Land Value Capture in Practice: Ethiopia's Urban Land Lease System

Ethiopia’s urban land system is a large-scale experiment in keeping land value in public hands: the state owns all urban land and grants time-limited rights to use it rather than selling plots. Wudu Muluneh Yimer examines how the system developed and worked in practice, drawing on his experience managing land administration in Addis Ababa and later teaching and researching the field. The system’s roots lie in the Derg government’s 1975 nationalization of urban land. Its permit-based allocation sought to curb inequality and speculation, but land was assigned administratively, users paid nominal rent, and restricted transfer rights contributed to delays, inefficient use, corruption, informal dealings, and little municipal revenue.

After the Derg fell, Proclamation No. 80/1993 replaced permits with leases while preserving public ownership. It introduced fixed-term contractual rights, public tenders, competitive bidding, benchmark prices, and the ability to transfer or mortgage leasehold interests. The rules aimed to prevent individuals from pocketing increases in land value: a leaseholder could not freely sell an appreciating right and retain the gain, which was meant to return to government, including when land was re-leased. Yet the law restricted private gains without establishing a clear, direct collection mechanism. Lease payments were generally tied to the original bid rather than automatically adjusted as land values rose, limiting ongoing public capture. The reform thus opened land to investment and finance while exposing tensions between public value capture, workable markets, and effective administration.