Impact of the new property tax policy on affordable housing in Addis Ababa


Property tax is a tax that is imposed primarily on real estate properties such as land, buildings and other structures.  In some countries the tax is also imposed on business and farm equipment and inventories.1.  Property tax is the source of funding for local government, contribute to 1.1% of GDP in high-income countries in comparison to just 0.3 and 0.6% of GDP in low- and middle-income countries respectively2.

The idea of taxing property in Ethiopia, however, dates back to 19423, Ethiopia currently lacks explicit property tax regulations and property tax collection trend was minimum, leading the government to issue a new property tax proclamation since January 2023. In line with the new regulation, the authority to collect property taxes was given to regional and city administrations.

To date, the revenues generated through the property tax (previously known as roof tax, city house tax) system are very limited, only 7% of the municipality tax revenue in Addis Ababa4. To increase the sector’s income, Addis Ababa city administration made decisions to execute new property tax levying and collection systems based on new research conducted by the city government. In the new property tax rate study three grades of land are categorized and the properties are grouped as residential and commercial. Each residential and commercial properties are again categorized into three based on the materials they are made of it namely a)wood and mud or b)condominium or c)block villa, apartment or similar buildings. Accordingly, the rent/sqm is identified for each categories i.e. with respect to grade order from 1 to 3, residential made of wood and mud (214, 156 & 148 ETB), condominium (247, 182 &161 ETB), block villa and apartment (361, 317 & 267 ETB) while for commercial made of wood and mud (444, 417 & 282 ETB), Condominium (493, 428 & 398 ETB), block villa, apartment and related building (632, 542 & 417 ETB). The tax rate is calculated based on the annual rental value. Hence the rental value up to

·        ETB 600, 1% tax rate applies,

·        600-1200, 1.5%,

·        1200-1800, 2%,

·        1800-2400,2.5%,

·        2400-3600,3%,

·        3600-4800,3.5%,

·        4800-6000, 4%, and

·        above 6000,4.5%.

Thus, the new property tax is calculated as multiplication of rental rate, tax rate, area of property and twelve (months of the year).

Even though, the concept behind and the decision made by the City Administration is taken as positive by different bodies, there are still cautions. It is essential for the City Administration to thoroughly examine the potential impact of the tax on property owners who may struggle to afford the additional financial burden.

Rising property rental prices in Addis Ababa can indeed contribute to further increases in rent if new property taxation is imposed. Landlords may pass on the tax expenses to tenants through higher rental rates.

In order to address these cautions, the City Administration should consider conducting comprehensive research and analysis on the potential impact of property taxation.As it is essential for the City Administration to strike a balance between revenue generation, affordability, and economic growth while carefully considering the potential consequences and alternative measures to address any concerns raised.

1.        McLure, C. E. and Harriss, . C. Lowell., 2023. property taxEncyclopedia Britannica.

2.        Wold bank, 2020. Property tax diagnostic manual

3.        The Historical Development of Real Property Tax Laws in Ethiopia: A Critical Review of The Laws.

4.        International growth center (IGC),2021

#AddisAbabaRentFreeze #TenantProtection #HousingChallenges #CityAdministrationDecree #RentControl #ResidentSafeguard #HousingStability #InflationImpact


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