Informal Subletting in Private Rental Housing as a Mechanism for Housing Affordability

Abstract

Rental housing takes more than half of Addis Ababa’s housing. Out of this, thirty-seven percent is provided by the private rental housing sector, which supplies housing for an increasing number of residents of Addis Ababa. Due to economic and other factors informal subletting is being practiced as a more reachable step in the affordability ladder of housing. This study examines the process of informal subletting in the private rental housing sector in Addis Ababa city, and its contribution to the affordable housing supply. It is an effort to fill the knowledge gap of housing supply options, in which the concept of subletting has not been given due attention. This informal subletting process has four major actors; namely the broker, landlord/landlady, head tenant, and subtenant. This mechanism is initiated and coordinated mainly by the broker from assigning the rental and sublet price up to preparing the contract made between a landlord with a head tenant & head tenant with subtenant. The landlord collects rent and pays tax, head tenant manages the sublet house & collects rent from the subtenants, and subtenant pays the monthly rent. The head tenants are able to subsidize their housing expenses by 10% - 79% after subletting. For the subtenants the sublet units are hardly affordable but are cheaper than renting in a condominium housing located in the study area. It is recommended that this subletting mechanism be recognized in the formal housing policy.