Urban Land Transfer and State Monopoly in Value Capture in Ethiopia Daniel W. Ambaye Bahir Dar University, Ethiopia

Introduction Expansion of cities require extensive annexation of rural farm land at the verge of cities and towns This land is annexed by cities through expropriation measures State transfers land for urban housing and investment mainly through lease auction which fetches large profit On the other, state pays inadequate compensation to those who lost land which creates unfair environment This paper suggests for the state to reconsider the revision of the amount and thereby shares the profit it solely captures

Methodology Desk review of secondary sources Personal observation Media Lease auction results published on line The data is focused on the lease auction prices from the expansion zone part of the Addis Ababa city

Land Rights in Ethiopia Ownership of land vests in the state and people of Ethiopia which shows – Joint ownership of land by the people and state Peasants and pastoralists are entitled to obtain land free of charge This right gives life time prerogatives of use, bequeath and lease of the land to the holder No sale of land allowed Protection against arbitrary state eviction Compensation in the event of expropriation Yet, constitution’s position acquisition of urban land for different purposes is hazy

Lease proclamation Urban land can be acquired either through allotment or auction Few organs can get land by allotment (without tendering) eg. public offices, religious institutions, manufacturing, publicly approved self help housing programs…. As a principle, every one has to bid/auction to get land for residence or business Restrictions on urban land transfer

Selling unfinished properties is restricted – No benefit if there is sale – municipal supervision during sale – Limited credit access for unfinished properties – Rational: to discourage rent seeking and to encourage completion of housing and thereby boosting housing stock

Urban Land Grade in Addis Ababa Zone Range of Initial Lease Price USD GradesPrice USD Central Market Zone Transitional Zone Expansion Zone

The Addis Ababa city floats land for residence and business at least every two months people bid for a plot of land at a time The highest price witnessed so far is 17,775 USD per m2 in the city center (Merkato)

Expropriation is a compulsory taking of land for public purpose activities Compensation is paid only for immovables (plants and building) established on the land and improvements made to the land Loss of land is not as such compensable But displacement compensation is paid as ten times of annual produce (if the land is to be taken without replacement) by taking average of 5 years income The Addis Ababa city calculates the compensation of loss of land as 20 birr (1USD) per square meter Expropriation is a compulsory taking of land for public purpose activities Compensation is paid only for immovables (plants and building) established on the land and improvements made to the land Loss of land is not as such compensable But displacement compensation is paid as ten times of annual produce (if the land is to be taken without replacement) by taking average of 5 years income The Addis Ababa city calculates the compensation of loss of land as 20 birr (1USD) per square meter Land expropriation

Compensation…. Compensation is criticized as inadequate mainly because it: – leaves out the location (site value) of land during valuation – It basis its calculation by taking previous 5 years produce Many farmers who lost their land to urban centers do complain on the insufficiency As joint owners they are not provided with enough compensation that recompense the loss of land

State monopoly in value capture By taking land at cheaper price from farmers state transfers it to urban residents and investors at high price: State justifies this – on the belief that only all land belonged to state – on the basis of state provision of infrastructure at no cost to society – Infrastructure is what increases 70% land value But it even does not give the rest of the 30%

ZoneLocation Initial price per m2 in USD Auction Date Auction Winning price range per m2 in USD Compensat ion paid to farmers per m2 in USD Winner Min Winner Max ExpansionAkaki kaliti th Oct ExpansionYeka th Oct ExpansionNifas Silk th Oct ExpansionAkaki kaliti th Sep ExpansionAkaki kaliti th June Transition Addis Ketema th June ExpansionKolfe th June ExpansionBole 9 15 th June ExpansionAkaki th May

ExpansionAkaki th May ExpansionBole th May ExpansionNefas Silk th May ExpansionGulele th May ExpansionKolfe th May S.NS.N ZoneLocationInitial price per m2 in birr Auction Round Auction Winning price range per m2 in birr Compensation paid to farmers per m2

Rethink on: Equity of land holding (Pple of equity requires us to create more access to land) Constitutionality of the lease proclamation on property right Constitutional principle of equal ownership by the state and the people Share of profit

Recommendations Through legislative amendment: Ease property right transfer in urban areas Share profit with land holders by paying adequate compensation Create opportunity to accessing land to urban middle and lower income group