By Samuel Mulugeta
The two-year-old rental agreement is less than two months away from expiring. The Ethiopian Consumers’ Concern Organization (ECCO) has announced that landlords are increasing rents by 50 to 100 percent as the two-year-old law, which prohibits increases, nears its expiration date. The main reasons cited for this price increase are the high cost of living and the increase in the price of basic goods in the country, in addition to the tax imposed on landlords by the government, which has forced landlords to pass on their costs to tenants.
The two-year rental agreement framework previously issued by the Addis Ababa City Administration will expire on June 30, 2018. In order to prevent any sudden disruption in the market following the expiration of this deadline, the administration is currently conducting an extensive study and will soon announce a new decision based on the study’s conclusion. According to the information provided by the administration, the new decision may allow the rent to remain at its current level; otherwise, only a modest and small increase may be allowed, taking into account the current market conditions and the pressure of landlords.
However, it is important to learn from the implementation experience of the past two years that a law on paper alone cannot bring a lasting solution. Although the previous law was good at the promulgation level, it has been open to landlords to increase prices secretly without government recognition because it lacked a strong structure and regulatory body to properly enforce the law on the ground. Not only this, but the indirect threat of "leaving the house immediately because we are going to move in ourselves" has created a huge loophole for tenants to evict them and charge them whatever exorbitant prices they want. Therefore, the next legal framework to be announced in June should completely close these implementation gaps and respect the rights of the tenant.
So what should the new legal framework look like?
First of all, the new law should have a "price ceiling" that clearly sets the amount of increase that landlords can make each year, in line with the general wage growth in the country and the current market conditions, and not exceed a certain minimum percentage. This will help both landlords and tenants know their future in advance and be secure.
Secondly, there should be a separate tax relief or incentive system for landlords to ensure that they do not use the tax burden to pass on the full cost to the tenant community and exacerbate the price inflation.
The long-term solution to the problem, however, is to quickly complete the housing construction projects that the government has initiated and to significantly ease the housing supply.
