In October, a controversial directive was issued by the Addis Abeba City Land Administration suspending the transfer of incompletely constructed homes. Then, in November, the city followed up with another directive to handover a list of all the incomplete homes that were in the process of being transferred.
 

The purpose of the directive was to increase the city's income from taxes collected at the time of transfer. The logic was that if the homes had already been completed by the time of sale, they would be worth more and therefore be subject to higher taxes giving the city more revenue.
 

Before, this fuzzy logic is analysed, a few more clarifications must be made.
 

Firstly, it has been widely circulated by many news sources that the city government's need for financial support is not being met. It does not have enough income and has resorted to borrowing.

In fact, it has applied for additional loans from government organisations and state-owned companies after falling behind on the payments of previous loans from the same types of sources. As a result, its requests for cash have not always been heeded (to its embarrassment).

It is in a serious crisis that demands not only a short-term solution in the form of loans, but also a long-term solution in the form of positive cash flow.
 

The chartered city has even gone a step further and voiced its interest to be treated like other regional states when it comes to receiving funds from the federal government's annual budget. This would be a first, and should worry its creditors. It is a sign that the city does not see its lack of financial support being met anytime soon.

The city seems to feel desperate - desperate enough to make directives that fall outside the bounds of constitutionality and negatively affect the community, such as the recent ones concerning the transfer of incomplete homes.
 

To better understand how this affects individuals, consider someone who is a member of the fledgling working-middleclass of Ethiopia. Suppose they have started the construction of a home on the periphery of the city, for example. Most middleclass working people do not have all the money necessary to build the house when they start. They may only have enough to secure the land or build the foundation. Money is then invested on the construction as it is earned from jobs or small businesses that the owner partakes in. If they are capable, they may be able to secure a loan, but this does not always cover the full cost of construction.

Many people who do have enough money upfront to build a home simply buy a home that has already been constructed, rather than spending all that time and going through all the learning processes of building a new one.
 

Now suppose someone building a home changes their mind and does not want the house or the location anymore? Perhaps they got a new job on the other side of town (or country or world for that matter). Or maybe they lost their job and no longer have a source of capital  to complete construction. What else can they do besides selling the incomplete home to recoup their investment?

Is it fair to say, "Too bad. They should have had more foresight. I guess they should not have bitten off more than they could chew? "Would this even help the city government earn more income?
 

Forget investments, what if someone building a home has a major health crisis in their family - perhaps even their own health? Should they not be able to sell their home, whether complete or not, to pay for lifesaving medical expenses rather than be forced to continue to invest in their real estate?
 

The scenarios are endless, and the point is that the city must act constitutionally in order to avoid violating the basic rights of citizens aspertains to their property.

Granted, there are those who buy land titles, for a fraction of the investment cost of a home, build a foundation (or less) and make a quicker profit by selling it as is. Some of these people are wealthy developers (not part of the middleclass). They are making a lot of money repeating a strategy that does not actually provide any solution to one of the other crises that the city is facing - a lack of adequate housing.

But this is not the main issue, and is presumably not the scenario the city is trying to prevent.

The city claims that it is losing money because the amount of tax revenue it receives from a building foundation is much less than a completed house. But the other unit of measurement that must be taken into account is time - on two fronts.

One front is the time it takes to build and sell a foundation versus the time it takes to build and sell a home. The other front is the rate of the real estate's increase in value and how long owners are willing to wait to sell property, which is often not bringing in any income. (After all one does not rent a foundation like they rent a house or a room.)

Since building a foundation takes less time than building a home, they city may actually get a comparable amount of tax income from the sale of foundations versus the sale of complete homes due to the higher volume of foundations that can be built and sold in a given amount of time for a given amount of capital invested.

As far as appreciation, it depends on how patient (or lazy) owners are to get a higher return on their investment. And this may depend on how many resources they have. A developer with a lot of land may keep most of it as a slowly but steadily increasing asset, because he does not have the resources (or the skills to get the resources) to earn a higher return by developing it.
 

At this point a much bigger picture can be seen.  The city is trying to make the most of the resources at its disposal, developers are trying to get a return on their investments with limited resources and skills, and individuals are trying to realise the dream of homeownership amidst the rollercoasters of life.

What is needed is a law or directive that differentiates between the needs of everyone involved, which the current directives do not do.
 

The solution may be to come back to the issue of time with a few other details added in. After all, the real issue is not whether property is resold  time and again for modest price increases each time or sold once for a higher price after taking the time to build it. The totals may end up being equal.

The goal is to decrease the amount of time  a piece of property sits around slowly appreciating without generating income (and tax revenue) and without value being added to it through development.
 

The recent directives inadequately and indirectly address this issue.
 

If individuals do not have access to the resources necessary to complete construction, the property may remain idle for even longer than if they were allowed to sell it to someone who did have the capital to continue and eventually finish the job.

This would be prevented by the recent directives. They may have to wait until their financial situation changes for the better, during which time the property will remain idle - and for who knows how long?
 

Instead the city government can rely on time limits on development or, even better, on the amount of time a property can sit without being developed or used. If owners do not have the capacity to continue work, they could be required to sell the property to someone who did have the resources to continue work. There could even be exceptions or extensions for people who own only one or two properties versus developers who own many properties (often without the capacity to develop all of them). Other extenuating circumstances could also warrant evaluation for time extensions.
 

The most important issue here is to protect property rights. But what is also important is supporting the middleclass in a country where it is just beginning to grow. An expanding middleclass is important for stability and democracy in any society.

The current directives discourage members of the middleclass from even undertaking the construction of a home for fear they might not get enough money to finish the job and then not be able to get back the money tied up in the unfinished property. As such it favours the wealthy upper-class, which may not even develop land as fast as it would with the competition and in some cases the support of the middleclass.