Ethiopia’s escalating housing shortage has reached a critical juncture, prompting lawmakers and experts to call for the urgent establishment and implementation of a national housing bank. The proposed institution is seen as a vital step toward providing sustainable financial solutions for millions of Ethiopians struggling to access affordable homes.
With Ethiopia’s urban population projected to exceed 42 million by 2037, the demand for new housing is staggering. Estimates indicate the country needs to build nearly 486,000 urban homes annually from 2025 to 2035 to keep pace with population growth and urbanization. Yet, the current supply falls far short, with a backlog of more than 1.2 million homes in Addis Ababa alone and an annual nationwide supply that meets only a fraction of the need.
The housing deficit has led to the proliferation of informal settlements, overcrowding, and substandard living conditions, particularly in urban centers. More than 70% of Ethiopia’s housing stock is considered in need of complete replacement or significant upgrades. High land and construction costs, coupled with limited access to affordable finance, further exacerbate the crisis.
The urgency of the situation was underscored during the Urban and Infrastructure Development Ministry’s nine-month budget performance report to the House of Peoples’ Representatives. Members of parliament’s standing committee on urban, infrastructure, and transport affairs stressed that a dedicated housing bank—similar to development banks seen in other countries—would play a crucial role in providing long-term, low-interest loans for home construction.
Deputy Chairperson Eshetu Temesgen warned that without such an institution, it would be difficult to find a sustainable and effective solution to the housing shortage. “The establishment of a national housing bank is not just necessary, it is urgent,” he said, urging the Ministry of Urban and Infrastructure to prioritize the issue and move quickly toward implementation.
While a handful of private sector institutions and cooperatives offer limited housing finance, experts say these are insufficient to meet the needs of Ethiopia’s large and growing population. More than half of housing purchases are financed informally through relatives, friends, and savings groups, with only about 23% of the market relying on mortgages. High interest rates, low incomes, and regulatory barriers have kept mortgage uptake low, and the proportion of bank loans directed to housing remains small.
The government’s Integrated Housing Development Programme (IHDP) has provided some relief, supplying 280,000 subsidized condominium units between 2004 and 2016. However, this meets just 2% of market demand, and surging prices have put even these units out of reach for many low-income families.
Urban and Infrastructure Minister Chaltu Sani acknowledged the scale of the problem, noting that 37,314 homes were built in the past nine months through direct government and regional funding, as well as initiatives led by Prime Minister Abiy Ahmed. In the private sector, 210,184 of a planned 252,656 homes have been completed, representing an 83% completion rate. However, experts agree these achievements are still insufficient given the country’s rapid population growth and rising rates of homelessness.
To address the financial barriers, the government allocated 6.6 billion birr for public housing development and 9.77 billion birr for the private sector in the past nine months. A draft legal framework for improving home financing has been developed, and calls are mounting for its immediate implementation alongside the creation of a national housing bank.
Beyond financing, land supply issues continue to hinder housing development. Delays in land allocation, low prioritization of rural housing construction, and compensation disputes related to infrastructure projects have all slowed progress. The standing committee emphasized that without government leadership and targeted subsidies, the housing crisis will remain unresolved.
Analysts and industry observers say the establishment of a national housing bank could be transformative for Ethiopia’s housing sector. By providing long-term, affordable loans and supporting cooperative societies, government employees, and private individuals, such a bank could help bridge the gap between supply and demand and reduce reliance on informal financing.
“Affordable financing is the missing link in Ethiopia’s housing market,” said a local housing expert. “A dedicated housing bank would make it possible for more Ethiopians—especially low- and middle-income families—to own decent homes.”
