethiopia was privately owned. The type of ownership was free hold. There are many forms

• Rest gult

• Permit

• Government land

• In 1974 the military regime transferred all ownership of land to government through Pro. No. 47/67, nationalization of urban land and extra houses

• The right of property holders limited

• They are not allowed to rent their house,

• To develop and invest more then 250,000

• To have title book for their house not for the land

• They are allowed to hold land in rent base

The existing land tenure • The military regime was overthrown by the Ethiopian

People’s Revolutionary Democratic Front (EPRDF) in 1991. This led to a review of the land tenure system with an emphasis on leasehold rights, although all land remained public/government property.

• urban land lease tenure system was introduced with the objective • to serve as value capture tool • Restoration of the market value for land and implement

the free market principles • To encourage efficient utilization of land and control

urban sprawl • encourage investment/easing investment capital

burden by making the land acquisition payment dispersed for long time

• to do away with speculation and urban sprawl • to increase the attractiveness of cities and property

value increment by reinvesting the revenue in public infrastructure

Land lease system

Allocation

Government office buildings, social services, government or self-help housing projects, places of worship, embassies and international organizations manufacturing industries and other projects that have national or regional significance.

Auction

All other property, including commercial and housing for higher income households.

Allocated at a ‘base price’ set

by the City or with no payament Allocated by auction.

Housing in the city

• Waiting list 900,000 households – not far off the existing size of the city.

• Currently the public housing process delivers 50,000 units a year; impressive but not enough.

• Housing Associations and Private Developers deliver another 10%.

• Housing backlog means 34% of housing supply is ‘informal’

Restructuring the city

• Urban renewal zone (inner city):

• Areas identified for renewal (mostly semi-formal housing owned by low to middle income people)

• Properties expropriated.

• Compensation rules set (excludes value of land)

• Households relocated to new housing in other parts of city

• Urban expansion zone (periphery of city): • Expropriation of rural land owned by farmers, with

compensation.

• Farmers also making informal arrangements

• Urban upgrading zone (transition city): as community based and individual developments projects

Casainchis - the first large renewal project

53% of area for residential; 23% commercial; remainder for green areas and social facilities

Difficult and time consuming compensation and relocation process; Revenue from land leasing not as much as needed.

Lideta – flagship City housing project

Lideta project

26 hectares of land. 58 condominium buildings constructed on the site. Apartments range from single room ‘studio’ units to 3 bed units.

Unit allocation and financing • Households who were displaced get priority. • Others have to enter a lottery to get a housing allocation. • Home owners are allocated units based on affordability criteria. • 20% deposit required with loan taken out with State Bank, at

subsidised rate.

Land lease results • Land lease raises 6% of overall revenue raised by

City. 9% of capital finance( this looks small partly because of the cash based accountings which is 20% of the newly and about 3% of the previously leased land. And the unusual revenue power given for Addis)

• Bids for auctioned land from US$ 500 up 1,500 per square metre.

• 60-94% of land is allocated at base price or provided free, not auctioned*/ for equity and development channelization/.

*Kaganova & Zeneba, 2014

Conclusions • More than any value capturing tool it enables to capture part

of the government created value

• Despite municipal revenues (especially fees and charges) percentage share decline ,tend to be eroded by inflation as they are specified in nominal terms, whereas lease is generating good amount of revenue/ in Addis,

• Encourage investment /It also has an innovative approach to property development centred on the land lease system

• By all this measures inline with the economic development of the country the city is growing fast

• The rate of development of Addis Ababa is impressive by any standards.

• The tax power given the City/ like VAT and income tax from non incorporated business/ a substantial revenue stream.

• During reestablishment of the City/1991 the city were in a position that cannot pay a salary for its employees /its revenue was less than 200 million Birr , but afterwards the city became s self financing vibrant city, progressively develop its infrastructure

The revenue trend in Addis Ababa

0.00

5000.00

10000.00

15000.00

20000.00

25000.00

30000.00

1992

(199

9/20

00)

1993

(200

0/20

01)

1994

(200

1/20

02)

1995

(200

2/20

03)

1996

(200

3/20

04)

1997

(200

4/20

05)

1998

(200

5/20

06)

1999

(200

6/20

07)

2000

(200

7/20

08)

2001

(200

8/20

09)

2002

(200

9/20

10)

2005

(201

0/20

11)

2004

(201

1/20

12)

2005

(201

2/20

13)

2006

(201

3/20

14)

2007

(201

4/20

15)

Mil

lio

ns

Revenues in Birr

Revenues in Birr

Conclusions • But the level of land supply is not responsive

enough to the demand • because of institutional limitation and more land

allocation for direct financial gains/ • which leads to insufficient land and housing

supply, on the one hand, and high prices on the other.

• There is arguments that the land allocated at the base or reduced price does not always go to targeted groups.

• The special condition of the lease system/ not indexed with new development gains/ and Non steady nature of the lease revenue, so property tax is envisaged to bridge the gap

Thank you

Urban infrastructure in Sub-Saharan Africa – harnessing land

values, housing and transport