Integrated Housing and Development Program (IHDP)
Ministry of Urban Development Housing and Construction

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Since 2005 the government of the Federal Democratic Republic of Ethiopia has been implementing a comprehensive housing program. The initiative was a response to the severe housing shortage in the major urban centers, amounting about 1,000,000 units. Besides due to the lack of proper maintenance, there was not only a lack of housing in terms of quantity but also the available units were largely dilapidated (ca. 50% of the national housing stock), which means that a large percentage of the urban population had to live in overcrowded and/ or as slums categorized neighborhoods. Furthermore, even though the government tried to enhance the production of housing units by the provision of land to real estate developers and housing cooperatives, it soon became obvious, that the construction sector was completely underdeveloped and unable to produce housing at scale, especially not as desired for the urban poor. In addition, there were no financing institutions in place which would enable investments into affordable housing. Finally, unemployment and poverty were striking problems during this time. The government decided to intervene timely to address this temporary market failure by designing a comprehensive public sector intervention. The program had to address all of the interlinked issues and to maximize positive side effects to be triggered by the investment of public resources. The Integrated Housing Development Program (IHDP) therefore includes not only the production of housing units and new residential sites but additionally aims at: - employment creation especially the development of Micro and Small Enterprises (MSE), - poverty reduction through home ownership, cross-subsidies, job creation and special support of female headed households, - slum reduction and the development of completive, modern towns and cities as well as - Financial, technical, human resources and institutional capacity development.

B. Strategic Approach

 2. What was the solution?
The problem was first addressed by the former Ministry of Federal Affairs, initiating a Low-Cost-Housing Project starting from 1999. The focus of this project was to introduce and develop a construction technology, which would reduce construction cost and time, allow labor intensive construction without the need of sophisticated machineries and suitable for the involvement of less qualified laborers and Micro and Small Scale Enterprises (MSE). In this way the production of housing units was planned to be embedded into a comprehensive intervention, linking production of housing units with the active development of the construction sector, the redevelopment of slum areas and the reduction of poverty. Over the course of the project, several pilot buildings were realized in different Ethiopian cities. Later, the Addis Ababa City Administration initiated a pilot project with 5,242 units in Addis Ababa. Following this success story, in 2006 the project was up-scaled by the newly formed Ministry of Works and Urban Development (now Ministry of Urban Development, Housing and Construction) and a national Integrated Housing Development Program (IHDP) launched in 56 Ethiopian cities. The initial goal of the IHDP was to construct 400,000 housing units, create 200,000 jobs, promote the development of 10,000 micro - and small - enterprises, enhance the capacity of the construction sector, renew inner city slum areas, and promote home ownership for low and middle income households. Up to today, the program managed to deliver 171,089 housing units for low and middle income households. The other major achievement of the program is in the sphere of creation of job opportunities. Until 2013/14 a total of 534,440 job opportunities have been created through the IHDP.

 3. How did the initiative solve the problem and improve people’s lives?
The IHDP required very strong decision making. Comparable approaches in accord with the existing and unique socio-economic environment were not available and therefore the development of local system became necessary. To create a maximum benefit out of the public investments a real comprehensive, holistic and integrated system was designed. In addition, the government committed itself to prioritize the investment of public resources and allocated a significant amount of budget and subsidies for the IHDP. The decision for a public sector led initiative came along with the development of new public institutions, like the Housing Development Project Offices, MSE development or the bank based saving schemes. It also addressed cultural issues like shift to urban lifestyles in multi-storey housing and enhanced individual saving culture. The program was open to be continuously improved and therefore reacts to the ever changing environment.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
Following the development of the low cost housing projects of Addis Ababa and the national Integrated Housing Development Program (IHDP), the government approved and translated into action a stand-alone comprehensive national Housing Policy and Strategy Framework. The implementation of the program required: - The establishment of Housing Development Project Offices - The development of the legal framework e.g. Condominium Proclamations, regulations and directives - The development of a scheme for the establishment and capacity building of Micro- and Small Enterprises (MSE) - The development and implementation of capacity building schemes for contractors and consultants. - Development of finance schemes e.g. municipal and regional bonds, bank based saving schemes, cross-subsidy schemes. - Housing transfer systems/ processes. - Land preparation and relocation schemes. - Bulk purchasing of construction materials and machineries. In 2013 the IHDP underwent a major change which was the shift towards saving based and income diversified programs. The 10/90 program has its target largely low-income residents (about 22,234 Registrants), primarily civil servants, earning a monthly income below Birr 1200 (US$59). Low-icome households are required to save 10 percent of the purchase price for two years, realizing 5 percent interest on their savings. The remaining 90 percent of the purchase price is then paid back over 25 years at a rate of 9.5 percent. The 20/80 scheme targets the lower middle income households (about 785,148 registrants). Applicants in this scheme have to deposit 20 percent the estimated total housing cost and then a 20 year loan is provided for the remaining 80 percent of the purchase price at a rate of 9.5 percent. Similarly the 40/60 program is for middle and high-income earning households (about 164,687 registrants) who should save 40 percent upfront over five years, realizing a 5.5 percent interest on savings. For the remaining 60 percent of the purchase price, they can get loan which they will have to repay over 17 years at a rate of 7.5 percent. And lastly, the Housing Cooperative scheme targets (about 2,392 registrants) the lower-high income groups who are expected to cover 100 percent of construction costs.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
Due to the complexity of the IHDP, the implementation involved a wide range of stakeholders at the federal, regional and urban levels. The federal levels are the Ministry of Urban Development, Housing and Construction (MUDHCo), the Ethiopian National Bank and the Commercial Bank of Ethiopia. The first two developed necessary policies, programs and projects, facilitate bulk purchase, capacity building and financing schemes. The Commercial Bank of Ethiopia offered the individual loan and saving schemes. Ethiopian Revenue and Customs Authority have also a stake in facilitating import duty and taxes related to construction materials and machineries. At regional level main stakeholders are the Regional Bureaus of Urban Development, Housing and Construction and Regional Housing development Agencies. Their role is to ensure that the IHDP is properly implemented in their respective regions. The city administrations are responsible for the local implementation like land and construction management, infrastructure development, transfer and administration of condominiums and their owners’ associations. Infrastructure providing institutions are working in coordination and integration with the city administrations. The private sector is involved as contractors, consultants and the newly established Micro and small enterprises. The involved civil society is only comprised of the beneficiaries in terms of housing provision and job creation but also the academic institutions which were largely involved to provide technical advice.
 6. How was the strategy implemented and what resources were mobilized?
The IHDP is largely pre-financed by individual bank loans from the Commercial Bank of Ethiopia and public budget. Up to today, the Ethiopian National Bank purchased bonds from the regional states and the cities of Addis Ababa and Dire Dawa worth around 1.34 billion USD (26.8 billion ETB) to facilitate the implementation of the IHDP. The Ethiopian government and the cities subsidize the IHDP through: - the provision of land (compensation and other land preparation costs), -the financing of the infrastructure cost (e.g. Main line for electricity, water and sewerage, main and access roads, etc ) - the financing of the management of the program e.g. Housing Development Project Offices, Construction Management, - Value Added Tax (VAT) exemptions and - Exemption of import duty. In addition, capacity enhancement programs were provided for contractors, consultants and MSE on a large scale. The condominium units are purchased by individual households, who are required to settle a down payment, the amount varying on the type of the program, prior to handing over of the units and pay the remaining amount to the Commercial Bank which is providing the mid-term mortgages. The costs charged to the citizen equals the pure construction costs (cost of construction materials, payment for contractors and consultants). The different transfer to the citizen includes cross-subsidy schemes. Larger units’ subsidy smaller unit since they are sold for a higher per square meter prices than the Studios and one-bedroom units. In addition, there is a significant financial gain from the marketing of the commercial units (sold via closed auctions). Since the diversification of the sub-programs in 2013 (2006 Ethiopian calendar), the financing has shifted towards the mobilization of private savings. For all programs the registration requires the enrolment to a bank saving scheme. This has created a large scale revolving fund.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
The development of a new comprehensive system which included the integration of newly established institutions, new business processes, new professions and is a tremendous success story of public sector intervention. Based on confident local innovations, strong decision making and the brave to implement intermediated solutions were at the same time constantly reacting to the changing environment. With this system the IHDP: - Developed new residential areas with more than 170,000 condominium units already transferred to the citizens. The sites include all necessary technical and social infrastructure facilities. As far as location and the status is concerned, in Addis Ababa while 108,482 units are finalized , about 66,763 units are under construction. Similarly in Diredawa and other regional states 62,607 units are finalized , about 6,587 units are under construction. - Created more than 530,000 jobs and provided respective capacity development. Out of this more than 34,000 are in public sector, 1,300 are consultants, 318,000 are contractors and more than 179, 000 are in micro and small scale - During the first phases the IHDP develop vacant plots within the city and urban extension areas, but recently included the redevelopment of urban slums. On three inner-city sites comprehensive and integrated urban renewal projects, which included the construction of units for 5,356 households were successfully implemented. - Development of the construction industry e.g. increased availability of construction machineries, wider range of available construction technologies, specifically trained labor force, higher graded contractors, MSEs and consultancy companies. - Introduced schemes for individual saving for housing.

 8. What were the most successful outputs and why was the initiative effective?
Various monitoring and evaluation instruments such as proclamations, regulations, directives and standards, etc., had been developed and maintained by stakeholders involved in the program. The IHDP goals have been included as part of the national five-years Growth and Transformation Plan (GTP), so that at each level of the federal and regional government the planning implementation, reporting, monitoring and evaluation would be carried out by specified time. A steering committee, composed of the Bureau Heads of the federal and regional housing development office and representatives from consulting firms was created to undertake the overall follow up of the implementation of the program. Later, a Board of Governors containing all members of the former steering committee had taken over the role. The Housing Development Project Office which assumed full management of the program has to provide different periodical reports (monthly, quarterly and annually) to the board of director. The program involves periodical monitoring and evaluation process whether the goals and objectives are met against the standards set, such as design, finance modalities, quality; target groups etc. while the construction quality control management is outsourced to consultants.

 9. What were the main obstacles encountered and how were they overcome?
1) Lack of capacities: Both in the private and public sector particularly in terms of knowledge, skills, experiences and institutional arrangements and systems. These resulted in an extended period of construction and an increase in the overall construction costs that in turn leads to the escalated price and low quality of the housing units. Of course in order to address these issues that capacity development in terms of creating workable environment training of contractors, consultants, MSE and the implementing staff, implementing modern construction management system and kaizen management had been implemented. 2) The need but lack of available financial resources: As the program requires huge amount of budget, it created a challenge for city mayors to finance all the expenses of the program. So it was addressed by issuing bonds and has got priorities on federal, regional and local level and providing respective public finance. Furthermore, the financing schemes are adjusted to the developments e.g. resulting in the introduction of the saving schemes. 3) Excess demand: The demand still exceeds the supply capacities, especially with regard to the construction capacities for infrastructure and housing units. It is therefore planned to enhance the involvement of the private sector, not only locally but also internationally. 4) Scarcity of land: Especially in Addis Ababa, new architectural and urban designs with higher densities were developed (G+9 for the 40/60 scheme and G+12 and above for the 20/80 scheme). 5) Construction costs are increasing: The challenges of affordability and addressing different income groups especially for the low income groups. This was addressed by the development of the so-called 10/90 sub-program which requires only a 10% down payment of the construction costs. The remaining 90% are covered through a long-term loan. Construction costs are also minimalized by the application of very cost-efficient designs.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
With the IHDP the public sector proved its ability to design and implement an initiative that required local innovation, strong decision making and very committed stakeholders. The trust developed during the first years of the program is reflected in the high number of registered clients for the new housing sub-programs and obligatory saving schemes (ca. 1 million in Addis Ababa). Therefore, besides the obvious and visible benefits of housing supply, slum reduction, job creation, poverty reduction, development of a saving culture and the development of the construction sector has strengthened the confidence of the involved public sector stakeholders as well as its reputation with the citizens. The introduction of bank-based saving schemes mobilized around 600 million USD (12 billion ETB) in only 12 months. This equals an increase in bank based savings from 9 to 21%. The jobs created directly with the support of the IHDPadditionally triggered a multiplying effect The successful instruments of the MSE development schemes have already been transferred to other sectors e.g. agriculture and service sectors.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The IHDP has fostered several sustainable developments. This includes the provision of affordable housing at sites which are linked with public transport, provide social infrastructure locally, mix different income groups and provide facilities for income generating activities. Today there are several different housing sub-programs which are tailored to the capacities and needs of specific target groups. The development of affordable financing schemes and architectural/ urban design solutions is a continuous process, which aims at making best possible use of available resources and development potentials. Many MSE established under the program managed to lift their members out of extreme poverty, established themselves in a way to now produce for the private market and grew to be larger enterprises. Several specific tools developed under the IHDP are transferable to countries with similar challenges or to other sectors of the Ethiopian economy e.g. the principles of the MSE development scheme. Nevertheless they will need to be adjusted to the specific local requirements. Several countries have voiced their interest to establish partnerships with Ethiopian stakeholders in order to learn from the experiences of the IHDP.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
Successful local solutions require development of local tailor-made innovations but also the courage for decision making which allows the implementation of a continuous improvement process. In the case of the IHDP the decision for the ambitious targets required at first substantial public investments. A very specific lesson learned is the importance of enhancing the integration of the planning and construction of different infrastructures. At first it was anticipated that the existing system would be able to complement the activities of the IHDP. This was not the case. As a result a specific institution for the future integration infrastructures is under development. Data management remains a challenge which will have to be addressed in future. The housing sector will stay one of the foci of the development efforts of the Ethiopian government. By now the capacities of the construction industry have been significantly improved. In future the government will more and more retain from much of its functions and strengthen the involvement of the private sector. Upcoming solutions will have to specifically address the following challenges: - Ensuring access to housing for the very poor and poor households while more involving the private sector; - Implementing sustainable land management and marketing for inner city areas; - Ensuring the success urban redevelopment projects which involve extensive planning, participation activities; - Enhancing the environmental performance of the housing development e.g. reduction of carbon emissions; - Developing inner-city places with urban design qualities.

Contact Information

Institution Name:   Ministry of Urban Development Housing and Construction
Institution Type:   Government Agency  
Contact Person:   Selamawit Alem
Title:   Capacity Building and reform Bureau Head  
Telephone/ Fax:   +251911688791
Institution's / Project's Website:  
Address:   Bole Sub City
Postal Code:  
City:   Addis Ababa

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