House rent is simply unbearable

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“I don’t think there is a sense in the Addis City Administration or the country that the Prime Minister or other high concerned official gave priority and significant leadership to reducing the house rent,” wrote a columnist in a Amharic newspaper. Perhaps the city’s biggest mistake was failing, the columnist added, to connect the highly inflated and steady increase of house rent with that of inflation.
What the columnist wrote epitomizes the picture of the condition of the current house rent.
“It is common to increase the rent every two months without giving prior notice. Sometimes the owner of the house comes and gives the rent increase order in the middle of the month and you pay the difference at the end of the month. I faced both in the last 18 months,” said Abrham Abebe, a private employee with a monthly salary of 3,000 birr. He pays half of what he earns for the house rent that has two small classes with a common latrine and shower. Of course, he adds, the house is clean and safe.
Most Addis Ababa residents are desperate due to the steady rise of house rent. Their feeling is more or less identical.  Indalkachew Habtamu, a recent Addis Ababa University Mechanical Engineering graduate complains that getting a reasonably good house is difficult in Addis. The rent is impossible to cover. “We have to pay for three or six months in advance. This is a very cruel way of treating us. I know that no one gives any free lunches this time. But paying up to 10,000 birr in advance for a house you have not yet lived is just crazy,” Indalkachew said.
In his view making profit margins that are large enough is what is expected from any business venture. But the owners of the houses are not conducting business in a healthy way by making arbitrary rent increases.  What can we do? He asked. There is no responsible body that controls the free upward movement, he complained.
Abere Gebre-Michael, a daily labourer with a monthly income of 800 birr laments, “I can’t go with my plan of marrying my girlfriend last November. That was simply because we can’t afford the house rent. I live in a small 2 x 2 shabby room for 350 birr. It has no ceiling and the floor is dust.  I don’t have any thing except my bed and box. If she comes in how do we live in this room? We can’t afford to rent a house with two rooms. So we cancelled our plan,” he said.
If there is one man who expressed satisfaction is Daghachew Hailu. He rented a house 15 years ago from a family at Shola market. “I have been here for the last 15 years. When I rented I was single. A year later I was married. My first son is now 13 years old the second daughter is 11. I pay for the house rent 500 birr. So far the owners increased two times, they rose from 400 to 500 birr. You know it is rarely possible to get these kind of owners,” he said.
People who rented from the government or Kebele are comfortable. The rent is just a token, like from 20 birr up to 100 for the Kebele houses and from 100 up to 9,000 for the houses under the Government Housing Agency. The 9,000 birr is for CMC houses originally built for the diplomatic Corp at the time of the former regime. In all the Kebele and government houses there is no harassment, no increase of rent time and again. Almost all of them are comfortable with the condition they live in. Some of them, in fact, benefit by renting one or two classes because they actually make 10 or twenty times what they pay in rent to the kebele by re-renting the rooms.  
Studios at the condominium now cost up to 1,500 birr depending on the area. Condos with one or two bedrooms cost up to 2,500 birr. Condos in the city centre like the Balderas, Kebena, Arat Kilo or Piazza are extremely expensive. Their rent goes up to 5,000 birr. Condos at Asko, Jemo, Kaliti are relatively cheaper than those located in the center.
One person described their personal experience with rental increases:
“I was paying 1,400 birr for two rooms in a servant quarters with an outside shower and toilet in maganagna.  When the price was raised to 3,500 birr I moved outside the city to Jemo and got a well maintained two bedroom condo for 1,500 birr. However the price rose to 2,500 within a matter of months. My job forced me to relocate to the city and when I went to look for places inside the city studios were going from 1,600-2,000; one bedrooms were between 2,500 and 3,000 and two bedrooms started at 3,000 and went over four if they were high quality. Competition was also fierce.  Several times I would decide on a place and go to give the owner  one month rent as a deposit only to have another person arrive right before me with three or even six month’s rent and sometimes with more than the asking price,” they said.
Despite all the fact that money has been pouring in to the economy, it is true that people could not withstand with house rent increase. More than 4.76 billion birr has been pumped in to the salaries of the government employees this year. The government wage bill went up from 15.7 billion birr to 20.46 billion birr after January 2011.
With the increase of the demand there has also been a new trend in the housing industry. In 1992 Major Tariku Desalegn joined the thousands of other Addis house owners struggling to take part in the Addis house rent boom. His location at Hayhulet was perfect for the house rent. He built an additional 10 rooms on his 500Km of land. By then the taxation was relaxed as the regime was new. In 1998 Tariku grew the business by constructing a ground plus five building with loans from the private bank. Tariku is really the lucky one. He practically owns a debt-free five story building. “I am still in the game. But this time, though the business is pretty excellent, it is difficult to work with the tax authority. So now I decided to fund a new business hoping to profit from the highly expanding Internet café. This is a global dotcom boom that entered in Addis recently,” he commented.
Like Tariku many people were engaged in this sector in the last 20 or so years. Construction of houses for rent has also dramatically increased. Wide ranging real estate construction has taken place. But the demand remains high.  There are many factors for this. The first is the explosion of population in Addis Ababa. The second is the demolition of slums in the city. The displaced residents have no option except renting a house at an exorbitant price. This is just to get a shelter until they get their own condos or house constructed on a land given by the city administration for compensation.
The third factor is connected with inflation. When life becomes hard, house owners try to off balance by increasing their income, which is an additional cost for the tenant. The other important factor is the taxing system. House owners are entitled to pay up to 35 percent of their income for tax. It was in fact 50 percent before it was reduced to 35 some 8 years ago. This is indeed a huge tax imposition.