New Rent Regulations Stir Diverse Opinions

The recent re-registration of residential properties under the new tenancy legislation has sparked a wave of activity and mixed feelings across the housing bureaus of the 119 weredas in the capital. This legislation, which mandates a two-year minimum lease, state-approved annual rent increases, and additional levies on property taxes for unrented homes, aims to regulate tenant-landlord relationships and promote affordable housing.

The rollout began last week with a deadline set for a month, requiring the registration of current lease agreements to serve as a baseline for future rent increases. In just five days, around 4,515 agreements were signed, highlighting both the urgency and confusion surrounding the process.

Demise Welkaba, a housing assistant and team leader at Kirkos sub-city, expressed that most people arrived for registration uninformed about the new regulations. This issue, coupled with inadequate staffing, has slowed down the registration process, particularly for the 1,200 condominiums and 480 homes in his jurisdiction.

Abera Amente, head of Housing Information & Administration at the Ministry of Urban & Infrastructure, emphasized the necessity of government intervention to curb escalating housing costs and prevent unjust evictions. He pointed out that housing expenses should not consume more than 30% of monthly incomes, a threshold that many urbanites exceed due to soaring rents.

The regulation is expected to enhance rent tax implementation, reduce informal housing transactions, and improve dispute resolution between tenants and landlords. Currently, 60% of urban residents live in rented homes out of nearly half a million available units, with average rents around 8,000 Br and approximately 70,000 units remaining vacant.

To discourage keeping properties vacant, the law imposes increased property tax levies that could reach up to 25%. However, some landlords have found a loophole in the system by underreporting their tenants to potentially lower their tax burden.

The law also mandates all rental payments to be made digitally for better tracking and requires a six-month notice before evictions, except in cases of severe property damage, repeated non-payment, or illegal activities. Despite these measures, accurate tax collection remains a challenge. Last year, only 886 property owners reported their rental income at the Woreda 15 Revenues Bureau, resulting in 7.1 million Birr, but underreporting continues to undermine tax revenue collection efforts.

Officials are hopeful that the new legal framework will enhance relations between tenants and landlords. Kassahun Tadesse, Head of the Woreda 15 Housing Administration Bureau, handles around 400 tenant-landlord disputes annually, ranging from unlawful rent increases to sudden evictions, affecting 4,800 condominiums and 400 private homes in Woreda. "Housing is in constant crisis," Kassahun told Fortune, describing it as "a giant mess."

Despite periodic bans on rent increases by the city administration since the COVID-19 pandemic, rental prices have stayed high. The Center for Affordable Housing Finance in Africa reports that Ethiopia needs nearly 486,000 new urban homes each year. The capital's housing development and administration bureau manages around 350,000 condominiums and 150,000 Kebele homes, and it aims to enforce the new law by implementing administrative penalties and directives to enhance regulatory oversight.

Muleneh Feyisa, deputy head of Housing Development & Administration, notes that the lack of regulation has mainly harmed tenants. He points to international examples showing that rent regulation laws help control prices. "The fixed-price asset price regulation will further strengthen our regulatory capacity," Muluneh told Fortune.

The Ministry is considering a regulation to establish fixed-price evaluation metrics, which would lay the groundwork for rent laws and property taxes. Additionally, there are plans to expand the tax base by introducing property taxes, increasing VAT levies, and implementing excise stamps to boost domestic revenue. Last year, rent tax revenues were 5.2 billion Birr from 143,900 taxpayers. Heyru Hassen, the Bureau's tax assessment leader, believes this amount should be much higher if property owners reported their income accurately, noting that many falsify data to evade taxes. "We are losing revenues," Heyru told Fortune, adding that assessments are conducted when there is suspicion of false reporting. "They will be forced to pay under our valuations."

Experts recommend addressing immediate issues like rent control and long-term solutions such as increasing housing availability through financing options.

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Source: Addis Fortune